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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-29961
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ALLIANCE CAPITAL
MANAGEMENT L.P.
(Exact name of Registrant as specified in its charter)
Delaware 13-4064930
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1345 Avenue of the Americas 10105
New York, N.Y. (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (212) 969-1000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class Name of each exchange on which registered
-------------- -----------------------------------------
Units of None
limited partnership interest
in Alliance Capital Management L.P.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
There is no established trading market for the units of limited
partnership interest in Alliance Capital Management L.P. and they are subject to
significant restrictions on transfer. Accordingly, it is not possible to state
the aggregate market value of the units held by non-affiliates of the
registrant.
172,243,906 units of limited partnership interest in Alliance Capital
Management L.P. were outstanding as of March 1, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Certain pages of the 1999 Annual Report are incorporated by reference
in Part II of this Form 10-K.
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<PAGE>
GLOSSARY OF CERTAIN DEFINED TERMS
"ACMC" refers to ACMC, Inc., a wholly-owned subsidiary of Equitable.
"Alliance" refers to Alliance Capital Management Corporation, a
wholly-owned subsidiary of Equitable, and, where appropriate, to ACMC, its
predecessor.
"Alliance Capital" refers to Alliance Capital Management L.P., a
Delaware limited partnership, which is the operating partnership, and its
subsidiaries and, where appropriate, to its predecessors, Alliance Holding and
ACMC and their respective subsidiaries.
"Alliance Capital Units" refers to units of limited partnership
interest in Alliance Capital.
"Alliance Holding" refers to Alliance Capital Management Holding L.P.,
a Delaware limited partnership formerly known as Alliance Capital Management
L.P.
"Alliance Holding Units" refers to units representing assignments of
beneficial ownership of limited partnership interests in Alliance Holding and to
100,000 units of general partnership interest in Alliance Holding.
"AXA" refers to AXA, a company organized under the laws of France.
"AXA Financial" refers to AXA Financial, Inc., formerly The Equitable
Companies Incorporated.
"ECMC" refers to Equitable Capital Management Corporation, a
wholly-owned subsidiary of Equitable.
"Equitable" refers to The Equitable Life Assurance Society of the
United States, a wholly-owned subsidiary of AXA Financial, and its subsidiaries
other than Alliance Capital and its subsidiaries.
"General Partner" refers to Alliance in its capacity as general partner
of Alliance Capital and Alliance Holding, and, where appropriate, to ACMC, its
predecessor, in its capacity as general partner of Alliance Holding.
"Investment Advisers Act" refers to the Investment Advisers Act of
1940.
"Investment Company Act" refers to the Investment Company Act of 1940.
"1999 Annual Report" refers to the Alliance Capital Management L.P. and
Alliance Capital Management Holding L.P. 1999 Annual Report to Unitholders.
PART I
Item 1. Business
General
In October 1999 Alliance Holding reorganized by transferring its
business and assets to Alliance Capital, a newly formed private partnership, in
exchange for all of the Alliance Capital Units ("Reorganization"). Since the
Reorganization Alliance Capital has conducted the diversified investment
management services business conducted by Alliance Holding prior to the
Reorganization and Alliance Holding's business has consisted of holding Alliance
Capital Units and engaging in related activities. As part of the Reorganization
Alliance Holding offered each Alliance Holding Unitholder the opportunity to
exchange Alliance Holding Units for Alliance Capital Units on a one-for-one
basis. As of March 1, 2000 Alliance Holding held approximately 42% of the
outstanding Alliance Capital Units. The Alliance Holding Units trade publicly on
the New York
1
<PAGE>
Stock Exchange, Inc. ("NYSE") while the Alliance Capital Units do not trade
publicly and are subject to significant restrictions on transfer. Alliance is
the General Partner of both Alliance Capital and Alliance Holding.
Alliance Holding was formed in 1987 to succeed to the business of ACMC
which began providing investment management services in 1971. On April 21, 1988
the business and substantially all of the operating assets of ACMC were conveyed
to Alliance Holding in exchange for a 1% general partnership interest in
Alliance Holding and approximately 55% of the outstanding Alliance Holding
Units. In December 1991 ACMC transferred its 1% general partnership interest in
Alliance Holding to Alliance.
On February 19, 1998 Alliance Holding declared a two for one Alliance
Holding Unit split payable to Alliance Holding Unitholders of record on March
11, 1998. No adjustments have been made to the number of Alliance Holding Units
outstanding or per Alliance Holding Unit amounts prior to March 11, 1998 except
in Item 5, Item 6, Item 7, Item 8 and Item 11.
As of March 1, 2000 AXA, AXA Financial, Equitable and certain
subsidiaries of Equitable were the beneficial owners of 95,855,945 Alliance
Capital Units or approximately 55.7% of the issued and outstanding Alliance
Capital Units and 1,544,356 Alliance Holding Units or approximately 2.1% of the
issued and outstanding Alliance Holding Units. As of March 1, 2000 Alliance
Holding was the owner of 71,855,296 Alliance Capital Units or approximately
41.7% of the issued and outstanding Alliance Capital Units.
As of March 1, 2000 AXA and its subsidiaries owned approximately 60.3%
of the issued and outstanding shares of the common stock of AXA Financial. AXA
Financial is a public company with shares traded on the NYSE. AXA Financial owns
all of the shares of Equitable. For insurance regulatory purposes all shares of
common stock of AXA Financial beneficially owned by AXA have been deposited into
a voting trust. See "Item 12. Security Ownership of Certain Beneficial Owners
and Management".
AXA, a French company, is the holding company for an international
group of insurance and related financial services companies. AXA's insurance
operations include activities in life insurance, property and casualty insurance
and reinsurance. The insurance operations are diverse geographically with
activities principally in Western Europe, North America, the Asia/Pacific area,
and, to a lesser extent, in Africa and South America. AXA is also engaged in
asset management, investment banking, securities trading, brokerage, real estate
and other financial services activities principally in the United States, as
well as in Western Europe and the Asia/Pacific area.
Alliance Capital, one of the nation's largest investment advisers,
provides diversified investment management services to institutional clients and
high net-worth individuals and, through various investment vehicles, to
individual investors.
Alliance Capital's separately managed accounts consist primarily of the
active management of equity and fixed income accounts for institutional
investors and high net-worth individuals. Alliance Capital's institutional
clients include corporate and public employee pension funds, the general and
separate accounts of Equitable and its insurance company subsidiary, endowments,
foundations, and other domestic and foreign institutions. Alliance Capital's
mutual funds management services, which developed as a diversification of its
institutional investment management business, consist of the management,
distribution and servicing of mutual funds and cash management products,
including money market funds and deposit accounts.
The following tables provide a summary of assets under management and
associated revenues of Alliance Capital:
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<PAGE>
Assets Under Management
(in millions)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Separately Managed Accounts (1)(4) $ 97,275 $ 119,507 $ 133,706 $ 168,121 $ 198,878
Mutual Funds Management (4):
Alliance Mutual Funds .......... 23,134 27,624 40,376 60,722 96,372
Variable Products .............. 12,292 17,070 23,830 31,364 40,906
Cash Management Services (2) ... 13,820 18,591 20,742 26,452 32,165
---------- ---------- ---------- ---------- ----------
Total ............................ $ 146,521 $ 182,792 $ 218,654 $ 286,659 $ 368,321
========== ========== ========== ========== ==========
Revenues
(in thousands)
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Separately Managed Accounts (1) .. $ 232,132 $ 280,909 $ 322,850 $ 373,018 $ 453,029
Mutual Funds Management :
Alliance Mutual Funds .......... 277,815 327,769 432,520 674,234 1,089,525
Variable Products (3) .......... 29,632 44,967 67,805 93,174 124,058
Cash Management Services (2) ... 91,135 127,265 146,152 174,829 187,635
Other ............................ 8,541 7,607 6,009 8,801 15,058
---------- ---------- ---------- ---------- ----------
Total ............................ $ 639,255 $ 788,517 $ 975,336 $1,324,056 $1,869,305
========== ========== ========== ========== ==========
</TABLE>
(1) Includes the general and separate accounts of Equitable and its
insurance company subsidiary.
(2) Includes money market deposit accounts brokered by Alliance Capital for
which no investment management services are performed.
(3) Net of certain fees paid to Equitable for services rendered by
Equitable in marketing the variable annuity insurance and variable life
products for which The Hudson River Trust ("HRT") was the funding
vehicle. All of the portfolios of HRT were transferred to EQ Advisors
Trust ("EQAT") effective October 18, 1999 and such fees are no longer
payable to Equitable.
(4) Assets under management exclude certain non-discretionary advisory
relationships and reflect 100% of the assets managed by unconsolidated
affiliates.
SEPARATELY MANAGED ACCOUNTS
As of December 31, 1997, 1998 and 1999 separately managed accounts for
institutional investors and high net-worth individuals represented approximately
61%, 59% and 54%, respectively, of total assets under management by Alliance
Capital. The fees earned from the management of these accounts represented
approximately 33%, 28% and 24% of Alliance Capital's revenues for 1997, 1998 and
1999, respectively.
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<PAGE>
Separately Managed Accounts Assets Under Management (1)
(in millions)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Equity & Balanced:
Domestic......................... $42,706 $51,292 $61,259 $87,032 $105,965
International & Global........... 3,854 10,903 7,883 7,370 11,591
Fixed Income:
Domestic......................... 32,553 36,042 39,079 41,911 43,299
International & Global........... 1,891 2,381 2,759 4,030 5,151
Passive:
Domestic......................... 12,787 15,478 19,860 23,050 26,472
International & Global........... 3,484 3,411 2,866 4,728 6,400
------- -------- -------- -------- --------
Total.............................. $97,275 $119,507 $133,706 $168,121 $198,878
======= ======== ======== ======== ========
</TABLE>
(1) Includes 100% of the assets managed by unconsolidated affiliates of
$587 million at December 31, 1999, $432 million at December 31, 1998
and $203 million at December 31, 1997.
Revenues From Separately Managed Accounts Management
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Investment Services:
Equity & Balanced:
Domestic......................... $132,802 $157,511 $184,200 $238,063 $311,342
International & Global........... 10,373 32,453 30,192 16,371 27,370
Fixed Income:
Domestic......................... 67,102 65,449 80,600 89,286 82,417
International & Global........... 3,784 5,392 7,007 7,968 10,600
Passive:
Domestic......................... 5,919 8,015 9,187 9,911 8,827
International & Global........... 3,870 3,612 3,034 2,997 3,759
-------- -------- -------- -------- --------
223,850 272,432 314,220 364,596 444,315
Service and Other Fees............. 8,282 8,477 8,630 8,422 8,714
-------- -------- -------- -------- --------
Total.............................. $232,132 $280,909 $322,850 $373,018 $453,029
======== ======== ======== ======== ========
</TABLE>
Investment Management Services
Alliance Capital's separately managed accounts consist primarily of the
active management of equity accounts, balanced (equity and fixed income)
accounts and fixed income accounts for institutional investors and high
net-worth individuals. Alliance Capital also provides active management for
international (non-U.S.) and global (including U.S.) equity, balanced and fixed
income portfolios, asset allocation portfolios, venture capital portfolios,
investment partnership portfolios known as hedge funds and portfolios that
invest in real estate investment trusts. Alliance Capital provides "passive"
management services for equity, fixed income and international accounts. As of
December 31, 1999 Alliance Capital's accounts were managed by 140 portfolio
managers with an average of 17 years of experience in the industry and 10 years
of experience with Alliance Capital.
4
<PAGE>
Equity and Balanced Accounts. Alliance Capital's separately managed
equity and balanced accounts contributed approximately 22%, 19% and 18% of
Alliance Capital's total revenues for 1997, 1998 and 1999, respectively. Assets
under management relating to active equity and balanced accounts grew from
approximately $34.3 billion as of December 31, 1994 to approximately $117.6
billion as of December 31, 1999.
Alliance Capital has had a distinct and consistent style of equity
investing. Alliance Capital does not emphasize market timing as an investment
tool but instead emphasizes long-term trends and objectives, generally remaining
fully invested. Alliance Capital's equity strategy is to invest in the
securities of companies experiencing growing earnings momentum which are known
as growth stocks. The result of these investment characteristics is that
Alliance Capital's client portfolios tend to have, as compared to the average of
companies comprising the Standard & Poor's Index of 500 Stocks ("S&P 500"), a
greater market price volatility, a lower average yield and a higher average
price-earnings ratio.
Alliance Capital's principal method of securities evaluation is through
fundamental analysis undertaken by its internal staff of full-time research
analysts, supplemented by research undertaken by Alliance Capital's portfolio
managers. Alliance Capital holds frequent investment strategy meetings in which
senior management, portfolio managers and research analysts discuss investment
strategy. Alliance Capital's portfolio managers construct and maintain
portfolios that adhere to each client's guidelines and conform to Alliance
Capital's current investment strategy.
Alliance Capital's balanced accounts consist of an equity component and
a fixed income component. Typically, from 50% to 75% of a balanced account is
managed in the same manner as a separate equity account, while the remaining
fixed income component is oriented toward capital preservation and income
generation.
Fixed Income Accounts. Alliance Capital's separately managed fixed
income accounts contributed approximately 9%, 7% and 5% of Alliance Capital's
total revenues for 1997, 1998 and 1999, respectively. Assets under management
relating to active fixed income accounts increased from approximately $34.1
billion as of December 31, 1994 to approximately $48.5 billion as of December
31, 1999.
Alliance Capital's fixed income management services include
conventional actively managed bond portfolios in which portfolio maturity
structures, market sector concentrations and other characteristics are actively
shifted in anticipation of market changes. Fixed income management services also
include managing portfolios which invest in foreign government securities and
other foreign debt securities. Sector concentrations and other portfolio
characteristics are heavily committed to areas that Alliance Capital's portfolio
managers believe have the best investment values. Alliance Capital also manages
portfolios that are limited to specialized areas of the fixed income markets,
such as mortgage-backed securities and high-yield bonds.
Passive Management. Alliance Capital's strategy in passive portfolio
management is to provide customized portfolios to meet specialized client needs,
such as a portfolio designed to replicate a particular index. Alliance Capital
offers domestic and international indexation strategies, such as portfolios
designed to match the performance characteristics of the S&P 500 and the Morgan
Stanley Capital International Indices and enhanced indexation strategies
designed to add incremental returns to a benchmark. Alliance Capital also offers
a variety of structured fixed income portfolio applications, including
immunization (designed to produce a compound rate of return over a specified
time, irrespective of interest rate movements), dedication (designed to produce
specific cash flows at specific times to fund known liabilities) and indexation
(designed to replicate the return of a specified market index or benchmark). As
of December 31, 1999 Alliance Capital managed approximately $32.9 billion in
passive portfolios.
Private Investing Services. In 1996 Alliance Capital acquired a
minority interest in Albion Alliance LLC ("Albion Alliance") which is Alliance
Capital's primary vehicle for providing global investing services in respect of
private and illiquid securities to institutions and high net-worth individuals.
Alliance Corporate Finance Group Incorporated ("ACFG"), a wholly-owned
subsidiary of Alliance Capital, was formed in 1993 when the business of ECMC was
acquired to manage investments in private mezzanine financings and private
investment limited partnerships. Private mezzanine financings are investments in
the subordinated debt and/or preferred stock portions of leveraged transactions
(such as leveraged buy-outs and leveraged recapitalizations). Such investments
are usually coupled with a contingent interest component or investment in an
equity participation, which provide the potential for capital appreciation.
Because Albion Alliance is now Alliance Capital's primary vehicle for providing
these types of services, it is not expected that ACFG will manage any new
private investments other than for Equitable and its subsidiaries.
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<PAGE>
ACFG manages two private mezzanine investment funds designed for
institutional investors, with an aggregate of approximately $199.4 million under
management as of December 31, 1999. As of that date Equitable and its insurance
company subsidiary had investments of approximately $40.0 million in these
funds.
Structured Products. Alliance Capital manages 34 structured products
with an aggregate of $10.0 billion in assets as of December 31, 1999. $6.7
billion of these assets are included in mutual fund assets under management and
$3.3 billion are included in separately managed assets under management as of
December 31, 1999. Structured products consist of securities, typically multiple
classes of senior and subordinated debt obligations together with an equity
component, issued by a special purpose company. An actively or passively managed
portfolio of equity or fixed income securities or other financial products
generally backs such securities. A majority of Alliance Capital's structured
product assets are based on a short duration fixed income strategy, including
the seven "Pegasus" transactions which, as of December 31, 1999, had an
aggregate of $5.2 billion in assets under management. Alliance Capital also
manages two collateralized bond obligation funds whose pools of collateral debt
securities consist primarily of privately-placed, fixed rate corporate debt
securities acquired from Equitable and its affiliates. As of December 31, 1999
these funds had an aggregate of approximately $131.5 million in assets under
management. As of that date AXA Financial and its insurance company subsidiaries
had investments of approximately $86.4 million in these funds.
Hedge Funds. As of December 31, 1999, Alliance Capital managed hedge
funds which had approximately $1.9 billion in assets under management and
separately managed hedge accounts which had approximately $1.0 billion in assets
under management in four distinct strategies. Alliance Capital's hedge funds are
privately placed domestic and offshore investment vehicles. The portfolios of
the hedge funds consist of various types of securities, including equities,
domestic and foreign government and other debt securities, convertible
securities, warrants, options and futures. The hedge funds take short positions,
including the purchase of put options on securities, market indices or futures.
The hedge funds employ the use of leverage through securities exposure and
borrowings.
Clients
The approximately 1,775 separately managed accounts for institutions
and high net-worth individuals (other than investment companies) for which
Alliance Capital acts as investment manager include corporate employee benefit
plans, public employee retirement systems, the general and separate accounts of
Equitable and its insurance company subsidiary, endowments, foundations, foreign
governments, multi-employer pension plans and financial and other institutions.
AXA and the general and separate accounts of Equitable and its
insurance company subsidiary, including investments made by these accounts in
HRT and EQAT (See "Individual Investor Services - Variable Products"),
represented approximately 20%, 22% and 26% of total assets under management by
Alliance Capital at December 31, 1999, 1998 and 1997, respectively, and
approximately 8%, 11% and 14% of Alliance Capital's total revenues for 1999,
1998 and 1997, respectively. Taken as a whole they comprise Alliance Capital's
largest institutional client.
As of December 31, 1999 corporate employee benefit plan accounts
represented approximately 11% of total assets under management by Alliance
Capital. Assets under management for other tax-exempt accounts, including public
employee benefit funds organized by government agencies and municipalities,
endowments, foundations and multi-employer employee benefit plans, represented
approximately 32% of total assets under management as of December 31, 1999.
The following table lists Alliance Capital's ten largest institutional
clients, ranked in order of size of total assets under management as of December
31, 1999. Since Alliance Capital's fee schedules vary based on the type of
account, the table does not reflect the ten largest revenue generating clients.
6
<PAGE>
<TABLE>
<CAPTION>
Client or Sponsoring Employer Type of Account
----------------------------- ---------------
<S> <C>
AXA and its subsidiaries (including Equitable and Equity, Fixed Income, Passive, Global
its insurance company subsidiary)................. Equity, Global Fixed Income
North Carolina Retirement System.................. Passive Equity, U.S. Equity, Global Equity
Foreign Government Central Bank................... Equity, Global Equity, Fixed Income,
Global Fixed Income
State Board of Administration of Florida......... Equity, Fixed Income
New York State Common Retirement System .......... Equity
Frank Russell Trust............................... U.S. Equity, Global Equity
Sun America....................................... Equity
SEI Investment.................................... Equity
Foreign Government Central Bank................... U.S. Fixed Income, Global Fixed Income,
U.S. Equity, Global Equity, Asian Equity
L.A. Fire and Police Pension Fund................. Passive
</TABLE>
These institutional clients accounted for approximately 22% of Alliance
Capital's total assets under management at December 31, 1999 and approximately
6% of Alliance Capital's total revenues for the year ended December 31, 1999
(32% and 11%, respectively, if the investments by the separate accounts of
Equitable in EQAT and HRT were included). No single institutional client other
than Equitable and its insurance company subsidiary accounted for more than
approximately 1% of Alliance Capital's total revenues for the year ended
December 31, 1999. AXA and the general and separate accounts of Equitable and
their subsidiaries accounted for approximately 10% of Alliance Capital's total
assets under management at December 31, 1999 and approximately 3% of Alliance
Capital's total revenues for the year ended December 31, 1999 (20% and 8%,
respectively, if the investments by the separate accounts of Equitable in EQAT
and HRT were included).
Since its inception, Alliance Capital has experienced periods when it
gained significant numbers of new accounts or amounts of assets under management
and periods when it lost significant accounts or assets under management. These
fluctuations result from, among other things, the relative attractiveness of
Alliance Capital's investment style or level of performance under prevailing
market conditions, changes in the investment patterns of clients that result in
a shift in assets under management and other circumstances such as changes in
the management or control of a client.
Investment Management Agreements and Fees
Alliance Capital's separately managed accounts are managed pursuant to
a written investment management agreement between the client and Alliance
Capital, which usually is terminable at any time or upon relatively short notice
by either party. In general, Alliance Capital's contracts may not be assigned
without the consent of the client.
In providing investment management services to institutional clients,
Alliance Capital is principally compensated on the basis of fees calculated as a
percentage of assets under management. Fees are generally billed quarterly and
are calculated on the value of an account at the beginning or end of a quarter
or on the average of such values during the quarter. As a result, fluctuations
in the amount or value of assets under management are reflected in revenues from
management fees within two calendar quarters.
Management fees paid on equity and balanced accounts are generally
charged in accordance with a fee schedule that ranges from 0.90% (for the first
$10 million in assets) to 0.25% (for assets over $60 million) per annum of
assets under management. Fees for the management of fixed income portfolios
generally are charged in accordance with lower fee schedules, while fees for
passive equity portfolios typically are even lower. Fees for the management of
hedge funds are higher than the fees charged for equity and balanced accounts
and also provide for the payment of performance fees or carried interests to
Alliance Capital. With respect to approximately 6% of assets under management,
Alliance Capital charges performance-based fees, which consist of a relatively
low base fee plus an additional fee if investment performance for the account
exceeds certain benchmarks. No assurance can be given that such fee arrangements
will not become more common in the investment management industry. Utilization
of such fee arrangements by Alliance Capital on a broader basis could create
greater fluctuations in Alliance Capital's revenues.
7
<PAGE>
ACFG's fees for corporate finance activities generally involve the
payment of a base management fee ranging from 0.10% to .50% of assets under
management per annum. In some cases ACFG receives performance fees generally
equivalent to 20% of gains in excess of a specified hurdle rate.
In connection with the investment advisory services provided to the
general and separate accounts of Equitable and its insurance company subsidiary
Alliance Capital provides ancillary accounting, valuation, reporting, treasury
and other services. Equitable and its insurance company subsidiary compensate
Alliance Capital for such services. See "Item 13. Certain Relationships and
Related Transactions".
Marketing
Alliance Capital's institutional products are marketed by marketing
specialists who solicit business for the entire range of Alliance Capital's
institutional account management services. Marketing specialists are dedicated
to corporate and insurance plans as well as public retirement systems,
multi-employer pension plans and the hedge fund marketplace. Alliance Capital's
institutional marketing structure supports its commitment to provide
comprehensive and timely client service. A client service representative is
assigned to each institutional account. This individual is available to meet
with the client as often as necessary and attends client meetings with the
portfolio manager.
MUTUAL FUNDS MANAGEMENT
Alliance Capital (i) manages and sponsors a broad range of open-end and
closed-end mutual funds other than EQAT and markets wrap fee accounts ("Alliance
Mutual Funds"), (ii) is the sub-advisor of certain portfolios of EQAT which is
the funding vehicle for variable annuity insurance and variable life insurance
products offered by Equitable and its insurance company subsidiary, (iii)
manages other funds which serve as funding vehicles for variable annuity
insurance and variable life insurance products offered by other insurance
companies ("Variable Products"), (iv) provides cash management services (money
market funds and federally insured deposit accounts) that are marketed to
individual investors through broker-dealers, banks, insurance companies and
other financial intermediaries, (v) manages and sponsors certain structured
products, and (vi) manages and sponsors certain hedge funds. The net assets
comprising the Alliance Mutual Funds, Variable Products, money market funds and
deposit accounts, structured products and hedge funds on December 31, 1999
amounted to approximately $169.4 billion. The assets of the Alliance Mutual
Funds, Variable Products, money market funds, structured products and hedge
funds are managed by the same investment professionals who manage Alliance
Capital's accounts of institutional investors and high net-worth individuals.
8
<PAGE>
Revenues From Mutual Funds Management
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
Alliance Mutual Funds (1):
Investment Services ...... $ 147,036 $ 173,260 $ 235,613 $ 389,839 $ 648,719
Distribution Revenues .... 107,012 128,917 167,321 241,948 379,273
Shareholder Servicing Fees 16,558 19,156 22,957 36,230 54,562
Other Revenues ........... 7,209 6,436 6,629 6,217 6,971
---------- ---------- ---------- ---------- ----------
277,815 327,769 432,520 674,234 1,089,525
---------- ---------- ---------- ---------- ----------
Variable Products:
Investment Services (2) .. 29,051 43,901 66,376 91,506 121,959
Distribution Revenues .... 203 551 772 730 772
Shareholder Servicing Fees 12 15 16 18 18
Other Revenues ........... 366 500 641 920 1,309
---------- ---------- ---------- ---------- ----------
29,632 44,967 67,805 93,174 124,058
---------- ---------- ---------- ---------- ----------
Cash Management Services:
Investment Services (3) .. 56,642 74,441 82,770 107,051 116,765
Distribution Revenues .... 23,328 39,481 48,758 59,168 61,727
Shareholder Servicing Fees 9,951 12,085 13,354 7,227 7,752
Other Revenues ........... 1,214 1,258 1,270 1,383 1,391
---------- ---------- ---------- ---------- ----------
91,135 127,265 146,152 174,829 187,635
---------- ---------- ---------- ---------- ----------
Total ...................... $ 398,582 $ 500,001 $ 646,477 $ 942,237 $1,401,218
========== ========== ========== ========== ==========
</TABLE>
(1) Includes fees received by Alliance Capital in connection with certain
structured products, hedge funds and wrap fee accounts.
(2) Net of certain fees paid to Equitable for services rendered by
Equitable in marketing the variable annuity insurance and variable life
products for which HRT was the funding vehicle. All of the portfolios
of HRT were transferred to EQAT effective October 18, 1999 and such
fees are no longer payable to Equitable.
(3) Includes fees received by Alliance Capital in connection with its
distribution of money market deposit accounts for which no investment
management services are provided.
9
<PAGE>
Alliance Mutual Funds
Alliance Capital has been managing mutual funds since 1971. Since then,
Alliance Capital has sponsored open-end load mutual funds and closed-end mutual
funds (i) registered as investment companies under the Investment Company Act
("U.S. Funds") and (ii) which are not registered under the Investment Company
Act and which are not publicly offered to United States persons ("Offshore
Funds"). On December 31, 1999 net assets in the Alliance Mutual Funds totaled
approximately $96.4 billion.
Net Assets as
of December 31,
1999
-----------------
Type of Alliance Mutual Funds (in millions)
- -----------------------------
U.S. Funds - Open-End:
Equity and Balanced........................... $ 46,668.2
Taxable Fixed Income.......................... 6,973.9
Tax Exempt Fixed Income....................... 3,357.6
Offshore Funds (Open and Closed-End):
Taxable Fixed Income.......................... 14,847.2
Equity and Balanced........................... 8,336.3
Wrap Fee Programs............................... 10,472.6
U.S. Funds - Closed-End......................... 3,533.3
Unconsolidated Affiliates (1)................... 2,182.4
----------
Total........................................... $ 96,371.5
==========
(1) Assets under management exclude certain non-discretionary advisory
relationships and reflect 100% of the assets managed by unconsolidated
affiliates.
10
<PAGE>
Variable Products
EQAT is the funding vehicle for the variable annuity and variable life
insurance products offered by Equitable and its insurance company subsidiary.
The Alliance Variable Products Series Fund is a funding vehicle for variable
annuity and variable life insurance products offered by other unaffiliated
insurance companies. On December 31, 1999 the net assets of the portfolios of
the Variable Products totaled approximately $40.9 billion:
Net Assets as
of December 31,
1999
---------------
(in millions)
EQAT:
Common Stock Portfolio ............. $ 16,593.5
Aggressive Stock Portfolio ......... 4,602.2
Growth Investors Portfolio ......... 2,698.4
Equity Index Portfolio ............. 2,639.5
Balanced Portfolio ................. 2,136.7
Global Portfolio ................... 1,990.6
Growth & Income Portfolio .......... 1,503.3
Money Market Portfolio ............. 1,443.6
High Yield Portfolio ............... 566.6
Conservative Investors Portfolio ... 476.0
EQ/Alliance Premier Growth Portfolio 474.3
Small Cap Growth Portfolio ......... 403.8
Quality Bond Portfolio ............. 330.9
International Portfolio ............ 288.5
Intermediate Government Portfolio... 202.9
-----------
Alliance Variable Products Series Fund .. 4,554.9
-----------
Total ................................... $ 40,905.7
===========
Distribution. The Alliance Mutual Funds are distributed to individual
investors through broker-dealers, insurance sales representatives, banks,
registered investment advisers, financial planners and other financial
intermediaries. Alliance Fund Distributors, Inc. ("AFD"), a registered
broker-dealer and a wholly-owned subsidiary of Alliance Capital, serves as the
principal underwriter and distributor of the U.S. Funds and serves as a placing
or distribution agent for most of the Offshore Funds. There are 215 sales
representatives who devote their time exclusively to promoting the sale of
shares of Alliance Mutual Funds by financial intermediaries.
Alliance Capital maintains a mutual fund distribution system (the
"System") which permits open-end Alliance Mutual Funds to offer investors
various options for the purchase of mutual fund shares, including the purchase
of Front-End Load Shares and Back-End Load Shares. The Front-End Load Shares are
subject to a conventional front-end sales charge paid by investors to AFD at the
time of sale. AFD in turn compensates the financial intermediaries distributing
the funds from the front-end sales charge paid by investors. For Back-End Load
Shares, investors do not pay a front-end sales charge although, if there are
redemptions before the expiration of the minimum holding period (which ranges
from one year to four years), investors pay a contingent deferred sales charge
("CDSC") to AFD. While AFD is obligated to compensate the financial
intermediaries at the time of the purchase of Back-End Load Shares, it receives
higher ongoing distribution fees from the funds. Payments made to financial
intermediaries in connection with the sale of Back-End Load Shares under the
System, net of CDSC received, reduced cash flow from operations by approximately
$393.4 million and $232.5 million during 1999 and 1998, respectively. Management
of Alliance Capital believes AFD will recover the payments made to financial
intermediaries for the sale of Back-End Load Shares from the higher distribution
fees and CDSC it receives over periods not exceeding 5 1/2 years.
The rules of the National Association of Securities Dealers, Inc.
effectively limit the aggregate of all front-end, deferred and asset-based sales
charges paid to AFD with respect to any class of its shares by each open-end
U.S. Fund to 6.25% of cumulative gross sales of shares of that class, plus
interest at the prime rate plus 1% per annum.
11
<PAGE>
The open-end U.S. Funds and Offshore Funds have entered into agreements
with AFD under which AFD is paid a distribution services fee. Alliance Capital
uses borrowings and its own resources to finance distribution of open-end
Alliance Mutual Fund shares.
The selling and distribution agreements between AFD and the financial
intermediaries that distribute Alliance Mutual Funds are terminable by either
party upon notice (generally of not more than sixty days) and do not obligate
the financial intermediary to sell any specific amount of fund shares. A small
amount of mutual fund sales is made directly by AFD, in which case AFD retains
the entire sales charge.
During 1999 the ten financial intermediaries responsible for the
largest volume of sales of open-end U.S. Funds and Variable Products were
responsible for 61% of such sales. AXA Advisors, LLC (formerly EQ Financial
Consultants, Inc.), ("AXA Advisors"), a wholly-owned subsidiary of Equitable
that utilizes members of Equitable's insurance agency sales force as its
registered representatives, has entered into a selected dealer agreement with
AFD and since 1986 has been responsible for a significant portion of total sales
of shares of open-end U.S. Funds and Offshore Funds (7%, 5% and 4% in 1997, 1998
and 1999, respectively). AXA Advisors is under no obligation to sell a specific
amount of fund shares and also sells shares of mutual funds sponsored by
organizations unaffiliated with Equitable.
Subsidiaries of Merrill Lynch & Co., Inc. (collectively "Merrill
Lynch") were responsible for approximately 24%, 26% and 26% of open-end Alliance
Mutual Fund sales in 1997, 1998 and 1999, respectively. Citigroup Inc.
("Citigroup"), parent company of Salomon Smith Barney, was responsible for
approximately 7% of open-end Alliance Mutual Fund sales in 1997, 6% in 1998 and
6% in 1999. Neither Merrill Lynch nor Citigroup is under any obligation to sell
a specific amount of Alliance Mutual Fund shares and each also sells shares of
mutual funds that it sponsors and which are sponsored by unaffiliated
organizations.
No dealer or agent other than AXA Advisors, Merrill Lynch and Citigroup
has in any year since 1993 accounted for more than 10% of the sales of open-end
Alliance Mutual Funds.
Many of the financial intermediaries that sell shares of Alliance
Mutual Funds also offer shares of funds not managed by Alliance Capital and
frequently offer shares of funds managed by their own affiliates.
Based on industry sales data reported by the Investment Company
Institute (January 2000), Alliance Capital's market share in the U.S. mutual
fund industry is 1.38% of total industry assets and Alliance Capital accounted
for 1.94% of total open-end industry sales in the U.S. during 1999. While the
performance of the Alliance Mutual Funds is a factor in the sale of their
shares, there are other factors contributing to success in the mutual fund
management business that are not as important in the institutional account
management business. These factors include the level and quality of shareholder
services (see "Shareholder and Administration Services" below) and the amounts
and types of distribution assistance and administrative services payments.
Alliance Capital believes that its compensation programs with financial
intermediaries are competitive with others in the industry.
Under current interpretations of the Glass-Steagall Act and other laws
and regulations governing depository institutions, banks and certain of their
affiliates generally are permitted to act as agent for their customers in
connection with the purchase of mutual fund shares and to receive as
compensation a portion of the sales charges paid with respect to such purchases.
During 1999 banks and their affiliates accounted for approximately 8% of the
sales of shares of open-end U.S. Funds and Variable Products.
Investment Management Agreements and Fees. Investment management fees
from the Alliance Mutual Funds, EQAT and the Variable Products vary between
.145% and 1.50% per annum of average net assets. As certain of the U.S. Funds
have grown, fee schedules have been revised to provide lower incremental fees
above certain levels. Fees paid by the U.S. Funds, EQAT and the Variable
Products are fixed annually by negotiation between Alliance Capital and the
board of directors or trustees of each U.S. Fund and EQAT, including a majority
of the disinterested directors or trustees. Changes in fees must be approved by
the shareholders of each U.S. Fund and EQAT. In general, the investment
management agreements with the U.S. Funds, EQAT and the Variable Products
provide for termination at any time upon 60 days' notice.
Under each investment management agreement with a U.S. Fund, Alliance
Capital provides the U.S. Fund with investment management services, office space
and order placement facilities and pays all compensation of directors or
trustees
12
<PAGE>
and officers of the U.S. Fund who are affiliated persons of Alliance Capital.
Each U.S. Fund pays all of its other expenses. If the expenses of a U.S. Fund
exceed an expense limit established under the securities laws of any state in
which shares of that U.S. Fund are qualified for sale or as prescribed in the
U.S. Fund's investment management agreement, Alliance Capital absorbs such
excess through a reduction in the investment management fee. Currently, Alliance
Capital believes that California and South Dakota are the only states to impose
such a limit. The expense ratios for the U.S. Funds during their most recent
fiscal year ranged from .33% to 4.12%. In connection with newly organized U.S.
Funds, Alliance Capital may also agree to reduce its fee or bear certain
expenses to limit expenses during an initial period of operations.
Cash Management Services
Alliance Capital provides cash management services to individual
investors through a product line of money market fund portfolios and three types
of brokered money market deposit accounts. Net assets in these products as of
December 31, 1999 totaled approximately $32.1 billion.
Net Assets
as of
December 31,
1999
--------------
(in millions)
Money Market Funds:
Alliance Capital Reserves (two portfolios) ....... $ 13,507.1
Alliance Government Reserves (two portfolios) .... 7,336.9
ACM Institutional Reserves (five portfolios) ..... 5,447.2
Alliance Municipal Trust (eight portfolios) ...... 3,862.4
Alliance Money Market Fund (three portfolios) .... 1,274.5
ACM International Reserves (one portfolio) ....... 313.9
Money Market Deposit Accounts (three products) ....... 419.4
Unconsolidated Affiliates (1) ........................ 4.0
----------
Total................................................. $ 32,165.4
==========
(1) Assets under management exclude certain non-discretionary
advisory relationships and reflect 100% of the assets managed
by unconsolidated affiliates.
Alliance Capital also offers a managed assets program, which provides
customers of participating financial intermediaries with a Visa card, access to
automated teller machines and check writing privileges. The program is linked to
the customer's chosen Alliance money market fund. The program serves to enhance
relationships with financial intermediaries and to attract and retain
investments in the Alliance money market funds, as well as to generate fee
income.
Under its investment management agreement with each money market fund,
Alliance Capital is paid an investment management fee equal to 0.50% per annum
of the fund's average net assets except for ACM Institutional Reserves which
pays a fee between 0.20% and 0.45% of its average net assets. In the case of
certain money market funds, the fee is payable at lesser rates with respect to
average net assets in excess of $1.25 billion. For distribution and account
maintenance services rendered in connection with the sale of money market
deposit accounts, Alliance Capital receives fees from the participating banks
that are based on outstanding account balances. Because the money market deposit
account programs involve no investment management functions to be performed by
Alliance Capital, Alliance Capital's costs of maintaining the account programs
are less, on a relative basis, than its costs of managing the money market
funds.
On December 31, 1999 more than 99% of the assets invested in Alliance
Capital's cash management programs were attributable to regional broker-dealers
and other financial intermediaries, with the remainder coming directly from the
public. On December 31, 1999 more than 500 financial intermediaries offered
Alliance Capital's cash management services. Alliance Capital's money market
fund market share (not including deposit products), as computed based on market
data reported by the Investment Company Institute (December 1999), has increased
from 1.42% of total money market fund industry assets at the end of 1994 to
2.01% at December 31, 1999.
13
<PAGE>
Alliance Capital makes payments to financial intermediaries for
distribution assistance and shareholder servicing and administration. Alliance
Capital's money market funds pay fees to Alliance Capital at annual rates of up
to 0.25% of average daily net assets pursuant to "Rule 12b-1" distribution plans
except for Alliance Money Market Fund which pays a fee of up to 0.45% of its
average daily net assets. Such payments are supplemented by Alliance Capital in
making payments to financial intermediaries under the distribution assistance
and shareholder servicing and administration program. During 1999 such
supplemental payments totaled approximately $66.6 million ($58.0 million in
1998). There are 7 employees of Alliance Capital who devote their time
exclusively to marketing Alliance Capital's cash management services.
A principal risk to Alliance Capital's cash management services
business is the acquisition of its participating financial intermediaries by
companies that are competitors or that plan to enter the cash management
services business. As of December 31, 1999 the five largest participating
financial intermediaries were responsible for assets aggregating approximately
$25.3 billion, or 79% of the cash management services total.
Many of the financial intermediaries whose customers utilize Alliance
Capital's cash management services are broker-dealers whose customer accounts
are carried, and whose securities transactions are cleared and settled, by the
Pershing Division ("Pershing") of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ Securities Corporation"), a subsidiary of AXA Financial.
Pursuant to an agreement between Pershing and Alliance Capital, Pershing
recommends that certain of its correspondent firms use Alliance Capital's money
market funds and other cash management products. As of December 31, 1999 DLJ
Securities Corporation and these Pershing correspondents were responsible for
approximately $20.6 billion or 64% of Alliance Capital's total cash management
assets. Pershing may terminate its agreement with Alliance Capital on 180 days'
notice. If the agreement were terminated, Pershing would be under no obligation
to recommend or in any way assist in the sale of Alliance Capital's cash
management products and would be free to recommend or assist in the sale of
competitive products.
Alliance Capital's money market funds are investment companies
registered under the Investment Company Act and are managed under the
supervision of boards of directors or trustees, which include disinterested
directors or trustees who must approve investment management agreements and
certain other matters. The investment management agreements between the money
market funds and Alliance Capital provide for an expense limitation of 1% per
annum or less of average daily net assets. See "Mutual Funds Management -
Investment Management Agreements and Fees".
Shareholder and Administration Services
Alliance Fund Services, Inc. ("AFS"), a wholly-owned subsidiary of
Alliance Capital, provides registrar, dividend disbursing and transfer agency
related services for each U.S. Fund and provides servicing for each U.S. Fund's
shareholder accounts. As of December 31, 1999 AFS employed 482 people. AFS
operates out of offices in Secaucus, New Jersey, and San Antonio, Texas. Under
each servicing agreement AFS receives a monthly fee. Each servicing agreement
must be approved annually by the relevant U.S. Fund's board of directors or
trustees, including a majority of the disinterested directors or trustees, and
may be terminated by either party without penalty upon 60 days' notice.
Most U.S. Funds utilize Alliance Capital and AFS personnel to perform
legal, clerical and accounting services not required to be provided by Alliance
Capital. Payments by a U.S. Fund for these services must be specifically
approved in advance by the U.S. Fund's board of directors or trustees.
Currently, Alliance Capital and AFS are accruing revenues for providing clerical
and accounting services to the U.S. Funds and these closed-end funds at the rate
of approximately $8.6 million per year.
ACM Fund Services S.A. ("ACMFS"), a wholly-owned subsidiary of Alliance
Capital, is the registrar and transfer agent of substantially all of the
Offshore Funds. As of December 31, 1999 ACMFS employed 20 people. ACMFS operates
out of offices in Luxembourg and receives a monthly fee for its registrar and
transfer agency services. Each agreement between ACMFS and an Offshore Fund may
be terminated by either party upon 60 days' notice.
Alliance Capital expects to continue to devote substantial resources to
shareholder servicing because of its importance in competing for assets invested
in mutual funds and cash management services.
YEAR 2000
14
<PAGE>
Alliance Capital's systems and facilities passed into the new millenium
successfully and are continuing to operate without disruption in 2000. Alliance
Capital incurred approximately $43 million in costs related to its Year 2000
initiatives.
COMPETITION
The financial services industry is highly competitive and new entrants
are continually attracted to it. No one or small number of competitors is
dominant in the industry. Alliance Capital is subject to substantial competition
in all aspects of its business. Pension fund, institutional and corporate assets
are managed by investment management firms, broker-dealers, banks and insurance
companies. Many of these financial institutions have substantially greater
resources than Alliance Capital. Alliance Capital competes with other providers
of institutional investment products and services primarily on the basis of the
range of investment products offered, the investment performance of such
products and the services provided to clients. Based on an annual survey
conducted by Pensions & Investments, as of December 31, 1998 Alliance Capital
was ranked 11th out of 754 managers based on U.S. tax-exempt assets under
management, 5th out of the 20 largest managers of international index assets,
7th out of the 25 largest managers of domestic equity index funds and 12th out
of the 25 largest domestic bond index managers.
Many of the firms competing with Alliance Capital for institutional
clients also offer mutual fund shares and cash management services to individual
investors. Competitiveness in this area is chiefly a function of the range of
mutual funds and cash management services offered, investment performance,
quality in servicing customer accounts and the capacity to provide financial
incentives to financial intermediaries through distribution assistance and
administrative services payments funded by "Rule 12b-1" distribution plans and
the investment adviser's own resources.
CUSTODY AND BROKERAGE
Neither Alliance Capital nor its subsidiaries maintains custody of
client funds or securities, which is maintained by client-designated banks,
trust companies, brokerage firms or other custodians. Custody of the assets of
Alliance Mutual Funds, EQAT and money market funds is maintained by custodian
banks and central securities depositories.
Alliance Capital generally has the discretion to select the brokers or
dealers to be utilized to execute transactions for client accounts.
Broker-dealers affiliated with AXA Financial and Equitable effect transactions
for client accounts only if the use of the broker-dealers has been specifically
authorized or directed by the client.
REGULATION
Alliance Capital, Alliance Holding, Albion Alliance, ACFG and Alliance
are investment advisers registered under the Investment Advisers Act. Each U.S.
Fund is registered with the Securities and Exchange Commission ("SEC") under the
Investment Company Act and the shares of most U.S. Funds are qualified for sale
in all states in the United States and the District of Columbia, except for U.S.
Funds offered only to residents of a particular state. AFS is registered with
the SEC as a transfer agent and AFD is registered with the SEC as a
broker-dealer. AFD is subject to minimum net capital requirements ($8.4 million
at December 31, 1999) imposed by the SEC on registered broker-dealers and had
aggregate regulatory net capital of $14.2 million at December 31, 1999.
The relationships of Equitable and its insurance company subsidiary
with Alliance Capital are subject to applicable provisions of the New York
Insurance Law and regulations. Certain of the investment advisory agreements and
ancillary administrative service agreements between Equitable and its insurance
company subsidiary and Alliance Capital are subject to disapproval by the New
York Superintendent of Insurance within a prescribed notice period. Under the
New York Insurance Law and regulations, the terms of these agreements are to be
fair and equitable, charges or fees for services performed are to be reasonable,
and certain other standards must be met. Fees must be determined either with
reference to fees charged to other clients for similar services or, in certain
cases, which include the ancillary service agreements, based on cost
reimbursement.
Alliance Capital's assets under management and revenues derived from
the general accounts of Equitable and its insurance company subsidiary are
directly affected by the investment policies for the general accounts. Among the
numerous factors influencing general account investment policies are regulatory
factors, such as (i) laws and regulations that require diversification of the
investment portfolios and limit the amount of investments in certain investment
categories such as below investment grade fixed maturities, equity real estate
and equity interests, (ii) statutory investment valuation reserves, and (iii)
15
<PAGE>
risk-based capital guidelines for life insurance companies approved by the
National Association of Insurance Commissioners. These policies have recently
resulted in the shifting of general account assets managed by Alliance Capital
into categories with lower management fees.
All aspects of Alliance Capital's business are subject to various
federal and state laws and regulations and to the laws in the foreign countries
in which Alliance Capital's subsidiaries conduct business. These laws and
regulations are primarily intended to benefit clients and Alliance Mutual Fund
shareholders and generally grant supervisory agencies broad administrative
powers, including the power to limit or restrict the carrying on of business for
failure to comply with such laws and regulations. In such event, the possible
sanctions which may be imposed include the suspension of individual employees,
limitations on engaging in business for specific periods, the revocation of the
registration as an investment adviser, censures and fines.
EMPLOYEES
As of December 31, 1999 Alliance Capital and its subsidiaries employed
2,396 employees, including 277 investment professionals, of whom 140 are
portfolio managers, 122 are research analysts and 15 are order placement
specialists. The average period of employment of these professionals with
Alliance Capital is approximately 8 years and their average investment
experience is approximately 14 years. Alliance Capital considers its employee
relations to be good.
SERVICE MARKS
Alliance Capital has registered a number of service marks with the U.S.
Patent and Trademark Office, including an "A" design logo and the combination of
such logo and the words "Alliance" and "Alliance Capital". Each of these service
marks was registered in 1986.
Item 2. Properties
Alliance Capital's and Alliance Holding's principal executive offices
at 1345 Avenue of the Americas, New York, New York are occupied pursuant to a
lease which extends until 2016. Alliance Capital and Alliance Holding currently
occupy approximately 407,000 square feet at this location. Alliance Capital also
occupies approximately 114,097 square feet at 135 West 50th Street, New York,
New York under leases expiring in 2016. Alliance Capital also occupies
approximately 4,594 square feet at 709 Westchester Avenue and 21,057 square feet
at 925 Westchester Avenue, White Plains, New York under leases expiring in 2004.
Alliance Capital and its subsidiaries, AFD and AFS, occupy approximately 134,261
square feet of space in Secaucus, New Jersey pursuant to a lease which extends
until 2016, approximately 92,067 square feet of space in San Antonio, Texas
pursuant to a lease which extends until 2009, and approximately 59,033 square
feet at the Glenmaura Corporate Centre, Scranton, Pennsylvania, under a lease
expiring in 2004.
Alliance Capital also leases space in San Francisco, California;
Chicago, Illinois; Greenwich, Connecticut; Minneapolis, Minnesota; and
Beechwood, Ohio, and its subsidiaries and affiliates lease space in Windhoek,
Namibia; London, England; Paris, France; Tokyo, Japan; Sydney, Australia;
Toronto, Canada; Luxembourg; Singapore; Manama, Bahrain; Mumbai, New Delhi,
Bangalore, Pune, Calcutta and Chennai, India; Johannesburg, South Africa; and
Istanbul, Turkey. Subsidiaries and affiliates of Alliance Capital have offices
in Vienna, Austria; Svo Paolo, Brazil; Hong Kong, China; Seoul, Korea;
Warsaw, Poland; Moscow, Russia; Cairo, Egypt; Talinn, Estonia; Harare, Zimbabwe;
Prague, Czech Republic; and Bucharest, Romania.
16
<PAGE>
Item 3. Legal Proceedings
On July 25, 1995, a Consolidated and Supplemental Class Action
Complaint ("Original Complaint") was filed against the Alliance North American
Government Income Trust, Inc. (the "Fund"), Alliance Holding and certain other
defendants affiliated with Alliance Holding alleging violations of federal
securities laws, fraud and breach of fiduciary duty in connection with the
Fund's investments in Mexican and Argentine securities. On September 26, 1996,
the United States District Court for the Southern District of New York granted
the defendants' motion to dismiss all counts of the Original Complaint. On
October 29, 1997, the United States Court of Appeals for the Second Circuit
affirmed that decision.
On October 29, 1996, plaintiffs filed a motion for leave to file an
amended complaint. The principal allegations of the amended complaint are that
(i) the Fund failed to hedge against currency risk despite representations that
it would do so, (ii) the Fund did not properly disclose that it planned to
invest in mortgage-backed derivative securities, and (iii) two advertisements
used by the Fund misrepresented the risks of investing in the Fund. On October
15, 1998, the United States Court of Appeals for the Second Circuit issued an
order granting plaintiffs' motion to file an amended complaint alleging that the
Fund misrepresented its ability to hedge against currency risk and denying
plaintiffs' motion to file an amended complaint alleging that the Fund did not
properly disclose that it planned to invest in mortgage-backed derivative
securities and that certain advertisements used by the Fund misrepresented the
risks of investing in the Fund. On December 1, 1999 the United States District
Court for the Southern District of New York granted defendants' motion for
summary judgement on all claims against all defendants. On December 14 and 15,
1999 the plaintiffs filed motions for reconsideration of the Court's ruling.
These motions are currently pending with the Court.
On March 24, 2000 Alliance Capital announced that a memorandum of
understanding had been signed with the lawyers for the plaintiffs settling this
action. Under the settlement Alliance Capital will permit Fund shareholders to
invest up to $250 million in Alliance Mutual Funds free of initial sales
charges. Like all class action settlements, the settlement is subject to court
approval.
Alliance Capital assumed all of Alliance Holding's liabilities in
respect of this litigation in connection with the Reorganization. Alliance
Capital and Alliance Holding believe that the allegations in the amended
complaint are without merit and intend to vigorously defend against this action.
While the ultimate outcome of this matter cannot be determined at this time,
management of Alliance Capital and Alliance Holding does not expect that it will
have a material adverse effect on Alliance Capital's or Alliance Holding's
results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
Neither Alliance Capital nor Alliance Holding submitted a matter to a
vote of security holders during the fourth quarter of 1999.
17
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market for the Alliance Capital Units and the Alliance Holding Units
There is no established public trading market for the Alliance Capital
Units. The Alliance Capital Units are subject to very significant liquidity
restrictions. In general, transfers of Alliance Capital Units will be allowed
only with the written consent of both Equitable and the General Partner. Either
Equitable or the General Partner may withhold its consent to a transfer in its
sole discretion, for any reason. Generally, neither Equitable nor the General
Partner will permit any transfer that it believes would create a risk that
Alliance Capital would be treated as a corporation for tax purposes.
On March 1, 2000 there were approximately 671 Alliance Capital
Unitholders of record.
The Alliance Holding Units are traded on the NYSE. The high and low
sale prices on the NYSE during each quarter of Alliance Holding's two most
recent fiscal years were as follows:
1999 High Low
---- ---- ---
First Quarter 26 7/8 24 1/2
Second Quarter 32 5/16 24 1/8
Third Quarter 33 7/16 25
Fourth Quarter 34 24 5/16
1998 High Low
---- ---- ---
First Quarter 27 7/8 18 13/16
Second Quarter 29 23 7/8
Third Quarter 28 19 5/8
Fourth Quarter 27 1/2 19 3/4
On February 19, 1998, Alliance Holding declared a two for one Alliance
Holding Unit split payable to Unitholders of record on March 11, 1998. The high
and low sale prices above have been adjusted to reflect the Alliance Holding
Unit split to the extent necessary.
On March 1, 2000 the closing price of the Alliance Holding Units on the
NYSE was $37.125 per Unit. As of March 1, 2000 there were approximately 1,659
Alliance Holding Unitholders of record.
18
<PAGE>
Cash Distributions
Each of Alliance Capital and Alliance Holding distributes on a
quarterly basis all of its Available Cash Flow (as defined in its respective
Partnership Agreement). Prior to the Reorganization, Alliance Holding's
Available Cash Flow was derived from the operations now conducted by Alliance
Capital. Subsequent to the completion of the Reorganization in the fourth
quarter of 1999, when Alliance Capital commenced operations, Alliance Holding's
principal sources of income and cash flow are attributable to its ownership of
approximately 42% of the outstanding Alliance Capital Units.
On February 14, 2000 Alliance Capital paid a distribution of Available
Cash Flow in respect of the fourth quarter of 1999 and a Special Distribution in
the aggregate amount of $0.91 per Alliance Capital Unit.
During its two most recent fiscal years Alliance Holding made the
following distributions of Available Cash Flow:
Quarter During 1999 With
Respect to Which a Cash Amount of Cash
Distribution Was Paid from Distribution Per
Available Cash Flow Alliance Holding Unit Payment Date
---------------------------- -------------------- -------------
First Quarter $ 0.54 May 24, 1999
Second Quarter 0.54 August 16, 1999
Third Quarter 0.56 November 15, 1999
Fourth Quarter 0.85 February 14, 2000
------
$ 2.49
======
Quarter During 1998 With
Respect to Which a Cash Amount of Cash
Distribution Was Paid from Distribution Per
Available Cash Flow Alliance Holding Unit Payment Date
---------------------------- -------------------- -------------
First Quarter $ 0.38 May 18, 1998
Second Quarter 0.42 August 18, 1998
Third Quarter 0.39 November 23, 1998
Fourth Quarter 0.43 February 23, 1999
------
$ 1.62
======
On February 19, 1998 Alliance Holding declared a two for one Alliance
Holding Unit split payable to Unitholders of record on March 11, 1998. The cash
distribution per Alliance Holding Unit amounts above have been adjusted to
reflect the Unit split to the extent necessary.
Item 6. Selected Financial Data
The Selected Consolidated Financial Data of Alliance Capital Management
L.P. which appears on page 47 of the 1999 Annual Report is incorporated by
reference in this Annual Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations which appears on pages 48 through 62 of the 1999 Annual Report is
incorporated by reference in this Annual Report on Form 10-K.
19
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The quantitative and qualitative disclosures about market risk
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations on pages 61 through 62 of the 1999 Annual Report are
incorporated by reference in this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of Alliance Capital Management
L.P. and subsidiaries and the report thereon by KPMG LLP which appear on pages
63 through 84 of the 1999 Annual Report are incorporated by reference in this
Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Neither Alliance Capital nor Alliance Holding had any changes in or
disagreements with accountants on accounting or financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
General Partner
Alliance Capital's and Alliance Holding's activities are managed and
controlled by Alliance as General Partner and Alliance Capital and Alliance
Holding Unitholders do not have any rights to manage or control Alliance Capital
or Alliance Holding. The General Partner has agreed that it will conduct no
active business other than managing Alliance Capital and Alliance Holding,
although it may make certain investments for its own account.
The General Partner does not receive any compensation from Alliance
Capital or Alliance Holding for services rendered to Alliance Capital or
Alliance Holding as General Partner. The General Partner holds a 1% general
partnership interest in Alliance Capital and 100,000 units of general
partnership interest in Alliance Holding. As of March 1, 2000 Equitable, ACMC
and ECMC, affiliates of the General Partner, held 95,855,945 Alliance Capital
Units and 1,544,356 Alliance Holding Units.
The General Partner is reimbursed by Alliance Capital for all expenses
incurred by it in carrying out its activities as General Partner of Alliance
Capital and Alliance Holding, including compensation paid by the General Partner
to its directors and officers (to the extent such persons are not compensated
directly as employees of Alliance Capital) and the cost of directors and
officers liability insurance obtained by the General Partner. The General
Partner was not reimbursed for any such expenses in 1999 except for directors'
fees and directors and officers liability insurance.
20
<PAGE>
Directors and Executive Officers of the General Partner
The directors and executive officers of the General Partner are as
follows:
Name Age Position
---- --- --------
Dave H. Williams.............. 67 Chairman of the Board and
Director
Luis Javier Bastida........... 54 Director
Donald H. Brydon.............. 54 Director
Bruce W. Calvert.............. 53 Director, Vice Chairman and
Chief Executive Officer
John D. Carifa................ 55 Director, President and Chief
Operating Officer
Henri de Castries............. 45 Director
Kevin C. Dolan................ 46 Director
Denis Duverne................. 47 Director
Alfred Harrison............... 62 Director and Vice Chairman
Herve Hatt.................... 35 Director
Michael Hegarty............... 55 Director
Benjamin D. Holloway.......... 75 Director
Edward D. Miller.............. 59 Director
Peter D. Noris................ 44 Director
Frank Savage.................. 61 Director
Stanley B. Tulin.............. 50 Director
Reba W. Williams.............. 63 Director
Robert B. Zoellick............ 46 Director
David R. Brewer, Jr........... 54 Senior Vice President and
General Counsel
Robert H. Joseph, Jr.......... 52 Senior Vice President and
Chief Financial Officer
Mr. Williams joined Alliance in 1977 and has been the Chairman of the
Board since that time. He was elected a Director of Equitable on March 21, 1991
and was elected to the AXA Financial Board of Directors in May of 1992. He
served as a Senior Executive Vice President of AXA from January 1997 through
January 2000. AXA, AXA Financial and Equitable are parents of Alliance Capital
and Alliance Holding. Mr. Williams is the husband of Mrs. Reba W. Williams, a
Director of Alliance.
Mr. Bastida was elected a Director of Alliance in February 1995. He is
Head of Global Asset Management and Private Banking and a member of the
Executive Committee of Banco Bilbao Vizcaya, Argentaria S.A. ("BBVA"). Mr.
Bastida has been with BBVA since 1976. Prior to that he worked for General
Electric. He is Chairman of Finanzia, the Specialized Finance subsidiary of BBVA
and of Canal International Holding, and a Director of Privanza, the Private Bank
of the same group.
Mr. Brydon was elected a Director of Alliance in May 1997. He is
Chairman and Chief Executive Officer of AXA Investment Managers S.A. Mr. Brydon
was formerly Barclays Group's Deputy Chief Executive of BZW, the investment
banking division of Barclays Plc., and was a member of the Executive Committee
of Barclays. Before joining BZW, Mr. Brydon was the Chief Executive and Chairman
of Barclays de Zoete Wedd Investment Management Ltd. (BZWIM) and had served in
various executive capacities within the Barclays organization including Barclays
Investment Management Ltd. and Barclays Bank. Mr. Brydon serves as director of
Allied Domecq Plc., Nycomed Amersham Plc., Edinburgh UK Index Trust Plc. and
Edinburgh Inca Trust. He also serves as a member of the Executive Committee of
the UK's Institutional Fund Managers Association. In addition, Mr. Brydon serves
as Advisor of British Aerospace Pension Fund Investment Management Ltd. AXA
Investment Managers S.A. is a subsidiary of AXA, a parent of Alliance Capital
and Alliance Holding.
Mr. Calvert joined Alliance in 1973 as an equity portfolio manager and
was elected Chief Executive Officer on January 6, 1999. He served as Chief
Investment Officer from May 3, 1993 until January 6, 1999. He was elected Vice
21
<PAGE>
Chairman on May 3, 1993. From 1986 to 1993 he was an Executive Vice President
and from 1981 to 1986 he was a Senior Vice President. He was elected a Director
of Alliance in 1992.
Mr. Carifa joined Alliance in 1971 and was elected President and Chief
Operating Officer on May 3, 1993. He was the Chief Financial Officer from 1973
until 1994. He was an Executive Vice President from 1986 to 1993 and he was a
Senior Vice President from 1980 to 1986. He was elected a Director of Alliance
in 1992.
Mr. de Castries was elected a Director of Alliance in October 1993.
Since January 2000, he has been Vice Chairman of AXA's Management Board. Prior
thereto, he was Senior Executive Vice President Financial Services and Life
Insurance Activities of AXA in the United States, Germany, the United Kingdom
and Benelux from 1996 to 2000; Executive Vice President Financial Services and
Life Insurance Activities of AXA from 1993 to 1996; General Secretary of AXA
from 1991 to 1993; and Central Director of Finances of AXA from 1989 to 1991.
Mr. de Castries is also a Director or Officer of various subsidiaries and
affiliates of the AXA Group and a Director of AXA Financial, Equitable and
Donaldson Lufkin & Jenrette, Inc. ("DLJ"). Mr. de Castries was elected Vice
Chairman of AXA Financial on February 14, 1996 and was elected Chairman of AXA
Financial, effective April 1, 1998. AXA, AXA Financial and Equitable are parents
of Alliance Capital and Alliance Holding. DLJ and Equitable are subsidiaries of
AXA Financial.
Mr. Dolan was elected a Director of Alliance in May 1995. He was Chief
Executive Officer of AXA Investment Managers Paris, a subsidiary of AXA until
September 1999 and is now the Senior Executive Vice President for AXA Investment
Managers on a global basis. Mr. Dolan has been with AXA since 1993. From 1983 to
1993 Mr. Dolan was Deputy General Manager of BFCE and CEO of BFCE Investment
Corporation. AXA is a parent of Alliance Capital and Alliance Holding.
Mr. Duverne was elected a Director of Alliance in February 1996. Mr.
Duverne is Group Executive Vice President-Finance, Control and Strategy of AXA,
which he joined as Senior Vice President in 1995. Prior to that Mr. Duverne was
a member of the Executive Committee, Operations of Banque Colbert from 1992 to
1995. Mr. Duverne was Secretary General of Compagnie Financiere IBI from 1991 to
1992. Mr. Duverne worked for the French Ministry of Finance serving as Deputy
Assistant Secretary for Tax Policy from 1988 to 1991 and director of the
Corporate Taxes Department from 1986 to 1988. He is also a Director of various
subsidiaries and affiliates of the AXA Group. Mr. Duverne is also a Director of
DLJ and Equitable. AXA and Equitable are parents of Alliance Capital and
Alliance Holding. DLJ and Equitable are subsidiaries of AXA Financial.
Mr. Harrison joined Alliance in 1978 and was elected Vice Chairman on
May 3, 1993. Mr. Harrison is in charge of Alliance Capital's Minneapolis office
and is a senior portfolio manager. He was an Executive Vice President from 1986
to 1993 and a Senior Vice President from 1978 to 1986. He was elected a Director
of Alliance in 1992.
Mr. Hatt was elected a Director of Alliance in May 1998. He has been
Senior Vice President - Asset Management Activities and Group Strategic Planning
of AXA since March 1998. From 1992 to 1998 he was a senior engagement manager
with McKinsey & Company, the management consultants, in London and in Paris. AXA
is a parent of Alliance Capital and Alliance Holding.
Mr. Hegarty was elected a Director of Alliance in May 1998. He is
Senior Vice Chairman, Chief Operating Officer and a Director of AXA Financial.
Mr. Hegarty joined AXA Financial in 1998. He previously served as Vice Chairman
of the Chase Manhattan Corporation and the Chase Manhattan Bank. In addition to
serving as a Director of Alliance and AXA Financial, Mr. Hegarty is a Director
of DLJ. AXA Financial and Equitable are parents of Alliance Capital and Alliance
Holding. DLJ and Equitable are subsidiaries of AXA Financial.
Mr. Holloway was elected a Director of Alliance in November 1987. He is
a consultant to The Continental Companies. From September 1988 until his
retirement in March 1990, Mr. Holloway was a Vice Chairman of Equitable. He
served as an Executive Vice President of Equitable from 1979 until 1988. Prior
to his retirement he served as a Director and Officer of various Equitable
subsidiaries and was also a Director of DLJ until March 1990. Mr. Holloway was a
Director of Rockefeller Center Properties, Inc. and is a Director Emeritus of
The Duke University Management Corporation, Chairman of The Touro National
Heritage Trust, a Regent of the Cathedral of St. John the Divine and a Trustee
of Duke University (Emeritus) and the American Academy in Rome (Emeritus).
22
<PAGE>
Mr. Miller was elected a Director of Alliance in July 1997. He has been
a Director, President and Chief Executive Officer of AXA Financial since August
1997. He was President of Equitable from August 1997 to January 1998 and has
been Chairman of Equitable since January 1998 and Chief Executive Officer and a
Director of Equitable since August 1997. He became a member of AXA's Management
Board in January 2000. He was Senior Executive Vice President of AXA until
becoming a member of AXA's Management Board. From 1996 to 1997, he was Senior
Vice Chairman of Chase Manhattan Corporation. Prior thereto, he was President of
Chemical Bank (which merged with Chase in 1996) from 1994 to 1996 and Vice
Chairman from 1991 to 1994. He is also a Director of DLJ, AXA Canada and KeySpan
Energy Corporation, formed as a result of the merger of Long Island Lighting
Company and Brooklyn Union Gas Co. AXA, AXA Financial and Equitable are parents
of Alliance Capital and Alliance Holding. DLJ and Equitable are subsidiaries of
AXA Financial.
Mr. Noris was elected a Director of Alliance in July 1995. Since 1995
Mr. Noris has been Executive Vice President and Chief Investment Officer of AXA
Financial. Since 1995 Mr. Noris has been the Executive Vice President and Chief
Investment Officer of Equitable. Prior to that he was Vice President -
Investment Strategy for Salomon Brothers from 1992 to 1995. From 1984 to 1992
Mr. Noris was a Principal in the Fixed Income and Equity Divisions of Morgan
Stanley Group Inc. AXA Financial and Equitable are parents of Alliance Capital
and Alliance Holding.
Mr. Savage was elected a Director of Alliance in May 1993. He has been
Chairman of Alliance Capital Management International, a division of Alliance
Capital, since May 1994. Mr. Savage is a Director of ACFG, a subsidiary of
Alliance Capital, and was Chairman of ACFG from July 1993 to August 1996. Prior
to that, he was with ECMC, serving as Vice Chairman from June 1986 to April
1992, and Chairman from April 1992 to July 1993. In addition, Mr. Savage is a
Director of Lockheed Martin Corporation, Qualcomm Inc., and Enron Corp.
Mr. Tulin was elected a Director of Alliance in July 1997. He is Vice
Chairman and Chief Financial Officer of AXA Financial and Director, Vice
Chairman and Chief Financial Officer of Equitable. Mr. Tulin was elected a
Director of DLJ in June 1997. Mr. Tulin was formerly Coopers & Lybrand's
Co-Chairman of the Insurance Industry Practice. Before joining Coopers &
Lybrand, Mr. Tulin was with Milliman and Robertson for 17 years. Mr. Tulin is a
Fellow of the Society of Actuaries, a Board member of the American Academy of
Actuaries and a frequent speaker at actuarial and insurance industry
conferences. He is a member of the Board of Directors and Treasurer of the
Jewish Theological Seminary; Treasurer of Brandeis University Graduate School of
International Economics and Finance; and a Board Member of the New York City
Opera. AXA Financial and Equitable are parents of Alliance Capital and Alliance
Holding. DLJ and Equitable are subsidiaries of AXA Financial.
Mrs. Williams was elected a Director of Alliance in October 1993. She
is currently the Director of Special Projects of Alliance Capital. She serves on
the Boards of Directors of the India Liberalisation Fund, The Spain Fund, The
Austria Fund and The Southern Africa Fund. Mrs. Williams, who has worked at
McKinsey & Company and as a securities analyst at Mitchell, Hutchins, Inc., has
a Masters in Business Administration and a Ph.D. in Art History. Mrs. Williams
is the wife of Mr. Dave H. Williams, Chairman of the Board and a Director of
Alliance.
Mr. Zoellick was elected a Director of Alliance in February 1997. He is
a Resident Fellow and member of the Board of The German Marshall Fund of the
United States (a non-profit foundation), a Research Scholar at the Belfer Center
at Harvard University, and a Senior International Advisor at Goldman, Sachs &
Co. In 1999, Mr. Zoellick was the President and CEO of the Center for Strategic
and International Studies, an independent non-profit policy institute. He served
as the John M. Olin Professor in National Security Affairs at the U.S. Naval
Academy in 1997-98. From 1993 through 1997, Mr. Zoellick was an Executive Vice
President at Fannie Mae, the largest investor in home mortgages in the U.S.
Before joining Fannie Mae, he was Deputy Chief of Staff of the White House and
Assistant to the President from 1992 to 1993. From 1989 to 1992, Mr. Zoellick
was the Counselor of the State Department and later also Under Secretary of
State for Economics. From 1985 to 1988, Mr. Zoellick served at the Department of
Treasury in a number of posts, including Counselor to Secretary James A. Baker
III. He serves on the boards of Jones Intercable and Said Holdings and the
Advisory Board of Enron Corp. Mr. Zoellick also serves on the boards of numerous
non-profit entities.
Mr. Brewer joined Alliance in 1987 and has been Senior Vice President
and General Counsel since 1991. From 1987 until 1990 Mr. Brewer was Vice
President and Assistant General Counsel of Alliance.
Mr. Joseph joined Alliance in 1984 and has been Senior Vice President
and Chief Financial Officer since December 1994. He was Senior Vice President
and Controller from 1989 until January 1994 and Senior Vice President-Finance
from
23
<PAGE>
January 1994 until December 1994. From 1986 until 1989 Mr. Joseph was Vice
President and Controller of Alliance and from 1984 to 1986 Mr. Joseph was a Vice
President and the Controller of AFS, a subsidiary of Alliance Capital.
Certain executive officers of Alliance are also directors or trustees
and officers of various Alliance Mutual Funds and are directors and officers of
certain of Alliance Capital's subsidiaries and affiliates.
All directors of the General Partner hold office until the next annual
meeting of the stockholder of the General Partner and until their successors are
elected and qualified. All officers of the General Partner serve at the
discretion of the General Partner's Board of Directors.
The General Partner has an Audit Committee composed of its independent
directors Mr. Holloway and Mr. Zoellick. The Audit Committee reports to the
Board of Directors with respect to the selection and terms of engagement of the
independent auditors of Alliance Capital and Alliance Holding, with respect to
the Year 2000 initiative and certain other matters. The Audit Committee also
reviews various matters relating to the accounting and auditing policies and
procedures of Alliance Capital and Alliance Holding. The Audit Committee held 4
meetings in 1999.
The General Partner has a Board Compensation Committee composed of
Messrs. Williams, Holloway and Miller. The Board Compensation Committee is
responsible for compensation and compensation related matters, including, but
not limited to, responsibility and authority for determining bonuses,
contributions and awards under most employee incentive plans or arrangements,
amending or terminating such plans or arrangements or any welfare benefit plan
or arrangement or adopting any new incentive, fringe benefit or welfare benefit
plan or arrangement. The Option Committee, consisting of Mr. Holloway and Mr.
Zoellick, is responsible for granting options under Alliance Capital's 1993 Unit
Option Plan. The 1997 Option Committee, consisting of Messrs. Williams,
Holloway, Miller and Zoellick, is responsible for granting options under
Alliance Capital's 1997 Long Term Incentive Plan. The Unit Option and Unit Bonus
Committee, consisting of Messrs. Holloway and Miller, is responsible for
granting awards under Alliance Capital's Unit Bonus Plan. The Board Compensation
Committee, Option Committee, Unit Option and Unit Bonus Committee and 1997
Option Committee consult with a Management Compensation Committee consisting of
Messrs. Williams, Calvert, Carifa and Harrison with respect to matters within
their authority. The Century Club Plan Committee, consisting of Messrs. Carifa
and Michael J. Laughlin, Executive Vice President of the General Partner and
Chairman of the Board of AFD, is responsible for granting awards under Alliance
Capital's Century Club Plan.
The General Partner pays directors who are not employees of Alliance
Capital, Alliance Holding, AXA Financial or any affiliate of AXA Financial an
annual retainer of $18,000 plus $1,000 per meeting attended of the Board of
Directors and $500 per meeting of a committee of the Board of Directors not held
in conjunction with a Board of Directors meeting. Alliance Capital reimburses
Messrs. Bastida, Brydon, de Castries, Dolan, Duverne, Hatt, Holloway and
Zoellick for certain expenses incurred in attending Board of Directors'
meetings. Other directors are not entitled to any additional compensation from
the General Partner for their services as directors. The Board of Directors
meets quarterly.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
General Partner's directors and executive officers, and persons who own more
than 10% of the Alliance Holding Units to file with the SEC initial reports of
ownership and reports of changes in ownership of Alliance Holding Units. To the
best of Alliance Holding's knowledge, during the year ended December 31, 1999
all Section 16(a) filing requirements applicable to its executive officers,
directors and 10% beneficial owners were complied with except that a Statement
of Changes in Beneficial Ownership on Form 4 was filed late on behalf of Mr.
Michael Hegarty, a Director of Alliance, in respect of his purchase of Alliance
Holding Units.
24
<PAGE>
Item 11. Executive Compensation
The following Summary Compensation Table sets forth all plan and
non-plan compensation awarded to, earned by or paid to the Chairman of the Board
and each of the four most highly compensated executive officers of the General
Partner at the end of 1999 ("Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term Compensation
-------------------- ---------
Annual Compensation Awards Payouts
----------------------------------- -------------------- --------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted All
Compen- Stock LTIP other
sation Award(s) Options/ Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($) (1) ($) (#Units) ($) (1) ($) (2)
- --------------------------- ---- ---------- --------- ------- --- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dave H. Williams 1999 274,996 $5,500,000 --------- 0 0 $ 0 419,581
Chairman of the Board 1998 274,976 4,500,000 ---------
1997 274,976 3,000,000 --------- 0 0 835,027
0
John D. Carifa 1999 269,232 7,200,000 6,601,411 0 0 0 1,506,082
President & Chief Operating 1998 250,000 5,000,000 --------- 0 500,000 0 1,209,640
Officer 1997 250,000 4,000,000 --------- 0 0 0 686,979
Bruce W. Calvert 1999 269,232 6,200,000 --------- 0 0 0 1,506,856
Vice Chairman & 1998 250,000 4,500,000 264,273 0 500,000 0 1,208,311
Chief Executive Officer 1997 250,000 4,000,000 --------- 0 0 0 687,532
Robert H. Joseph, Jr. 1999 172,692 738,000 610,429 0 15,000 0 283,348
Senior Vice President & 1998 163,846 591,500 257,798 0 20,000 0 187,737
Chief Financial Officer 1997 160,000 494,000 --------- 0 20,000 0 110,335
David R. Brewer, Jr. 1999 172,692 741,500 879,670 0 15,000 0 283,348
Senior Vice President 1998 163,846 595,000 199,448 0 20,000 0 187,737
& General Counsel 1997 157,692 495,500 104,646 0 20,000 0 110,037
</TABLE>
(1) Perquisites and personal benefits are not included in column (e) if the
aggregate amount did not exceed the lesser of either $50,000 or 10% of
the total annual salary and bonus reported in columns (c) and (d).
Column (e) for 1999 includes for Mr. Carifa, among other perquisites
and personal benefits, $6,525,000 representing the dollar value of the
difference between the exercise price and fair market value of Alliance
Holding Units acquired as a result of the exercise of options and
$42,000 for personal tax services.
Column (e) for 1999 includes for Mr. Joseph, among other perquisites
and personal benefits, $588,246 representing the dollar value of the
difference between the exercise price and fair market value of Alliance
Holding Units acquired as a result of the exercise of options and
$9,000 for personal tax services.
Column (e) for 1999 includes for Mr. Brewer, among other perquisites
and personal benefits, $860,222 representing the dollar value of the
difference between the exercise price and fair market value of Alliance
Holding Units acquired as a result of the exercise of options and
$6,000 for personal tax services.
25
<PAGE>
Column (e) for 1998 includes for Mr. Calvert, among other perquisites
and personal benefits, $247,323 for costs, including housing,
cost-of-living adjustment, tax equalization and car allowance, for a
temporary assignment in London and $16,950 for personal tax services.
Column (e) for 1998 includes for Mr. Joseph, among other perquisites
and personal benefits, $240,000 representing the dollar value of the
difference between the exercise price and fair market value of Alliance
Holding Units acquired as a result of the exercise of options and
$9,000 for personal tax services.
Column (e) for 1998 and 1997 includes for Mr. Brewer, among other
perquisites and personal benefits, $187,000 and $98,000 respectively,
representing the dollar value of the difference between the exercise
price and the fair market value of Alliance Holding Units acquired as a
result of the exercise of options and, for 1998, $5,700 for personal
tax services.
(2) Column (i) includes award amounts vested and earnings credited in 1997,
1998 and 1999 in respect of the Alliance Partners Compensation Plan.
Column (i) does not include any amounts in respect of awards made in
1999 in respect of the Alliance Partners Compensation Plan since none
of these awards have vested and no earnings have been credited in
respect of the 1999 awards.
Column (i) includes the following amounts for 1999:
<TABLE>
<CAPTION>
Earnings Vesting of Awards
Accrued Vesting of Awards and Accrued Earnings Profit
On Partners and Accrued Earnings Under Alliance Sharing Term Life
Plan Under Capital Partners Plan Insurance
Balances Accumulation Plan Compensation Plan Contribution Premiums Total
-------- ----------------- ----------------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Dave H. Williams $ 14,669 $ 83,581 $ 281,141 $ 23,000 $ 17,190 $ 419,581
John D. Carifa 5,735 33,442 1,438,366 23,000 5,539 1,506,082
Bruce W. Calvert 5,060 34,891 1,438,366 23,000 5,539 1,506,856
Robert H. Joseph, Jr. 0 0 256,862 23,000 3,486 283,348
David R. Brewer, Jr. 0 0 256,862 23,000 3,486 283,348
</TABLE>
26
<PAGE>
Option Grants in 1999
The table below shows information regarding grants of options made to
the Named Executive Officers under the 1993 Unit Option Plan and the 1997 Long
Term Incentive Plan ("Alliance Capital Option Plans") during 1999. The amounts
shown for each of the Named Executive Officers as potential realizable values
are based on assumed annualized rates of appreciation of five percent and ten
percent over the full ten-year term of the options, which would result in
Alliance Holding Unit prices of approximately $48.77 and $77.65, respectively.
The amounts shown as potential realizable values for all Alliance Holding
Unitholders represent the corresponding increases in the market value of
72,259,583 outstanding Alliance Holding Units held by all Alliance Holding
Unitholders as of December 31, 1999, which would total approximately $1.4
billion and $3.4 billion, respectively. No gain to the optionees is possible
without an increase in Alliance Holding Unit price which will benefit all
Alliance Holding Unitholders proportionately. These potential realizable values
are based solely on assumed rates of appreciation required by applicable SEC
regulations. Actual gains, if any, on option exercises and Alliance Holding
Unitholdings are dependent on the future performance of the Alliance Holding
Units. There can be no assurance that the potential realizable values shown in
this table will be achieved.
Option Grants In 1999
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed
Individual Grants (1) Annual Rates of Unit Price
Appreciation for Option Term
---------------------------------------------------------------------------------------------------
% of total
Number of Options
Securities Granted to
Underlying Employees in Exercise
Options Granted Fiscal Year Price Expiration 5% 10%
Name (#) (2) ($/Unit) Date ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dave H. Williams 0 N/A N/A N/A N/A N/A
John D. Carifa 0 N/A N/A N/A N/A N/A
Bruce W. Calvert 0 N/A N/A N/A N/A N/A
Robert H. Joseph, Jr. 15,000 .8 30.25 12/06/09 277,800 711,000
David R. Brewer, Jr. 15,000 .8 30.25 12/06/09 277,800 711,000
</TABLE>
(1) Options on Alliance Holding Units are awarded at the fair market value of
Alliance Holding Units at the date of award and become exercisable in 20%
increments commencing one year from such date if the optionee has not died
or terminated employment. Such options lapse at the earliest of ten years
after award, three months after the optionee's normal termination of
employment or disability, six months after the optionee's death, or at the
time of the optionee's termination of employment otherwise than normally.
(2) Options in respect of 2,000,000 Alliance Holding Units were granted in 1999.
27
<PAGE>
Aggregated Option Exercises in 1999 and 1999 Year-End Option Values
The following table summarizes for each of the Named Executive Officers
the number of options exercised during 1999, the aggregate dollar value realized
upon exercise, the total number of Alliance Holding Units subject to unexercised
options held at December 31, 1999, and the aggregate dollar value of
in-the-money, unexercised options held at December 31, 1999. Value realized upon
exercise is the difference between the fair market value of the underlying
Alliance Holding Units on the exercise date and the exercise price of the
option. Value of unexercised, in-the-money options at fiscal year-end is the
difference between its exercise price and the fair market value of the
underlying Alliance Holding Units on December 31, 1999, which was $29.9375 per
Alliance Holding Unit. These values have not been, and may never be, realized.
The underlying options have not been, and may never be, exercised, and actual
gains, if any, on exercise will depend on the value of Alliance Holding Units on
the date of exercise. There can be no assurance that these values will be
realized.
Aggregated Option Exercises In 1999
And December 31, 1999 Option Values
<TABLE>
<CAPTION>
Number of Alliance Value of Unexercised
Holding Units In-the-Money Options
Underlying Unexpired at December 31, 1999 ($) (1)
Options Value Options at December 31, 1999
Exercised Realized ----------------------------------- ------------------------------------
Name (# Units) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------ ---------------- ----------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Dave H. Williams 0 N/A 0 0 0 0
John D. Carifa 400,000 6,525,000 380,000 470,000 6,065,000 2,875,625
Bruce W. Calvert 0 N/A 740,000 460,000 13,255,000 2,673,125
Robert H. Joseph, Jr. 30,620 588,246 120,500 63,000 2,295,070 571,875
David R. Brewer, Jr. 34,058 860,222 148,750 59,000 3,046,711 490,875
- -------------------------- ------------ ---------------- ----------------- ----------------- ------------------ -----------------
</TABLE>
(1) In-the-Money Options are those where the fair market value of the
underlying Alliance Holding Units exceeds the exercise price of the option.
The Named Executive Officers hold no other options in respect of the
Alliance Holding Units or the Alliance Capital Units.
Options to acquire Alliance Holding Units are granted by Alliance
Capital to its employees. Upon exercise of options, Alliance Holding exchanges
the proceeds from exercise for a number of Alliance Capital Units equal to the
number of Alliance Holding Units acquired pursuant to the option exercises, thus
increasing Alliance Holding's investment in Alliance Capital.
Compensation Agreements with Certain Executive Officers
In connection with Equitable's 1985 acquisition of DLJ, the parent of
ACMC in 1985, ACMC entered into employment agreements with Messrs. Williams,
Carifa and Calvert. Each agreement provided for deferred compensation payable in
stated monthly amounts for ten years commencing at age 65, or earlier in a
reduced amount in the event of disability or death, if the individual involved
so elects. The right to receive such deferred compensation is vested. Assuming
payments commence at age 65, the annual amount of deferred compensation payable
for ten years to Messrs. Williams, Carifa and Calvert is $425,731, $522,036, and
$434,612, respectively. While Alliance Capital assumed responsibility for
payment of these deferred compensation obligations, ACMC and Alliance are
required, subject to certain limitations, to make capital contributions to
Alliance Capital in an amount equal to the payments, and ACMC is also obligated
to the employees for the payments. ACMC's obligations to make capital
contributions to Alliance Capital are guaranteed, subject to certain
limitations, by Equitable Investment Corporation ("EIC"), a wholly-owned
subsidiary of Equitable, the parent of Alliance.
Certain Employee Benefit Plans
Retirement Plan. Alliance Capital maintains a qualified,
non-contributory, defined benefit retirement plan covering most employees of
Alliance Capital who have completed one year of service and attained age 21.
Employer contributions are determined by application of actuarial methods and
assumptions to reflect the cost of benefits under the plan. Each participant's
benefits are determined under a formula which takes into account years of
credited service, the participant's
28
<PAGE>
average compensation over prescribed periods and Social Security covered
compensation. The maximum annual benefit payable under the plan may not exceed
the lesser of $100,000 or 100% of a participant's average aggregate compensation
for the three consecutive years in which he received the highest aggregate
compensation from Alliance Capital or such lower limit as may be imposed by the
Internal Revenue Code on certain participants by reason of their coverage under
another qualified plan maintained by Alliance Capital. A participant is fully
vested after the completion of five years of service. The plan generally
provides for payments to or on behalf of each vested employee upon such
employee's retirement at the normal retirement age provided under the plan or
later, although provision is made for payment of early retirement benefits on an
actuarially reduced basis. Normal retirement age under the plan is 65. Death
benefits are payable to the surviving spouse of an employee who dies with a
vested benefit under the plan.
The table below sets forth with respect to the retirement plan the
estimated annual straight life annuity benefits payable upon retirement at
normal retirement age for employees with the remuneration and years of service
indicated.
<TABLE>
<CAPTION>
Estimated Annual Benefits
-------------------------------------------------------------------------------------
Average Final Years of Service at Retirement
Compensation -------------------------------------------------------------------------------------
15 20 25 30 35 40 45
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$100,000 $19,078 $25,437 $31,796 $38,156 $44,515 $49,515 $54,515
150,000 30,328 40,437 50,546 60,656 70,765 78,265 85,765
200,000 41,578 55,437 69,296 83,156 97,015 100,000 100,000
250,000 52,828 70,437 88,046 100,000 100,000 100,000 100,000
300,000 64,078 85,437 100,000 100,000 100,000 100,000 100,000
</TABLE>
Assuming they are employed by Alliance Capital until age 65, the
credited years of service under the plan for Messrs. Williams, Carifa, Calvert,
Joseph and Brewer would be 20, 40, 38, 28 and 22, respectively. Compensation on
which plan benefits are based includes only base compensation and not bonuses,
incentive compensation, profit-sharing plan contributions or deferred
compensation. The compensation for calculation of plan benefits for each of
these five individuals for 1999 is $160,000, $160,000, $160,000, $160,000 and
$160,000, respectively.
DLJ Executive Supplemental Retirement Program. In 1983 DLJ adopted an
Executive Supplemental Retirement Program under which certain employees of
Alliance Capital deferred a portion of their 1983 compensation in return for
which DLJ agreed to pay each of them a specified annual retirement benefit for
15 years beginning at age 65. Benefits are based upon the participant's age and
the amount deferred and are calculated to yield an approximate 12.5% annual
compound return. In the event of the participant's disability or death, an equal
or lesser amount is to be paid to the participant or his beneficiary. After age
55, participants the sum of whose age and years of service equals 80 may elect
to have their benefits begin in an actuarially reduced amount before age 65. DLJ
has funded its obligation under the Program through the purchase of life
insurance policies.
The following table shows as to the Named Executive Officers who are
participants in the Plan the estimated annual retirement benefit payable at age
65. Each of these individuals is fully vested in the applicable benefit.
Estimated Annual
Name Retirement Benefit
---- ------------------
Dave H. Williams $ 55,838.28
John D. Carifa 124,495.56
Bruce W. Calvert 154,501.80
29
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Security Holders
Alliance Holding has no information that any person beneficially owns
more than 5% of the Alliance Holding Units.
Alliance Capital has no information that any person beneficially owns
more than 5% of the outstanding Alliance Capital Units except Equitable, ACMC
and ECMC, wholly-owned subsidiaries of AXA Financial as reported on Amendment
No. 7 to Schedule 13D dated November 3, 1999, filed with the SEC by AXA and
certain of its affiliates pursuant to the Securities Exchange Act of 1934. The
following table and notes have been prepared in reliance upon such filing for
the nature of ownership and an explanation of overlapping ownership.
Amount and Nature of
Name and Address of Beneficial Percent
Beneficial Owner Ownership of Class
---------------- --------- --------
AXA (1)(2)(3)(4) 95,855,945 55.7%
25, avenue Matignon
75008 Paris
France
AXA Financial (4) 95,855,945 55.7%
1290 Avenue of the Americas
New York, NY 10019
(1) Based on information provided by AXA Financial, at March 1, 2000,
AXA and certain of its subsidiaries beneficially owned approximately
60.3% of AXA Financial's outstanding common stock. For insurance
regulatory purposes the shares of capital stock of AXA Financial
beneficially owned by AXA and its subsidiaries have been deposited
into a voting trust ("Voting Trust") which has an initial term of 10
years commencing May 12, 1992. The trustees of the Voting Trust (the
"Voting Trustees") are Claude Bebear, Patrice Garnier and Henri de
Clermont-Tonnerre, each of whom serves on either the Management
Board (in the case of Mr. Bebear) or Supervisory Board (in the case
of Messrs. Garnier and de Clermont-Tonnerre) of AXA. The Voting
Trustees have agreed to exercise their voting rights to protect the
legitimate economic interests of AXA, but with a view to ensuring
that certain minority shareholders of AXA do not exercise control
over AXA Financial or certain of its insurance subsidiaries.
(2) Based on information provided by AXA, on March 1, 2000,
approximately 20.3% of the issued ordinary shares (representing
31.9% of the voting power) of AXA were owned directly and indirectly
by Finaxa, a French holding company. As of March 1, 2000, 60.7% of
the shares (representing 70.7% of the voting power) of Finaxa were
owned by four French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned 34.8%
of the shares, representing 40.4% of the voting power), and 22.3% of
the shares of Finaxa (representing 13.3% of the voting power) were
owned by Paribas, a French bank. Including the ordinary shares owned
by Finaxa, on March 1, 2000, the Mutuelles AXA directly or
indirectly owned approximately 23.3% of the issued ordinary shares
(representing 36.7% of the voting power) of AXA.
(3) The Voting Trustees may be deemed to be beneficial owners of all
Alliance Capital Units beneficially owned by AXA and its
subsidiaries. In addition, the Mutuelles AXA, as a group, and Finaxa
may be deemed to be beneficial owners of all Alliance Capital Units
beneficially owned by AXA and its subsidiaries. By virtue of the
provisions of the Voting Trust Agreement, AXA may be deemed to have
shared voting power with respect to the Alliance Capital Units. AXA
and its subsidiaries have the power to dispose or direct the
disposition of
30
<PAGE>
all shares of the capital stock of AXA Financial deposited in the
Voting Trust. The Mutuelles AXA, as a group, and Finaxa may be
deemed to share the power to vote or to direct the vote and to
dispose or to direct the disposition of all the Alliance Capital
Units beneficially owned by AXA and its subsidiaries. The address of
each of AXA and the Voting Trustees is 25, avenue Matignon, 75008,
Paris, France. The address of Finaxa is 23 avenue Matignon, 75008
Paris, France. The addresses of the Mutuelles AXA are as follows:
The address of each of AXA Conseil Vie Assurance Mutuelle, AXA
Assurances Vie Mutuelle and AXA Assurances I.A.R.D. Mutuelle is 370,
rue Saint Honore, 75001 Paris, France; and the address of AXA
Courtage Assurance Mutuelle is 26, rue Louis le Grand, 75002 Paris,
France. The address of Paribas is 3, rue d'Antin, Paris, France.
(4) By reason of their relationship, AXA, the Voting Trustees, the
Mutuelles AXA, Finaxa, AXA Financial, Equitable, Equitable Holdings,
LLC, EIC, ACMC and ECMC may be deemed to share the power to vote or
to direct the vote and to dispose or direct the disposition of all
or a portion of the 95,855,945 Alliance Capital Units.
Alliance Holding, 1345 Avenue of the Americas, New York, NY 10105, owns
71,855,296 or 41.7% of the outstanding Alliance Capital Units.
31
<PAGE>
Management
The following table sets forth, as of March 1, 2000, the beneficial
ownership of Alliance Capital Units by each director and each Named Executive
Officer of the General Partner and by all directors and executive officers of
the General Partner as a group:
Number of Alliance Capital
Name of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ---------------- ------------------- -----
Dave H. Williams (1) 759,036 *
Luis Javier Bastida 0 *
Donald H. Brydon (1) 0 *
Bruce W. Calvert (1) 500,000 *
John D. Carifa (1) 1,020,000 *
Henri de Castries (1) 0 *
Kevin C. Dolan (1) 0 *
Denis Duverne (1) 0 *
Alfred Harrison (1) 365,410 *
Herve Hatt (1) 0 *
Michael Hegarty (1) 18,000 *
Benjamin D. Holloway 0 *
Edward D. Miller (1) 0 *
Peter D. Noris (1) 0 *
Frank Savage (1) 10,000 *
Stanley B. Tulin (1) 0 *
Reba W. Williams (1)(2) 759,036 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. (1) 0 *
Robert H. Joseph, Jr. (1) 0 *
All Directors and executive officers
of the General Partner as a Group (20 persons) 2,672,446 1.6%
* Number of Alliance Capital Units listed represents less than 1% of the Units
outstanding.
(1) Excludes Alliance Capital Units beneficially owned by AXA, AXA Financial
and/or Equitable. Messrs. Williams, Brydon, de Castries, Dolan, Duverne,
Hatt, Hegarty, Miller, Noris and Tulin are directors and/or officers of AXA,
AXA Financial and/or Equitable. Messrs. Williams, Calvert, Carifa, Harrison,
Savage, Brewer, Joseph and Mrs. Reba W. Williams are directors and/or
officers of Alliance.
(2) Includes 759,036 Alliance Capital Units owned by Mr. Dave H. Williams.
32
<PAGE>
Management
The following table sets forth, as of March 1, 2000, the beneficial
ownership of Alliance Holding Units by each director and each Named Executive
Officer of the General Partner and by all directors and executive officers of
the General Partner as a group:
Number of Alliance Holding
Name of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ---------------- -------------------- -----
Dave H. Williams (1)(2) 1,009,876 1.4%
Luis Javier Bastida 0 *
Donald H. Brydon (1) 0 *
Bruce W. Calvert (1)(3) 1,290,000 1.8%
John D. Carifa (1)(4) 1,435,336 2.0%
Henri de Castries (1) 2,000 *
Kevin C. Dolan (1) 0 *
Denis Duverne (1) 2,000 *
Alfred Harrison (1) 342,940 *
Herve Hatt (1) 0 *
Michael Hegarty (1) 0 *
Benjamin D. Holloway 11,600 *
Edward D. Miller (1) 0 *
Peter D. Noris (1) 2,000 *
Frank Savage (1) 81,000 *
Stanley B. Tulin (1) 4,000 *
Reba W. Williams (1)(5) 1,009,876 1.4%
Robert B. Zoellick 600 *
David R. Brewer, Jr. (1)(6) 254,750 *
Robert H. Joseph, Jr. (1)(7) 148,500 *
All Directors and executive officers
of the General Partner as a Group (20 persons)(8) 4,584,602 6.4%
* Number of Alliance Holding Units listed represents less than 1% of
the Units outstanding.
(1) Excludes Alliance Holding Units beneficially owned by AXA, AXA Financial
and/or Equitable. Messrs. Williams, Brydon, de Castries, Dolan, Duverne,
Hatt, Hegarty, Miller, Noris and Tulin are directors and/or officers of AXA,
AXA Financial and/or Equitable. Messrs. Williams, Calvert, Carifa, Harrison,
Savage, Brewer, Joseph and Mrs. Reba W. Williams are directors and/or
officers of Alliance.
(2) Includes 160,000 Alliance Holding Units owned by Mrs. Reba W. Williams.
(3) Includes 790,000 Alliance Holding Units which may be acquired within 60 days
under Alliance Capital Option Plans.
(4) Includes 440,000 Alliance Holding Units which may be acquired within 60 days
under Alliance Capital Option Plans.
(5) Includes 849,876 Alliance Holding Units beneficially owned by Mr. Dave H.
Williams.
(6) Includes 152,750 Alliance Holding Units which may be acquired within 60 days
under Alliance Capital Option Plans and 1,000 Alliance Holding Units owned
by Mr. Brewer's wife.
(7) Includes 128,500 Alliance Holding Units which may be acquired within 60 days
under Alliance Capital Option Plans.
(8) Includes 1,511,250 Alliance Holding Units which may be acquired within 60
days under Alliance Capital Option Plans.
33
<PAGE>
The following tables set forth, as of March 1, 2000, the beneficial
ownership of the common stock of AXA Financial, AXA and Finaxa by each director
and each Named Executive Officer of the General Partner and by all directors and
executive officers of the General Partner as a group:
AXA Financial Common Stock
Name of Number of Shares and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ---------------- -------------------- -----
Dave H. Williams (1) 200,000 *
Luis Javier Bastida 0 *
Donald H. Brydon (2) 0 *
Bruce W. Calvert (3) 100,000 *
John D. Carifa (4) 100,000 *
Henri de Castries (2)(5) 86,665 *
Kevin C. Dolan (2) 0 *
Denis Duverne (2)(6) 53,999 *
Alfred Harrison 0 *
Herve Hatt (2) 0 *
Michael Hegarty (2)(7) 296,794 *
Benjamin D. Holloway 108 *
Edward D. Miller (2)(8) 732,711 *
Peter D. Noris (9) 216,333 *
Frank Savage 136 *
Stanley B. Tulin (10) 278,753 *
Reba W. Williams (11) 200,000 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive officers of the General 2,065,499
Partner as a Group (20 Persons) (12) *
* Number of shares listed represents less than one percent (1%) of the number
of shares of AXA Financial common stock outstanding.
(1) Represents 200,000 shares subject to options held by Mr. Williams, which
options Mr. Williams has the right to exercise within 60 days.
(2) Excludes shares beneficially owned by AXA. Messrs. Brydon, de Castries,
Dolan, Duverne, Hatt, and Miller are officers of AXA.
(3) Represents 100,000 shares subject to options held by Mr. Calvert, which
options Mr. Calvert has the right to exercise within 60 days.
(4) Represents 100,000 shares subject to options held by Mr. Carifa, which
options Mr. Carifa has the right to exercise within 60 days.
(5) Represents 86,665 shares subject to options held by Mr. de Castries, which
options Mr. de Castries has the right to exercise within 60 days.
(6) Includes 49,999 shares subject to options held by Mr. Duverne, which options
Mr. Duverne has the right to exercise within 60 days and 4,000 shares owned
jointly by Mr. Duverne and his spouse, Sylvie Duverne.
(7) Includes 295,956 shares subject to options held by Mr. Hegarty, which
options Mr. Hegarty has the right to exercise within 60 days.
(8) Includes 732,511 shares subject to options held by Mr. Miller, which options
Mr. Miller has the right to exercise within 60 days.
(9) Represents 216,633 shares subject to options held by Mr. Noris, which
options Mr. Noris has the right to exercise within 60 days.
(10) Includes 253,280 shares subject to options held by Mr. Tulin, which options
Mr. Tulin has the right to exercise within 60 days and 8,000 shares owned
jointly by Mr. Tulin and his spouse, Riki P. Tulin.
34
<PAGE>
(11) Represents 200,000 shares subject to options held by Mr. Williams, which
options Mr. Williams has the right to exercise within 60 days.
(12) Includes 2,035,044 shares subject to options, which options may be
exercised within 60 days.
AXA Common Stock
Name of Number of Shares and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ---------------- -------------------- -----
Dave H. Williams (1) 10,000 *
Luis Javier Bastida 0 *
Donald H. Brydon (2) 6,250 *
Bruce W. Calvert (3) 2,500 *
John D. Carifa (4) 3,000 *
Henri de Castries (5) 122,750 *
Kevin C. Dolan (6) 29,350 *
Denis Duverne (7) 26,042 *
Alfred Harrison 0 *
Herve Hatt (8) 2,500 *
Michael Hegarty (9) 3,750 *
Benjamin D. Holloway 0 *
Edward D. Miller (10) 12,500 *
Peter D. Noris (11) 4,250 *
Frank Savage 0 *
Stanley B. Tulin (12) 8,500 *
Reba W. Williams (13) 10,000 *
Robert B. Zoellick 300 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive officers of the General
Partner as a Group (20 persons) (14) 231,692 *
* Number of shares listed represents less than one percent (1%) of the AXA
common stock outstanding. Holdings of AXA American Depositary Shares are
expressed as their equivalent in AXA common stock. Each AXA American
Depositary Share is equivalent to one-half of a share of AXA common stock.
(1) Represents 10,000 shares subject to options held by Mr. Williams, which
options Mr. Williams has the right to exercise within 60 days.
(2) Represents 6,250 shares subject to options held by Mr. Brydon, which
options Mr. Brydon has the right to exercise within 60 days.
(3) Represents 2,500 shares subject to options held by Mr. Calvert, which
options Mr. Calvert has the right to exercise within 60 days.
(4) Includes 2,500 shares subject to options held by Mr. Carifa, which options
Mr. Carifa has the right to exercise within 60 days.
(5) Includes 59,125 shares subject to options held by Mr. de Castries, which
options Mr. de Castries has the right to exercise within 60 days and 7,500
shares owned by Mr. de Castries' three minor children.
(6) Represents 29,350 shares subject to options held by Mr. Dolan, which
options Mr. Dolan has the right to exercise within 60 days.
(7) Includes 16,000 shares held jointly with Mr. Duverne's wife, 42 shares
owned by Mr. Duverne's children and 10,000 shares subject to options held
by Mr. Duverne, which options Mr. Duverne has the right to exercise within
60 days.
(8) Represents 2,500 shares subject to options held by Mr. Hatt, which options
Mr. Hatt has the right to exercise within 60 days.
(9) Represents 3,750 shares subject to options held by Mr. Hegarty, which
options Mr. Hegarty has the right to exercise within 60 days.
(10) Represents 12,500 shares subject to options held by Mr. Miller, which
options Mr. Miller has the right to exercise within 60 days.
35
<PAGE>
(11) Represents 4,250 shares subject to options held by Mr. Noris, which options
Mr. Noris has the right to exercise within 60 days.
(12) Includes 7,500 shares subject to options held by Mr. Tulin, which options
Mr. Tulin has the right to exercise within 60 days.
(13) Represents 10,000 shares subject to options held by Mr. Williams, which
options Mr. Williams has the right to exercise within 60 days.
(14) Includes 150,225 shares subject to options, which options may be exercised
within 60 days.
Finaxa Common Stock
-------------------
Name of Number of Shares and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ---------------- -------------------- -----
Dave H. Williams 0 *
Luis Javier Bastida 0 *
Donald H. Brydon 0 *
Bruce W. Calvert 0 *
John D. Carifa 0 *
Henri de Castries 71,001 *
Kevin C. Dolan 0 *
Denis Duverne 0 *
Alfred Harrison 0 *
Herve Hatt 0 *
Michael Hegarty 0 *
Benjamin D. Holloway 0 *
Edward D. Miller 0 *
Peter D. Noris 0 *
Frank Savage 0 *
Stanley B. Tulin 0 *
Reba W. Williams 0 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive officers
of the General Partner as a Group (20 persons) 71,001 *
* Number of shares listed represents less than one percent (1%) of the Finaxa
common stock outstanding.
36
<PAGE>
The General Partner makes all decisions relating to the management of
Alliance Capital and Alliance Holding. The General Partner has agreed that it
will conduct no business other than managing Alliance Capital and Alliance
Holding, although it may make certain investments for its own account. Conflicts
of interest, however, could arise between Alliance Capital and Alliance Holding,
the General Partner and the Unitholders of both Alliance Capital and Alliance
Holding.
Section 17-403(b) of the Delaware Revised Uniform Limited Partnership
Act (the "Delaware Act") states that, except as provided in the Delaware Act or
the partnership agreement, a general partner of a limited partnership has the
same liabilities to the partnership and to the limited partners as a general
partner in a partnership without limited partners. While, under Delaware law, a
general partner of a limited partnership is liable as a fiduciary to the other
partners, the Amended and Restated Agreement of Limited Partnership of Alliance
Capital Management L.P. ("Alliance Capital Partnership Agreement") and the
Amended and Restated Agreement of Limited Partnership of Alliance Capital
Management Holding L.P. ("Alliance Holding Partnership Agreement") set forth a
more limited standard of liability for the General Partner. The Alliance Capital
Partnership Agreement and the Alliance Holding Partnership Agreement provide
that the General Partner is not liable for monetary damages for errors in
judgment or for breach of fiduciary duty (including breach of any duty of care
or loyalty), unless it is established that the General Partner's action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury, with reckless disregard for the best interests of Alliance Capital
or Alliance Holding or with actual bad faith on the part of the General Partner,
or constituted actual fraud. Whenever the Alliance Capital Partnership Agreement
and the Alliance Holding Partnership Agreement provide that the General Partner
is permitted or required to make a decision (i) in its "discretion," the General
Partner is entitled to consider only such interests and factors as it desires
and has no duty or obligation to consider any interest of or other factors
affecting Alliance Capital or Alliance Holding or any Unitholder of Alliance
Capital or Alliance Holding or (ii) in its "good faith" or under another express
standard, the General Partner will act under that express standard and will not
be subject to any other or different standard imposed by the Alliance Capital
Partnership Agreement and the Alliance Holding Partnership Agreement or
applicable law.
In addition, the Alliance Capital Partnership Agreement and the
Alliance Holding Partnership Agreement grant broad rights of indemnification to
the General Partner and its directors and affiliates and authorize Alliance
Capital and Alliance Holding to enter into indemnification agreements with the
directors, officers, partners, employees and agents of Alliance Capital and its
affiliates and Alliance Holding and its affiliates. Alliance Capital and
Alliance Holding have granted broad rights of indemnification to officers of the
General Partner and employees of Alliance Capital and Alliance Holding. The
foregoing indemnification provisions are not exclusive, and Alliance Capital and
Alliance Holding are authorized to enter into additional indemnification
arrangements. Alliance Capital and Alliance Holding have obtained directors and
officers liability insurance.
The Alliance Capital Partnership Agreement and the Alliance Holding
Partnership Agreement also allow transactions between Alliance Capital and
Alliance Holding and the General Partner or its affiliates if the transactions
are on terms determined by the General Partner to be comparable to (or more
favorable to Alliance Capital or Alliance Holding than) those that would prevail
with any unaffiliated party. The Alliance Capital Partnership Agreement and the
Alliance Holding Partnership Agreement provide that those transactions are
deemed to meet that standard if such transactions are approved by a majority of
those directors of the General Partner who are not directors, officers or
employees of any affiliate of the General Partner (other than Alliance Capital,
and its subsidiaries or Alliance Holding) or, if in the reasonable and good
faith judgment of the General Partner, the transactions are on terms
substantially comparable to (or more favorable to Alliance Capital or Alliance
Holding than) those that would prevail in a transaction with an unaffiliated
party.
The Alliance Capital Partnership Agreement and the Alliance Holding
Partnership Agreement expressly permit all affiliates of the General Partner
(including Equitable and its other subsidiaries) to compete, directly or
indirectly, with Alliance Capital and Alliance Holding, to engage in any
business or other activity and to exploit any opportunity, including those that
may be available to Alliance Capital and Alliance Holding. AXA, AXA Financial,
Equitable and certain of their subsidiaries currently compete with Alliance
Capital. See "Item 13. Certain Relationships and Related
Transactions-Competition." The Alliance Capital Partnership Agreement and the
Alliance Holding Partnership Agreement further provide that, except to the
extent that a decision or action by the General Partner is taken with the
specific intent of providing a benefit to an affiliate of the General Partner to
the detriment of Alliance Capital or Alliance Holding, there is no liability or
obligation with respect to, and no challenge of, decisions or actions of the
General Partner that would otherwise be subject to claims or other challenges as
improperly benefiting affiliates of the General Partner to the detriment of
Alliance Capital or Alliance Holding or otherwise involving any conflict of
interest or breach of a duty of loyalty or similar fiduciary obligation.
37
<PAGE>
The fiduciary obligations of general partners is a developing area of
the law and it is not clear to what extent the foregoing provisions of the
Alliance Capital Partnership Agreement and the Alliance Holding Partnership
Agreement are enforceable under Delaware or federal law.
Item 13. Certain Relationships and Related Transactions
Competition
AXA, AXA Financial, Equitable and certain of their direct and indirect
subsidiaries provide financial services, some of which are competitive with
those offered by Alliance Capital. The Alliance Capital Partnership Agreement
specifically allows Equitable and its subsidiaries (other than the General
Partner) to compete with Alliance Capital and to exploit opportunities that may
be available to Alliance Capital. AXA, AXA Financial, Equitable and certain of
their subsidiaries have substantially greater financial resources than Alliance
Capital or the General Partner.
Financial Services
The Alliance Capital Partnership Agreement and the Alliance Holding
Partnership Agreement permit Equitable and its affiliates to provide services to
Alliance Capital and Alliance Holding on terms comparable to (or more favorable
to Alliance Capital than) those that would prevail in a transaction with an
unaffiliated third party. The General Partner believes that its arrangements
with Equitable and its affiliates are at least as favorable to Alliance Capital
and Alliance Holding as could be obtained from an unaffiliated third party,
based on its knowledge of and inquiry with respect to comparable arrangements
with or between unaffiliated third parties.
Alliance Capital acts as the investment manager for the general and
separate accounts of Equitable and its insurance company subsidiary pursuant to
investment advisory agreements. During 1999 Alliance Capital received
approximately $54.1 million in fees pursuant to these agreements. In connection
with the services provided under these agreements Alliance Capital provides
ancillary accounting, valuation, reporting, treasury and other services under
service agreements. During 1999 Alliance Capital received approximately $8.9
million in fees pursuant to these agreements. Equitable provides certain legal
and other services to Alliance Capital relating to certain insurance and other
regulatory aspects of the general and separate accounts of Equitable and its
insurance company subsidiary. During 1999 Alliance Capital paid approximately
$1.2 million to Equitable for these services.
During 1999 Alliance Capital paid Equitable approximately $39.7 million
for certain services provided by Equitable with respect to the marketing of the
variable annuity insurance and variable life insurance products for which HRT
was the funding vehicle until October 18, 1999 when all of the portfolios of HRT
were transferred to EQAT and such payments terminated.
Equitable has issued life insurance policies to ACMC on certain
employees of Alliance Capital, the costs of which are borne by ACMC without
reimbursement by Alliance Capital. During 1999 ACMC paid approximately $5.2
million in insurance premiums on these policies.
Alliance Capital and its employees are covered under various insurance
policies maintained by Equitable and its subsidiaries. The amount of premiums
for these group policies paid by Alliance Capital to Equitable was approximately
$218,000 for 1999.
Alliance Capital provides investment management services to certain
employee benefit plans of Equitable and DLJ. Advisory fees from these accounts
totaled approximately $5.0 million for 1999 including $3.6 million from the
separate accounts of Equitable.
In April 1996 Alliance Capital acquired the United States investing
activities and business of National Mutual Funds Management ("NMFM"), a
subsidiary of AXA. In connection therewith Alliance Capital entered into
investment management agreements with AXA Asia Pacific Holdings Limited
(formerly National Mutual Holdings Limited), the parent of NMFM and a subsidiary
of AXA, and various of its subsidiaries (collectively, the "AXA Asia Pacific
Group"). The AXA Asia Pacific Group paid approximately $3.2 million in advisory
fees to Alliance Capital in 1999. Alliance Capital earned an additional $32,500
in advisory fees from the AXA Asia Pacific Group in 1999, which fees were paid
in full in 2000.
38
<PAGE>
AXA Advisors was Alliance Capital's third largest distributor of U.S.
Funds in 1999 for which AXA Advisors received sales concessions from Alliance
Capital on sales of $1,065 million. In 1999 AXA Advisors also distributed
certain of Alliance Capital's cash management products. AXA Advisors received
distribution payments totaling $9.8 million in 1999 for these services.
DLJ Securities Corporation and Pershing distribute certain Alliance
Mutual Funds and cash management products and receive sales concessions and
distribution payments. In addition, Alliance Capital and Pershing have an
agreement pursuant to which Pershing recommends to certain of its correspondent
firms the use of Alliance Capital's cash management products for which Pershing
is allocated a portion of the revenues derived by Alliance Capital from sales
through the Pershing correspondents. Amounts paid by Alliance Capital to DLJ
Securities Corporation, Pershing and Wood Struthers & Winthrop Management Corp.,
a subsidiary of DLJ, in connection with the above distribution services were
$96.3 million in 1999. DLJ and its subsidiaries also provide Alliance Capital
with brokerage and various other services, including clearing, investment
banking, research, data processing and administrative services. Brokerage, the
expense of which is borne by Alliance Capital's clients, aggregated
approximately $1.9 million for 1999. During 1999 Alliance Capital paid $600,000
to DLJ and its subsidiaries for all other services.
During 1999 Alliance Capital reimbursed Equitable in the amount of
$700,000 for rent and the use of certain services and facilities.
Alliance Capital and its subsidiaries provide investment management
services to AXA Reinsurance Company, a subsidiary of AXA, and its affiliates,
pursuant to discretionary investment advisory agreements. AXA Reinsurance
Company and its affiliates paid Alliance Capital approximately $1.1 million
during 1999 for such services. Alliance Capital earned an additional $99,000 in
management fees from AXA Reinsurance Company and its affiliates during 1999,
which fees were paid in full in 2000.
Alliance Capital and its subsidiaries also provide investment
management services to AXA World Funds, a Luxembourg fund, pursuant to a
sub-advisory agreement between Alliance Capital and AXA Funds Management SA, a
subsidiary of AXA. Alliance Capital earned approximately $189,000 in management
fees during 1999, which fees were paid in full in 2000.
Other Transactions
During 1999 Alliance Capital paid certain legal and other expenses
incurred by Equitable and its insurance company subsidiary relating to the
general and separate accounts of Equitable and such subsidiary for which it has
been or will be fully reimbursed by Equitable. The largest amount of such
indebtedness outstanding during 1999 was approximately $73,000 which represents
the amount outstanding on September 30, 1999.
In connection with the Reorganization, Alliance Capital agreed to
reimburse Alliance Holding for all costs and expenses incurred by Alliance
Holding other than the payment of taxes.
Equitable and its affiliates are not obligated to provide funds to
Alliance Capital, except for ACMC's and the General Partner's obligation to fund
certain of Alliance Capital's deferred compensation and employee benefit plan
obligations referred to under "Item 11. Executive Compensation - Compensation
Agreements with Named Executive Officers".
In 1999 GIE Informatique AXA, an affiliate of AXA, entered into a
technology cost contribution agreement with various AXA subsidiaries, including
Alliance Capital, to enable the participants to share the costs and benefits of
cooperative technology development through GIE Informatique AXA. All
participants are joint owners of the technology and processes developed under
this agreement. In 1999 Alliance Capital's share of such costs was approximately
$1,142,000. Alliance Capital anticipates continuing to pay its share of such
costs under this agreement in 2000.
During 1999 four money market mutual funds sponsored by Alliance
Capital ("Money Market Funds") owned an aggregate of $570 million of funding
agreements issued by General American Life Insurance Company ("General
American"). The funding agreements had a maturity date of July 10, 2000 but
permitted the holder to redeem the principal amount thereof on seven days
written notice. The Money Market Funds gave written redemption notices on August
2, 1999. On August 10,
39
<PAGE>
1999 General American announced that in light of the redemption notices issued
by owners of a substantial portion of the funding agreements, including the
Money Market Funds, it was unable to honor the redemption notices in a timely
fashion. Equitable obtained letters of credit in favor of the Money Market Funds
under which the Money Market Funds were entitled to draw on July 10, 2000, the
maturity date of the funding agreements, to pay principal in an amount up to the
face amount of the funding agreements. Alliance Capital entered into a
reimbursement agreement with Equitable under which it agreed to reimburse
Equitable for all amounts drawn down by the Money Market Funds under the letters
of credit and pay certain fees and expenses to Equitable. The letters of credit
were terminated on October 4, 1999 when Metropolitan Life Insurance Company
assumed General American's liabilities under the funding agreements and agreed
to honor the redemption requests. Alliance Capital paid $1,066,362 to or on
behalf of Equitable under the reimbursement agreement in 1999 and is obligated
to pay an additional $70,744.
Mrs. Reba W. Williams, the wife of Dave H. Williams, was employed by
Alliance Capital during 1999 and received compensation in the amount of
$100,000.
Certain of the hedge funds managed by Alliance Capital pay a portion of
the carried interests or performance fees to certain portfolio managers,
research analysts and other investment professionals who are associated with the
management of the hedge funds. Alliance Capital provides investment management
services to the hedge funds and is entitled to receive between 75% and 100% of
the aggregate carried interests or performance fees paid by such funds. Alliance
Capital received approximately $47 million from the hedge funds in 1999
primarily in respect of the performance by the hedge funds in 1998. Mr. Alfred
Harrison, a Director and Vice Chairman of the General Partner, received
$4,618,064 in 1999 in respect of his association with the hedge funds.
ACMC and the General Partner are obligated, subject to certain
limitations, to make capital contributions to Alliance Capital in an amount
equal to the payments Alliance Capital is required to make as deferred
compensation under the employment agreements entered into in connection with
Equitable's 1985 acquisition of DLJ, as well as obligations of Alliance Capital
to various employees and their beneficiaries under Alliance Capital's Capital
Accumulation Plan. In 1999 ACMC made capital contributions to Alliance Capital
in the amount of $1,092,000 in respect of these obligations. ACMC's obligations
to make these contributions are guaranteed by EIC subject to certain
limitations. All tax deductions with respect to these obligations, to the extent
funded by ACMC, Alliance or EIC, will be allocated to ACMC or Alliance.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following is a list of the documents filed as a part of this Annual
Report on Form 10-K:
Reference Pages
Alliance Capital Financial Statements in 1999 Annual Report
------------------------------------- ---------------------
Consolidated Statements of Financial Condition
December 31, 1999 and 1998........................ 63
Consolidated Statements of Income
Years ended December 31, 1999, 1998 and 1997...... 64
Consolidated Statements of Changes in Partners' Capital
and Comprehensive Income
Years ended December 31 1999, 1998 and 1997....... 65
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998, and 1997..... 66
Notes to Consolidated Financial Statements................. 67 - 83
Independent Auditors' Report............................... 84
Schedules are omitted because they are not applicable, or the
required information is set forth in the financial statements or notes
thereto.
(b) Reports on Form 8-K.
40
<PAGE>
Neither Alliance Capital nor Alliance Holding filed a report
on Form 8-K during the last quarter of 1999.
(c) Exhibits.
The following exhibits required to be filed by Item 601 of
Regulation S-K are filed herewith or, in the case of Exhibit 13.1,
incorporated by reference herein:
Exhibit Description
------- -----------
2.1 Agreement and Plan of Reorganization dated August 20,
1999 among Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.), Alliance
Capital Management L.P. (formerly Alliance Capital
Management L.P. II), Alliance Capital Management
Corporation and the Equitable Life Assurance Society
of the United States (incorporated by reference to
Exhibit (a)(1) to the Form 10-Q for the quarterly
period ended September 30, 1999 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed on November 15, 1999).
3.1 Amended and Restated Certificate of Limited
Partnership dated October 29, 1999 of Alliance
Capital Management L.P. (formerly Alliance Capital
Management L.P. II) (incorporated by reference to
Exhibit 2.1 to the Registration Statement of Form 8-A
of Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P. II) filed on March
15, 2000).
3.2 Amended and Restated Agreement of Limited Partnership
dated October 29, 1999 of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) (incorporated by reference to Exhibit (a)(2) to
the Form 10-Q for the quarterly period ended
September 30, 1999 of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) filed on November 15, 1999).
3.3 Amended and Restated Agreement of Limited Partnership
dated October 29, 1999 of Alliance Capital Management
L.P. (formerly Alliance Capital Management L.P. II)
(incorporated by reference to Exhibit (a)(3) to the
Form 10-Q for the quarterly period ended September
30, 1999 of Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.) filed on
November 15, 1999).
10.1 Unit Option Plan Agreement dated December 6, 1999
with Robert H. Joseph, Jr.
10.2 Unit Option Plan Agreement dated December 6, 1999
with David R. Brewer, Jr.
10.3 Amended and Restated Alliance Partners Compensation
Plan dated December 6, 1999.
10.4 Restricted Unit Award Agreement dated December 31,
1999 with Bruce W. Calvert.
10.5 Restricted Unit Award Agreement dated December 31,
1999 with John D. Carifa.
10.6 Restricted Unit Award Agreement dated December 31,
1999 with Alfred Harrison.
10.7 Restricted Unit Award Agreement dated December 31,
1999 with Robert H. Joseph, Jr.
10.8 Restricted Unit Award Agreement dated December 31,
1999 with David R. Brewer, Jr.
10.9 Commercial Paper Dealer Agreement, dated as of
December 14, 1999.
10.10 Extendible Commercial Notes Dealer Agreement, dated
as of December 14, 1999.
10.11 Amended and Restated Investment Advisory and
Management Agreement dated October 29, 1999 among
Alliance Capital Management Holding L.P. (formerly
Alliance Capital Management L.P.), Alliance Corporate
Finance Group Incorporated and The Equitable Life
Assurance Society of the United States (incorporated
by reference to Exhibit (a)(6) to the Form 10-Q for
the quarterly period ended September 30, 1999 of
Alliance Capital Management Holding L.P. (formerly
Alliance Capital Management L.P.) filed on November
15, 1999).
10.12 Amended and Restated Accounting, Valuation, Reporting
and Treasury Services Agreement dated October 29,
1999 between Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.), Alliance
Corporate Finance Group Incorporated and The
Equitable Life Assurance Society of the United States
(incorporated by reference to Exhibit (a)(7) to the
41
<PAGE>
Form 10-Q for the quarterly period ended September
30, 1999 of Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.) filed on
November 15, 1999).
10.13 Global Assignment and Assumption Agreement dated
October 29, 1999 between Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) and Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P. II) (incorporated by
reference to Exhibit (a)(8) to the Form 10-Q for the
quarterly period ended September 30, 1999 of Alliance
Capital Management Holding L.P. (formerly Alliance
Capital Management L.P.) filed on November 15, 1999).
10.14 Pass-Through Agreement dated October 29, 1999 between
Alliance Capital Management Holding L.P. (formerly
Alliance Capital Management L.P.) and Alliance
Capital Management L.P. (formerly Alliance Capital
Management L.P. II) (incorporated by reference to
Exhibit (a)(9) to the Form 10-Q for the quarterly
period ended September 30, 1999 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed on November 15, 1999).
10.15 Reimbursement Agreement dated August 16, 1999 between
Alliance Capital Management Holding L.P. (formerly
Alliance Capital Management L.P.) and The Equitable
Life Assurance Society of the United States
(incorporated by reference to Exhibit (a)(1) to the
Form 10-Q for the quarterly period ended June 30,
1999 of Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.) filed on
August 16, 1999).
10.16 Revolving Credit Agreement dated as of July 21, 1999
among Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P. II), as Borrower,
and the lending institutions listed on Schedule 1
thereto, collectively as Banks, and Fleet National
Bank, as Administrative Agent, The First National
Bank of Chicago, as Syndication Agent, and Banque
Nationale de Paris, as Documentation Agent
(incorporated by reference to Exhibit (a)(2) to the
Form 10-Q for the quarterly period ended June 30,
1999 of Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.) filed on
August 16, 1999).
10.17 Exchange Agreement dated April 8, 1999 among Alliance
Capital Management Holding L.P. (formerly Alliance
Capital Management L.P.), Alliance Capital Management
L.P. (formerly Alliance Capital Management L.P. II)
and The Equitable Life Assurance Society of the
United States (incorporated by reference to Exhibit
10.2 to the Registration Statement on Form S-4 of
Alliance Capital Management L.P. (formerly Alliance
Capital Management L.P. II)).
10.18 Indemnification and Reimbursement Agreement dated
April 8, 1999 among Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.), Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P. II) and The
Equitable Life Assurance Society of the United States
(incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-4 of Alliance
Capital Management L.P. (formerly Alliance Capital
Management L.P. II)).
10.19 Unit Option Plan Agreement dated December 10, 1998
with Bruce W. Calvert (incorporated by reference to
Exhibit 10.102 to the Form 10-K for the fiscal year
ended December 31, 1998 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1999).
10.20 Unit Option Plan Agreement dated December 10, 1998
with John D. Carifa (incorporated by reference to
Exhibit 10.103 to the Form 10-K for the fiscal year
ended December 31, 1998 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1999).
10.21 Unit Option Plan Agreement dated December 10, 1998
with David R. Brewer, Jr. (incorporated by reference
to Exhibit 10.105 to the Form 10-K for the fiscal
year ended December 31, 1998 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1999).
10.22 Unit Option Plan Agreement dated December 10, 1998
with Robert H. Joseph, Jr. (incorporated by reference
to Exhibit 10.107 to the Form 10-K for the fiscal
year ended December 31, 1998 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1999).
10.23 Revolving Credit Agreement dated as of July 20, 1998
among Alliance Capital Management L.P., as Borrower,
and the lending institutions listed on Schedule 1
thereto, collectively as Banks, and
42
<PAGE>
Nations Bank, N.A., The Chase Manhattan Bank and the
Bank of New York, individually as Co-Agents, Nations
Bank N.A., as Administrative Agent, The Chase
Manhattan Bank, as Syndication Agent, and the Bank of
New York, as Documentation Agent (incorporated by
reference to Exhibit 10.106 to the Form 10-K for the
fiscal year ended December 31, 1998).
10.24 Unit Option Plan Agreement dated December 16, 1997
with David R. Brewer, Jr. (incorporated by reference
to Exhibit 10.98 to the Form 10-K for the fiscal year
ended December 31, 1997 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1998).
10.25 Unit Option Plan Agreement dated December 16, 1997
with Robert H. Joseph, Jr. (incorporated by reference
to Exhibit 10.97 to the Form 10-K for the fiscal year
ended December 31, 1997 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1998).
10.26 1997 Long Term Incentive Plan (incorporated by
reference to Annex I to the Proxy Statement on
Schedule 14A of Alliance Capital Management Holding
L.P. (formerly Alliance Capital Management L.P.)
filed December 4, 1997).
10.27 Unit Option Plan Agreement dated December 16, 1996
with David R. Brewer, Jr. (incorporated by reference
to Exhibit 10.93 to the Form 10-K for the fiscal year
ended December 31, 1996 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 27, 1997).
10.28 Unit Option Plan Agreement dated December 16, 1996
with Robert H. Joseph, Jr. (incorporated by reference
to Exhibit 10.92 to the Form 10-K for the fiscal year
ended December 31, 1996 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 27, 1997).
10.29 Unit Option Plan Agreement dated December 5, 1995
with David R. Brewer, Jr. (incorporated by reference
to Exhibit 10.82 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1996).
10.30 Unit Option Plan Agreement dated July 24, 1995 with
Bruce W. Calvert (incorporated by reference to
Exhibit 10.78 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1996).
10.31 Unit Option Plan Agreement dated July 24, 1995 with
John D. Carifa (incorporated by reference to Exhibit
10.80 to the Form 10-K for the fiscal year ended
December 31, 1995 of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) filed April 1, 1996).
10.32 Unit Option Plan Agreement dated April 25, 1995 with
Bruce W. Calvert (incorporated by reference to
Exhibit 10.77 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1996).
10.33 Unit Option Plan Agreement dated April 25, 1995 with
John D. Carifa (incorporated by reference to Exhibit
10.79 to the Form 10-K for the fiscal year ended
December 31, 1995 of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) filed April 1, 1996).
10.34 Unit Option Plan Agreement dated April 25, 1995 with
David R. Brewer, Jr. (incorporated by reference to
Exhibit 10.81 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1996).
10.35 Unit Option Plan Agreement dated April 25, 1995 with
Robert H. Joseph, Jr. (incorporated by reference to
Exhibit 10.83 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1997).
10.36 Unit Option Plan Agreement dated December 5, 1995
with Robert H. Joseph, Jr. (incorporated by reference
to Exhibit 10.84 to the Form 10-K for the fiscal year
ended December 31, 1995 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed April 1, 1997).
43
<PAGE>
10.37 Unit Option Plan Agreement dated May 10, 1994 with
Bruce W. Calvert (incorporated by reference to
Exhibit 10.59 to the Form 10-K for the fiscal year
ended December 31, 1994 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1995).
10.38 Unit Option Plan Agreement dated May 10, 1994 with
John D. Carifa (incorporated by reference to Exhibit
10.60 to the Form 10-K for the fiscal year ended
December 31, 1994 of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) filed March 30, 1995).
10.39 Unit Option Plan Agreement dated May 10, 1994 with
David R. Brewer, Jr. (incorporated by reference to
Exhibit 10.61 to the Form 10-K for the fiscal year
ended December 31, 1994 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1995).
10.40 Unit Option Plan Agreement dated May 10, 1994 with
Robert H. Joseph, Jr. (incorporated by reference to
Exhibit 10.62 to the Form 10-K for the fiscal year
ended December 31, 1994 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 30, 1995).
10.41 Convertible Note Purchase Agreement dated as of
August 11, 1994 between Alliance Capital Management
L.P. (formerly Alliance Capital Management L.P. II)
and Banco Bilbao Vizcaya, S.A. (incorporated by
reference to Exhibit 10.67 to the Form 8-K to
Alliance Capital Management L.P. (formerly Alliance
Capital Management L.P.) filed on August 12, 1994).
10.42 Alliance Capital Management Holding L.P. (formerly
Alliance Capital Management L.P.) 1993 Unit Option
Plan (incorporated by reference to Exhibit 4.1 to the
Form S-8 of Alliance Capital Management Holding L.P.
(formerly Alliance Capital Management L.P.) filed
July 12, 1993).
10.43 Alliance Capital Management L.P. Unit Bonus Plan
(incorporated by reference to Exhibit 4.2 to the Form
S-8 of Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P.) filed July 12,
1993).
10.44 Alliance Capital Management L.P. Century Club Plan
(incorporated by reference to Exhibit 4.3 to the Form
S-8 of Alliance Capital Management L.P. (formerly
Alliance Capital Management L.P.) filed July 12,
1993).
10.45 Unit Option Plan Agreement dated October 10, 1992
with David R. Brewer, Jr. (incorporated by reference
to Exhibit 10.49 to the Form 10-K for the fiscal year
ended December 31, 1992 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 25, 1993).
10.46 Unit Option Plan Agreement dated October 10, 1992
with Robert H. Joseph, Jr. (incorporated by reference
to Exhibit 10.48 to the Form 10-K for the fiscal year
ended December 31, 1992 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 25, 1993).
10.47 Alliance Capital Accumulation Plan (incorporated by
reference to Exhibit 10.51 to the Form 10-K for the
fiscal year ended December 31, 1992 of Alliance
Capital Management Holding L.P. (formerly Alliance
Capital Management L.P.) filed March 25, 1993).
10.48 Transfer Agreement dated December 12, 1991 between
Alliance Capital Management Corporation and Alliance
GP Incorporated (incorporated by reference to Exhibit
10.46 to the Form 10-K of Alliance Capital Management
Holding L.P. (formerly Alliance Capital Management
L.P.) filed March 27, 1992).
10.49 Unit Option Plan Agreement dated August 8, 1991 with
David R. Brewer, Jr. (incorporated by reference to
Exhibit 10.42 to the Form 10-K for the fiscal year
ended December 31, 1991 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 27, 1992).
10.50 Unit Option Plan Agreement dated August 8, 1991 with
Robert H. Joseph, Jr. (incorporated by reference to
Exhibit 10.41 to the Form 10-K for the fiscal year
ended December 31, 1991 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 27, 1992).
10.51 Unit Option Plan Agreement dated May 16, 1990 with
David R. Brewer, Jr. (incorporated by reference to
Exhibit 10.33 to the Form 10-K for the fiscal year
ended December 31, 1990 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed
44
<PAGE>
March 28, 1991).
10.52 Unit Option Plan Agreement dated May 16, 1990 with
Robert H. Joseph, Jr. (incorporated by reference to
Exhibit 10.32 to the Form 10-K for the fiscal year
ended December 31, 1990 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 28, 1991).
10.53 Alliance Capital Accumulation Plan (incorporated by
reference to Exhibit 10.11 to the Form 10-K for the
fiscal year ended December 31, 1988 of Alliance
Capital Management Holding L.P. (formerly Alliance
Capital Management L.P.) filed March 31, 1989).
10.54 Alliance Partners Plan (incorporated by reference to
Exhibit 10.12 to the Form 10-K for the fiscal year
ended December 31, 1988 of Alliance Capital
Management Holding L.P. (formerly Alliance Capital
Management L.P.) filed March 31, 1989).
11.1 Computation of Pro Forma Earnings per Unit for the
years ended December 31, 1999, 1998 and 1997.
13.1 Pages 47 through 84 of the 1999 Annual Report.
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
24.1 Power of Attorney by Luis Javier Bastida
24.2 Power of Attorney by Donald H. Brydon
24.3 Power of Attorney by Henri de Castries
24.4 Power of Attorney by Kevin C. Dolan
24.5 Power of Attorney by Denis Duverne
24.6 Power of Attorney by Alfred Harrison
24.7 Power of Attorney by Herve Hatt
24.8 Power of Attorney by Michael Hegarty
24.9 Power of Attorney by Benjamin D. Holloway
24.10 Power of Attorney by Edward D. Miller
24.11 Power of Attorney by Peter D. Noris
24.12 Power of Attorney by Stanley B. Tulin
24.13 Power of Attorney by Robert B. Zoellick
27.1 Financial Data Schedule
45
<PAGE>
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.
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, General Partner
Date: March 28, 2000 By: /s/ Bruce W. Calvert
---------------------------------
Bruce W. Calvert
Vice Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Date: March 28, 2000 /s/ John D. Carifa
--------------------------------------
John D. Carifa
President and Chief Operating Officer
Date: March 28, 2000 /s/ Robert H. Joseph, Jr.
--------------------------------------
Robert H. Joseph, Jr.
Senior Vice President, Chief
Financial Officer and Principal
Accounting Officer
46
<PAGE>
Directors
/s/ Dave H. Williams *
- --------------------------------- ----------------------------------
Dave H. Williams Michael Hegarty
Chairman and Director Director
* *
- --------------------------------- ----------------------------------
Luis Javier Bastida Benjamin D. Holloway
Director Director
* *
- --------------------------------- ----------------------------------
Donald H. Brydon Edward D. Miller
Director Director
/s/ Bruce W. Calvert *
- --------------------------------- ----------------------------------
Bruce W. Calvert Peter D. Noris
Director Director
/s/ John D. Carifa /s/ Frank Savage
- --------------------------------- ----------------------------------
John D. Carifa Frank Savage
Director Director
* *
- --------------------------------- ----------------------------------
Henri de Castries Stanley B. Tulin
Director Director
* /s/ Reba W. Williams
- --------------------------------- ----------------------------------
Kevin C. Dolan Reba W. Williams
Director Director
* *
- --------------------------------- ----------------------------------
Denis Duverne Robert B. Zoellick
Director Director
* /s/ David R. Brewer, Jr.
- --------------------------------- ----------------------------------
Alfred Harrison David R. Brewer, Jr.
Director (Attorney-in-Fact)
*
- ---------------------------------
Herve Hatt
Director
47
ALLIANCE CAPITAL MANAGEMENT L.P.
UNIT OPTION PLAN AGREEMENT
AGREEMENT, dated December 6, 1999 between Alliance Capital Management
L.P. (the "Partnership"), Alliance Capital Management Holding L.P. ("Alliance
Holding") and Robert H. Joseph, Jr. (the "Employee"), an employee of the
Partnership or a subsidiary of the Partnership.
The Option Committee (the "Administrator") of the Board of Directors
(the "Board") of Alliance Capital Management Corporation, the general partner of
the Partnership and Alliance Holding, pursuant to the Alliance Capital
Management L.P. 1993 Unit Option Plan, a copy of which has been delivered to the
Employee (the "Plan"), has granted to the Employee an option to purchase units
representing assignments of beneficial ownership of limited partnership
interests in Alliance Holding (the "Units") as hereinafter set forth, and
authorized the execution and delivery of this Agreement.
In accordance with that grant, and as a condition thereto, the
Partnership, Alliance Holding and the Employee agree as follows:
1. Grant of Option. Subject to and under the terms and conditions set
forth in this Agreement and the Plan, the Employee is the owner of an option
(the "Option") to purchase the number of Units set forth in Section 1 of Exhibit
A attached hereto at the per Unit price set forth in Section 2 of Exhibit A.
2. Term and Exercise Schedule. This Option shall not be exercisable to
any extent prior to December 6, 2000 or after December 6, 2009 (the "Expiration
Date"). Subject to the terms and conditions of this Agreement and the Plan, the
Employee shall be entitled to exercise the Option prior to the Expiration Date
and to purchase Units hereunder in accordance with the schedule set forth in
Section 3 of Exhibit A.
The right to exercise this Option shall be cumulative so that to the
extent this Option is not exercised when it becomes initially exercisable with
respect to any Units, it shall be exercisable with respect to such Units at any
time thereafter until the Expiration Date and any Units subject to this Option
which have not then been purchased may not, thereafter, be purchased hereunder.
A Unit shall be considered to have been purchased on or before the Expiration
Date if notice of the purchase has been given and payment therefor has actually
been received pursuant to Sections 3 and 13, on or before the Expiration Date.
3. Notice of Exercise, Payment and Certificate. Exercise of this Option,
in whole or in part, shall be by delivery of a written notice to the Partnership
and Alliance Holding pursuant to Section 13 which specifies the number of Units
being purchased and is accompanied by payment
<PAGE>
therefor in cash. Promptly after receipt of such notice and purchase price, the
Partnership and Alliance Holding shall deliver to the person exercising the
Option a certificate for the number of Units purchased. Units to be issued upon
the exercise of this Option may be either authorized and unissued Units or Units
which have been reacquired by the Partnership, a subsidiary of the Partnership,
Alliance Holding or a subsidiary of Alliance Holding.
4. Termination of Employment. This Option may be exercised only while
the Employee is a full-time employee of the Partnership, except as follows:
(a) Disability. If the Employee's employment with the Partnership
terminates because of Disability, the Employee (or his personal
representative) shall have the right to exercise this Option, to the
extent that the Employee was entitled to do so on the date of
termination of his employment, for a period which ends not later than
the earlier of (i) three months after such termination, and (ii) the
Expiration Date. "Disability" shall mean a determination by the
Administrator that the Employee is physically or mentally incapacitated
and has been unable for a period of six consecutive months to perform
the duties for which he was responsible immediately before the onset of
his incapacity. In order to assist the Administrator in making a
determination as to the Disability of the Employee for purposes of this
paragraph (a), the Employee shall, as reasonably requested by the
Administrator, (A) make himself available for medical examinations by
one or more physicians chosen by the Administrator and approved by the
Employee, whose approval shall not unreasonably be withheld, and (B)
grant the Administrator and any such physicians access to all relevant
medical information concerning him, arrange to furnish copies of medical
records to them, and use his best efforts to cause his own physicians to
be available to discuss his health with them.
(b) Death. If the Employee dies (i) while in the employ of the
Partnership, or (ii) within one month after termination of his
employment with the Partnership because of Disability (as determined in
accordance with paragraph (a) above), or (iii) within one month after
the Partnership terminates his employment for any reason other than for
Cause (as determined in accordance with paragraph (c) below), this
Option may be exercised, to the extent that the Employee was entitled to
do so on the date of his death, by the person or persons to whom the
Option shall have been transferred by will or by the laws of descent and
distribution, for a period which ends not later than the earlier of (A)
six months from the date of the Employee's death, and (B) the Expiration
Date.
(c) Other Termination. If the Partnership terminates the
Employee's employment for any reason other than death, Disability or for
Cause, the Employee shall have the right to exercise this Option, to the
extent that he was entitled to do so on the date of the termination of
his employment, for a period which ends not later than the earlier of
(i) three months after such termination, and (ii) the Expiration Date.
"Cause" shall mean (A) the Employee's continuing willful failure to
perform his duties as an employee (other than as a result of his total
or partial incapacity due to physical or mental illness), (B) gross
negligence or malfeasance in the performance of the Employee's duties,
(C) a finding by a court or other
2
<PAGE>
governmental body with proper jurisdiction that an act or acts by the
Employee constitutes (1) a felony under the laws of the United States
or any state thereof (or, if the Employee's place of employment is
outside of the United States, a serious crime under the laws of the
foreign jurisdiction where he is employed, which crime if committed in
the United States would be a felony under the laws of the United States
or the laws of New York), or (2) a violation of federal or state
securities law (or, if the Employee's place of employment is outside of
the United States, of federal, state or foreign securities law) by
reason of which finding of violation described in this clause (2) the
Board determines in good faith that the continued employment of the
Employee by the Partnership would be seriously detrimental to the
Partnership and its business, (D) in the absence of such a finding by a
court or other governmental body with proper jurisdiction, such a
determination in good faith by the Board by reason of such act or acts
constituting such a felony, serious crime or violation, or (E) any
breach by the Employee of any obligation of confidentiality or
non-competition to the Partnership.
For purposes of this Agreement, employment by a subsidiary of the
Partnership shall be deemed to be employment by the Partnership. A "subsidiary"
of the Partnership shall be any corporation or other entity of which the
Partnership and/or its subsidiaries (a) have sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of its
board of directors, or (b) otherwise have the power to direct or cause the
direction of its management and policies.
5. Non-Transferability. This Option is not transferable other than by
will or the laws of descent and distribution and, except as otherwise provided
in Section 4, during the lifetime of the Employee this Option is exercisable
only by the Employee.
6. No Right to Continued Employment. This Option shall not confer upon
the Employee any right to continue in the employ of the Partnership or interfere
in any way with the right of the Partnership to terminate the employment of the
Employee at any time for any reason.
7. Payment of Withholding Tax. (a) In the event that the Partnership or
Alliance Holding determines that any federal, state or local tax or any other
charge is required by law to be withheld with respect to the exercise of this
Option, the Employee shall promptly pay to the Partnership or a subsidiary
specified by the Partnership or Alliance Holding, on at least seven business
days' notice, an amount equal to such withholding tax or charge or (b) if the
Employee does not promptly so pay the entire amount of such withholding tax or
charge in accordance with such notice, or make arrangements satisfactory to the
Partnership and Alliance Holding regarding payment thereof, the Partnership or
any subsidiary of the Partnership may withhold the remaining amount thereof from
any amount due the Employee from the Partnership or the subsidiary.
8. Dilution and Other Adjustments. The existence of this Option shall
not impair the right of the Partnership or Alliance Holding or their respective
partners to, among other things, conduct, make or effect any change in the
Partnership's or Alliance Holding's business, any issuance of debt obligations
or other securities by the Partnership or Alliance Holding, any grant of options
3
<PAGE>
with respect to an interest in the Partnership or Alliance Holding or any
adjustment, recapitalization or other change in the partnership interests of the
Partnership or Alliance Holding (including, without limitation, any
distribution, subdivision, or combination of limited partnership interests), or
any incorporation of the Partnership or Alliance Holding. In the event of such a
change in the partnership interests of the Partnership or Alliance Holding, the
Board shall make such adjustments to this Option, including the purchase price
specified in Section 1, as it deems appropriate and equitable. In the event of
incorporation of the Partnership or Alliance Holding, the Board shall make such
arrangements as it deems appropriate and equitable with respect to this Option
for the Employee to purchase stock in the resulting corporation in place of the
Units subject to this Option. Any such adjustment or arrangement may provide for
the elimination of any fractional Unit or shares of stock which might otherwise
become subject to this Option. Any decision by the Board under this Section
shall be final and binding upon the Employee.
9. Rights as an Owner of a Unit. The Employee (or a transferee of this
Option pursuant to Section 4) shall have no rights as an owner of a Unit with
respect to any Unit covered by this Option until he becomes the holder of record
of such Unit, which shall be deemed to occur at the time that notice of purchase
is given and payment in full is received under Section 3 and 13. By such
actions, the Employee (or such transferee) shall be deemed to have consented to,
and agreed to be bound by, all other terms, conditions, rights and obligations
set forth in the then current Amended and Restated Agreement of Limited
Partnership of Alliance Holding and the then current Amended and Restated
Agreement of Limited Partnership of the Partnership. Except as provided in
Section 8, no adjustment shall be made with respect to any Unit for any
distribution for which the record date is prior to the date on which the
Employee becomes the holder of record of the Unit, regardless of whether the
distribution is ordinary or extraordinary, in cash, securities or other
property, or of any other rights.
10. Administrator. If at any time there shall be no Option Committee of
the Board, the Board shall be the Administrator.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
12. Interpretation. The Employee accepts this Option subject to all the
terms and provisions of the Plan, which shall control in the event of any
conflict between any provision of the Plan and this Agreement, and accepts as
binding, conclusive and final all decisions or interpretations of the Board or
the Administrator upon any questions arising under the Plan and/or this
Agreement.
13. Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Partnership, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if the
Partnership should move its principal office, to such principal office, in the
case of Alliance Holding, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if
Alliance Holding should move its principal office, to
4
<PAGE>
such principal office, and, in the case of the Employee, tohis last permanent
address as shown on the Partnership's records, subject to the right of either
party to designate some other address at any time hereafter in a notice
satisfying the requirements of this Section.
14. Sections and Headings. All section references in this Agreement are
to sections hereof for convenience of reference only and are not to affect the
meaning of any provision of this Agreement.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, its General Partner
By: /s/ John D. Carifa
------------------------------------
John D. Carifa
President
ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.
By: Alliance Capital Management
Corporation, General Partner
By: /s/ John D. Carifa
------------------------------------
John D. Carifa
President
/s/ Robert H. Joseph, Jr.
------------------------------------
Robert H. Joseph, Jr.
5
<PAGE>
Exhibit A To Unit Option Plan Agreement Dated December 6, 1999
between Alliance Capital Management L.P.,
Alliance Capital Management Holding L.P. and Robert H. Joseph, Jr.
1. The number of Units that the Employee is entitled to purchase pursuant
to the Option granted under this Agreement is 15,000.
2. The per Unit price to purchase Units pursuant to the Option granted
under this Agreement is $30.25 per Unit.
3. Percentage of Units With Respect to
Which the Option First Becomes
Exercisable on the Date Indicated
---------------------------------
1. December 6, 2000 20%
2. December 6, 2001 20%
3. December 6, 2002 20%
4. December 6, 2003 20%
5. December 6, 2004 20%
6
ALLIANCE CAPITAL MANAGEMENT L.P.
UNIT OPTION PLAN AGREEMENT
AGREEMENT, dated December 6, 1999 between Alliance Capital Management
L.P. (the "Partnership"), Alliance Capital Management Holding L.P. ("Alliance
Holding") and David R. Brewer, Jr. (the "Employee"), an employee of the
Partnership or a subsidiary of the Partnership.
The Option Committee (the "Administrator") of the Board of Directors
(the "Board") of Alliance Capital Management Corporation, the general partner of
the Partnership and Alliance Holding, pursuant to the Alliance Capital
Management L.P. 1993 Unit Option Plan, a copy of which has been delivered to the
Employee (the "Plan"), has granted to the Employee an option to purchase units
representing assignments of beneficial ownership of limited partnership
interests in Alliance Holding (the "Units") as hereinafter set forth, and
authorized the execution and delivery of this Agreement.
In accordance with that grant, and as a condition thereto, the
Partnership, Alliance Holding and the Employee agree as follows:
1. Grant of Option. Subject to and under the terms and conditions set
forth in this Agreement and the Plan, the Employee is the owner of an option
(the "Option") to purchase the number of Units set forth in Section 1 of Exhibit
A attached hereto at the per Unit price set forth in Section 2 of Exhibit A.
2. Term and Exercise Schedule. This Option shall not be exercisable to
any extent prior to December 6, 2000 or after December 6, 2009 (the "Expiration
Date"). Subject to the terms and conditions of this Agreement and the Plan, the
Employee shall be entitled to exercise the Option prior to the Expiration Date
and to purchase Units hereunder in accordance with the schedule set forth in
Section 3 of Exhibit A.
The right to exercise this Option shall be cumulative so that to the
extent this Option is not exercised when it becomes initially exercisable with
respect to any Units, it shall be exercisable with respect to such Units at any
time thereafter until the Expiration Date and any Units subject to this Option
which have not then been purchased may not, thereafter, be purchased hereunder.
A Unit shall be considered to have been purchased on or before the Expiration
Date if notice of the purchase has been given and payment therefor has actually
been received pursuant to Sections 3 and 13, on or before the Expiration Date.
3. Notice of Exercise, Payment and Certificate. Exercise of this Option,
in whole or in part, shall be by delivery of a written notice to the Partnership
and Alliance Holding pursuant to Section 13 which specifies the number of Units
being purchased and is accompanied by payment
<PAGE>
therefor in cash. Promptly after receipt of such notice and purchase price, the
Partnership and Alliance Holding shall deliver to the person exercising the
Option a certificate for the number of Units purchased. Units to be issued upon
the exercise of this Option may be either authorized and unissued Units or Units
which have been reacquired by the Partnership, a subsidiary of the Partnership,
Alliance Holding or a subsidiary of Alliance Holding.
4. Termination of Employment. This Option may be exercised only while
the Employee is a full-time employee of the Partnership, except as follows:
(a) Disability. If the Employee's employment with the Partnership
terminates because of Disability, the Employee (or his personal
representative) shall have the right to exercise this Option, to the
extent that the Employee was entitled to do so on the date of
termination of his employment, for a period which ends not later than
the earlier of (i) three months after such termination, and (ii) the
Expiration Date. "Disability" shall mean a determination by the
Administrator that the Employee is physically or mentally incapacitated
and has been unable for a period of six consecutive months to perform
the duties for which he was responsible immediately before the onset of
his incapacity. In order to assist the Administrator in making a
determination as to the Disability of the Employee for purposes of this
paragraph (a), the Employee shall, as reasonably requested by the
Administrator, (A) make himself available for medical examinations by
one or more physicians chosen by the Administrator and approved by the
Employee, whose approval shall not unreasonably be withheld, and (B)
grant the Administrator and any such physicians access to all relevant
medical information concerning him, arrange to furnish copies of medical
records to them, and use his best efforts to cause his own physicians to
be available to discuss his health with them.
(b) Death. If the Employee dies (i) while in the employ of the
Partnership, or (ii) within one month after termination of his
employment with the Partnership because of Disability (as determined in
accordance with paragraph (a) above), or (iii) within one month after
the Partnership terminates his employment for any reason other than for
Cause (as determined in accordance with paragraph (c) below), this
Option may be exercised, to the extent that the Employee was entitled to
do so on the date of his death, by the person or persons to whom the
Option shall have been transferred by will or by the laws of descent and
distribution, for a period which ends not later than the earlier of (A)
six months from the date of the Employee's death, and (B) the Expiration
Date.
(c) Other Termination. If the Partnership terminates the
Employee's employment for any reason other than death, Disability or for
Cause, the Employee shall have the right to exercise this Option, to the
extent that he was entitled to do so on the date of the termination of
his employment, for a period which ends not later than the earlier of
(i) three months after such termination, and (ii) the Expiration Date.
"Cause" shall mean (A) the Employee's continuing willful failure to
perform his duties as an employee (other than as a result of his total
or partial incapacity due to physical or mental illness), (B) gross
negligence or malfeasance in the performance of the Employee's duties,
(C) a finding by a court or other
2
<PAGE>
governmental body with proper jurisdiction that an act or acts by the
Employee constitutes (1) a felony under the laws of the United States or
any state thereof (or, if the Employee's place of employment is outside
of the United States, a serious crime under the laws of the foreign
jurisdiction where he is employed, which crime if committed in the
United States would be a felony under the laws of the United States or
the laws of New York), or (2) a violation of federal or state securities
law (or, if the Employee's place of employment is outside of the United
States, of federal, state or foreign securities law) by reason of which
finding of violation described in this clause (2) the Board determines
in good faith that the continued employment of the Employee by the
Partnership would be seriously detrimental to the Partnership and its
business, (D) in the absence of such a finding by a court or other
governmental body with proper jurisdiction, such a determination in good
faith by the Board by reason of such act or acts constituting such a
felony, serious crime or violation, or (E) any breach by the Employee of
any obligation of confidentiality or non-competition to the Partnership.
For purposes of this Agreement, employment by a subsidiary of the
Partnership shall be deemed to be employment by the Partnership. A "subsidiary"
of the Partnership shall be any corporation or other entity of which the
Partnership and/or its subsidiaries (a) have sufficient voting power (not
depending on the happening of a contingency) to elect at least a majority of its
board of directors, or (b) otherwise have the power to direct or cause the
direction of its management and policies.
5. Non-Transferability. This Option is not transferable other than by
will or the laws of descent and distribution and, except as otherwise provided
in Section 4, during the lifetime of the Employee this Option is exercisable
only by the Employee.
6. No Right to Continued Employment. This Option shall not confer upon
the Employee any right to continue in the employ of the Partnership or interfere
in any way with the right of the Partnership to terminate the employment of the
Employee at any time for any reason.
7. Payment of Withholding Tax. (a) In the event that the Partnership or
Alliance Holding determines that any federal, state or local tax or any other
charge is required by law to be withheld with respect to the exercise of this
Option, the Employee shall promptly pay to the Partnership or a subsidiary
specified by the Partnership or Alliance Holding, on at least seven business
days' notice, an amount equal to such withholding tax or charge or (b) if the
Employee does not promptly so pay the entire amount of such withholding tax or
charge in accordance with such notice, or make arrangements satisfactory to the
Partnership and Alliance Holding regarding payment thereof, the Partnership or
any subsidiary of the Partnership may withhold the remaining amount thereof from
any amount due the Employee from the Partnership or the subsidiary.
8. Dilution and Other Adjustments. The existence of this Option shall
not impair the right of the Partnership or Alliance Holding or their respective
partners to, among other things, conduct, make or effect any change in the
Partnership's or Alliance Holding's business, any issuance of debt obligations
or other securities by the Partnership or Alliance Holding, any grant of options
3
<PAGE>
with respect to an interest in the Partnership or Alliance Holding or any
adjustment, recapitalization or other change in the partnership interests of the
Partnership or Alliance Holding (including, without limitation, any
distribution, subdivision, or combination of limited partnership interests), or
any incorporation of the Partnership or Alliance Holding. In the event of such a
change in the partnership interests of the Partnership or Alliance Holding, the
Board shall make such adjustments to this Option, including the purchase price
specified in Section 1, as it deems appropriate and equitable. In the event of
incorporation of the Partnership or Alliance Holding, the Board shall make such
arrangements as it deems appropriate and equitable with respect to this Option
for the Employee to purchase stock in the resulting corporation in place of the
Units subject to this Option. Any such adjustment or arrangement may provide for
the elimination of any fractional Unit or shares of stock which might otherwise
become subject to this Option. Any decision by the Board under this Section
shall be final and binding upon the Employee.
9. Rights as an Owner of a Unit. The Employee (or a transferee of this
Option pursuant to Section 4) shall have no rights as an owner of a Unit with
respect to any Unit covered by this Option until he becomes the holder of record
of such Unit, which shall be deemed to occur at the time that notice of purchase
is given and payment in full is received under Section 3 and 13. By such
actions, the Employee (or such transferee) shall be deemed to have consented to,
and agreed to be bound by, all other terms, conditions, rights and obligations
set forth in the then current Amended and Restated Agreement of Limited
Partnership of Alliance Holding and the then current Amended and Restated
Agreement of Limited Partnership of the Partnership. Except as provided in
Section 8, no adjustment shall be made with respect to any Unit for any
distribution for which the record date is prior to the date on which the
Employee becomes the holder of record of the Unit, regardless of whether the
distribution is ordinary or extraordinary, in cash, securities or other
property, or of any other rights.
10. Administrator. If at any time there shall be no Option Committee of
the Board, the Board shall be the Administrator.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
12. Interpretation. The Employee accepts this Option subject to all the
terms and provisions of the Plan, which shall control in the event of any
conflict between any provision of the Plan and this Agreement, and accepts as
binding, conclusive and final all decisions or interpretations of the Board or
the Administrator upon any questions arising under the Plan and/or this
Agreement.
13. Notices. Any notice under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or when
deposited in the United States mail, registered, postage prepaid, and addressed,
in the case of the Partnership, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if the
Partnership should move its principal office, to such principal office, in the
case of Alliance Holding, to the Secretary of Alliance Capital Management
Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if
Alliance Holding should move its principal office,
4
<PAGE>
to such principal office, and, in the case of the Employee, to his last
permanent address as shown on the Partnership's records, subject to the right of
either party to designate some other address at any time hereafter in a notice
satisfying the requirements of this Section.
14. Sections and Headings. All section references in this Agreement are
to sections hereof for convenience of reference only and are not to affect the
meaning of any provision of this Agreement.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, its General Partner
By: /s/ John D. Carifa
----------------------------------
John D. Carifa
President
ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.
By: Alliance Capital Management
Corporation, General Partner
By: /s/ John D. Carifa
----------------------------------
John D. Carifa
President
/s/ David R. Brewer, Jr.
----------------------------------
David R. Brewer, Jr.
5
<PAGE>
Exhibit A To Unit Option Plan Agreement Dated December 6, 1999
between Alliance Capital Management L.P.,
Alliance Capital Management Holding L.P. and David R. Brewer, Jr.
1. The number of Units that the Employee is entitled to purchase pursuant
to the Option granted under this Agreement is 15,000.
2. The per Unit price to purchase Units pursuant to the Option granted
under this Agreement is $30.25 per Unit.
3. Percentage of Units With Respect to
Which the Option First Becomes
Exercisable on the Date Indicated
---------------------------------
1. December 6, 2000 20%
2. December 6, 2001 20%
3. December 6, 2002 20%
4. December 6, 2003 20%
5. December 6, 2004 20%
6
AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
(as amended through December 6, 1999)
Alliance Capital Management Holding L.P. (together with any successor to
all or substantially all of its business and assets, "Holding") and its
successor and affiliate Alliance Capital Management L.P. (together with any
successor to all or substantially all of its business and assets, "Alliance")
have established this Alliance Partners Compensation Plan to (i) create a
compensation program to attract and retain eligible employees expected to make a
significant contribution to the future growth and success of Holding and
Alliance, including their respective subsidiaries and (ii) foster the long-term
commitment of these employees through the accumulation of capital and increased
ownership of equity interests in Holding.
ARTICLE I
DEFINITIONS; ELIGIBILITY
1. Definitions. Whenever used in the Plan, each of the following terms
shall have the meaning for that term set forth below:
(a) "Account" means, with respect to Pre-1999 Awards, a separate
bookkeeping account established for each Participant for each such
Award, with the amount of the Award credited to the Account together
with Earnings thereafter credited thereon.
(b) "Affiliate" means (i) any entity that, directly or
indirectly, is controlled by Alliance and (ii) any entity in which
Alliance has a significant equity interest, in either case as determined
by the Board or, if so authorized by the Board, the Committee.
(c) "Alliance Units" means units representing assignments of
beneficial ownership of limited partnership interests in Alliance.
(d) "Award" means any Pre-1999 Award or any Post-1998 Award.
(e) "Award Agreement" means any written agreement, contract or
other instrument or document evidencing any Award, which may, but need
not, be executed or acknowledged by a Participant.
<PAGE>
(f) "Board" means the Board of Directors of the general partner
of Holding and Alliance.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Committee" shall mean the Board or one or more committees
of the Board designated by the Board to administer the Plan.
(i) "Company" shall mean Holding, Alliance and any corporation
or other entity of which Holding or Alliance (i) has sufficient voting
power (not depending on the happening of a contingency) to elect at
least a majority of its board of directors or other governing body, as
the case may be, or (2) otherwise has the power to direct or cause the
direction of its management and policies.
(j) "Director" shall mean any member of the Board.
(k) "Disability" shall mean, with respect to a Participant, a
good faith determination by the Committee that the Participant is
physically or mentally incapacitated and has been unable for a period of
six consecutive months to perform substantially all of the duties for
which the Participant was responsible immediately before the
commencement of the incapacity. In order to assist the Committee in
making such a determination and as reasonably requested by the
Committee, a Participant will (i) make himself or herself available for
medical examination by one or more physicians chosen by the Committee
and approved by the Participant, whose approval shall not be
unreasonably withheld, (ii) grant the Committee and any such physicians
access to all relevant medical information relating to the Participant,
(iii) arrange to furnish copies of medical records to the Committee and
such physicians, and (iv) use his or her best efforts to cause the
Participant's own physicians to be available to discuss the
Participant's health with the Committee and its chosen physicians.
(l) "Earnings" means an amount computed as of the end of each
calendar year equal to the product of (A) the balance of the
Participant's Account as of the Effective Date of the Award credited
thereto and (B) a percentage equal to the higher of (1) the "Alliance
Growth Rate" for the period from such Effective Date through the end of
the calendar year as of which the computation is being made (the
"Earnings Period") and (2) the "Cumulative Compound Reference Rate" for
the Earnings Period. For purposes of the foregoing, the "Alliance Growth
Rate" means 1 plus the cumulative percentage increase or decrease in the
level of Alliance's pre-tax operating earnings per Alliance Unit for
each calendar year during the
2
<PAGE>
Earnings Period, compounded annually, multiplied by the square of 1 plus
the Reference Rate at the end of the Earnings Period, based on such
product, determining the resultant compound annual growth rate (using
the number of years in the Earnings Period plus two) and on the basis of
such computation, determining the cumulative compound growth rate over
the Earnings Period. Alliance's pre-tax operating earnings per Alliance
Unit shall be based on Alliance's earnings for each year during the
Earnings Period, including the weighted average number of Alliance Units
outstanding during each such year, as determined in accordance with
generally accepted accounting principles. For purposes of the foregoing,
the "Cumulative Compound Reference Rate" means 1 plus the cumulative
Reference Rate determined by taking the Reference Rate at the end of
each calendar year during the Earnings Period, compounded annually,
multiplied by the square of 1 plus the Reference Rate at the end of the
Earnings Period, based on such product, determining the resultant
compound annual rate (using the number of years in the Earnings Period
plus two) and on the basis of such computation, determining the
cumulative compound rate over the Earnings Period. All computations
shall be made by the Committee and the resulting amounts rounded to the
nearest one hundredth.
(m) "Effective Date" of an Award means December 31 of the
calendar year for which the Award is initially granted under the Plan
pursuant to Section 3(a) or 9 hereof.
(n) "Eligible Employee" shall mean, for any calendar year, an
employee of a Company whom the Committee determines to be eligible for
an Award; provided, that in connection with Pre-1999 Awards, Eligible
Employees for any calendar year shall be limited to those employees
whose annual compensation from the Companies for such year, excluding
any Award, exceeds the amount prescribed by Code section 414(q)(1)(B) as
adjusted from time to time and is such that the employees are
"highly-compensated employees" by reference to ERISA sections 201(2),
301(a)(3) and 401(a)(1), as determined by the Committee.
(o) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time.
(p) "Fair Market Value" shall mean, with respect to a Holding
Unit as of any given date and except as otherwise expressly provided by
the Board, the closing price of a Holding Unit on the New York Stock
Exchange on such date or, if no sale of Holding Units occurs on the New
York Stock Exchange on such date, the closing price of a Holding Unit on
such Exchange on the last preceding day on which such sale occurred.
3
<PAGE>
(q) "Final Account Balance" means the aggregate of the vested
balances of a Participant in each Account maintained for the
Participant as of the end of the calendar year immediately preceding
the calendar year in which the employment of the Participant with the
Companies terminates for any reason or, if the Participant's employment
with the Companies terminates as of a calendar year end, as of that
year end.
(r) "Holding Units" means units representing assignments of
beneficial ownership of limited partnership interests in Holding.
(s) "Participant" means any Eligible Employee of any Company
who has been designated by the Committee to receive an Award for any
calendar year and who thereafter remains employed by a Company.
(t) "Partner's Pool" means, for each calendar year commencing
with 1995, the sum of (i) the maximum amount first available to be
awarded under this Plan with respect to that year; (ii) the aggregate
amount previously forfeited pursuant to Sections 6 or 12 and not
subsequently re-granted under the Plan; provided, that with respect to
Restricted Units forfeited pursuant to Section 6, the amount that shall
be added to the Partner's Pool pursuant to this Section 1(t) shall be
the number of such Restricted Units multiplied by the Grant Value
thereof; and (iii) an amount equal to the difference between the amount
of the Partners Pool for the immediately preceding calendar year (as
computed pursuant to this Subsection for that prior year) and the
aggregate amount of Awards for such year; provided, that the Board or
Committee may increase the amount otherwise available for awards under
the Plan in any year by a reduction in the amount otherwise available
for awards under the Alliance bonus pool for that year.
(u) "Plan" means the Alliance Partners Compensation Plan, as
set forth herein and as amended from time to time.
(v) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other
entity.
(w) "Post-1998 Award" means any Award subject to the
provisions of Article II hereof.
(x) "Pre-1999 Award" means any Award subject to the provisions
of Article III hereof.
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<PAGE>
(y) "Reference Rate" for any year means the average of the
rates of interest on 6-month commercial paper (6-month certificates of
deposit after August 31, 1997) as reflected on "Federal Reserve
statistical release" H.15 (or any successor publication thereto) as of
the last day of the calendar year for or as of which such rate is to be
determined and as of the last day of the immediately prior twelve
calendar months.
(z) "Restricted Unit" shall mean any Holding Unit granted
under Section 3(a) of the Plan and designated as a Restricted Unit.
(aa) "Retirement" with respect to a Participant shall mean
that the employment of the Participant with the Company has terminated
either (i) on or after the Participant's attaining age 65, or (ii) on
or after the Participant's attaining age 55 at a time when the sum of
the Participant's age and aggregate full calendar years of service with
the Company, including service prior to April 21, 1988 with the
corporation then named Alliance Capital Management Corporation, equals
or exceeds 70.
(bb) "Termination of Employment" shall mean that the
Participant involved is no longer performing services as an employee of
any Company other than pursuant to a severance or special termination
arrangement.
2. Eligibility. The Committee, in its sole discretion, will
designate those Eligible Employees employed by a Company at the end of a
calendar year who are to receive Awards for that year. In making such
designation, the Committee will consider an Eligible Employee's position with a
Company, the manner in which the Eligible Employee is expected to contribute to
the future growth and success of the Company and such other criteria as it shall
deem relevant. The Committee may vary the amount of Awards to a particular
Participant from year to year and may determine that a Participant who received
an Award to a particular year is not eligible to receive any Award with respect
to any subsequent year. An Eligible Employee who is a member of the Committee
during a particular year shall be eligible to receive an Award for that year
only if the Award is approved by the majority of the other members of the
Committee.
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<PAGE>
ARTICLE II
POST-1998 AWARDS
3. Grant of Awards.
(a) Not later than thirty days after the end of each calendar
year commencing with 1999, the Committee may make Awards, effective as
of the Effective Date of such calendar year, in such amounts as the
Committee determines in its sole discretion. The amount of each such
Award shall initially be denominated in a specific cash amount. Except
as otherwise provided below, each such Award shall be treated hereunder
as a Post-1998 Award. In its sole discretion, the Committee may
determine that the aggregate amount of Awards for any year will be less
than the Partners Pool for that year.
(b) As soon as reasonably practicable after the grant of
Post-1998 Awards for each year as described in Section 3(a) above, the
Committee shall determine, in its sole discretion, the Grant Value of a
Holding Unit for such Awards. For this purpose, "Grant Value" shall mean
the effective per-Unit cost of acquiring or issuing the Holding Units to
be awarded with respect to such Post-1998 Awards. Upon determination of
the Grant Value for each relevant year, each Post-1998 Award for such
year shall be denominated, and shall thereafter be treated for all
purposes as, a grant of that number of Restricted Units equal to the
quotient of the original cash-denominated amount of such Award, divided
by the Grant Value for such Award, rounded down to the nearest integer.
(c) A Participant to whom a Post-1998 Award is made shall,
reasonably promptly after either the vesting of Restricted Units subject
to a Post-1998 Award or the determination of the Grant Value for the
relevant year as described in Section 3(b) above, be provided with a
statement indicating the number of Restricted Units subject to such
Award, subject to and pursuant to the terms of the Plan and the
applicable Award Agreement.
(d) Notwithstanding the foregoing, the Committee shall have the
authority, in its sole discretion, to treat any Award for a calendar
year commencing with 1999 as a Pre-1999 Award. In such case, (i) the
provisions of this Article II (other than Sections 3(a) and 3(d)) shall
not apply to such Award; (ii) an Account shall be established with
respect to such Award; and (iii) such Award shall otherwise be treated
as subject in all respects to the provisions of Article III of the Plan;
provided, that, notwithstanding Section 11 of the Plan, the amount of
such Account (including Earnings thereon) will vest at the same rate as
the rate at which
6
<PAGE>
restrictions would have lapsed with respect to the applicable
Restricted Units in accordance with Section 5, had such Award instead
been treated as a Post-1998 Award.
4. Restricted Units.
(a) Restricted Units may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as provided in the Plan or the
applicable Award Agreements. Each certificate issued in respect of
Restricted Units with respect to which transfer restrictions remain in
effect shall bear an appropriate legend, in the form determined by the
Committee. Upon the lapse of the restrictions applicable to such
Restricted Units, the owner thereof shall have the right, upon request,
to receive a certificate or certificates representing such Units free of
the legend (to the extent permissible and appropriate under relevant
securities or other law). Until receipt of any such request, the
Committee shall cause certificates representing such Units to be held on
the Participant's behalf by the recordkeeper designated by the Committee
under the Plan.
(b) Distributions paid on or in respect of any Restricted Units
(whether vested or unvested) shall be paid directly to the relevant
Participant.
5. Vesting of Restricted Units.
(a) Except as provided in Section 5(b) below, restrictions shall
lapse with respect to the Restricted Units subject to each Post-1998
Award in equal annual installments during the Vesting Period (as
determined below) with respect to such Award, with restrictions as to
the first such installment lapsing on the first anniversary of the date
determined for this purpose by the Committee in connection with such
Award (the "Grant Date"), and restrictions as to the remaining
installments lapsing on subsequent anniversaries of the Grant Date,
provided in each case that the Participant is employed by a Company on
such anniversary. The "Vesting Period" with respect to each Post-1998
Award shall be as set forth in the
7
<PAGE>
following table, based on the Participant's age as of the Effective Date with
respect to such Award:
Age of Participant
As of Effective Date Vesting Period
-------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) In the event of a Participant's Termination of Employment due
to death or Disability, restrictions on any remaining Restricted Units
held by such Participant shall immediately lapse.
6. Forfeitures. In the event of a Participant's Termination of
Employment for reasons other than death or Disability, all rights and interests
in all of such Participant's Restricted Units with respect to which restrictions
have not previously lapsed will be immediately forfeited; provided, however,
that, in its sole discretion, the Committee may determine to accelerate the
Participant's vesting of any such rights and interests and avoid the forfeiture
of the Participant's otherwise unvested Restricted Units. Any amounts forfeited
pursuant to this Section 6 shall increase the amount of the Partners Pool as
provided for in Section 1(t)(ii).
7. Section 83(b) Election. A Participant will not make an
election under section 83(b) of the Code with respect to an award of Restricted
Units unless, prior to the date such election is filed with the Internal Revenue
Service, the Participant (i) notifies the Committee of the Participant's
intention to file such election, (ii) furnishes the Committee with a copy of the
election to be filed and (iii) pays (or makes arrangements for the payment
thereof satisfactory to the Committee) the withholding amount to Alliance in
accordance with Section 17(i).
8. Adjustment of Restricted Units. In the event that the
Committee determines that any distribution (whether in the form of cash, limited
partnership interests, other securities, or other property), recapitalization
(including, without limitation, any subdivision or combination of limited
8
<PAGE>
partnership interests), reorganization, consolidation, combination, repurchase,
or exchange of limited partnership interests or other securities of Holding,
issuance of warrants or other rights to purchase limited partnership interests
or other securities of Holding, any incorporation of Holding, or other similar
transaction or event affects the Holding Units such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee may, if so authorized by the Board, in such
manner as it may deem equitable, adjust the number of Holding Units or other
securities of Holding (or number and kind of other securities or property)
subject to outstanding Awards, or, if deemed appropriate, make provision for a
cash payment to the holder of an outstanding Award.
ARTICLE III
PRE-1999 AWARDS
9. Grant of Awards. Not later than thirty days after the end of
each calendar year prior to 1999, the Committee may make Pre-1999 Awards,
effective as of December 31 of the year to which the Award relates, in such
amounts as the Committee determines in its sole discretion. A Participant to
whom a Pre-1999 Award is made shall promptly thereafter be notified of the Award
in writing by the Committee. The amount of each Pre-1999 Award made to a
Participant will be credited to a separate Account as of the Effective Date of
the Award. In its sole discretion, the Committee may determine that the
aggregate amount of Awards for any year will be less than the Partners Pool for
that year.
10. Earnings on an Account. As of the end of each calendar year
following the year for which an Account is established, each Account maintained
for a Participant who was employed by the Company at the end of that year will
be credited or debited, as applicable, with the amount, if any, necessary to
reflect Earnings as of that date. As soon as practicable after the end of each
such calendar year, a statement shall be provided to each such Participant
indicating the current balance in each Account maintained for the Participant as
of the end of the calendar year.
11. Vesting of Amounts in a Participant=s Account. With respect
to each Pre-1999 Award made for 1995, a Participant's rights and interest
therein and any Earnings thereon credited to the Participant's Account will vest
at the rate of 33a percent for each full calendar year that the Participant is
employed by a Company after 1995. With respect to each Pre-1999 Award made for a
calendar year after 1995, a Participant's rights and interest therein and any
Earnings thereon credited to the Participant's Account will vest at the rate of
122
9
<PAGE>
percent for each full calendar year that the Participant is employed by a
Company after the Effective Date of the Award. Notwithstanding any provision of
this Article III to the contrary, a Participant's rights and interest in the
balance in the Participant's Account to the extent not then vested shall become
fully vested upon the Participant's death, Disability or Retirement.
12. Forfeiture of a Participant=s Account Balances. If a
Participant ceases to be employed by any of the Companies, the balance of any
Account maintained for a Participant on the effective date of the Participant's
Termination of Employment that is not then fully vested (and that does not vest
upon such termination) pursuant to Section 11 or Section 3(d) will thereupon be
forfeited; provided, however, that, in its sole discretion, the Committee may
determine to accelerate the Participant's vesting in any such Account and avoid
the forfeiture of the Participant's otherwise unvested Account balance. Any
amounts forfeited pursuant to this Section 12 shall increase the amount of the
Partners Pool as provided for in Section 1(t)(ii).
13. Distributions of a Participant=s Final Account Balances.
(a) In the event a Participant's employment with the Companies
terminates by reason of the Participant's death, the Participant's Final
Account Balance, plus interest as provided in Subsection (d)(i) of this
Section, will be distributed to the Participant's Beneficiary in a
single-sum cash payment within 45 days after the later of the date the
Committee receives (i) written notification in form satisfactory to it
of the Participant's death, and (ii) any tax waiver or governmental
document deemed relevant by the Committee with respect to making the
payment.
(b) In the event a Participant's employment with the Companies
terminates by reason of the Participant's Disability or Retirement, the
Participant's Final Account Balance, plus interest as provided in
Subsection (d)(ii) of this Section, will be distributed to the
Participant or to the Participant's Beneficiary, as the case may be, in
cash in five equal annual installments, the first to be made on a date
within 45 days after the January 1 immediately following the effective
date of such Disability or Retirement and the others to be made within
45 days of January 1 in each of the four subsequent calendar years;
provided, however, that a payment shall be made in a single-sum in an
amount up to 50 percent of his or her Final Account Balance, plus
interest as provided in Subsection (d)(i) of this Section, if the
Participant elects to receive such a payment by written notice submitted
to the Committee at least twelve months before the effective date of the
Participant's Disability or Retirement, as the case may be. Any such
single-sum payment shall be made within 45 days after the
10
<PAGE>
effective date of the Participant's Disability or Retirement, as the
case may be, and the subsequent five equal installment payments, which
shall total (i) the Final Account Balance reduced by the single-sum
payment computed without regard to Subsection (d)(i) of this Section
plus (ii) interest as provided in Subsection (d)(ii) of this Section,
shall be made within 45 days of January 1 in each of the five
subsequent calendar years.
(c) In the event a Participant's employment with the Companies
terminates for any reason other than the Participant's death, Disability
or Retirement, the Participant's Final Account Balance, plus interest as
provided in Subsection (d)(ii) of this Section, will be distributed to
the Participant or the Participant's Beneficiary, as the case may be, in
cash in five equal annual installments, the first to be made on a date
within 45 days after the January 1 immediately following the effective
date of the Participant's Termination of Employment and the others
within 45 days of January 1 in each of the four subsequent calendar
years.
(d) (i) Each single-sum payment to be made pursuant to
Subsection (a) or (b) of this Section shall include interest on the
Final Account Balance to be paid at the Reference Rate as of the date
the Final Account Balance is to be determined.
(ii) Each installment payment to be made pursuant to
Subsection (b) or (c) of this Section shall be calculated by
considering the portion of the Participant's Final Account
Balance payable in installments as an indebtedness that accrues
interest at the Reference Rate as of the date the Final Account
Balance is determined and that will be amortized by equal
payments on January 1 of the five calendar years in which the
installments payments are to be made sufficient to fully
discharge the deemed indebtedness by the final installment
payment.
ARTICLE IV
ADMINISTRATION; MISCELLANEOUS
14. Administration of the Plan. The Plan is intended to be an
unfunded, non-qualified deferred compensation plan within the meaning of ERISA
and shall be administered by the Committee as such. The Committee shall have the
full power and authority to administer and interpret the Plan and to take any
and all actions in connection with the Plan, including, but not limited to, the
power and authority to prescribe all applicable procedures, forms and
agreements. The Committee's interpretation and construction of the Plan,
including its
11
<PAGE>
computation of Grant Value, number of Restricted Units to be awarded each
Participant, and Earnings, shall be conclusive and binding on all persons having
an interest in the Plan.
15. Authority to Vary Terms of Awards. The Committee shall have
the authority to grant Awards other than as described in Articles II and III,
subject to such terms and conditions as the Committee shall determine in its
discretion.
16. Amendment, Suspension and Termination of the Plan. The
Committee reserves the right at any time, without the consent of any Participant
or Beneficiary and for any reason, to amend, suspend or terminate the Plan in
whole or in part in any manner; provided that no such amendment, suspension or
termination shall adversely affect any right of any Participant or Beneficiary
with respect to any Post-1998 Award or, with respect to any Pre-1999 Award, any
balance in any Account, prior to such amendment, suspension or termination.
17. General Provisions.
(a) To the extent provided by the Committee, each Participant may
file with the Committee a written designation of one or more persons,
including a trust or the Participant's estate, as the Beneficiary
entitled to receive, in the event of the Participant's death, any amount
or property to which the Participant would otherwise have been entitled
under the Plan. A Participant may, from time to time, revoke or change
his or her Beneficiary designation by filing a new designation with the
Committee. If (i) no such Beneficiary designation is in effect at the
time of a Participant's death, (ii) no designated Beneficiary survives
the Participant, or (iii) a designation on file is not legally effective
for any reason, then the Participant's estate shall be the Participant's
Beneficiary.
(b) Neither the establishment of the Plan nor the grant of any
Award or any action of any Company, the Board of Directors, or the
Committee pursuant to the Plan, shall be held or construed to confer
upon any Participant any legal right to be continued in the employ of
any Company. Each Company expressly reserves the right to discharge any
Participant without liability to the Participant or any Beneficiary,
except as to any rights which may expressly be conferred upon the
Participant under the Plan.
(c) The right of any Participant or Beneficiary to receive
payments under Article III of the Plan shall be an unsecured claim
against
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<PAGE>
the general assets of Alliance. All distribution to be made under
Article III of the Plan shall be paid from the general funds of
Alliance and no special or separate fund shall be established and no
segregation of assets shall be made to assure payments of any such
distributions. No Participant or Beneficiary shall have any right,
title or interest whatsoever in, or to, any investments which Alliance
may make to assist it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to the
Plan, shall create or be construed to create a trust of any kind, or a
fiduciary relationship between any Company and any other person.
(d) No right to receive any payment under the Plan may be
transferred or assigned, pledged or otherwise encumbered by any
Participant or Beneficiary other than by will, by the applicable laws of
descent and distribution or by a court of competent jurisdiction. Any
other attempted assignment or alienation of any payment hereunder shall
be void and of no force or effect.
(e) If any provision of the Plan shall be held illegal or invalid,
the illegality or invalidity shall not affect the remaining provisions
of the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included in the Plan.
(f) Any notice to be given by the Committee under the Plan to a
Participant or Beneficiary shall be in writing addressed to the
Participant or Beneficiary, as the case may be, at the last address
shown for the recipient on the records of any Company or subsequently
provided in writing to the Committee. Any notice to be given by a
Participant under the Plan shall be in writing addressed to the
Committee at the address of Alliance.
(g) Section headings herein are for convenience of reference only
and shall not affect the meaning of any provision of the Plan.
(h) The provisions of the Plan shall be governed and construed in
accordance with the laws of the State of New York.
(i) There shall be withheld from each payment made pursuant to
the Plan any tax or other charge required to be withheld therefrom
pursuant to any federal, state or local law. A Company by whom a
Participant is employed shall also be entitled to withhold from any
compensation payable to a Participant any tax imposed by Section 3101 of
the Code, or any successor provision, on any Award made to the
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<PAGE>
Participant; provided, however, that if for any reason the Company does
not so withhold the entire amount of such tax on a timely basis, the
Participant shall be required to reimburse Alliance for the amount of
the tax not withheld promptly upon Alliance's request therefore. With
respect to Restricted Units: (i) in the event that the Committee
determines that any federal, state or local tax or any other charge is
required by law to be withheld with respect to the Restricted Units, the
vesting of Restricted Units, or an election under Section 83(b) of the
Code (a "Withholding Amount") then, in the discretion of the Committee,
either (X) prior to or contemporaneously with the delivery of Restricted
Units to the recipient, the recipient shall pay the Withholding Amount
to Alliance in cash or in vested Holding Units already owned by the
recipient (which are not subject to a pledge or other security
interest), or a combination of cash and such Units, having a total fair
market value, as determined by the Committee, equal to the Withholding
Amount; (Y) Alliance shall retain from any vested Restricted Units to be
delivered to the recipient that number of Units having a fair market
value, as determined by the Committee, equal to the Withholding Amount
(or such portion of the Withholding Amount that is not satisfied under
clause (X) as payment of the Withholding Amount; or (Z) if Restricted
Units are delivered without the payment of the Withholding Amount
pursuant to either clause (X) or (Y), the recipient shall promptly pay
the Withholding Amount to Alliance on at least seven business days
notice from the Committee either in cash or in vested Holding Units
owned by the recipient (which are not subject to a pledge or other
security interest), or a combination of cash and such Units, having a
total fair market value, as determined by the Committee, equal to the
Withholding Amount, and (ii) in the event that the recipient does not
pay the Withholding Amount to Alliance as required pursuant to clause
(i) or make arrangements satisfactory to Alliance regarding payment
thereof, Alliance may withhold any unpaid portion thereof from any
amount otherwise due the recipient from Alliance.
14
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and Restated
Alliance Partners Compensation Plan (the "Plan"), as specified below, in
connection with your 1999 award under the Plan:
Participant ("you"): Bruce W. Calvert
Amount of Award (to be
converted to Restricted Units): $1,875,000
Date of Grant: December 31, 1999
Vesting Commencement Date: January 31, 2000
In connection with your grant of restricted Units, you, Alliance Capital
Management Holding L.P. and Alliance Capital Management L.P. ("Alliance") agree
as set forth in this agreement (the "Agreement"). The Plan provides a
description of the terms and conditions governing restricted Units. If there is
any inconsistency between the terms of this Agreement and the terms of the Plan,
the Plan's terms completely supersede and replace the conflicting terms of this
Agreement. All capitalized terms have the meanings given them in the Plan,
unless specifically stated otherwise in the Agreement. The restricted Units
granted under this Agreement are referred to in the Agreement as the "Restricted
Units."
1. Restrictions. Until restrictions lapse as described in
Paragraph 2, you may not sell, transfer, pledge or otherwise assign or dispose
of any Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in Paragraph 2(b)
below, restrictions will lapse with respect to the Restricted Units in equal
annual installments during the applicable Vesting Period (as defined below),
with restrictions as to the first such installment lapsing on the first
anniversary of the Vesting Commencement Date set forth above, and restrictions
as to the remaining installments lapsing on the subsequent anniversaries of the
Vesting Commencement Date, provided in each case that you are employed by a
Company on such anniversary. The Vesting Period is as set forth in the following
table, based on your age as of December 31, 1999:
<PAGE>
Your Age
As of December 31, 1999 Vesting Period
----------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to death
or Disability, restrictions on any remaining Restricted Units that you
hold as of the date of your termination shall immediately lapse.
3. Forfeitures. If your employment with the Companies terminates for
reasons other than death or Disability, you will immediately forfeit all of your
rights and interests in any Restricted Units as to which restrictions have not
previously lapsed, unless the Committee determines, in its sole discretion, to
accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for you by
Alliance. After your Restricted Units have vested, a certificate for those Units
will be released to you.
5. Distributions. Any distributions paid by Alliance Capital Management
Holding L. P. in connection with Restricted Units (whether or not vested) will
be paid directly to you.
6. Section 83(b) Election. You agree not to make an election under
section 83(b) of the Code with respect to your Restricted Units unless, before
you file the election with the Internal Revenue Service, you (i) notify the
Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
7. Tax Withholding. If the Committee determines that any federal, state
or local tax or any other charge is required by law to be withheld with respect
to the Restricted Units, the vesting of Restricted Units, or an election under
Section 83(b) of the Code (a "Withholding Amount") then, in the discretion of
the
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<PAGE>
Committee, either (a) prior to or contemporaneously with the delivery to you
of Restricted Units, you agree to pay the Withholding Amount to Alliance in cash
or in vested Units that you already own (which are not subject to a pledge or
other security interest), or a combination of cash and such Units, having a
total fair market value equal to the Withholding Amount; (b) Alliance Capital
Management Holding L.P. will retain from any vested Restricted Units to be
delivered to you that number of Units having a fair market value, as determined
by the Committee, equal to the necessary Withholding Amount; or (c) if
Restricted Units are delivered without the payment of the Withholding Amount
under either clause (a) or (b) above, you agree promptly to pay the Withholding
Amount to Alliance on at least seven business days notice from the Committee
either in cash or in vested Units that you already own (which are not subject to
a pledge or other security interest), or a combination of cash and such Units,
having a total fair market value equal to the Withholding Amount. You agree that
if you do not pay the Withholding Amount to Alliance or make satisfactory
payment arrangements as described above, Alliance may withhold any unpaid
portion of the Withholding Amount from any amount otherwise due to you.
8. Adjustments in Authorized Units. In the event of a partnership
restructuring, extraordinary distribution or similar event, the Committee has
the sole discretion to adjust the number of Restricted Units in accordance with
the Plan.
9. Administration. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of which
shall be binding upon you. The Committee is under no obligation to treat you or
your award consistently with the treatment provided for other participants in
the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right to
continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company's right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
(c) This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York (without regard to conflict
of law provisions).
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<PAGE>
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of December 31, 1999.
Alliance Capital Management
Holding L.P.
By: Alliance Capital
Management Corporation, its
General Partner
By: /s/ Robert H. Joseph, Jr.
-------------------------
Title Senior Vice President
& Chief Financial Officer
Participant
/s/ Bruce W. Calvert
------------------------
Name: Bruce W. Calvert
4
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and Restated
Alliance Partners Compensation Plan (the "Plan"), as specified below, in
connection with your 1999 award under the Plan:
Participant ("you"): John D. Carifa
Amount of Award (to be
converted to Restricted Units): $1,875,000
Date of Grant: December 31, 1999
Vesting Commencement Date: January 31, 2000
In connection with your grant of restricted Units, you, Alliance Capital
Management Holding L.P. and Alliance Capital Management L.P. ("Alliance") agree
as set forth in this agreement (the "Agreement"). The Plan provides a
description of the terms and conditions governing restricted Units. If there is
any inconsistency between the terms of this Agreement and the terms of the Plan,
the Plan's terms completely supersede and replace the conflicting terms of this
Agreement. All capitalized terms have the meanings given them in the Plan,
unless specifically stated otherwise in the Agreement. The restricted Units
granted under this Agreement are referred to in the Agreement as the "Restricted
Units."
1. Restrictions. Until restrictions lapse as described in
Paragraph 2, you may not sell, transfer, pledge or otherwise assign or dispose
of any Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in Paragraph 2(b)
below, restrictions will lapse with respect to the Restricted Units in equal
annual installments during the applicable Vesting Period (as defined below),
with restrictions as to the first such installment lapsing on the first
anniversary of the Vesting Commencement Date set forth above, and restrictions
as to the remaining installments lapsing on the subsequent anniversaries of the
Vesting Commencement Date, provided in each case that you are employed by a
Company on such anniversary. The Vesting Period is as set forth in the following
table, based on your age as of December 31, 1999:
<PAGE>
Your Age
As of December 31, 1999 Vesting Period
----------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to death
or Disability, restrictions on any remaining Restricted Units that you
hold as of the date of your termination shall immediately lapse.
3. Forfeitures. If your employment with the Companies terminates for
reasons other than death or Disability, you will immediately forfeit all of your
rights and interests in any Restricted Units as to which restrictions have not
previously lapsed, unless the Committee determines, in its sole discretion, to
accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for you by
Alliance. After your Restricted Units have vested, a certificate for those Units
will be released to you.
5. Distributions. Any distributions paid by Alliance Capital
Management Holding L. P. in connection with Restricted Units (whether or not
vested) will be paid directly to you.
6. Section 83(b) Election. You agree not to make an election under
section 83(b) of the Code with respect to your Restricted Units unless, before
you file the election with the Internal Revenue Service, you (i) notify the
Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
7. Tax Withholding. If the Committee determines that any federal, state
or local tax or any other charge is required by law to be withheld with respect
to the Restricted Units, the vesting of Restricted Units, or an election under
Section 83(b) of the Code (a "Withholding Amount") then, in the discretion of
the
<PAGE>
Committee, either (a) prior to or contemporaneously with the delivery to you of
Restricted Units, you agree to pay the Withholding Amount to Alliance in cash or
in vested Units that you already own (which are not subject to a pledge or other
security interest), or a combination of cash and such Units, having a total fair
market value equal to the Withholding Amount; (b) Alliance Capital Management
Holding L.P. will retain from any vested Restricted Units to be delivered to you
that number of Units having a fair market value, as determined by the Committee,
equal to the necessary Withholding Amount; or (c) if Restricted Units are
delivered without the payment of the Withholding Amount under either clause (a)
or (b) above, you agree promptly to pay the Withholding Amount to Alliance on at
least seven business days notice from the Committee either in cash or in vested
Units that you already own (which are not subject to a pledge or other security
interest), or a combination of cash and such Units, having a total fair market
value equal to the Withholding Amount. You agree that if you do not pay the
Withholding Amount to Alliance or make satisfactory payment arrangements as
described above, Alliance may withhold any unpaid portion of the Withholding
Amount from any amount otherwise due to you.
8. Adjustments in Authorized Units. In the event of a partnership
restructuring, extraordinary distribution or similar event, the Committee has
the sole discretion to adjust the number of Restricted Units in accordance with
the Plan.
9. Administration. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of which
shall be binding upon you. The Committee is under no obligation to treat you or
your award consistently with the treatment provided for other participants in
the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right to
continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company's right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
(c) This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York (without regard to conflict
of law provisions).
3
<PAGE>
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of December 31, 1999.
Alliance Capital Management
Holding L.P.
By: Alliance Capital
Management Corporation, its
General Partner
By: /s/ Robert H. Joseph, Jr.
-------------------------
Title Senior Vice President
& Chief Financial Officer
Participant
/s/ John D. Carifa
--------------------------
Name: John D. Carifa
4
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and Restated
Alliance Partners Compensation Plan (the "Plan"), as specified below, in
connection with your 1999 award under the Plan:
Participant ("you"): Alfred Harrison
Amount of Award (to be
converted to Restricted Units): $1,875,000
Date of Grant: December 31, 1999
Vesting Commencement Date: January 31, 2000
In connection with your grant of restricted Units, you, Alliance Capital
Management Holding L.P. and Alliance Capital Management L.P. ("Alliance") agree
as set forth in this agreement (the "Agreement"). The Plan provides a
description of the terms and conditions governing restricted Units. If there is
any inconsistency between the terms of this Agreement and the terms of the Plan,
the Plan's terms completely supersede and replace the conflicting terms of this
Agreement. All capitalized terms have the meanings given them in the Plan,
unless specifically stated otherwise in the Agreement. The restricted Units
granted under this Agreement are referred to in the Agreement as the "Restricted
Units."
1. Restrictions. Until restrictions lapse as described in
Paragraph 2, you may not sell, transfer, pledge or otherwise assign or dispose
of any Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in Paragraph 2(b)
below, restrictions will lapse with respect to the Restricted Units in equal
annual installments during the applicable Vesting Period (as defined below),
with restrictions as to the first such installment lapsing on the first
anniversary of the Vesting Commencement Date set forth above, and restrictions
as to the remaining installments lapsing on the subsequent anniversaries of the
Vesting Commencement Date, provided in each case that you are employed by a
Company on such anniversary. The Vesting Period is as set forth in the following
table, based on your age as of December 31, 1999:
<PAGE>
Your Age
As of December 31, 1999 Vesting Period
----------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to death
or Disability, restrictions on any remaining Restricted Units that you
hold as of the date of your termination shall immediately lapse.
3. Forfeitures. If your employment with the Companies terminates for
reasons other than death or Disability, you will immediately forfeit all of your
rights and interests in any Restricted Units as to which restrictions have not
previously lapsed, unless the Committee determines, in its sole discretion, to
accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for you by
Alliance. After your Restricted Units have vested, a certificate for those Units
will be released to you.
5. Distributions. Any distributions paid by Alliance Capital Management
Holding L. P. in connection with Restricted Units (whether or not vested) will
be paid directly to you.
6. Section 83(b) Election. You agree not to make an election under
section 83(b) of the Code with respect to your Restricted Units unless, before
you file the election with the Internal Revenue Service, you (i) notify the
Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
7. Tax Withholding. If the Committee determines that any federal, state
or local tax or any other charge is required by law to be withheld with respect
to the Restricted Units, the vesting of Restricted Units, or an election under
Section 83(b) of the Code (a "Withholding Amount") then, in the discretion of
the
<PAGE>
Committee, either (a) prior to or contemporaneously with the delivery to you of
Restricted Units, you agree to pay the Withholding Amount to Alliance in cash or
in vested Units that you already own (which are not subject to a pledge or other
security interest), or a combination of cash and such Units, having a total fair
market value equal to the Withholding Amount; (b) Alliance Capital Management
Holding L.P. will retain from any vested Restricted Units to be delivered to you
that number of Units having a fair market value, as determined by the Committee,
equal to the necessary Withholding Amount; or (c) if Restricted Units are
delivered without the payment of the Withholding Amount under either clause (a)
or (b) above, you agree promptly to pay the Withholding Amount to Alliance on at
least seven business days notice from the Committee either in cash or in vested
Units that you already own (which are not subject to a pledge or other security
interest), or a combination of cash and such Units, having a total fair market
value equal to the Withholding Amount. You agree that if you do not pay the
Withholding Amount to Alliance or make satisfactory payment arrangements as
described above, Alliance may withhold any unpaid portion of the Withholding
Amount from any amount otherwise due to you.
8. Adjustments in Authorized Units. In the event of a partnership
restructuring, extraordinary distribution or similar event, the Committee has
the sole discretion to adjust the number of Restricted Units in accordance with
the Plan.
9. Administration. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of which
shall be binding upon you. The Committee is under no obligation to treat you or
your award consistently with the treatment provided for other participants in
the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right to
continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company's right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
(c) This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York (without regard to conflict
of law provisions).
3
<PAGE>
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of December 31, 1999.
Alliance Capital Management
Holding L.P.
By: Alliance Capital
Management Corporation, its
General Partner
By: /s/ Robert H. Joseph, Jr.
-------------------------
Title Senior Vice President
& Chief Financial Officer
Participant
/s/ Alfred Harrison
----------------------------
Name: Alfred Harrison
4
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and Restated
Alliance Partners Compensation Plan (the "Plan"), as specified below, in
connection with your 1999 award under the Plan:
Participant ("you"): Robert H. Joseph, Jr.
Amount of Award (to be
converted to Restricted Units): $460,000
Date of Grant: December 31, 1999
Vesting Commencement Date: January 31, 2000
In connection with your grant of restricted Units, you, Alliance
Capital Management Holding L.P. and Alliance Capital Management L.P.
("Alliance") agree as set forth in this agreement (the "Agreement"). The Plan
provides a description of the terms and conditions governing restricted Units.
If there is any inconsistency between the terms of this Agreement and the terms
of the Plan, the Plan's terms completely supersede and replace the conflicting
terms of this Agreement. All capitalized terms have the meanings given them in
the Plan, unless specifically stated otherwise in the Agreement. The restricted
Units granted under this Agreement are referred to in the Agreement as the
"Restricted Units."
1. Restrictions. Until restrictions lapse as described in Paragraph 2,
you may not sell, transfer, pledge or otherwise assign or dispose of any
Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in Paragraph
2(b) below, restrictions will lapse with respect to the Restricted Units in
equal annual installments during the applicable Vesting Period (as defined
below), with restrictions as to the first such installment lapsing on the first
anniversary of the Vesting Commencement Date set forth above, and restrictions
as to the remaining installments lapsing on the subsequent anniversaries of the
Vesting Commencement Date, provided in each case that you are employed by a
Company on such anniversary. The Vesting Period is as set forth in the following
table, based on your age as of December 31, 1999:
<PAGE>
Your Age
As of December 31, 1999 Vesting Period
----------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to
death or Disability, restrictions on any remaining Restricted Units
that you hold as of the date of your termination shall immediately
lapse.
3. Forfeitures. If your employment with the Companies terminates for
reasons other than death or Disability, you will immediately forfeit all of your
rights and interests in any Restricted Units as to which restrictions have not
previously lapsed, unless the Committee determines, in its sole discretion, to
accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for you by
Alliance. After your Restricted Units have vested, a certificate for those Units
will be released to you.
5. Distributions. Any distributions paid by Alliance Capital Management
Holding L. P. in connection with Restricted Units (whether or not vested) will
be paid directly to you.
6. Section 83(b) Election. You agree not to make an election under
section 83(b) of the Code with respect to your Restricted Units unless, before
you file the election with the Internal Revenue Service, you (i) notify the
Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
<PAGE>
7. Tax Withholding. If the Committee determines that any federal, state
or local tax or any other charge is required by law to be withheld with respect
to the Restricted Units, the vesting of Restricted Units, or an election under
Section 83(b) of the Code (a "Withholding Amount") then, in the discretion of
the Committee, either (a) prior to or contemporaneously with the delivery to you
of Restricted Units, you agree to pay the Withholding Amount to Alliance in cash
or in vested Units that you already own (which are not subject to a pledge or
other security interest), or a combination of cash and such Units, having a
total fair market value equal to the Withholding Amount; (b) Alliance Capital
Management Holding L.P. will retain from any vested Restricted Units to be
delivered to you that number of Units having a fair market value, as determined
by the Committee, equal to the necessary Withholding Amount; or (c) if
Restricted Units are delivered without the payment of the Withholding Amount
under either clause (a) or (b) above, you agree promptly to pay the Withholding
Amount to Alliance on at least seven business days notice from the Committee
either in cash or in vested Units that you already own (which are not subject to
a pledge or other security interest), or a combination of cash and such Units,
having a total fair market value equal to the Withholding Amount. You agree that
if you do not pay the Withholding Amount to Alliance or make satisfactory
payment arrangements as described above, Alliance may withhold any unpaid
portion of the Withholding Amount from any amount otherwise due to you.
8. Adjustments in Authorized Units. In the event of a partnership
restructuring, extraordinary distribution or similar event, the Committee has
the sole discretion to adjust the number of Restricted Units in accordance with
the Plan.
9. Administration. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of which
shall be binding upon you. The Committee is under no obligation to treat you or
your award consistently with the treatment provided for other participants in
the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right to
continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company's right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
(c) This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York (without regard to conflict
of law provisions).
3
<PAGE>
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of December 31, 1999.
Alliance Capital Management
Holding L.P.
By: Alliance Capital
Management Corporation, its
General Partner
By: /s/ Robert H. Joseph, Jr.
-----------------------------
Title Senior Vice President
& Chief Financial Officer
Participant
/s/ Robert H. Joseph, Jr.
-------------------------
Name: Robert H. Joseph, Jr.
4
RESTRICTED UNIT AWARD AGREEMENT
UNDER THE AMENDED AND RESTATED
ALLIANCE PARTNERS COMPENSATION PLAN
You have been granted restricted Units under the Amended and Restated
Alliance Partners Compensation Plan (the "Plan"), as specified below, in
connection with your 1999 award under the Plan:
Participant ("you"): David Brewer
Amount of Award (to be
converted to Restricted Units): $460,000
Date of Grant: December 31, 1999
Vesting Commencement Date: January 31, 2000
In connection with your grant of restricted Units, you, Alliance Capital
Management Holding L.P. and Alliance Capital Management L.P. ("Alliance") agree
as set forth in this agreement (the "Agreement"). The Plan provides a
description of the terms and conditions governing restricted Units. If there is
any inconsistency between the terms of this Agreement and the terms of the Plan,
the Plan's terms completely supersede and replace the conflicting terms of this
Agreement. All capitalized terms have the meanings given them in the Plan,
unless specifically stated otherwise in the Agreement. The restricted Units
granted under this Agreement are referred to in the Agreement as the "Restricted
Units."
1. Restrictions. Until restrictions lapse as described in Paragraph 2,
you may not sell, transfer, pledge or otherwise assign or dispose of any
Restricted Units.
2. Vesting of Restricted Units. (a) Except as provided in Paragraph 2(b)
below, restrictions will lapse with respect to the Restricted Units in equal
annual installments during the applicable Vesting Period (as defined below),
with restrictions as to the first such installment lapsing on the first
anniversary of the Vesting Commencement Date set forth above, and restrictions
as to the remaining installments lapsing on the subsequent anniversaries of the
Vesting Commencement Date, provided in each case that you are employed by a
Company on such anniversary. The Vesting Period is as set forth in the following
table, based on your age as of December 31, 1999:
<PAGE>
Your Age
As of December 31, 1999 Vesting Period
----------------------- --------------
Up to and including 47 8 years
48 7 years
49 6 years
50-57 5 years
58 4 years
59 3 years
60 2 years
61 1 year
62 or older Fully vested at grant
(b) If your employment with the Companies terminates due to death
or Disability, restrictions on any remaining Restricted Units that you
hold as of the date of your termination shall immediately lapse.
3. Forfeitures. If your employment with the Companies terminates for
reasons other than death or Disability, you will immediately forfeit all of your
rights and interests in any Restricted Units as to which restrictions have not
previously lapsed, unless the Committee determines, in its sole discretion, to
accelerate the vesting of those Restricted Units.
4. Unit Certificates. Your Restricted Units will be held for you by
Alliance. After your Restricted Units have vested, a certificate for those Units
will be released to you.
5. Distributions. Any distributions paid by Alliance Capital
Management Holding L. P. in connection with Restricted Units (whether or not
vested) will be paid directly to you.
6. Section 83(b) Election. You agree not to make an election under
section 83(b) of the Code with respect to your Restricted Units unless, before
you file the election with the Internal Revenue Service, you (i) notify the
Committee of your intention to file the election, (ii) furnish the Committee
with a copy of the election to be filed and (iii) pay (or make satisfactory
arrangements for paying) the necessary tax withholding amount to Alliance in
accordance with Section 8.
7. Tax Withholding. If the Committee determines that any federal, state
or local tax or any other charge is required by law to be withheld with respect
to the Restricted Units, the vesting of Restricted Units, or an election under
Section 83(b) of the Code (a "Withholding Amount") then, in the discretion of
the
<PAGE>
Committee, either (a) prior to or contemporaneously with the delivery to you of
Restricted Units, you agree to pay the Withholding Amount to Alliance in cash or
in vested Units that you already own (which are not subject to a pledge or other
security interest), or a combination of cash and such Units, having a total fair
market value equal to the Withholding Amount; (b) Alliance Capital Management
Holding L.P. will retain from any vested Restricted Units to be delivered to you
that number of Units having a fair market value, as determined by the Committee,
equal to the necessary Withholding Amount; or (c) if Restricted Units are
delivered without the payment of the Withholding Amount under either clause (a)
or (b) above, you agree promptly to pay the Withholding Amount to Alliance on at
least seven business days notice from the Committee either in cash or in vested
Units that you already own (which are not subject to a pledge or other security
interest), or a combination of cash and such Units, having a total fair market
value equal to the Withholding Amount. You agree that if you do not pay the
Withholding Amount to Alliance or make satisfactory payment arrangements as
described above, Alliance may withhold any unpaid portion of the Withholding
Amount from any amount otherwise due to you.
8. Adjustments in Authorized Units. In the event of a partnership
restructuring, extraordinary distribution or similar event, the Committee has
the sole discretion to adjust the number of Restricted Units in accordance with
the Plan.
9. Administration. It is expressly understood that the Committee is
authorized to administer, construe, and make all determinations necessary or
appropriate to the administration of the Plan and this Agreement, all of which
shall be binding upon you. The Committee is under no obligation to treat you or
your award consistently with the treatment provided for other participants in
the Plan.
10. Miscellaneous.
(a) This Agreement does not confer upon you any right to
continuation of employment by a Company, nor does this Agreement interfere in
any way with a Company's right to terminate your employment at any time.
(b) This Agreement will be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
(c) This Agreement will be governed by, and construed in
accordance with, the laws of the state of New York (without regard to conflict
of law provisions).
3
<PAGE>
(d) This Agreement and the Plan constitute the entire
understanding between you and the Companies regarding this award. Any prior
agreements, commitments or negotiations concerning this award are superseded.
This Agreement may be amended only by another written agreement, signed by both
parties.
BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED
ABOVE AND IN THE PLAN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of December 31, 1999.
Alliance Capital Management
Holding L.P.
By: Alliance Capital
Management Corporation, its
General Partner
By: /s/ Robert H. Joseph, Jr.
-------------------------
Title Senior Vice President
& Chief Financial Officer
Participant
/s/ David Brewer
----------------------------
Name: David Brewer
4
COMMERCIAL PAPER DEALER AGREEMENT
[4(2) Program]
This Commercial Paper Dealer Agreement, dated as of December 14, 1999, confirms
the agreement among Goldman, Sachs & Co. ("Goldman"), Banc of America Securities
LLC ("BancAmerica") and Alliance Capital Management L.P. (the "Partnership"),
whereby each of Goldman and BancAmerica, severally and not jointly, will act as
a dealer with respect to the promissory notes to be issued by the Partnership,
which will be issued either in physical bearer form or book-entry form. Each of
Goldman and BancAmerica is also sometimes referred to herein as a "Dealer" and
collectively as the "Dealers." Notes in book-entry form will be represented by
master notes registered in the name of a nominee of The Depository Trust Company
("DTC") and recorded in the book-entry system maintained by DTC. The promissory
notes shall (a) be issued in denominations of not less than $250,000; (b) have
maturities not exceeding 270 days from the date of issue; and (c) not contain
any condition of redemption or right to prepay. Such notes, including the master
notes, shall hereinafter be referred to as "Commercial Paper" or "Notes."
Certain terms used in this Agreement are defined in paragraph 12 below. Any
Exhibits described in this Agreement are hereby incorporated by reference into
this Agreement and made fully a part hereof.
1. (a) The Partnership represents and warrants to the Dealers that: (i)
the Partnership has been duly organized and is validly existing as a limited
partnership in good standing under the laws of the State of Delaware; (ii) this
Agreement and the issuing and paying agency agreement dated as of December 14,
1999 with U.S. Bank Trust National Association (the "Issuing and Paying Agent",
which term shall include any successor issuing and paying agent under such
agreement), a copy of which has been provided to each of the Dealers (as such
agreement may be amended or supplemented from time to time, the "Issuing
Agreement"), have been duly authorized, executed and delivered by the
Partnership and each constitutes the valid and legally binding obligation of the
Partnership enforceable in accordance with its respective terms subject to any
applicable law relating to or affecting indemnification for liability under the
securities laws, and except to the extent such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and the applicability of equitable principles thereto whether in a
proceeding of law or in equity; (iii) the Notes have been duly authorized and,
when issued and duly delivered in accordance with the Issuing Agreement, will
constitute the valid and legally binding obligations of the Partnership,
enforceable in accordance with their terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and the applicability of equitable
principles thereto whether in a proceeding of law or in equity; (iv) the private
placement memorandum approved by the Partnership for distribution pursuant to
Section 7 hereof (the "Private Placement Memorandum") and the Annual Report on
Form 10-K of Alliance Capital Management Holding L.P., formerly Alliance Capital
Management L.P. ("Alliance Holding"), for the fiscal year ended December 31,
1998 and other documents subsequently filed with the Securities and Exchange
Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), by Alliance Holding and, so long as it remains
subject to the reporting requirements of the Exchange Act, by the
<PAGE>
Partnership (together, the "Offering Materials"), taken as a whole, except
insofar as any information therein relates to Goldman or BancAmerica (or their
respective affiliates) in its capacity as dealer hereunder, do not include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; (v) the offer and sale of the Notes
in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 4(2) thereof, and no indenture in respect of the Notes is
required to be qualified under the Trust Indenture Act of 1939, as amended; and
(vi) the Partnership is not an "investment company" or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1940, as amended.
(b) Each sale of a Note by the Partnership under this Agreement shall
constitute an affirmation that the foregoing representations and warranties
remain true and correct at the time of sale, and will remain true and correct at
the time of delivery, of such Note.
2. Each of the Dealers may, from time to time, but shall not be obligated
to, purchase Commercial Paper from the Partnership.
3. Prior to the initial issuance of Commercial Paper, the Partnership shall
have delivered to each of the Dealers an incumbency certificate identifying
persons authorized to sign Commercial Paper on the Partnership's behalf and
containing the true signatures of each of such persons.
4. Prior to the initial issuance of Commercial Paper, the Partnership shall
have supplied each of the Dealers with an opinion or opinions of counsel
addressing the matters set forth in paragraph 1(a)(i)-(iii) and (v) - (vi) above
and such other matters as the Dealers shall reasonably request, such opinion or
opinions to be in form and substance satisfactory to the Dealers.
5. All transactions in Commercial Paper between each of the Dealers and the
Partnership shall be in accordance with the custom and practice in the
commercial paper market. In accordance with such custom and practice, the
purchase of Commercial Paper by the applicable Dealer shall be negotiated
verbally between the applicable Dealer's personnel and the authorized
representative of the Partnership. Such negotiation shall determine the
principal amount of Commercial Paper to be sold, the discount rate or interest
rate applicable thereto, and the maturity thereof. The applicable Dealer's fee
for such sales shall be included in the discount rate with respect to Commercial
Paper issued at a discount, or stated separately as a fee, in the case of
Commercial Paper bearing interest. The applicable Dealer shall confirm each
transaction made with the Partnership in writing in such Dealer's customary
form. Delivery and payment of Commercial Paper shall be effected in accordance
with the Issuing Agreement.
6. The applicable Dealer shall pay for the Notes purchased by such Dealer
in immediately available funds on the business day such Notes, executed in a
manner satisfactory to such Dealer, are delivered to such Dealer in the case of
physical bearer Notes, or in the case of book-entry Notes, on the business day
such Notes are credited to such Dealer's Participant Account at DTC. Payment
shall be made in any manner permitted in the Issuing Agreement.
<PAGE>
The amount payable by the applicable Dealer to the Partnership shall be (i) in
the case of discount Notes, the face value thereof less the original issue
discount and less the compensation payable to such Dealer and (ii) in the case
of interest to follow Notes, the face value thereof less the compensation
payable to such Dealer.
7. From and after the date of this Agreement, the Partnership will supply
to each of the Dealers on a continuing basis three copies of all annual and
quarterly and other reports filed by the Partnership and Alliance Holding
pursuant to Section 13 of the Exchange Act, and reports mailed by the
Partnership or Alliance Holding to their unitholders (in their capacity as
unitholders), plus such other information as the Dealers may reasonably request.
The Partnership understands, however, that the Dealers shall distribute or
otherwise use any informational documents concerning the Partnership, including
the Private Placement Memorandum, only with the prior review and approval of the
Partnership. The Partnership further undertakes to supply copies of such reports
when requested by any Commercial Paper customer of the Dealers, as set forth in
the Private Placement Memorandum. The Partnership further agrees to notify the
Dealers promptly upon the occurrence of any event or other development, the
result of which causes the informational documents and the Partnership's or
Alliance Holding's annual or quarterly and other reports filed pursuant to
Section 13 of the Exchange Act, taken as a whole, to include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
8. (a) The Partnership agrees to indemnify and hold harmless each Dealer
and each person, if any, who controls such Dealer within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act (collectively, the
"Indemnitee"), against any and all losses, claims, damages, liabilities or
expenses, joint or several, to which any Indemnitee may become subject, under
the Act, the Exchange Act, or otherwise, insofar as such losses, claims damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of material fact
contained in the Offering Materials, taken as a whole, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading, or any breach of its agreements contained in this Agreement, and the
Partnership further agrees to reimburse each Indemnitee for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability, expense or action; provided, however,
that the Partnership will not be liable in any such case to the extent that any
such loss, claim damage, liability or expense arises out of or is based upon
such untrue statement or omission contained in the Offering Materials which
relates to the Dealers (or their respective affiliates) in their capacity as
dealer hereunder.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph 8(a) is for
any reason held unavailable (otherwise than in accordance with the provision
stated therein), the Partnership shall contribute to the aggregate costs of
satisfying any loss, damage, liability or expense sought to be charged against
or incurred by any Indemnitee in such proportion as is appropriate to reflect
the relative benefits received by the Partnership on the one hand and the
Dealers on the other from the offering of the Notes. For purposes of this
paragraph 8(b), the "relative benefits" received by the Partnership shall be
equal to the aggregate net proceeds received by the Partnership from Notes
3
<PAGE>
sold pursuant to this Agreement and the "relative benefits" received by each
Dealer shall be equal to the aggregate commissions and fees earned by such
Dealer hereunder.
9. The Dealers and the Partnership hereby establish and agree to observe
the following procedures in connection with offers, sales and subsequent resales
or other transfers of the Notes:
(a) Offers and sales of the Notes by or through the Dealers shall be
made only to: (i) investors reasonably believed by the applicable Dealer to
be Qualified Institutional Buyers or Institutional Accredited Investors and
(ii) non-bank fiduciaries or agents that will be purchasing Notes for one
or more accounts, each of which is reasonably believed by the Dealer to be
an Institutional Accredited Investor.
(b) Resales and other transfers of the Notes by the holders thereof
shall be made only in accordance with the restrictions in the legend
described in clause (e) below.
(c) No "general solicitation or general advertising" within the
meaning of Regulation D shall be used in connection with the offering of
the Notes. Without limiting the generality of the foregoing, without the
prior written approval of the other parties hereto, no party hereto shall
issue any press release or place or publish any "tombstone" or other
advertisement relating to the Notes.
(d) No sale of Notes to any one purchaser shall be for less than
$250,000 principal or face amount, and no Note shall be issued in a smaller
principal or face amount. If the purchaser is a non-bank fiduciary acting
on behalf of others, each person for whom such purchaser is acting must
purchase at least $250,000 principal or face amount of Notes.
(e) Offers and sales of the Notes by the Partnership through a Dealer
acting as agent for the Partnership shall be made in accordance with Rule
506 under the Securities Act, and shall be subject to the restrictions
described in the legend appearing on Exhibit A hereto. A legend
substantially to the effect of such Exhibit A shall appear as part of the
Private Placement Memorandum used in connection with offers and sales of
Notes hereunder, as well as on each individual certificate representing a
Note and each master note representing book-entry Notes offered and sold
pursuant to this Agreement.
(f) Each Dealer shall furnish or shall have furnished to each
purchaser of Notes for which it has acted as the Dealer a copy of the
then-current Private Placement Memorandum unless such purchaser has
previously received a copy of the Private Placement Memorandum as then in
effect. The Private Placement Memorandum shall expressly state that any
person to whom Notes are offered shall have an opportunity to ask questions
of, and receive information from, the Partnership and the applicable Dealer
and shall provide the names, addresses and telephone numbers of the persons
from whom information regarding the Partnership may be obtained.
(g) The Partnership agrees, for the benefit of the Dealers and each of
the holders and prospective purchasers from time to time of the Notes that,
if at any time the Partnership shall not be subject to Section 13 or 15(d)
of the Exchange Act, the
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<PAGE>
Partnership will furnish, upon request and at its expense, to the Dealers
and to holders and prospective purchasers of Notes information required by
Rule 144A(d)(4)(i) in compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by the Dealers
would be ineligible for resale under Rule 144A, the Partnership shall
immediately notify the Dealers (by telephone, confirmed in writing) of such
fact and shall promptly prepare and deliver to the Dealers an amendment or
supplement to the Private Placement Memorandum describing the Notes that
are ineligible, the reason for such ineligibility and any other relevant
information relating thereto.
10. The Partnership hereby represents and warrants to each Dealer, in
connection with offers, sales and resales of Notes, as follows:
(a) The Partnership hereby confirms to each Dealer that within the
preceding six months neither the Partnership nor any person other than the
Dealers acting on behalf of the Partnership has offered or sold any Notes,
or any substantially similar security of the Partnership to, or solicited
offers to buy any such security from, any person other than the Dealers;
provided, that the parties hereto acknowledge that, within the preceding
six months, the Dealers have offered and sold commercial paper notes on
behalf of the Partnership and Alliance Holding as described in paragraph 11
below. The Partnership also agrees that as long as the Notes are being
offered for sale by the Dealers as contemplated hereby and until at least
six months after the offer of Notes hereunder has been terminated, neither
the Partnership nor any person other than the Dealers will offer the Notes
or any substantially similar security of the Partnership for sale to, or
solicit offers to buy any such security from, any person other than the
Dealers if, as a result of the doctrine of "integration" referred to in
Rule 502 under the Securities Act, such offer or sale would render invalid
the exemption from the registration requirements of the Security Act
provided by Section 4(2) thereof for the offer and sale of the Notes, it
being understood that such agreement is made with a view to bringing the
offer and sale of the Notes within the exemption provided by Section 4(2)
of the Securities Act and shall survive any termination of this Agreement.
The Partnership hereby represents and warrants that it has not taken or
omitted to take, and will not take or omit to take, any action that would
cause the offering and sale of Notes hereunder to be integrated with any
other offering of securities, whether such offering is made by the
Partnership or some other party or parties.
(b) The Partnership represents and agrees that the proceeds of the
sale of the Notes are not currently contemplated to be used for the purpose
of buying, carrying or trading securities within the meaning of Regulation
T and the interpretations thereunder by the Board of Governors of the
Federal Reserve System. In the event that the Partnership determines to use
such proceeds for the purpose of buying, carrying or trading securities,
whether in connection with an acquisition of another company or otherwise,
the Partnership shall give the Dealers at least five business days' prior
written notice to that effect. The Partnership shall also give the Dealers
prompt notice of the actual date that it commences to purchase securities
with the proceeds of the Notes. Thereafter, in the event that a Dealer
purchases Notes as principal and does not resell
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<PAGE>
such Notes on the day of such purchase, to the extent necessary to comply
with Regulation T and the interpretations thereunder, such Dealer will sell
such Notes either (i) only to offerees it reasonably believes to be
Qualified Institutional Buyers or to Qualified Institutional Buyers it
reasonably believes are acting for other Qualified Institutional Buyers, in
each case in accordance with Rule 144A or (ii) in a manner which would not
cause a violation of Regulation T and the interpretations thereunder.
11. Each of the Dealers confirms that, in connection with the offer and
sale of commercial paper notes referred to in paragraph 10(a) above, (a) it made
offers and sales only to Institutional Accredited Investors or Qualified
Institutional Buyers and (b) it did not engage in any form of "general
solicitation or general advertising" within the meaning of Regulation D.
12. The following are definitions for certain terms used in this Agreement:
(a) "Institutional Accredited Investor" shall mean an institutional
investor that is an accredited investor within the meaning of Rule 501
under the Securities Act and that has such knowledge and experience in
financial and business matters that it is capable of evaluating and bearing
the economic risk of an investment in the Notes, including, but not limited
to, a bank, as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution, as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or
fiduciary capacity.
(b) "Non-bank fiduciary or agent" shall mean a fiduciary or agent
other than (a) a bank, as defined in Section 3(a)(2) of the Securities Act,
or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of
the Securities Act.
(c) "Qualified Institutional Buyer" shall have the meaning assigned to
that term in Rule 144A under the Securities Act.
(d) "Regulation D" shall mean Regulation D (Rules 501 et seq.) under
the Securities Act.
(e) "Rule 144A" shall mean Rule 144A under the Securities Act.
13. This Agreement may be terminated by the Partnership or either Dealer,
with respect to such Dealer, upon thirty days' written notice to the Dealers or
the Partnership, as the case may be. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
14. This Agreement shall inure to the benefit of and be binding upon the
undersigned parties and their respective successors, but no other person,
partnership, association, company or corporation.
If the foregoing accurately reflects our agreement, please sign the
enclosed copy in the space provided below and return it to the undersigned.
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<PAGE>
The parties hereto have caused the execution of this Agreement on the
date first provided above.
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, its General Partner
By: /s/ Anne S. Drennan
---------------------------------
Title: Senior Vice President and
Treasurer
Goldman, Sachs & Co.
By: /s/ William R. Harrison
---------------------------------
Authorized Signatory
Banc of America Securities LLC
By: /s/ Stephen R. Austen
---------------------------------
Title: Managing Director
7
<PAGE>
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS
AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE
PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN
OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES,
THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION
THEREOF AND THAT IT IS (A) AN INSTITUTIONAL INVESTOR THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") AND THAT EITHER IS PURCHASING NOTES
FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF
THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS
DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR
FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR
SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS
EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR (B) A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A
UNDER THE ACT THAT IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR
MORE OTHER ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF
WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER
ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT
PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER
THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER
THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO GOLDMAN, SACHS & CO., BANC
OF AMERICA SECURITIES LLC OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS
A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"),
NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2)
THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR A
QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF
RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000.
EXTENDIBLE COMMERCIAL NOTES DEALER AGREEMENT
This Extendible Commercial Notes Dealer Agreement, dated as of December 14,
1999, confirms the agreement among Goldman, Sachs & Co. ("Goldman"), Banc of
America Securities LLC ("BancAmerica") and Alliance Capital Management L.P. (the
"Partnership"), whereby each of Goldman and BancAmerica, severally and not
jointly, will act as a dealer with respect to the promissory notes to be issued
by the Partnership, which will be issued either in physical bearer form or
book-entry form. Each of Goldman and BancAmerica is also sometimes referred to
herein as a "Dealer" and collectively as the "Dealers." Notes in book-entry form
will be represented by master notes registered in the name of a nominee of The
Depository Trust Company ("DTC") and recorded in the book-entry system
maintained by DTC. The promissory notes shall (a) be issued in denominations of
not less than $250,000; (b) have maturities not exceeding 390 days from the date
of issue; and (c) shall have such terms as attached as Exhibit B hereto and as
specified in the Private Placement Memorandum (as defined below). Such notes,
including the master notes, shall hereinafter be referred to as "Notes." Certain
terms used in this Agreement are defined in paragraph 12 below. Any Exhibits
described in this Agreement are hereby incorporated by reference into this
Agreement and made fully a part hereof.
1. (a) The Partnership represents and warrants to the Dealers that: (i)
the Partnership has been duly organized and is validly existing as a limited
partnership in good standing under the laws of the State of Delaware; (ii) this
Agreement and the issuing and paying agency agreement dated as of December 14,
1999 with U.S. Bank Trust National Association (the "Issuing and Paying Agent",
which term shall include any successor issuing and paying agent under such
agreement), a copy of which has been provided to each of the Dealers (as such
agreement may be amended or supplemented from time to time, the "Issuing
Agreement"), have been duly authorized, executed and delivered by the
Partnership and each constitutes the valid and legally binding obligation of the
Partnership enforceable in accordance with its respective terms subject to any
applicable law relating to or affecting indemnification for liability under the
securities laws, and except to the extent such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and the applicability of equitable principles thereto whether in a
proceeding of law or in equity; (iii) the Notes have been duly authorized and,
when issued and duly delivered in accordance with the Issuing Agreement, will
constitute the valid and legally binding obligations of the Partnership,
enforceable in accordance with their terms, except to the extent such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally and the applicability of equitable
principles thereto whether in a proceeding of law or in equity; (iv) the private
placement memorandum approved by the Partnership for distribution pursuant to
Section 7 hereof (the "Private Placement Memorandum") and the Annual Report on
Form 10-K of Alliance Capital Management Holding L.P., formerly Alliance Capital
Management L.P. ("Alliance Holding"), for the fiscal year ended December 31,
1998 and other documents subsequently filed with the Securities and Exchange
Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), by Alliance Holding and, so long as it remains
subject to the reporting requirements of the Exchange Act, by the Partnership
(together, the "Offering Materials"), taken as a whole, except insofar as any
information therein relates to Goldman or BancAmerica (or their respective
affiliates) in its capacity as dealer hereunder, do not include any untrue
statement of a material fact or omit to
<PAGE>
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading; (v)
the offer and sale of the Notes in the manner contemplated by this Agreement
will be exempt from the registration requirements of the Securities Act of 1933,
as amended (the "Act"), pursuant to Section 4(2) thereof, and no indenture in
respect of the Notes is required to be qualified under the Trust Indenture Act
of 1939, as amended; and (vi) the Partnership is not an "investment company" or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(b) Each sale of a Note by the Partnership under this Agreement shall
constitute an affirmation that the foregoing representations and warranties
remain true and correct at the time of sale, and will remain true and correct at
the time of delivery, of such Note.
2. Each of the Dealers may, from time to time, but shall not be obligated
to, purchase Notes from the Partnership.
3. Prior to the initial issuance of Notes, the Partnership shall have
delivered to each of the Dealers an incumbency certificate identifying persons
authorized to sign Notes on the Partnership's behalf and containing the true
signatures of each of such persons.
4. Prior to the initial issuance of Notes, the Partnership shall have
supplied each of the Dealers with an opinion or opinions of counsel addressing
the matters set forth in paragraph 1(a)(i)-(iii) and (v) - (vi) above and such
other matters as the Dealers shall reasonably request, such opinion or opinions
to be in form and substance satisfactory to the Dealers.
5. All transactions in Notes between each of the Dealers and the
Partnership shall be in accordance with the custom and practice in the
commercial paper market. In accordance with such custom and practice, the
purchase of Notes by the applicable Dealer shall be negotiated verbally between
the applicable Dealer's personnel and the authorized representative of the
Partnership. Such negotiation shall determine the principal amount of Notes to
be sold, the discount rate or interest rate applicable thereto, and the maturity
thereof. The applicable Dealer's fee for such sales shall be included in the
discount rate with respect to Notes issued at a discount, or stated separately
as a fee, in the case of Notes bearing interest. The applicable Dealer shall
confirm each transaction made with the Partnership in writing in such Dealer's
customary form. Delivery and payment of Notes shall be effected in accordance
with the Issuing Agreement.
6. The applicable Dealer shall pay for the Notes purchased by such Dealer
in immediately available funds on the business day such Notes, executed in a
manner satisfactory to such Dealer, are delivered to such Dealer in the case of
physical bearer Notes, or in the case of book-entry Notes, on the business day
such Notes are credited to such Dealer's Participant Account at DTC. Payment
shall be made in any manner permitted in the Issuing Agreement. The amount
payable by the applicable Dealer to the Partnership shall be (i) in the case of
discount Notes, the face value thereof less the original issue discount and less
the compensation payable to such Dealer and (ii) in the case of interest to
follow Notes, the face value thereof less the compensation payable to such
Dealer.
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<PAGE>
7. (a) From and after the date of this Agreement, the Partnership will
supply to each of the Dealers on a continuing basis three copies of all annual
and quarterly and other reports filed by the Partnership and Alliance Holding
pursuant to Section 13 of the Exchange Act, and reports mailed by the
Partnership or Alliance Holding to their unitholders (in their capacity as
unitholders), plus such other information as the Dealers may reasonably request.
The Partnership understands, however, that the Dealers shall distribute or
otherwise use any informational documents concerning the Partnership, including
the Private Placement Memorandum, only with the prior review and approval of the
Partnership. The Partnership further undertakes to supply copies of such reports
when requested by any customer of the Dealers in respect of Notes, as set forth
in the Private Placement Memorandum.
(b) The Partnership further agrees to notify the Dealers promptly upon
the occurrence of any event or other development, the result of which causes the
informational documents and the Partnership's or Alliance Holding's annual or
quarterly and other reports filed pursuant to Section 13 of the Exchange Act,
taken as a whole, to include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(c) The Partnership agrees to give the Dealers (i) prompt notice (but
in any event prior to any subsequent issuance of Notes hereunder) of any
amendment to, modification of or waiver with respect to, the Notes or the
Issuing and Paying Agency Agreement, including a complete copy of any such
amendment, modification or waiver, (ii) in the event it elects not to redeem any
Notes on the applicable Initial Redemption Date (as defined in the Private
Placement Memorandum), written notice of such election by 11:00 a.m. on such
Initial Redemption Date, and (iii) not less than five nor more than 25 days'
notice of any proposed redemption of the Notes.
8. (a) The Partnership agrees to indemnify and hold harmless each Dealer
and each person, if any, who controls such Dealer within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act (collectively, the
"Indemnitee"), against any and all losses, claims, damages, liabilities or
expenses, joint or several, to which any Indemnitee may become subject, under
the Act, the Exchange Act, or otherwise, insofar as such losses, claims damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of material fact
contained in the Offering Materials, taken as a whole, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading, or any breach of its agreements contained in this Agreement, and the
Partnership further agrees to reimburse each Indemnitee for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability, expense or action; provided, however,
that the Partnership will not be liable in any such case to the extent that any
such loss, claim damage, liability or expense arises out of or is based upon
such untrue statement or omission contained in the Offering Materials which
relates to the Dealers (or their respective affiliates) in their capacity as
dealer hereunder.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph 8(a) is for
any reason held unavailable (otherwise than in accordance with the provision
stated therein), the Partnership shall contribute
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<PAGE>
to the aggregate costs of satisfying any loss, damage, liability or expense
sought to be charged against or incurred by any Indemnitee in such proportion as
is appropriate to reflect the relative benefits received by the Partnership on
the one hand and the Dealers on the other from the offering of the Notes. For
purposes of this paragraph 8(b), the "relative benefits" received by the
Partnership shall be equal to the aggregate net proceeds received by the
Partnership from Notes sold pursuant to this Agreement and the "relative
benefits" received by each Dealer shall be equal to the aggregate commissions
and fees earned by such Dealer hereunder.
9. The Dealers and the Partnership hereby establish and agree to observe
the following procedures in connection with offers, sales and subsequent resales
or other transfers of the Notes:
(a) Offers and sales of the Notes by or through the Dealers
shall be made only to: (i) investors reasonably believed by the
applicable Dealer to be Qualified Institutional Buyers or Institutional
Accredited Investors and (ii) non-bank fiduciaries or agents that will
be purchasing Notes for one or more accounts, each of which is
reasonably believed by the Dealer to be an Institutional Accredited
Investor.
(b) Resales and other transfers of the Notes by the holders
thereof shall be made only in accordance with the restrictions in the
legend described in clause (e) below.
(c) No "general solicitation or general advertising" within
the meaning of Regulation D shall be used in connection with the
offering of the Notes. Without limiting the generality of the
foregoing, without the prior written approval of the other parties
hereto, no party hereto shall issue any press release or place or
publish any "tombstone" or other advertisement relating to the Notes.
(d) No sale of Notes to any one purchaser shall be for less
than $250,000 principal or face amount, and no Note shall be issued in
a smaller principal or face amount. If the purchaser is a non-bank
fiduciary acting on behalf of others, each person for whom such
purchaser is acting must purchase at least $250,000 principal or face
amount of Notes.
(e) Offers and sales of the Notes by the Partnership through a
Dealer acting as agent for the Partnership shall be made in accordance
with Rule 506 under the Securities Act, and shall be subject to the
restrictions described in the legend appearing on Exhibit A hereto. A
legend substantially to the effect of such Exhibit A shall appear as
part of the Private Placement Memorandum used in connection with offers
and sales of Notes hereunder, as well as on each individual certificate
representing a Note and each master note representing book-entry Notes
offered and sold pursuant to this Agreement.
(f) Each Dealer shall furnish or shall have furnished to each
purchaser of Notes for which it has acted as the Dealer a copy of the
then-current Private Placement Memorandum unless such purchaser has
previously received a copy of the Private Placement Memorandum as then
in effect. The Private Placement Memorandum shall expressly state that
any person to whom Notes are offered shall have an opportunity to ask
questions of, and receive information from, the Partnership and the
applicable Dealer
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<PAGE>
and shall provide the names, addresses and telephone numbers of the
persons from whom information regarding the Partnership may be
obtained.
(g) The Partnership agrees, for the benefit of the Dealers and
each of the holders and prospective purchasers from time to time of the
Notes that, if at any time the Partnership shall not be subject to
Section 13 or 15(d) of the Exchange Act, the Partnership will furnish,
upon request and at its expense, to the Dealers and to holders and
prospective purchasers of Notes information required by Rule
144A(d)(4)(i) in compliance with Rule 144A(d).
(h) In the event that any Note offered or to be offered by the
Dealers would be ineligible for resale under Rule 144A, the Partnership
shall immediately notify the Dealers (by telephone, confirmed in
writing) of such fact and shall promptly prepare and deliver to the
Dealers an amendment or supplement to the Private Placement Memorandum
describing the Notes that are ineligible, the reason for such
ineligibility and any other relevant information relating thereto.
10. The Partnership hereby represents and warrants to each Dealer, in
connection with offers, sales and resales of Notes, as follows:
(a) The Partnership hereby confirms to each Dealer that within
the preceding six months neither the Partnership nor any person other
than the Dealers acting on behalf of the Partnership has offered or
sold any Notes, or any substantially similar security of the
Partnership to, or solicited offers to buy any such security from, any
person other than the Dealers; provided, that the parties hereto
acknowledge that, within the preceding six months, the Dealers have
offered and sold commercial paper notes on behalf of the Partnership
and Alliance Holding as described in paragraph 11 below. The
Partnership also agrees that as long as the Notes are being offered for
sale by the Dealers as contemplated hereby and until at least six
months after the offer of Notes hereunder has been terminated, neither
the Partnership nor any person other than the Dealers will offer the
Notes or any substantially similar security of the Partnership for sale
to, or solicit offers to buy any such security from, any person other
than the Dealers if, as a result of the doctrine of "integration"
referred to in Rule 502 under the Securities Act, such offer or sale
would render invalid the exemption from the registration requirements
of the Security Act provided by Section 4(2) thereof for the offer and
sale of the Notes, it being understood that such agreement is made with
a view to bringing the offer and sale of the Notes within the exemption
provided by Section 4(2) of the Securities Act and shall survive any
termination of this Agreement. The Partnership hereby represents and
warrants that it has not taken or omitted to take, and will not take or
omit to take, any action that would cause the offering and sale of
Notes hereunder to be integrated with any other offering of securities,
whether such offering is made by the Partnership or some other party or
parties.
(b) The Partnership represents and agrees that the proceeds of
the sale of the Notes are not currently contemplated to be used for the
purpose of buying, carrying or trading securities within the meaning of
Regulation T and the interpretations thereunder by the Board of
Governors of the Federal Reserve System. In the event that the
5
<PAGE>
Partnership determines to use such proceeds for the purpose of buying,
carrying or trading securities, whether in connection with an
acquisition of another company or otherwise, the Partnership shall give
the Dealers at least five business days' prior written notice to that
effect. The Partnership shall also give the Dealers prompt notice of
the actual date that it commences to purchase securities with the
proceeds of the Notes. Thereafter, in the event that a Dealer purchases
Notes as principal and does not resell such Notes on the day of such
purchase, to the extent necessary to comply with Regulation T and the
interpretations thereunder, such Dealer will sell such Notes either (i)
only to offerees it reasonably believes to be Qualified Institutional
Buyers or to Qualified Institutional Buyers it reasonably believes are
acting for other Qualified Institutional Buyers, in each case in
accordance with Rule 144A or (ii) in a manner which would not cause a
violation of Regulation T and the interpretations thereunder.
11. Each of the Dealers confirms that, in connection with the offer and
sale of commercial paper notes referred to in paragraph 10(a) above, (a) it made
offers and sales only to Institutional Accredited Investors or Qualified
Institutional Buyers and (b) it did not engage in any form of "general
solicitation or general advertising" within the meaning of Regulation D.
12. The following are definitions for certain terms used in this
Agreement:
(a) "Institutional Accredited Investor" shall mean an
institutional investor that is an accredited investor within the
meaning of Rule 501 under the Securities Act and that has such
knowledge and experience in financial and business matters that it is
capable of evaluating and bearing the economic risk of an investment in
the Notes, including, but not limited to, a bank, as defined in Section
3(a)(2) of the Securities Act, or a savings and loan association or
other institution, as defined in Section 3(a)(5)(A) of the Securities
Act, whether acting in its individual or fiduciary capacity.
(b) "Non-bank fiduciary or agent" shall mean a fiduciary or
agent other than (a) a bank, as defined in Section 3(a)(2) of the
Securities Act, or (b) a savings and loan association, as defined in
Section 3(a)(5)(A) of the Securities Act.
(c) "Qualified Institutional Buyer" shall have the meaning
assigned to that term in Rule 144A under the Securities Act.
(d) "Regulation D" shall mean Regulation D (Rules 501 et seq.)
under the Securities Act.
(e) "Rule 144A" shall mean Rule 144A under the Securities Act.
13. This Agreement may be terminated by the Partnership or either
Dealer, with respect to such Dealer, upon thirty days' written notice to the
Dealers or the Partnership, as the case may be. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
14. This Agreement shall inure to the benefit of and be binding upon
the undersigned parties and their respective successors, but no other person,
partnership, association, company or corporation.
6
<PAGE>
If the foregoing accurately reflects our agreement, please sign the
enclosed copy in the space provided below and return it to the undersigned.
7
<PAGE>
The parties hereto have caused the execution of this Agreement on the
date first provided above.
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, its General Partner
By: /s/ Anne S. Drennan
------------------------------------
Title: Senior Vice President and
Treasurer
Goldman, Sachs & Co.
By: /s/ William R. Harrison
------------------------------------
Authorized Signatory
Banc of America Securities LLC
By: /s/ Stephen R. Austen
------------------------------------
Title: Managing Director
8
<PAGE>
EXHIBIT A
FORM OF LEGEND FOR
PRIVATE PLACEMENT MEMORANDUM AND NOTES
THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS
AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE
PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN
OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES,
THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION
THEREOF AND THAT IT IS (A) AN INSTITUTIONAL INVESTOR THAT IS AN
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") AND THAT EITHER IS PURCHASING NOTES
FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF
THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS
DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR
FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR
SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS
EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR (B) A
QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A
UNDER THE ACT THAT IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR
MORE OTHER ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF
WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER
ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE
EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT
PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER
THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER
THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO GOLDMAN, SACHS & CO., BANC
OF AMERICA SECURITIES LLC OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS
A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"),
NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2)
THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR A
QIB, OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF
RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000.
Alliance Capital Management Holding L.P.
Pro Forma Calculation of Earnings Per Alliance Holding Unit
Years Ended December 31,
<TABLE>
<CAPTION>
Basic Net Income Per Alliance Holding Unit (in thousands) 1999 1998 1997
- --------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Equity in earnings of Operating Partnership $204,338 $132,457 $ 52,407
Income taxes 18,218 12,528 0
-------- -------- --------
Net income - Basic $186,120 $119,929 $ 52,407
======== ======== ========
Weighted average Alliance Holding Units outstanding - Basic 71,354 70,276 69,190
Basic net income per Alliance Holding Unit $ 2.61 $ 1.71 $ 0.76
======== ======== ========
Diluted Net Income Per Alliance Holding Unit (in thousands)
- -----------------------------------------------------------
Net income - Basic $186,120 $119,929 $ 52,407
Additional allocation of equity in earnings of the
Operating Partnership resulting from assumed dilutive
effect of employee options 7,056 4,447 1,970
-------- -------- --------
Net income - Diluted $193,176 $124,376 $ 54,377
======== ======== ========
Weighted average Alliance Holding Units outstanding -
Diluted 76,270 75,116 73,721
Diluted net income per Alliance Holding Unit $ 2.53 $ 1.66 $ 0.74
======== ======== ========
</TABLE>
Selected Consolidated Financial Data
(In thousands)
<TABLE>
<CAPTION>
Alliance Capital Management Holding L.P.
Operating
Partnership(1) Years Ended December 31,
1999 1998 1997 1996 1995
Income Statement Data:
Revenues:
Investment advisory and services fees:
<S> <C> <C> <C> <C> <C>
Alliance mutual funds $ 887,443 $ 588,396 $384,759 $291,601 $232,730
Separately managed accounts:
Affiliated clients 51,647 58,051 52,930 44,901 43,978
Third-party clients 392,668 306,545 261,290 227,530 179,872
Distribution revenues 441,772 301,846 216,851 169,071 130,543
Shareholder servicing fees 62,332 43,475 36,327 31,272 26,575
Other revenues 33,443 25,743 23,179 24,142 25,557
1,869,305 1,324,056 975,336 788,517 639,255
Expenses:
Employee compensation and benefits 508,566 340,923 264,251 214,880 172,301
Promotion and servicing:
Distribution plan payments to financial intermediaries:
Affiliated 106,170 82,444 56,118 30,533 23,710
Third-party 232,506 178,643 121,791 115,112 86,743
Amortization of deferred sales commissions 163,942 108,853 73,841 53,144 50,501
Other 118,110 90,400 60,416 48,868 40,161
General and administrative 184,754 162,323 120,283 100,854 88,889
Interest 22,585 7,586 2,968 1,923 1,192
Amortization of intangible assets 3,852 4,172 7,006 15,613 8,747
Reduction in recorded value of intangible assets -- -- 120,900 -- --
1,340,485 975,344 827,574 580,927 472,244
Income before income taxes 528,820 348,712 147,762 207,590 167,011
Income taxes 67,171 55,796 18,806 14,244 11,624
Net income $ 461,649 $ 292,916 $128,956 $193,346 $155,387
Net income excluding impact of performance fees $ 398,416 $ 270,366 $109,572 $182,490 $145,677
Net income before noncash charge(5) $ 461,649 $ 292,916 $249,856 $193,346 $155,387
Cash distributions(1)(2) $ 441,783 $ 278,363 $238,571 $184,546 $148,937
Balance sheet data at period end:
Total assets $1,661,061 $1,132,592 $784,460 $725,897 $575,058
Debt and long-term obligations(3) $ 491,004 $ 238,089 $130,429 $ 52,629 $ 30,839
Partners' capital $ 552,667 $ 430,273 $398,051 $476,020 $406,709
Assets under management at period end (in millions)(4) $ 368,321 $ 286,659 $218,654 $182,792 $146,521
</TABLE>
(1) As discussed in Notes 1 and 2 to the consolidated financial statements, the
financial information above reflects the operations of Alliance Capital
Management Holding L.P prior to the Reorganization effective October 29, 1999
and Alliance Capital Management L.P. (the "Operating Partnership") thereafter.
(2) The Operating Partnership is required to distribute all of its Available
Cash Flow, as defined in the Alliance Capital Partnership Agreement, to the
General Partner and Alliance Capital Unitholders.
(3) Includes accrued expenses under employee benefit plans due after one year
and debt.
(4) Assets under management exclude certain non-discretionary advisory
relationships and include 100% of the assets managed by unconsolidated
affiliates.
(5) $121 million to reduce the recorded value of goodwill and contracts
associated with the acquisition of Cursitor Holdings, L.P. and Cursitor Holdings
Limited in 1996.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Reorganization
Effective October 29, 1999, Alliance Capital Management Holding L.P., formerly
known as Alliance Capital Management L.P. ("Alliance Holding"), reorganized by
transferring its business to Alliance Capital Management L.P., a newly formed
private partnership ("Alliance Capital" or the "Operating Partnership"), in
exchange for all of the Units of Alliance Capital (the "Reorganization"). The
Operating Partnership recorded the transferred assets and assumption of
liabilities at the amounts reflected in Alliance Holding's books and records on
the date of transfer. Since the Reorganization, the Operating Partnership has
conducted the diversified investment management services business formerly
conducted by Alliance Holding, and Alliance Holding's business has consisted of
holding Alliance Capital Units and engaging in related activities. Alliance
Capital Management Corporation ("ACMC"), an indirect wholly-owned subsidiary of
AXA Financial, Inc. ("AXA Financial"), is the general partner of both Alliance
Holding and the Operating Partnership. Alliance Capital is a registered
investment adviser under the Investment Advisers Act of 1940. Alliance Holding
Units are publicly traded on the New York Stock Exchange while Alliance Capital
Units do not trade publicly and are subject to significant restrictions on
transfer.
As part of the Reorganization, Alliance Holding offered each Alliance Holding
Unitholder the opportunity to exchange Alliance Holding Units for Alliance
Capital Units on a one-for-one basis. In the exchange offer, approximately 99.6
million Alliance Holding Units were exchanged for Alliance Capital Units. This
number includes the approximately 95.1 million Alliance Holding Units exchanged
by affiliates of AXA Financial. At December 31, 1999, Alliance Holding owned
approximately 72.3 million, or 42%, of the issued and outstanding Alliance
Capital Units. ACMC owns 100,000 general partnership Units in Alliance Holding
and a 1% general partnership interest in the Operating Partnership. At December
31, 1999, AXA Financial was the beneficial owner of approximately 2% of Alliance
Holding's outstanding Units and approximately 55% of the Operating Partnership's
outstanding Units which, including the general partnership interests, equates to
an economic interest of approximately 57% in the Operating Partnership.
The Operating Partnership's consolidated financial statements and notes should
be read in conjunction with the consolidated financial statements and notes of
Alliance Holding included in this report.
The Operating Partnership
The Operating Partnership provides diversified investment management and related
services to a broad range of clients including unaffiliated separately managed
accounts, The Equitable Life Assurance Society of the United States ("ELAS"), a
wholly-owned subsidiary of AXA Financial, and its insurance company subsidiary
and to individual investors through mutual funds and various other investment
vehicles. Separately managed accounts consist primarily of the active management
of equity and fixed income portfolios for institutional investors. Separately
managed accounts include corporate and public employee pension funds, the
general and separate accounts of ELAS and its insurance company subsidiary,
endowment funds, and the assets of other domestic and foreign institutions. The
Operating Partnership provides investment management, distribution, and
shareholder and administrative services to its sponsored mutual funds and cash
management products, including money market funds and deposit accounts
("Alliance mutual funds").
All services currently provided by the Operating Partnership were provided by
Alliance Holding prior to the Reorganization.
The Operating Partnership's revenues are largely dependent on the total value
and composition of assets under its management. Assets under management grew
28.5% to $368.3 billion as of December 31, 1999 primarily as a result of market
appreciation, good investment performance and strong net sales of Alliance
mutual funds. Active equity and balanced account assets under management, which
comprise approximately 59.6% of total assets under management, grew 41.9%.
Active fixed income account assets under management, which comprise 30.8% of
total assets under management, increased by 10.4%.
On December 22, 1998, a subsidiary of Alliance Holding acquired Whittingdale
Holdings Limited ("Whittingdale"), with $1.5 billion in assets under management.
The purchase price consists of an initial payment of $4.8 million in cash and
two deferred payments, based on the attainment of certain revenue levels by
Whittingdale, currently estimated to be $6.9 million in the aggregate. The
acquisition was accounted for under the purchase method with the results of
Whittingdale included in the consolidated financial statements from the
acquisition date. In connection with the Reorganization, the Operating
Partnership assumed all of Alliance Holding's rights and obligations with
respect to the Whittingdale acquisition.
<PAGE>
In 1999, sales of Alliance mutual fund shares grew to $58.0 billion compared to
sales of $40.1 billion in 1998. The increase, principally domestic equity mutual
funds and equity funds sold to both U.S. and non-U.S. investors, combined with
an increase in mutual fund redemptions, resulted in net Alliance mutual fund
sales of $30.2 billion, an increase of 26.4% from $23.9 billion in 1998.
<TABLE>
<CAPTION>
Assets Under Management(1):
(Dollars in billions) 12/31/99 12/31/98 % Change 12/31/98 12/31/97 % Change
Alliance mutual funds:
<S> <C> <C> <C> <C> <C> <C>
Mutual funds $ 96.4 $ 60.7 58.8% $ 60.7 $ 40.4 50.2%
Variable products 40.9 31.4 30.3 31.4 23.8 31.9
Cash management products 32.1 26.5 21.1 26.5 20.8 27.4
169.4 118.6 42.8 118.6 85.0 39.5
Separately managed accounts:
Affiliated clients 29.8 28.9 3.1 28.9 28.4 1.8
Third-party clients 169.1 139.2 21.5 139.2 105.3 32.2
198.9 168.1 18.3 168.1 133.7 25.7
Total $368.3 $286.7 28.5% $286.7 $218.7 31.1%
Assets Under Management by Investment Orientation(1):
(Dollars in billions) 12/31/99 12/31/98 % Change 12/31/98 12/31/97 % Change
Active equity & balanced
Domestic $191.4 $142.1 34.7% $142.1 $ 98.1 44.9%
Global & international 28.1 12.6 123.0 12.6 12.7 (0.8)
Active fixed income
Domestic 97.6 88.5 10.3 88.5 76.2 16.1
Global & international 15.7 14.1 11.3 14.1 8.0 76.3
Index
Domestic 29.1 24.7 17.8 24.7 20.8 18.8
Global & international 6.4 4.7 36.2 4.7 2.9 62.1
Total $368.3 $286.7 28.5% $286.7 $218.7 31.1%
<PAGE>
Average Assets Under Management(1):
(Dollars in billions) 1999 1998 % Change 1998 1997 % Change
Alliance mutual funds $136.9 $100.5 36.2% $100.5 $ 72.9 37.9%
Separately managed accounts:
Affiliated clients 29.8 29.5 1.0 29.5 28.1 5.0
Third-party clients 147.9 120.5 22.7 120.5 99.4 21.2
Total $314.6 $250.5 25.6% $250.5 $200.4 25.0%
</TABLE>
<TABLE>
<CAPTION>
Analysis of Assets Under Management(1):
(Dollars in billions) 1999 1998 1997
Separately Alliance Separately Alliance Separately Alliance
Managed Mutual Managed Mutual Managed Mutual
Accounts Funds Total Accounts Funds Total Accounts Funds Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of year $168.1 $118.6 $286.7 $133.7 $ 85.0 $218.7 $119.5 $63.3 $182.8
Acquisitions -- -- -- 1.4 0.1 1.5 -- -- --
New business/sales 8.8 52.3 61.1 7.0 34.3 41.3 3.9 21.0 24.9
Terminations/redemptions (3.4) (27.8) (31.2) (3.5) (16.2) (19.7) (6.8) (8.6) (15.4)
Net cash management sales -- 5.7 5.7 -- 5.8 5.8 -- 2.2 2.2
Cash flow (4.7) (1.6) (6.3) (0.3) (1.5) (1.8) (5.0) (1.0) (6.0)
Appreciation 30.1 22.2 52.3 29.8 11.1 40.9 22.1 8.1 30.2
Net change 30.8 50.8 81.6 34.4 33.6 68.0 14.2 21.7 35.9
Balance at end of year $198.9 $169.4 $368.3 $168.1 $118.6 $286.7 $133.7 $85.0 $218.7
</TABLE>
(1) Excludes certain non-discretionary advisory relationships and includes 100%
of assets under management of unconsolidated affiliates. Includes $2.2 billion
mutual fund assets and $0.6 billion separately managed account assets at
December 31, 1999, $1.4 billion mutual fund assets and $0.4 billion separately
managed account assets at December 31, 1998 and $0.7 billion mutual fund assets
and $0.2 billion separately managed account assets at December 31, 1997. Certain
amounts in the 1998 and 1997 presentation have been reclassified to conform to
the 1999 presentation.
Assets under management at December 31, 1999 were $368.3 billion, an increase of
$81.6 billion or 28.5% from December 31, 1998. Alliance mutual fund assets under
management at December 31, 1999 were $169.4 billion, an increase of $50.8
billion or 42.8% from December 31, 1998, due principally to market appreciation
of $22.2 billion and net sales of mutual funds, variable products and cash
management products of $22.5 billion, $2.0 billion and $5.7 billion,
respectively. Separately managed account assets under management for third-party
and affiliated clients at December 31, 1999 were $198.9 billion, an increase of
$30.8 billion or 18.3% from December 31, 1998. This increase was due to market
appreciation of $30.1 billion, new third-party client accounts of $8.8 billion
and net asset additions to affiliated client accounts of $0.9 billion, offset by
third-party client account terminations and net asset withdrawals of $9.0
billion.
Assets under management at December 31, 1998 were $286.7 billion, an increase of
$68.0 billion or 31.1% from December 31, 1997. Alliance mutual fund assets under
management at December 31, 1998 were $118.6 billion, an increase of $33.6
billion or 39.5% from December 31, 1997, due principally to market appreciation
of $11.1 billion and net sales of mutual funds, variable products and cash
management products of $15.4 billion, $2.7 billion and $5.8 billion,
respectively. Separately managed account assets under management at December 31,
1998 were $168.1 billion, an increase of $34.4 billion or 25.7% from December
31, 1997. This increase was due to market appreciation of $29.8 billion, new
third-party client accounts of $7.0 billion, the acquisition of Whittingdale,
with $1.4 billion in separately managed account assets under management on the
date of acquisition, and net asset additions to affiliated client accounts of
$0.5 billion, offset by third-party client account terminations and net asset
withdrawals of $4.3 billion.
<PAGE>
Cursitor Alliance LLC ("Cursitor Alliance"), a subsidiary of the Operating
Partnership formed in connection with a 1996 acquisition, provides global asset
allocation services to U.S. and non-U.S. institutional investors. Due to poor
relative investment performance, Cursitor Alliance continues to experience
client account terminations and asset withdrawals although the decline in assets
under management has slowed since the first quarter of 1998. Cursitor Alliance's
assets under management aggregated $1.3 billion, $1.7 billion and $3.5 billion
at December 31, 1999, 1998, and 1997, respectively. See "Reduction in Recorded
Value of Intangible Assets" and "Capital Resources and Liquidity".
Basis of Presentation - Pro Forma Results
The pro forma financial information of the Operating Partnership for all periods
presented assumes the Reorganization occurred on January 1, 1997, and reflects
the Operating Partnership as a private partnership that is not subject to a
federal tax of 3.5% on partnership gross income from the active conduct of a
trade or business. The pro forma financial information does not necessarily
reflect the results of operations that would have been obtained had the
Reorganization occurred on January 1, 1997, nor is the pro forma financial
information necessarily indicative of the results of operations that may be
achieved for any future period.
<TABLE>
<CAPTION>
Pro Forma Consolidated Results of Operations(1)
(Dollars in millions) 1999 1998 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,869.3 $ 1,324.1 41.2% $ 1,324.1 $ 975.3 35.8%
Expenses $ 1,340.5 $ 975.4 37.4 $ 975.4 $ 827.5 17.9
Income before income taxes $ 528.8 $ 348.7 51.6 $ 348.7 $ 147.8 135.9
Income taxes $ 34.0 $ 25.2 34.9 $ 25.2 $ 18.8 34.0
Net income $ 494.8 $ 323.5 53.0 $ 323.5 $ 129.0 150.8
Net income excluding impact of performance fees $ 429.0 $ 298.5 43.6 $ 298.5 $ 109.6 172.4
Net income before reduction in recorded value of
intangible assets $ 494.8 $ 323.5 53.0% $ 323.5 $ 249.9 29.5%
Pre-tax margin(2) 37.0% 34.1% 34.1% 32.9%
</TABLE>
(1) Pro forma amounts assume the Alliance Holding Reorganization occurred on
January 1, 1997. The pro forma financial information reflects the Operating
Partnership as a private partnership that is not subject to a federal tax of
3.5% on partnership gross income from the active conduct of a trade or business.
(2) Calculated after netting distribution revenues against total expenses;
excludes the reduction in recorded value of Cursitor Alliance intangible assets.
Pro forma net income for 1999 increased $171.3 million or 53.0% to $494.8
million from pro forma net income of $323.5 million for 1998. The increase was
principally due to an increase in investment advisory and services fees,
resulting from higher average assets under management, and higher performance
fees which were offset partially by higher operating expenses, principally
employee compensation and benefits, promotion and servicing, and higher income
taxes.
<PAGE>
Pro forma net income for 1998 was $323.5 million, an increase of 150.8% from pro
forma net income of $129.0 million for 1997. Pro forma 1998 net income increased
$73.6 million or 29.5% compared to pro forma 1997 net income of $249.9 million
before the $120.9 million noncash charge recorded in 1997 to reduce the value of
Cursitor Alliance intangible assets. See "Reduction in Recorded Value of
Intangible Assets" and "Capital Resources and Liquidity". The 29.5% increase was
principally due to an increase in investment advisory and services fees,
resulting from higher average assets under management, which were offset
partially by higher operating expenses, principally employee compensation and
benefits, promotion and servicing, and higher income taxes.
<PAGE>
Basis of Presentation - Combined Results
The following is a discussion of the combined results of operations for 1999 of
the Operating Partnership and, prior to the Reorganization, Alliance Holding,
compared to 1998, and of 1998 compared to 1997. The combined presentation is
considered meaningful in understanding the diversified investment management
business operated by Alliance Holding prior to the Reorganization and by the
Operating Partnership thereafter. All information prior to the Reorganization is
that of Alliance Holding.
Revenues(1)
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 % Change 1998 1997 % Change
Investment advisory and services fees:
<S> <C> <C> <C> <C> <C> <C>
Alliance mutual funds $ 887.4 $ 588.4 50.8% $ 588.4 $384.8 52.9%
Separately managed accounts:
Affiliated clients 51.6 58.1 (11.2) 58.1 52.9 9.8
Third-party clients 392.7 306.5 28.1 306.5 261.3 17.3
Distribution revenues 441.8 301.9 46.3 301.9 216.8 39.3
Shareholder servicing fees 62.3 43.5 43.2 43.5 36.3 19.8
Other revenues 33.5 25.7 30.4 25.7 23.2 10.8
Total $1,869.3 $1,324.1 41.2% $1,324.1 $975.3 35.8%
</TABLE>
(1) Reflect revenues of Alliance Holding prior to the Reorganization and
revenues of the Operating Partnership thereafter.
Investment Advisory and Services Fees
Investment advisory and services fees, the largest component of the Operating
Partnership's revenues, are generally calculated as a small percentage of the
value of assets under management and vary with the type of account managed. Fee
income is therefore affected by changes in the amount of assets under
management, including market appreciation or depreciation, the addition of new
client accounts or client contributions of additional assets to existing
accounts, withdrawals of assets from and termination of client accounts,
purchases and redemptions of mutual fund shares, and shifts of assets between
accounts or products with different fee structures. The Operating Partnership's
investment advisory and services fees increased 39.7% and 36.3% in 1999 and
1998, respectively.
Certain investment advisory contracts provide for a performance fee, in addition
to or in lieu of a base fee, that is calculated as a percentage of the related
investment results over a specified period of time. Performance fees are
recorded as revenue at the end of the measurement period and will generally be
higher in favorable markets and lower in unfavorable markets, which may increase
the volatility of the Operating Partnership's revenues and earnings. Performance
fees earned on separately managed accounts and mutual funds aggregated $162.2
million, $52.9 million, and $35.0 million in 1999, 1998 and 1997, respectively.
Higher performance fees in 1999 were primarily the result of strong capital
markets, superior investment performance, new client accounts with performance
fee arrangements and a refinement of the procedures for estimating such fees.
<PAGE>
Investment advisory and services fees from Alliance mutual funds increased by
$299.0 million or 50.8% for 1999, primarily as a result of a 36.2% increase in
average assets under management and higher performance fees of $88.3 million.
The growth in investment advisory fees from Alliance mutual funds exceeded the
growth in average assets under management primarily as a result of increases in
sales of higher fee-based mutual fund products, principally domestic equity
mutual funds, and the higher performance fees discussed above. Investment
advisory and services fees from Alliance mutual funds increased by $203.6
million or 52.9% for 1998, primarily as a result of a 37.9% increase in average
assets under management.
Investment advisory and services fees from affiliated clients, primarily the
General Accounts of ELAS, decreased by $6.5 million or 11.2% for 1999, due
primarily to a decrease in performance fees of $5.7 million. Investment advisory
and services fees from affiliated clients increased 9.8% for 1998, due
principally to a 5.0% increase in average assets under management and an
increase in performance fees of $1.8 million.
Investment advisory and services fees from third-party clients increased by
$86.2 million or 28.1% for 1999 and by $45.2 million or 17.3% for 1998,
principally due to increases in average assets under management of 22.7% and
21.2%, respectively. The increase in average assets under management was
primarily a result of market appreciation. A $26.7 million increase in
performance fees also contributed to the higher fees in 1999.
Distribution Revenues
The Operating Partnership's subsidiary, Alliance Fund Distributors, Inc.,
("AFD"), acts as distributor of the Alliance mutual funds and receives
distribution plan fees from those funds in reimbursement of distribution
expenses it incurs. Distribution revenues increased 46.3% and 39.3% in 1999 and
1998, respectively, principally due to higher average equity mutual fund assets
under management attributable to strong sales of Back-End Load Shares under the
Operating Partnership's mutual fund distribution system (the "System"),
described under "Capital Resources and Liquidity", and market appreciation.
Shareholder Servicing Fees
The Operating Partnership's subsidiaries, Alliance Fund Services, Inc. and ACM
Fund Services S.A., provide transfer agency services to the Alliance mutual
funds. Shareholder servicing fees increased 43.2% and 19.8% in 1999 and 1998,
respectively, the result of increases in the number of mutual fund shareholder
accounts serviced and increased fee rates. The number of shareholder accounts
serviced increased to approximately 5.4 million as of December 31, 1999,
compared to approximately 3.8 million and 3.2 million as of December 31, 1998
and 1997, respectively.
Other Revenues
Other revenues consist principally of administration and recordkeeping services
provided to the Alliance mutual funds and the General Accounts of ELAS and its
insurance subsidiary. Investment income and changes in value of other
investments are also included in other revenues. Other revenues increased for
1999 principally as a result of higher reimbursements for administration and
recordkeeping services, increases in the market value of investments in hedge
funds sponsored by the Operating Partnership and dividend income. Other revenues
increased for 1998 as a result of changes in the market value of hedge fund
investments.
Expenses(1)
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
Employee compensation and benefits $ 508.6 $340.9 49.2% $340.9 $264.3 29.0%
Promotion and servicing 620.6 460.3 34.8 460.3 312.1 47.5
General and administrative 184.8 162.3 13.9 162.3 120.3 34.9
Interest 22.6 7.6 197.4 7.6 3.0 153.3
Amortization of intangible assets 3.9 4.3 (9.3) 4.3 6.9 (37.7)
Reduction in recorded value of intangible assets -- -- -- -- 120.9 --
Total $1,340.5 $975.4 37.4% $975.4 $827.5 17.8%
</TABLE>
(1) Reflect expenses of Alliance Holding prior to the Reorganization and
expenses of the Operating Partnership thereafter.
Employee Compensation and Benefits
In connection with the Reorganization, all employees of Alliance Holding became
employees of the Operating Partnership effective October 29, 1999. Employee
compensation and benefits, which represent approximately 37.9% of total expenses
in 1999, include salaries, commissions, fringe benefits and incentive
compensation based on profitability. Provisions for future payments to be made
under certain deferred compensation arrangements are also included in employee
compensation and benefits expense.
<PAGE>
Employee compensation and benefits increased 49.2% and 29.0% in 1999 and 1998,
respectively, primarily as a result of higher incentive compensation due to
increased operating earnings and increased base compensation and commissions.
Base compensation increased principally due to an increase in the number of
employees working in the mutual fund and technology areas and to salary
increases. The Operating Partnership had 2,396 employees at December 31, 1999
compared to 2,075 and 1,670 employees of Alliance Holding at December 31, 1998
and 1997, respectively. Commissions increased primarily due to higher mutual
fund sales.
Promotion and Servicing
Promotion and servicing expenses, which represent approximately 46.3% of total
expenses in 1999, include distribution plan payments to financial intermediaries
for distribution of sponsored mutual funds and cash management services'
products and amortization of deferred sales commissions paid to financial
intermediaries for the sale of Back-End Load Shares under the System. See
"Capital Resources and Liquidity". Also included in this expense category are
travel and entertainment, advertising, promotional materials, and investment
meetings and seminars for financial intermediaries that distribute the Operating
Partnership's mutual fund products.
Promotion and servicing expenses increased 34.8% and 47.5% in 1999 and 1998,
respectively, primarily due to increased distribution plan payments resulting
from higher average domestic, offshore and cash management assets under
management. An increase in amortization of deferred sales commissions of $55.1
million for 1999 as a result of higher sales of Back-End Load Shares also
contributed to the increase in promotion and servicing expense. Other promotion
and servicing expenses increased for 1999 and 1998 primarily as a result of
higher travel and entertainment costs and higher promotional expenditures
incurred in connection with mutual fund sales initiatives.
General and Administrative
General and administrative expenses, which represent approximately 13.8% of
total expenses in 1999, are costs related to operations, including technology,
professional fees, occupancy, communications, equipment and similar expenses.
General and administrative expenses increased 13.9% and 34.9% in 1999 and 1998,
respectively, due principally to higher technology expenses incurred in
connection with the Year 2000 project, the Euro conversion and other technology
initiatives as well as increased occupancy costs. A $10.0 million provision was
recorded in 1998 for the future acquisition of the minority interest in Cursitor
Alliance. See "Capital Resources and Liquidity".
Interest
Interest expense is incurred on the Operating Partnership's borrowings and on
deferred compensation owed to employees. Interest expense increased for 1999 and
1998 primarily as a result of higher debt and an increase in interest accrued on
deferred compensation liabilities.
Amortization of Intangible Assets
Amortization of intangible assets is primarily attributable to the intangible
assets recorded in connection with the acquisitions made by the Operating
Partnership and the acquisition of ACMC, Inc., the predecessor of both Alliance
Holding and the Operating Partnership, by ELAS during 1985. Amortization of
intangibles decreased for both 1999 and 1998 principally due to the noncash
charge recorded in 1997 to reduce the value of Cursitor Alliance intangible
assets. See "Reduction in Recorded Value of Intangible Assets".
Reduction in Recorded Value of Intangible Assets
The Operating Partnership recorded a noncash charge of $120.9 million during the
second quarter of 1997 to reduce the unamortized value of intangible assets to
fair value due to the significant decline in Cursitor Alliance's assets under
management and profitability.
Taxes on Income
The Operating Partnership, a private limited partnership, is not subject to
federal or state corporate income taxes. However, the Operating Partnership is
subject to the New York City unincorporated business tax. Domestic corporate
subsidiaries of the Operating Partnership are subject to federal, state and
local income taxes, and are generally included in the filing of a consolidated
federal income tax return; separate state and local income tax returns are
filed. Foreign corporate subsidiaries are generally subject to taxes in the
foreign jurisdictions where they are located.
Income tax expense of $67.2 million in 1999 increased by $11.4 million primarily
as a result of higher pre-tax income partially offset by a lower combined
effective tax rate. The $37.0 million increase in 1998 was principally due to
the 3.5% federal tax on partnership gross business income of Alliance Holding,
effective January 1, 1998, and higher pre-tax income.
<PAGE>
Capital Resources and Liquidity
Partners' capital of the Operating Partnership was $552.7 million at December
31, 1999, an increase of $122.4 million or 28.4% from Alliance Holding's
partners' capital of $430.3 million at December 31, 1998. Alliance Holding's
partners' capital at December 31, 1998 increased by $32.2 million or 8.1% from
$398.1 million at December 31, 1997.
Cash flow from operations and proceeds from borrowings have been the Operating
Partnership's and, prior to the Reorganization, Alliance Holding's principal
sources of working capital.
The Operating Partnership's and Alliance Holding's combined cash and cash
equivalents increased by $5.0 million in 1999. Cash inflows included $224.1
million from operations, proceeds from borrowings net of debt repayments of
$188.6 million and $14.1 million of proceeds from employee options exercised for
Alliance Holding Units. Cash outflows included $357.9 million in distributions
to partners and $63.5 million in capital expenditures.
Under certain circumstances through February 28, 2006, the Operating Partnership
has an option to purchase the minority interest in Cursitor Alliance and the
holders of the minority interest have an option to sell the minority interest to
the Operating Partnership for cash, Alliance Holding Units, or a combination
thereof with a value of not less than $10.0 million or more than $37.0 million
("Buyout Price"). The Buyout Price will be determined based on the amount of
global asset allocation investment advisory revenues earned by Cursitor Alliance
during a twelve-month period ending on the February 28th preceding the date
either option is exercised. Due to the decline in Cursitor Alliance revenues,
management believes that the Buyout Price for the minority interest will be
$10.0 million, which will be substantially higher than its fair value.
Accordingly, the Operating Partnership recorded a $10.0 million provision for
the Buyout Price in the first quarter of 1998.
The Operating Partnership's mutual fund distribution system includes a
multi-class share structure. The System permits the Operating Partnership's
open-end mutual funds to offer investors various options for the purchase of
mutual fund shares, including the purchase of Front-End Load Shares and Back-End
Load Shares. The Front-End Load Shares are subject to a conventional front-end
sales charge paid by investors to AFD at the time of sale. AFD in turn
compensates the financial intermediaries distributing the funds from the
front-end sales charge paid by investors. For Back-End Load Shares, investors do
not pay a front-end sales charge although, if there are redemptions before the
expiration of the minimum holding period (which ranges from one year to four
years), investors pay a contingent deferred sales charge ("CDSC") to AFD. While
AFD is obligated to compensate the financial intermediaries at the time of the
purchase of Back-End Load Shares, it receives higher ongoing distribution fees
from the funds. Payments made to financial intermediaries in connection with the
sale of Back-End Load Shares under the System, net of CDSC received, reduced
cash flow from operations by approximately $393.4 million (combined amount) and
$232.5 million during 1999 and 1998, respectively. Management believes AFD will
recover the payments made to financial intermediaries for the sale of Back-End
Load Shares from the higher distribution fees and CDSC it receives over periods
not exceeding 51/2 years.
During 1998, Alliance Holding increased its commercial paper program to $425
million and entered into a $425 million five-year revolving credit facility with
a group of commercial banks. Under the credit facility, the interest rate, at
the option of the borrower, is a floating rate generally based upon a defined
prime rate, a rate related to the London Interbank Offered Rate (LIBOR) or the
Federal Funds rate. A facility fee is payable on the total facility. Borrowings
under the credit facility and the commercial paper program may not exceed $425
million in the aggregate. In connection with the Reorganization, the Operating
Partnership assumed Alliance Holding's rights and obligations under the
five-year revolving credit facility and the commercial paper program. The
revolving credit facility will be used to provide back-up liquidity for the
Operating Partnership's commercial paper program, to fund commission payments to
financial intermediaries for the sale of Back-End Load Shares under the
Operating Partnership's mutual fund distribution system, and for general working
capital purposes.
During July 1999, Alliance Holding entered into a $200 million three-year
revolving credit facility with a group of commercial banks. In connection with
the Reorganization, the Operating Partnership assumed Alliance Holding's rights
and obligations under the three-year revolving credit facility. The new
revolving credit facility, the terms of which are generally similar to the $425
million credit facility, will be used to fund commission payments to financial
intermediaries for the sale of Back-End Load Shares under the Operating
Partnership's mutual fund distribution system and for general working capital
purposes.
The revolving credit facilities contain covenants which, among other things,
require the Operating Partnership to meet certain financial ratios. The
Operating Partnership was in compliance with the covenants at December 31, 1999.
In December 1999, the Operating Partnership established a $100 million
Extendible Commercial Notes ("ECN") Program as a supplement to its $425 million
commercial paper program. ECNs are short-term uncommitted debt instruments that
do not require back-up liquidity support.
<PAGE>
At December 31, 1999 and 1998, the Operating Partnership and Alliance Holding
had $384.7 million and $179.5 million of commercial paper outstanding,
respectively, at effective interest rates of 5.9% and 5.5%, respectively. There
were no borrowings outstanding under the revolving credit facilities or the ECN
Program on these dates.
The Operating Partnership's substantial equity base and access to public and
private debt, at competitive terms, should provide adequate liquidity for its
general business needs. Management believes that cash flow from operations and
the issuance of debt and Alliance Capital or Alliance Holding Units will provide
the Operating Partnership with the financial resources to meet its capital
requirements for mutual fund sales and its other working capital requirements.
Year 2000
The Operating Partnership's systems and facilities have passed into the new
millennium successfully, and are continuing to operate without disruption in
2000. The Operating Partnership incurred approximately $43 million of costs
related to the Year 2000 initiative.
Commitments and Contingencies
The Operating Partnership's capital commitments, which consist primarily of
operating leases for office space, are generally funded from future operating
cash flows.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint (the
"Original Complaint") was filed against Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance Holding and certain other defendants
affiliated with Alliance Holding alleging violations of federal securities laws,
fraud and breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine securities. On September 26, 1996, the United States
District Court for the Southern District of New York granted the defendants'
motion to dismiss all counts of the Original Complaint. On October 29, 1997, the
United States Court of Appeals for the Second Circuit affirmed that decision.
On October 29, 1996, plaintiffs filed a motion for leave to file an amended
complaint. The principal allegations of the proposed amended complaint are that
(i) the Fund failed to hedge against currency risk despite representations that
it would do so, (ii) the Fund did not properly disclose that it planned to
invest in mortgage-backed derivative securities, and (iii) two advertisements
used by the Fund misrepresented the risks of investing in the Fund. On October
15, 1998, the United States Court of Appeals for the Second Circuit issued an
order granting plaintiffs' motion to file an amended complaint alleging that the
Fund misrepresented its ability to hedge against currency risk and denying
plaintiffs' motion to file an amended complaint alleging that the Fund did not
properly disclose that it planned to invest in mortgage-backed derivative
securities and that certain advertisements used by the Fund misrepresented the
risks of investing in the Fund.
On December 1, 1999, the United States District Court for the Southern District
of New York granted the defendants' motion for summary judgment on all claims
against all defendants. On December 14 and 15, 1999, the plaintiffs filed
motions for reconsideration of the Court's ruling. These motions are currently
pending with the Court.
The Operating Partnership assumed all of Alliance Holding's liabilities in
respect of this litigation in connection with the Reorganization. The Operating
Partnership and Alliance Holding believe that the allegations in the proposed
amended complaint are without merit and intend to vigorously defend against
these claims. While the ultimate outcome of this matter cannot be determined at
this time, management does not expect that it will have a material adverse
effect on the Operating Partnership's results of operations or financial
condition.
Changes in Accounting Principles
The accounting policies summarized below are followed by the Operating
Partnership subsequent to the October 29, 1999 Reorganization and were followed
by Alliance Holding prior to the Reorganization.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". Under this Statement, an entity is required
to recognize derivative instruments as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
addition, any entity that elects to apply hedge accounting is required to
establish at the inception of the hedge the method it will use for assessing
effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137 ("SFAS 137"), which deferred the effective date of SFAS 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. Management
does not believe that the adoption of the Statement, in 2001, will have a
material effect on the Operating Partnership's results of operations, liquidity,
or capital resources.
<PAGE>
On January 1, 1998, Alliance Holding adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income", which
establishes the disclosure requirements for reporting comprehensive income in an
entity's financial statements. Total comprehensive income is reported in the
Consolidated Statements of Changes in Partners' Capital and Comprehensive Income
and includes net income, unrealized gains and losses on investments classified
as available-for-sale, and foreign currency translation adjustments. The
accumulated balance of comprehensive income items is displayed separately in the
partners' capital section of the Consolidated Statements of Financial Condition.
Alliance Holding adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information", in its 1998 consolidated financial statements. SFAS 131
establishes standards for the way a public enterprise reports information about
operating segments in its annual and interim financial statements. It also
establishes standards for related enterprise wide disclosures about products and
services, geographic areas and major customers. Generally, financial information
is required to be reported on basis used by management to allocate resources and
assess performance. Management has assessed the requirements of SFAS 131 and
determined that, because the Operating Partnership utilizes a consolidated
approach to assess performance and allocate resources, it has only one operating
segment.
In March 1998, the AICPA issued Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". Alliance Holding adopted the provisions of SOP 98-1 effective
January 1, 1998. SOP 98-1 requires capitalization of external and certain
internal costs incurred to obtain or develop internal-use computer software
during the application development stage. Capitalized internal-use software is
amortized on a straight-line basis over the lesser of the estimated useful life
of the software or six years. The adoption of SOP 98-1 did not have a material
impact on the consolidated financial statements.
Cash Distributions
The Operating Partnership is required to distribute all of its Available Cash
Flow (as defined in the Alliance Capital Partnership Agreement) to the General
Partner and Alliance Capital Unitholders. Alliance Holding is also required to
distribute all of its available cash flow (as defined in the Alliance Holding
Partnership Agreement). The combined Available Cash Flow of the Operating
Partnership for the two months ended December 31, 1999 and Alliance Holding for
the ten months ended October 29, 1999 and of Alliance Holding for each of the
years ended December 31, 1998 and 1997 were as follows:
Cash Distributions
(Dollars in thousands) 1999 1998 1997
Available Cash Flow $405,328 $278,363 $238,571
Special distribution 36,455 -- --
Total distribution $441,783 $278,363 $238,571
Market Risk, Risk Management and Derivative Financial Instruments
The Operating Partnership's investments consist of investments,
available-for-sale and other investments. Investments, available-for-sale
include equity and fixed income mutual funds and money market investments. The
carrying value of the money market investments approximates fair value. Although
investments, available-for-sale are purchased for long-term investment, the
portfolio strategy considers them available-for-sale from time-to-time due to
changes in market interest rates, equity prices and other relevant factors.
Other investments include investments in hedge funds sponsored by the Operating
Partnership.
Non Trading Market Risk Sensitive Instruments
Investments With Interest Rate Risk - Fair Value
The table below provides the Operating Partnership's potential exposure,
measured in terms of fair value, to an immediate 100 basis point increase in
interest rates from the levels prevailing at December 31, 1999. A 100 basis
point fluctuation in interest rates is a hypothetical rate scenario used to
calibrate potential risk and does not represent management's view of future
market changes. While these fair value measurements provide a representation of
interest rate sensitivity of fixed income mutual funds and fixed income hedge
funds, they are based on the portfolio exposures at a particular point in time
and may not be representative of future market results. These exposures will
change as a result of ongoing changes in investments in response to management's
assessment of changing market conditions and available investment opportunities
(in thousands):
At +100 Basis
December 31, 1999 Point Change
Fixed income investments $6,069 $(290)
<PAGE>
Investments With Equity Price Risk - Fair Value
The Operating Partnership's investments also include investments in equity
mutual funds and equity hedge funds. The following table provides the Operating
Partnership's potential exposure from those investments, measured in terms of
fair value, to an immediate 10% drop in equity prices from those prevailing at
December 31, 1999. A 10% decrease in equity prices is a hypothetical scenario
used to calibrate potential risk and does not represent management's view of
future market changes. While these fair value measurements provide a
representation of equity price sensitivity of equity mutual funds and equity
hedge funds, they are based on the portfolio exposures at a particular point in
time and may not be representative of future market results. These exposures
will change as a result of ongoing portfolio activities in response to
management's assessment of changing market conditions and available investment
opportunities (in thousands):
At -10% Equity
December 31, 1999 Price Change
Equity investments $56,310 $(5,631)
Derivative Financial Instruments
The Operating Partnership utilizes an interest rate cap to reduce its exposure
to interest rate risk by effectively placing an interest rate ceiling or "cap"
on interest payable on up to $100 million of the debt outstanding under the
Operating Partnership's commercial paper program and five-year revolving credit
facility. The $100 million notional principal amount does not represent the
Operating Partnership's exposure to credit risk, but is only a basis to
determine the payment obligation of the counterparty. During the three-year term
of the interest rate cap, the Operating Partnership will receive monthly
payments from the counterparty based on the excess, if any, of the stated
reference rate over 6% times the notional amount. Should the counterparty fail
to perform its obligations under the agreement, the Operating Partnership's
borrowing costs on the first $100 million of debt outstanding could exceed 6%.
However, at this time the Operating Partnership does not have any reason to
believe that the counterparty would fail to perform. While the notional amount
is the most commonly used measure of volume in the derivatives market, it is not
used by the Operating Partnership as a measure of risk as the notional amount
exceeds the possible loss that could arise from the interest rate cap. Mark to
market exposure is a point-in-time measure of the value of a derivative contract
on the open market. A positive value indicates existence of credit risk for the
Operating Partnership as the counterparty would owe money to the Operating
Partnership if the contract were closed. At year end 1999, the market value of
the Operating Partnership's derivative was $1,267,000 representing the time
value and intrinsic value components of the fair value. The table below provides
the interest rate sensitivity of the interest rate cap. These exposures will
change as a result of ongoing portfolio and risk management activities (in
thousands, except for term):
<TABLE>
<CAPTION>
Notional Term/ -100 Basis Fair Value at + 100 Basis
Amount Years Point Change December 31, 1999 Point Change
<S> <C> <C> <C> <C> <C>
Interest rate cap $100,000 3 $(682) $1,267 $997
</TABLE>
Debt - Fair Value
At year end 1999, the aggregate fair value of long-term debt issued by the
Operating Partnership was $5.6 million. The table below provides the potential
fair value exposure to an immediate 100 basis point decrease in interest rates
from those prevailing at year-end 1999 (in thousands):
At -100 Basis
December 31, 1999 Point Change
Long-term debt $5,627 $279
Forward-looking Statements
Certain statements provided by Alliance Capital and Alliance Holding in this
report are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from future results expressed or implied by such
forward-looking statements. The most significant of such factors include, but
are not limited to, the following: the performance of financial markets, the
investment performance of sponsored investment products and separately managed
accounts, general economic conditions, future acquisitions, competitive
conditions and government regulations, including changes in tax rates. Alliance
Capital and Alliance Holding caution readers to carefully consider such factors.
Further, such forward-looking statements speak only as of the date on which such
statements are made; Alliance Capital and Alliance Holding undertake no
obligation to update any forward-looking statements to reflect events or
circumstances after the date of such statements.
<PAGE>
Consolidated Statements of Financial Condition
(In thousands)
<TABLE>
<CAPTION>
Alliance
Holding
December 31,
1999 1998
Assets
<S> <C> <C>
Cash and cash equivalents $ 80,185 $ 75,186
Receivable from brokers and dealers for sale of shares of Alliance mutual funds 218,569 159,095
Fees receivable:
Alliance mutual funds 189,866 80,167
Separately managed accounts:
Affiliated clients 7,136 6,682
Third-party clients 112,847 86,166
Investments, available-for-sale 98,620 94,743
Furniture, equipment and leasehold improvements, net 140,045 96,401
Intangible assets, net 98,068 102,001
Deferred sales commissions, net 604,723 375,293
Other investments 57,786 25,125
Other assets 53,216 31,733
Total assets $1,661,061 $1,132,592
Liabilities and Partners' Capital
Liabilities:
Payable to Alliance mutual funds for share purchases $ 254,151 $ 199,316
Accounts payable and accrued expenses 225,922 202,980
Accrued compensation and benefits 235,120 106,929
Debt 390,079 190,210
Minority interests in consolidated subsidiaries 3,122 2,884
Total liabilities 1,108,394 702,319
Commitments and contingencies
Partners' capital:
General Partner 5,812 4,617
Limited partners; 171,861,373 and 170,365,963 Units issued and outstanding 575,385 457,010
581,197 461,627
Less: Capital contributions receivable from General Partner 31,154 30,519
Deferred compensation expense -- 500
Accumulated other comprehensive income (2,624) 335
Total partners' capital 552,667 430,273
Total liabilities and partners' capital $1,661,061 $1,132,592
</TABLE>
* As discussed in Notes 1 and 2, the financial information above reflects the
operations of Alliance Capital Management Holding L.P. prior to the
Reorganization effective October 29, 1999 and of Alliance Capital Management
L.P. thereafter.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements of Income
(In thousands)
<TABLE>
<CAPTION>
1999 Years Ended December 31,
Two Months Ten Months Combined
Ended Ended for Alliance Holding
December 31 October 29 1999 1998 1997
Revenues:
Investment advisory and services fees:
<S> <C> <C> <C> <C> <C>
Alliance mutual funds $228,834 $ 658,609 $ 887,443 $ 588,396 $384,759
Separately managed accounts:
Affiliated clients 8,339 43,308 51,647 58,051 52,930
Third-party clients 87,082 305,586 392,668 306,545 261,290
Distribution revenues 87,611 354,161 441,772 301,846 216,851
Shareholder servicing fees 11,636 50,696 62,332 43,475 36,327
Other revenues 7,313 26,130 33,443 25,743 23,179
430,815 1,438,490 1,869,305 1,324,056 975,336
Expenses:
Employee compensation and benefits 137,771 370,795 508,566 340,923 264,251
Promotion and servicing:
Distribution plan payments to financial intermediaries:
Affiliated 18,739 87,431 106,170 82,444 56,118
Third-party 45,017 187,489 232,506 178,643 121,791
Amortization of deferred sales commissions 31,229 132,713 163,942 108,853 73,841
Other 23,176 94,934 118,110 90,400 60,416
General and administrative 33,385 151,369 184,754 162,323 120,283
Interest 5,856 16,729 22,585 7,586 2,968
Amortization of intangible assets 641 3,211 3,852 4,172 7,006
Reduction in recorded value of intangible assets -- -- -- -- 120,900
295,814 1,044,671 1,340,485 975,344 827,574
Income before income taxes 135,001 393,819 528,820 348,712 147,762
Income taxes 8,098 59,073 67,171 55,796 18,806
Net income $126,903 $ 334,746 $ 461,649 $ 292,916 $128,956
</TABLE>
* As discussed in Notes 1 and 2, the financial information above reflects the
operations of Alliance Capital Management Holding L.P. prior to the
Reorganization effective October 29, 1999 and of Alliance Capital Management
L.P. thereafter.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statements of Changes in Partners' Capital and Comprehensive Income
(In thousands)
<TABLE>
<CAPTION>
For the Years Ended December 31,
Accumulated General
Limited Capital Deferred Other Total Partner's
Partner's Contributions Compensation Comprehensive Partners' Capital
Capital Receivable Expense Income Capital
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 5,108 $ 505,711 $(27,904) $(6,500) $ (395) $ 476,020
Comprehensive Income:
Net income 1,290 127,666 -- -- -- 128,956
Other comprehensive income:
Unrealized gain on investments, net -- -- -- -- 458 458
Foreign currency translation adjustment, net -- -- -- -- (2,069) (2,069)
Comprehensive Income 1,290 127,666 -- -- (1,611) 127,345
Cash distributions to partners ($1.285 per
Alliance Holding Unit) (2,186) (216,418) -- -- -- (218,604)
Amortization of deferred compensation expense -- -- -- 3,000 -- 3,000
Capital contributions from General Partner -- -- 761 -- -- 761
Compensation plan accrual 20 1,960 (1,980) -- -- --
Proceeds from options for Alliance Holding Units
exercised 95 9,434 -- -- -- 9,529
Balance at December 31, 1997 4,327 428,353 (29,123) (3,500) (2,006) 398,051
Comprehensive Income:
Net income 2,929 289,987 -- -- -- 292,916
Other comprehensive income:
Unrealized gain on investments, net -- -- -- -- 837 837
Foreign currency translation adjustment, net -- -- -- -- 834 834
Comprehensive Income 2,929 289,987 -- -- 1,671 294,587
Cash distributions to partners ($1.60 per
Alliance Holding Unit) (2,744) (271,700) -- -- -- (274,444)
Amortization of deferred compensation expense -- -- -- 3,000 -- 3,000
Capital contributions from General Partner -- -- 716 -- -- 716
Compensation plan accrual 21 2,091 (2,112) -- -- --
Proceeds from options for Alliance Holding Units
exercised 84 8,279 -- -- -- 8,363
Balance at December 31, 1998 4,617 457,010 (30,519) (500) (335) 430,273
Comprehensive Income:
Net income 3,347 331,399 -- -- -- 334,746
Other comprehensive income:
Unrealized gain on investments, net -- -- -- -- 370 370
Foreign currency translation adjustment, net -- -- -- -- 1,035 1,035
Comprehensive Income 3,347 331,399 -- -- 1,405 336,151
Cash distributions to partners ($2.07 per
Alliance Holding Unit) (2,608) (258,137) -- -- -- (260,745)
Amortization of deferred compensation expense -- -- -- 500 -- 500
Capital contributions from General Partner -- -- 686 -- -- 686
Compensation plan accrual 18 1,752 (1,770) -- -- --
Proceeds from options for Alliance Holding Units
exercised 120 11,853 -- -- -- 11,973
Balance prior to October 29, 1999, Reorganization 5,494 543,877 (31,603) -- 1,070 518,838
Comprehensive income:
Net income 1,269 125,634 -- -- -- 126,903
Other comprehensive income:
Unrealized gain on investments, net -- -- -- -- 1,645 1,645
Foreign currency translation adjustment, net -- -- -- -- (91) (91)
Comprehensive income 1,269 125,634 -- -- 1,554 128,457
Cash distributions to partners (971) (96,141) -- -- -- (97,112)
Capital contributions from General Partner -- -- 406 -- -- 406
Compensation plan accrual (1) (42) 43 -- -- --
Proceeds from options for Alliance Holding Units
exercised 21 2,057 -- -- -- 2,078
Balance at December 31, 1999 $ 5,812 $ 575,385 $(31,154) $-- $ 2,624 $ 552,667
</TABLE>
*As discussed in Notes 1 and 2, the financial information above reflects the
operations of Alliance Capital Management Holding L.P. prior to the
Reorganization effective October 29, 1999 and of Alliance Capital Management
L.P. thereafter.
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
1999 Years Ended December 31,
Two Months Ten Months Combined
Ended Ended for Alliance Holding
December 31 October 29 1999 1998 1997
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net income $ 126,903 $ 334,746 $ 461,649 $ 292,916 $ 128,956
Adjustments to reconcile net income to net cash
(used in) provided from operating activities:
Amortization and depreciation 35,641 152,635 188,276 129,374 92,773
Reduction in recorded value of intangible assets -- -- -- -- 120,900
Other, net 3,646 18,120 21,766 12,873 6,570
Changes in assets and liabilities:
(Increase) in receivable from brokers and dealers
for sale of shares of Alliance mutual funds (43,637) (15,777) (59,414) (90,389) (37,725)
(Increase) in fees receivable from Alliance
mutual funds (79,314) (30,386) (109,700) (22,302) (11,125)
(Increase) decrease in fees receivable from
affiliated clients 11,648 (12,104) (456) (1,675) (3,878)
(Increase) in fees receivable from third-party clients (7,632) (18,950) (26,582) (11,772) (15,612)
(Increase) in deferred sales commissions (67,114) (326,258) (393,372) (232,514) (150,301)
(Increase) in other investments (16,626) (17,935) (34,561) (14,708) (1,237)
(Increase) in other assets (21,791) (278) (22,069) (10,666) (10,091)
Increase in payable to Alliance mutual funds
for share purchases 46,813 7,981 54,794 102,321 41,481
Increase (decrease) in accounts payable and
accrued expenses 20,501 (190) 20,311 73,583 20,584
Increase (decrease) in accrued compensation
and benefits, less deferred compensation (43,863) 167,304 123,441 27,634 14,342
Net cash (used in) provided from operating activities (34,825) 258,908 224,083 258,025 195,637
Cash flows from investing activities:
Purchase of investments (301,448) (888,180) (1,189,628) (476,826) (516,720)
Proceeds from sale of investments 287,425 900,130 1,187,555 430,266 506,116
Purchase of businesses, net of cash acquired -- (142) (142) (2,911) --
Additions to furniture, equipment and leasehold
improvements, net (13,033) (50,463) (63,496) (31,910) (35,341)
Net cash (used in) investing activities (27,056) (38,655) (65,711) (81,381) (45,945)
Cash flows from financing activities:
Proceeds from issuance of debt 867,854 2,043,616 2,911,470 926,012 126,863
Repayment of debt (707,001) (2,015,874) (2,722,875) (826,375) (60,451)
Cash distributions to partners (97,112) (260,745) (357,857) (274,444) (218,604)
Capital contributions from General Partner 406 686 1,092 716 761
Proceeds from options for Alliance Holding Units exercised 2,078 11,973 14,051 8,363 9,529
Net cash provided from (used in) financing activities 66,225 (220,344) (154,119) (165,728) (141,902)
Effect of exchange rate changes on cash and
cash equivalents 529 217 746 509 (1,470)
Net increase in cash and cash equivalents 4,873 126 4,999 11,425 6,320
Cash and cash equivalents at beginning of the period 75,312 75,186 75,186 63,761 57,441
Cash and cash equivalents at end of the period $ 80,185 $ 75,312 $ 80,185 $ 75,186 $ 63,761
</TABLE>
* As discussed in Notes 1 and 2, the financial information above reflects the
operations of Alliance Capital Management Holding L.P. prior to the
Reorganization effective October 29, 1999 and of Alliance Capital Management
L.P. thereafter.
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Notes to Consolidated Financial Statements
1. Reorganization
Effective October 29, 1999, Alliance Capital Management Holding L.P., formerly
known as Alliance Capital Management L.P. ("Alliance Holding"), reorganized by
transferring its business to Alliance Capital Management L.P., a newly formed
private partnership ("Alliance Capital" or the "Operating Partnership"), in
exchange for all of the Units of Alliance Capital ("the Reorganization"). The
Operating Partnership recorded the transferred assets and assumption of
liabilities at the amounts reflected in Alliance Holding's books and records on
the date of transfer. Since the Reorganization, the Operating Partnership has
conducted the diversified investment management services business formerly
conducted by Alliance Holding, and Alliance Holding's business has consisted of
holding Alliance Capital Units and engaging in related activities. Alliance
Capital Management Corporation ("ACMC"), an indirect wholly-owned subsidiary of
AXA Financial, Inc. ("AXA Financial"), is the general partner of both Alliance
Holding and the Operating Partnership. Alliance Capital is a registered
investment adviser under the Investment Advisers Act of 1940. Alliance Holding
Units are publicly traded on the New York Stock Exchange while Alliance Capital
Units do not trade publicly and are subject to significant restrictions on
transfer.
As part of the Reorganization, Alliance Holding offered each Alliance Holding
Unitholder the opportunity to exchange Alliance Holding Units for Alliance
Capital Units on a one-for-one basis. In the exchange offer, approximately 99.6
million Alliance Holding Units were exchanged for Alliance Capital Units. This
number includes the approximately 95.1 million Alliance Holding Units exchanged
by affiliates of AXA Financial. At December 31, 1999, Alliance Holding owned
approximately 72.3 million, or 42%, of the issued and outstanding Alliance
Capital Units. ACMC owns 100,000 general partnership Units in Alliance Holding
and a 1% general partnership interest in the Operating Partnership. At December
31, 1999, AXA Financial was the beneficial owner of approximately 2% of Alliance
Holding's outstanding Units and approximately 55% of the Operating Partnership's
outstanding Units which, including the general partnership interests, equates to
an economic interest of approximately 57% in the Operating Partnership.
The Operating Partnership provides diversified investment management and related
services to a broad range of clients including unaffiliated separately managed
accounts, The Equitable Life Assurance Society of the United States ("ELAS"), a
wholly-owned subsidiary of AXA Financial, and its insurance company subsidiary
and to individual investors through mutual funds and various other investment
vehicles. Separately managed accounts consist primarily of the active management
of equity and fixed income portfolios for institutional investors. Separately
managed accounts include corporate and public employee pension funds, the
general and separate accounts of ELAS and its insurance company subsidiary,
endowment funds, and the assets of other domestic and foreign institutions. The
Operating Partnership provides investment management, distribution, and
shareholder and administrative services to its sponsored mutual funds and cash
management products, including money market funds and deposit accounts
("Alliance mutual funds").
The Operating Partnership's consolidated financial statements and notes should
be read in conjunction with the consolidated financial statements and notes of
Alliance Holding included in this report.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Operating Partnership's consolidated financial statements have been prepared
in accordance with generally accepted accounting principles. The preparation of
the financial statements in conformity with generally accepted accounting
principles requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
The consolidated financial statements' dollar and per Unit amounts and
disclosures reflect the operations of Alliance Holding prior to the
Reorganization effective October 29, 1999 and Alliance Capital thereafter. The
accounting policies summarized below are followed by the Operating Partnership
subsequent to the Reorganization and were followed by Alliance Holding prior to
the Reorganization. All information prior to the Reorganization is that of
Alliance Holding.
Principles of Consolidation
The consolidated financial statements include the Operating Partnership and its
majority-owned subsidiaries. The equity method of accounting is used for
unconsolidated subsidiaries in which the Operating Partnership's ownership
interests range from 20 to 50 percent and the Operating Partnership exercises
significant influence over operating and financial policies. All significant
intercompany transactions and balances among the consolidated entities have been
eliminated.
<PAGE>
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and highly
liquid investments with maturities of three months or less. Due to the
short-term nature of these investments, the recorded value approximates fair
value.
Investments
Investments, principally investments in Alliance mutual funds, are classified as
available-for-sale securities. These investments are stated at fair value with
unrealized gains and losses reported as a separate component of accumulated
other comprehensive income in partners' capital. Realized gains and losses on
the sale of investments are included in income currently and are determined
using the specific-identification method.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation is recognized on a
straight-line basis over the estimated useful lives of eight years for furniture
and three to six years for equipment. Leasehold improvements are amortized on a
straight-line basis over the lesser of their estimated useful lives or the terms
of the related leases.
Intangible Assets
Intangible assets consist principally of goodwill resulting from acquisitions
and costs assigned to contracts of businesses acquired. Goodwill is being
amortized on a straight-line basis over estimated useful lives ranging from
twelve to forty years. Costs assigned to investment contracts of businesses
acquired are being amortized on a straight-line basis over estimated useful
lives of twenty years. Impairment of intangible assets is evaluated by comparing
the undiscounted cash flows expected to be realized from those intangible assets
to their recorded values, pursuant to Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of ". If the expected future
cash flows are less than the carrying value of intangible assets, an impairment
loss is recognized for the difference between the carrying amount and the
estimated fair value of those intangible assets.
Deferred Sales Commissions
Sales commissions paid to financial intermediaries in connection with the sale
of shares of open-end Alliance mutual funds sold without a front-end sales
charge are capitalized and amortized over periods not exceeding five and
one-half years, the period of time during which deferred sales commissions are
expected to be recovered from distribution plan payments received from those
funds and from contingent deferred sales charges received from shareholders of
those funds upon the redemption of their shares. Contingent deferred sales
charges reduce unamortized deferred sales commissions when received.
Derivative Financial Instruments
Derivative financial instruments are used to manage exposure to adverse
movements in interest rates. Payments to be received as a result of interest
rate cap agreements are recognized as adjustments to interest expense. Premiums
paid are included in other assets and amortized to interest expense over the
period for which the cap is effective.
Revenue Recognition
Investment advisory and services base fees are recorded as revenue as the
related services are performed. Certain investment advisory contracts provide
for a performance fee, in addition to or in lieu of a base fee, that is
calculated as a percentage of the related investment results over a specified
period of time. Performance fees are recorded as revenue at the end of the
measurement period.
Mutual Fund Underwriting Activities
Purchases and sales of shares of Alliance mutual funds in connection with the
underwriting activities of the Operating Partnership's subsidiaries, including
related commission income, are recorded on trade date. Receivables from brokers
and dealers for sale of shares of Alliance mutual funds are generally realized
within three business days from trade date, in conjunction with the settlement
of the related payables to Alliance mutual funds for share purchases.
Option Plans
The Operating Partnership applies the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees", under
which compensation expense is recorded on the date of grant only if the market
price of the underlying Alliance Holding Units exceeds the exercise price.
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation", requires entities to recognize the fair value of
all stock-based awards on the date of grant as expense over the vesting period
or, alternatively, to continue to apply the provisions of APB 25 with disclosure
of pro forma net income as if the fair-value method defined in SFAS 123 had been
applied for employee stock option grants made in 1995 and subsequent years.
<PAGE>
Pension and Other Post-retirement Plans
On January 1, 1998, Alliance Holding adopted Statement of Financial Accounting
Standards No. 132 ("SFAS 132"), "Employers' Disclosures about Pension and Other
Post-retirement Benefits", which revises employers' disclosures about pension
and other post-retirement benefit plans. SFAS 132 does not change the method of
accounting for such plans.
Advertising
Advertising costs are expensed as incurred and are included in other promotion
and servicing expenses.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into United States
dollars at exchange rates in effect at the balance sheet dates, and related
revenues and expenses are translated into United States dollars at average
exchange rates in effect during each period. Net foreign currency gains and
losses resulting from the translation of assets and liabilities of foreign
operations into United States dollars are reported as a separate component of
accumulated other comprehensive income in partners' capital. Net foreign
currency gains and losses for the three-year period ended December 31, 1999 were
not material.
Cash Distributions to Partners
The Operating Partnership is required to distribute all of its Available Cash
Flow, as defined in the Alliance Capital Partnership Agreement, to the General
Partner and Alliance Capital Unitholders.
Comprehensive Income
On January 1, 1998, Alliance Holding adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income", which
establishes the disclosure requirements for reporting comprehensive income in an
entity's financial statements. Total comprehensive income is reported in the
Consolidated Statements of Changes in Partners' Capital and Comprehensive Income
and includes net income, unrealized gains and losses on investments classified
as available-for-sale, and foreign currency translation adjustments. The
accumulated balance of comprehensive income items is displayed separately in the
partners' capital section of the Consolidated Statements of Financial Condition.
Prior year ~financial statements have been reclassified to conform to the
requirements of SFAS 130.
Reclassifications
Certain amounts in the 1998 and 1997 consolidated financial statements have been
reclassified to conform with the 1999 presentation.
3. Pro Forma Financial Information (Unaudited)
The following table summarizes the unaudited condensed 1999, 1998 and 1997
results of operations of the Operating Partnership as if the Reorganization (See
Note 1) had occurred on January 1, 1997. The pro forma financial information
reflects the Operating Partnership ~as a private partnership that is not subject
to a federal tax of 3.5% on partnership gross income from the active conduct of
a trade or business.
The pro forma financial information does not necessarily reflect the results of
operations that would have been obtained had the Reorganization occurred on
January 1, 1997, nor is the pro forma financial information necessarily
indicative of the results of operations that may be achieved for any future
period.
(in thousands) 1999 1998 1997
Revenues $1,869,305 $1,324,056 $975,336
Expenses 1,340,485 975,344 827,574
Income before income taxes 528,820 348,712 147,762
Income taxes 34,067 25,196 18,806
Net income $ 494,753 $ 323,516 $128,956
4. Acquisitions
On December 22, 1998, a subsidiary of Alliance Holding acquired Whittingdale
Holdings Limited ("Whittingdale"). The purchase price consists of an initial
payment of $4.8 million in cash and two deferred payments, based on the
attainment of certain revenue levels by Whittingdale, initially estimated to be
$5.4 million in the aggregate payable on February 15, 2000 and 2001,
respectively. In connection with the Reorganization, the Operating Partnership
assumed all of Alliance Holding's rights and obligations with respect to the
Whittingdale acquisition. Accounts payable and accrued expenses at December 31,
1999 included $5.4 million representing the initial estimate of the deferred
payments. Subsequent to December 31, 1999, the estimate of the aggregate
deferred payments was revised to $6.9 million. The Operating Partnership also
has agreed to pay up to $6.7 million to the former owner of Whittingdale. The
amount of this payment is based upon revenues in the year 2003 and will be
expensed if and when the payment is incurred.
<PAGE>
The acquisition was accounted for under the purchase method with the results of
Whittingdale included in the consolidated financial statements from the
acquisition date. The excess of the purchase price over the fair value of net
assets acquired resulted in the recognition of goodwill of approximately $8.8
million, which increased to $10.3 million in 2000, and is being amortized over
twenty years. Pro forma financial information for the year ended December 31,
1998, reflecting the effects of the acquisition, is not presented because it
would not be materially different from the actual results reported.
On February 29, 1996, Alliance Holding acquired substantially all of the assets
and liabilities of Cursitor Holdings, L.P. ("CHLP") and all of the outstanding
shares of Cursitor Holdings Limited, currently Cursitor Alliance Holdings
Limited (collectively, "Cursitor"), for approximately $159.0 million. The
acquisition of Cursitor, which was accounted for under the purchase method,
resulted in the formation of a new subsidiary, Cursitor Alliance LLC ("Cursitor
Alliance"), in which CHLP owns a 7% minority equity interest which the Operating
Partnership has an option to purchase (See Note 11).
During the second quarter of 1997, management of Alliance Holding determined
that the value of the intangible assets recorded in connection with the 1996
acquisition of Cursitor was impaired and reduced the unamortized value by $120.9
million to estimated fair value.
5. Investments, Available-for-Sale
At December 31, 1999 and 1998, investments available-for-sale consisted solely
of investments in Alliance mutual funds. The amortized cost, gross unrealized
gains and losses and fair value of investments, available-for-sale were as
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1999 $95,016 $3,791 $(187) $98,620
December 31, 1998 $93,154 $2,169 $(580) $94,743
</TABLE>
Proceeds from sales of investments, available-for-sale were
approximately $1,187,555,000, $430,266,000 and $506,116,000 in 1999, 1998 and
1997, respectively. Gross gains and gross losses realized from the sales for the
years ended December 31, 1999, 1998 and 1997 were not material.
6. Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are comprised of (in thousands):
December 31,
1999 1998
Furniture and equipment $133,824 $95,886
Leasehold improvements 92,251 66,954
226,075 162,840
Less: Accumulated depreciation and amortization 86,030 66,439
Furniture, equipment and leasehold improvements, net $140,045 $96,401
7. Intangible Assets
Intangible assets consist of (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
Goodwill, net of accumulated amortization of $20,013 and
<S> <C> <C> <C> <C>
$17,693 in 1999 and 1998, respectively $80,434 $ 83,276
Costs assigned to investment contracts of businesses acquired,
net of accumulated amortization of $89,514 and $88,423 in
1999 and 1998, respectively 17,634 18,725
Intangible assets, net $98,068 $102,001
</TABLE>
<PAGE>
8. Other Investments
Other investments are comprised of (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Investments in sponsored partnerships and other investments $48,335 $19,559
Investments in unconsolidated affiliates 9,451 5,566
Other investments $57,786 $25,125
</TABLE>
9. Debt
During 1998, Alliance Holding increased its commercial paper program to $425
million and entered into a $425 million five-year revolving credit facility with
a group of commercial banks. Under the credit facility, the interest rate, at
the option of the borrower, is a floating rate generally based upon a defined
prime rate, a rate related to the London Interbank Offered Rate (LIBOR) or the
Federal Funds rate. A facility fee is payable on the total facility. Borrowings
under the credit facility and the commercial paper program may not exceed $425
million in the aggregate. In connection with the Reorganization, the Operating
Partnership assumed Alliance Holding's rights and obligations under the
five-year revolving credit facility and the commercial paper program. The
revolving credit facility will be used to provide back-up liquidity for the
Operating Partnership's commercial paper program, to fund commission payments to
financial intermediaries for the sale of Back-End Load Shares under the
Operating Partnership's mutual fund distribution system, and for general working
capital purposes.
During July 1999, Alliance Holding entered into a $200 million three-year
revolving credit facility with a group of commercial banks. In connection with
the Reorganization, the Operating Partnership assumed Alliance Holding's rights
and obligations under the three-year revolving credit facility. The new
revolving credit facility, the terms of which are generally similar to the $425
million credit facility, will be used to fund commission payments to financial
intermediaries for the sale of Back-End Load Shares under the Operating
Partnership's mutual fund distribution system and for general working capital
purposes.
The revolving credit facilities contain covenants which, among other things,
require the Operating Partnership to meet certain financial ratios. The
Operating Partnership was in compliance with the covenants at December 31, 1999.
In December 1999, the Operating Partnership established a $100 million
Extendible Commercial Notes ("ECN") Program as a supplement to its $425 million
commercial paper program. ECNs are short-term uncommitted debt instruments that
do not require back-up liquidity support.
At December 31, 1999 and 1998, the Operating Partnership and Alliance Holding
had $384.7 million and $179.5 million of commercial paper outstanding,
respectively, at effective interest rates of 5.9% and 5.5%, respectively. There
were no borrowings outstanding under the revolving credit facilities or the ECN
Program on these dates. The recorded amount of outstanding commercial paper
approximates fair value.
Debt also includes notes issued to CHLP in the aggregate principal amounts of
$5.4 million and $10.8 million at December 31, 1999 and 1998, respectively. The
notes bear interest at 6% per annum and the note outstanding at December 31,
1999 is payable in 2000. The recorded amounts of the notes approximate their
fair value.
10. Interest Rate Cap Agreement
Alliance Holding entered into a three-year interest rate cap agreement with a
major U.S. commercial bank, effective in December 1998, which was assumed by the
Operating Partnership in connection with the Reorganization. The purpose of this
agreement is to reduce the Operating Partnership's exposure to interest rate
risk by effectively placing an interest rate ceiling or "cap" of 6% per annum on
interest payable on up to $100 million of the debt outstanding under the
commercial paper program and the five-year revolving credit facility. The fair
value of the interest rate cap was approximately $1,267,000 at December 31,
1999, and the carrying value of the unamortized premium was $594,000.
The $100 million notional principal amount does not represent the Operating
Partnership's exposure to credit risk, but is the basis for determining the
payment obligation of the counterparty. During the term of the interest rate
cap, the Operating Partnership will receive monthly payments from the
counterparty based on the excess, if any, of the stated reference rate of 6%
times the notional amount. Should the counterparty fail to perform its
obligations under the agreement, the borrowing costs on the first $100 million
debt outstanding could exceed 6%. However, at this time, the Operating
Partnership does not have any reason to believe that the counterparty would fail
to perform.
<PAGE>
11. Commitments and Contingencies
The Operating Partnership and its subsidiaries lease office space, furniture and
office equipment under various operating leases. The future minimum payments
under noncancelable leases, net of sublease commitments, at December 31, 1999
aggregated $466,019,000 and are payable as follows: $31,110,000, $30,205,000,
$29,365,000, $29,391,000 and $28,384,000 for the years 2000 through 2004,
respectively, and a total of $317,564,000 for the remaining years through 2016.
Office leases contain escalation clauses that provide for the pass through of
increases in operating expenses and real estate taxes. Rent expense for the
years ended December 31, 1999, 1998 and 1997 was $31,907,000, $25,062,000, and
$21,262,000, respectively.
In connection with the Cursitor acquisition, Alliance Holding obtained an option
to purchase the minority interest held by CHLP in Cursitor Alliance, and CHLP
obtained an option to sell its minority interest to Alliance Holding for cash,
Alliance Holding Units, or a combination thereof with a value of not less than
$10.0 million or more than $37.0 million ("Buyout Price"). The Operating
Partnership assumed all of Alliance Holding's rights and obligations with
respect to CHLP in connection with the Reorganization. The Buyout Price will be
determined based on the amount of global asset allocation investment advisory
revenues earned by Cursitor Alliance during a twelve-month period ending on the
February 28th preceding the date either option is exercised. Due to the decline
in Cursitor Alliance revenues, management believes that the Buyout Price for the
minority interest will be $10.0 million, which will be substantially higher than
its fair value. Accordingly, a $10.0 million provision for the Buyout Price was
recorded in the first quarter of 1998.
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Original Complaint") was filed against Alliance North American Government
Income Trust, Inc. (the "Fund"), Alliance Holding and certain other defendants
affiliated with Alliance Holding alleging violations of federal securities laws,
fraud and breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine securities. On September 26, 1996, the United States
District Court for the Southern District of New York granted the defendants'
motion to dismiss all counts of the Original Complaint. On October 29, 1997, the
United States Court of Appeals for the Second Circuit affirmed that decision.
On October 29, 1996, plaintiffs filed a motion for leave to file an amended
complaint. The principal allegations of the proposed amended complaint are that
(i) the Fund failed to hedge against currency risk despite representations that
it would do so, (ii) the Fund did not properly disclose that it planned to
invest in mortgage-backed derivative securities, and (iii) two advertisements
used by the Fund misrepresented the risks of investing in the Fund. On October
15, 1998, the United States Court of Appeals for the Second Circuit issued an
order granting plaintiffs' motion to file an amended complaint alleging that the
Fund misrepresented its ability to hedge against currency risk and denying
plaintiffs' motion to file an amended complaint alleging that the Fund did not
properly disclose that it planned to invest in mortgage-backed derivative
securities and that certain advertisements used by the Fund misrepresented the
risks of investing in the Fund.
On December 1, 1999, the United States District Court for the Southern District
of New York granted the defendants' motion for summary judgment on all claims
against all defendants. On December 14 and 15, 1999, the plaintiffs filed
motions for reconsideration of the Court's ruling. These motions are currently
pending with the Court.
The Operating Partnership assumed all of Alliance Holding's liabilities in
respect of this litigation in connection with the Reorganization. The Operating
Partnership and Alliance Holding believe that the allegations in the proposed
amended complaint are without merit and intend to vigorously defend against
these claims. While the ultimate outcome of this matter cannot be determined at
this time, management of the Operating Partnership does not expect that it will
have a material adverse effect on the Operating Partnership's results of
operations or financial condition.
12. Net Capital
Alliance Fund Distributors, Inc. ("AFD"), a wholly-owned subsidiary of the
Operating Partnership, serves as distributor and/or underwriter for certain
Alliance mutual funds. AFD is registered as a broker-dealer under the Securities
Exchange Act of 1934 and is subject to the minimum net capital requirements
imposed by the Securities and Exchange Commission. AFD's net capital at December
31, 1999 was $14,187,000, which was $5,763,000 in excess of its required net
capital of $8,424,000.
13. Employee Benefit Plans
In connection with the Reorganization, all employees of Alliance Holding became
employees of the Operating Partnership effective October 29, 1999 and the
Operating Partnership assumed all employee benefit plans previously administered
by Alliance Holding. The Operating Partnership and its subsidiaries maintain a
number of qualified and nonqualified employee benefit and incentive compensation
plans. Except as indicated, the aggregate amount available for annual employee
bonuses and contributions to the various employee benefit plans discussed below
is based on a percentage of the consolidated operating profits of the Operating
Partnership and its subsidiaries.
<PAGE>
The Operating Partnership maintains a qualified profit sharing plan covering
substantially all U.S. and certain foreign employees. The amount of the annual
contribution to the plan is determined by a committee of the Board of Directors
of the General Partner. Contributions are limited to the maximum amount
deductible for federal income tax purposes, generally 15% of the total annual
compensation of eligible participants. Aggregate contributions for 1999, 1998
and 1997 were $11,415,000, $10,049,000 and $8,744,000, respectively.
The Operating Partnership maintains a qualified noncontributory defined benefit
retirement plan in the U.S. covering substantially all U.S. employees and
certain foreign employees. Benefits are based on years of credited service,
average final base salary and primary Social Security benefits. The Operating
Partnership's funding policy is to contribute annually an amount not to exceed
the maximum amount that can be deducted for federal income tax purposes. Plan
assets are comprised principally of corporate equity securities, U.S. Treasury
securities and shares of Alliance mutual funds.
The projected benefit obligation under the retirement plan at December 31, 1999
and 1998 was comprised of (in thousands):
1999 1998
Benefit obligation at beginning of year $33,481 $26,169
Service cost 3,599 2,769
Interest cost 2,313 1,891
Actuarial gains/losses (7,799) 3,313
Benefits paid (452) (661)
Benefit obligation at end of year $31,142 $33,481
Changes in plan assets at fair value for the years ended December 31, 1999 and
1998 were comprised of (in thousands):
1999 1998
Plan assets at fair value at beginning of year $32,244 $24,300
Actual return on plan assets 6,070 8,605
Benefits paid (452) (661)
Plan assets at fair value at end of year $37,862 $32,244
The following table presents the retirement plan's funded status and amounts
recognized in the consolidated statements of financial condition at December 31,
1999 and 1998 (in thousands):
1999 1998
Funded status $ 6,720 $(1,237)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (15,773) (5,139)
Prior service cost not yet recognized in net periodic
pension cost (1,308) (1,421)
Unrecognized net plan assets at January 1, 1987 being
recognized over 26.3 years (1,906) (2,049)
Accrued pension expense included in accrued compensation
and benefits $(12,267) $(9,846)
Net expense under the retirement plan for the years
ended December 31, 1999, 1998 and 1997 was comprised
of (in thousands):
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Service cost $ 3,599 $ 2,769 $ 2,143
Interest cost on projected benefit obligations 2,313 1,891 1,600
Expected return on plan assets (3,160) (2,393) (1,995)
Net amortization and deferral (331) (271) (272)
Net pension charge $ 2,421 $ 1,996 $ 1,476
</TABLE>
Actuarial computations at December 31, 1999, 1998 and
1997 were made utilizing the following assumptions:
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Discount rate on benefit obligations 8.00% 7.00% 7.50%
Expected long-term rate of return on plan assets 10.00% 10.00% 10.00%
Annual salary increases 5.66% 5.66% 5.50%
</TABLE>
Variances between actuarial assumptions and actual experience are amortized over
the estimated average remaining service lives of employees participating in the
retirement plan.
The Operating Partnership maintains a nonqualified unfunded deferred
compensation plan known as the Capital Accumulation Plan and assumed obligations
under contractual unfunded deferred compensation arrangements covering certain
executives which are not funded from the incentive compensation pool.
<PAGE>
The Capital Accumulation Plan was frozen on December 31, 1987 and no additional
awards have been made. The Board of Directors of the General Partner may
terminate the Capital Accumulation Plan at any time without cause, in which case
the Operating Partnership's liability would be limited to benefits that have
vested. Benefits due eligible executives under the contractual unfunded deferred
compensation arrangements vested on or before December 31, 1987. Payment of
vested benefits under both the Capital Accumulation Plan and the contractual
unfunded deferred compensation arrangements will generally be made over a
ten-year period commencing at retirement age. ACMC, Inc., a subsidiary of AXA
Financial, is obligated to make capital contributions to the Operating
Partnership in amounts equal to benefits paid under the Capital Accumulation
Plan and the contractual unfunded deferred compensation arrangements. Amounts
included in employee compensation and benefits expense for the Capital
Accumulation Plan and the contractual unfunded deferred compensation
arrangements for the years ended December 31, 1999, 1998 and 1997 were
$1,727,000, $2,112,000 and $1,980,000, respectively.
During 1995, the Operating Partnership established an unfunded deferred
compensation plan known as the Alliance Partners Compensation Plan (the "Plan")
under which certain awards may be granted to eligible executives. A committee
comprised of certain executive officers of the General Partner administers the
Plan and determines the aggregate amount and recipients of awards. Awards made
in 1995 vest ratably over three years. Awards made after 1995 generally vest
ratably over eight years. Until distributed, the 1995 through 1998 awards are
generally credited with earnings based on the Operating Partnership's earnings
growth rate. Payment of vested 1995 through 1998 benefits will generally be made
in cash over a five-year period commencing at retirement or termination of
employment although, under certain circumstances, full or partial lump sum
payments may be made. Effective for 1999, annual awards are payable in Alliance
Holding Units and a subsidiary of the Operating Partnership purchases Alliance
Holding Units for the account of each participant. The Alliance Holding Units
may not be transferred until vested. The vesting periods range from one to eight
years depending on the age of the participant. Participants receive
distributions on non-vested Alliance Holding Units during the vesting period.
The Plan may be terminated at any time without cause, in which case the
Operating Partnership's liability would be limited to vested benefits. The
Operating Partnership made awards in 1999, 1998 and 1997 aggregating
$48,210,000, $25,825,000 and $21,725,000, respectively. The amounts charged to
employee compensation and benefits expense for the Plan for the years ended
December 31, 1999, 1998 and 1997 were $12,044,000, $6,587,000 and $9,822,000,
respectively.
During 1994, certain key employees of Shields Asset Management, Incorporated
("Shields") and its wholly-owned subsidiary, Regent Investor Services
Incorporated ("Regent") entered into employment agreements with Alliance Holding
and were issued 1,290,320 new Alliance Holding Units with an aggregate fair
market value of approximately $15,000,000, which was amortized as employee
compensation expense ratably over five years. The Operating Partnership assumed
all of Alliance Holding's obligations with respect to such employees in
connection with the Reorganization. Aggregate amortization of $500,000 was
recorded for the year ended December 31, 1999 and $3,000,000 was recorded for
each of the years ended December 31, 1998 and 1997.
14. Employee Unit Award and Option Plans
In connection with the Reorganization, the Operating Partnership assumed all
obligations under the employee award and option plans previously administered by
Alliance Holding.
During 1988, a Unit Option Plan (the "Unit Option Plan") was established under
which options to purchase Alliance Holding Units were granted to certain key
employees. A committee of the Board of Directors of the General Partner
administers the Unit Option Plan and determines the grantees and the number of
options to be granted. Options may be granted for terms of up to ten years and
each option must have an exercise price of not less than the fair market value
of Alliance Holding Units on the date of grant. Options are exercisable at a
rate of 20% of the Alliance Holding Units subject to options on each of the
first five anniversary dates of the date of grant. As of December 31, 1999,
2,423,250 options to purchase Alliance Holding Units were outstanding under the
Unit Option Plan. No more options may be granted under the Unit Option Plan.
During 1993, the 1993 Unit Option Plan, the Unit Bonus Plan and the Century Club
Plan (together the "1993 Plans") were established by Alliance Holding.
Committees of the Board of Directors of the General Partner administer the 1993
Plans and determine the recipients of grants and awards. Under the 1993 Unit
Option Plan, options to purchase Alliance Holding Units may be granted to key
employees for terms of up to ten years. Each option must have an exercise price
of not less than the fair market value of Alliance Holding Units on the date of
grant. Options are exercisable at a rate of 20% of the Alliance Holding Units
subject to options on each of the first five anniversary dates of the date of
grant. Under the Unit Bonus Plan, Alliance Holding Units may be awarded to key
employees in lieu of all or a portion of the cash bonuses they would otherwise
receive under the Operating Partnership's incentive compensation program. Under
the Century Club Plan, employees whose primary responsibilities are to assist in
the distribution of Alliance mutual funds are eligible to receive an award of
Alliance Holding Units. The aggregate number of Alliance Holding Units that can
be the subject of options granted or that can be awarded under the 1993 Plans
may not exceed 6,400,000 Alliance Holding Units. As of December 31, 1999,
6,054,600 Alliance Holding Units were subject to options granted and 310,286
Alliance Holding Units were subject to awards made under the 1993 Plans.
<PAGE>
During 1997, the 1997 Long Term Incentive Plan (the "1997 Plan") was established
by Alliance Holding. Committees of the Board of Directors of the General Partner
administer the 1997 Plan and determine the recipients of Alliance Holding Unit
awards, including options, restricted Alliance Holding Units and phantom
restricted Alliance Holding Units, performance awards, other Alliance Holding
Unit based awards, or any combination thereof. Awards under the 1997 Plan may be
granted to key employees for terms established at the time of grant by the
Committees. The aggregate number of Alliance Holding Units that can be the
subject of options granted or that can be awarded under the 1997 Plan may not
exceed 16,000,000 Alliance Holding Units.
During 1999, 1998, and 1997, the Committees authorized the grant of options to
employees of the Operating Partnership to purchase 2,000,000, 2,777,000 and
2,125,000 Alliance Holding Units, respectively, under the Unit Option Plan, the
1993 Plans and the 1997 Plan. The per Alliance Holding Unit weighted-average
fair value of options granted during 1999, 1998 and 1997 was $3.88, $3.86 and
$2.18, respectively, on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free interest rates
of 5.7%, 4.4%, and 5.7% for 1999, 1998 and 1997, respectively; expected dividend
yield of 8.7% for 1999, 6.5% for 1998 and 8.0% for 1997; and a volatility factor
of the expected market price of Alliance Holding's Units of 29% for 1999 and
1998, and 26% for 1997.
The Operating Partnership applies APB 25 in accounting for its option plans and,
accordingly, no compensation cost has been recognized for employee options in
the consolidated financial statements. Had the Operating Partnership determined
compensation cost based on the fair value at the grant date for its employee
options under SFAS 123, the Operating Partnership's and Alliance Holding's
combined net income for 1999 and Alliance Holding's net income for 1998 and 1997
would have been reduced to the pro forma amounts indicated below (in thousands):
1999 1998 1997
SFAS 123 Pro forma net income $455,546 $289,831 $127,367
Pro forma net income reflects options granted beginning January 1,
1995. Therefore, the full impact of calculating compensation cost for options
under SFAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period of
five years and compensation cost for options granted prior to January 1, 1995 is
not considered.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected Alliance Holding Unit price
volatility. Because employee options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing model does not necessarily provide a reliable single
measure of the fair value of the options.
The following table summarizes the activity in options under the Unit Option
Plan, 1993 Plans and the 1997 Plan:
Weighted Average
Exercise Price
Alliance Holding Per Alliance
Units Holding Unit
Outstanding at January 1, 1997 10,068,200 $ 9.54
Granted 2,125,000 $18.28
Exercised (1,183,800) $ 8.06
Forfeited (371,800) $10.64
Outstanding at December 31, 1997 10,637,600 $11.41
Granted 2,777,000 $26.28
Exercised (938,972) $ 8.91
Forfeited (205,200) $13.14
Outstanding at December 31, 1998 12,270,428 $14.94
Granted 2,000,000 $30.18
Exercised (1,477,878) $ 9.51
Forfeited (303,800) $17.79
Outstanding at December 31, 1999 12,488,750 $17.95
Exercisable at December 31, 1999 6,129,550
Exercise prices for options outstanding as of December 31, 1999 ranged
from $3.66 to $30.94 per Alliance Holding Unit. The weighted-average remaining
contractual life of those options is 7.0 years.
<PAGE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
Options Outstanding Options Exercisable
Range of Number Weighted Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices as of 12/31/99 Contractual Life Exercise Price as of 12/31/99 Exercise Price
<S> <C> <C> <C> <C> <C>
$ 3.66 - $ 9.81 2,576,750 3.8 $ 8.31 2,246,350 $ 8.12
9.88 - 12.56 3,340,200 5.6 11.16 2,617,000 10.92
13.75 - 18.47 1,849,800 7.9 18.34 715,800 18.34
18.78 - 26.31 2,757,000 8.9 26.16 550,400 26.06
27.31 - 30.94 1,965,000 9.9 30.24 -- --
$ 3.66 - $30.94 12,488,750 7.0 $17.95 6,129,550 $12.12
</TABLE>
15. Income Taxes
The Operating Partnership is a private partnership for federal income tax
purposes and, accordingly, is not subject to federal and state corporate income
taxes. However, the Operating Partnership is subject to the New York City
unincorporated business tax ("UBT"). Domestic corporate subsidiaries of the
Operating Partnership, which are subject to federal, state and local income
taxes, are generally included in the filing of a consolidated federal income tax
return. Separate state and local income tax returns are filed. Foreign corporate
subsidiaries are generally subject to taxes in the foreign jurisdictions where
they are located. Alliance Holding is a publicly traded partnership for federal
income tax purposes and is subject to the UBT and, beginning January 1, 1998, a
3.5% federal tax on partnership gross income from the active conduct of a trade
or business.
<PAGE>
The provision for income taxes, which are all currently payable, consists of (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Partnership unincorporated business taxes $25,607 $16,047 $11,186
Federal tax on partnership gross business income 33,104 30,600 --
Corporate subsidiaries:
Federal 4,250 3,855 4,800
State, local and foreign 4,210 5,294 2,820
Provision for income taxes $67,171 $55,796 $18,806
</TABLE>
The principal reasons for the difference between the effective tax
rates and the UBT statutory tax rate of 4% are as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
UBT statutory rate $21,153 4.0% $13,948 4.0% $ 5,910 4.0%
Federal tax on partnership gross business income 33,104 6.3 30,600 8.8 -- --
Corporate subsidiaries' federal, state, local
and foreign income taxes 8,212 1.5 8,878 2.5 7,206 4.9
Reduction in recorded value of intangible assets -- -- -- -- 4,705 3.2
Miscellaneous 4,702 0.9 2,370 0.7 985 0.6
Provision for income taxes and effective tax rates $67,171 12.7% $55,796 16.0% $18,806 12.7%
</TABLE>
Under Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes", deferred income taxes reflect the net tax effect
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
The tax effect of significant items comprising the net deferred tax assets are
as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1999 1998
Deferred tax asset:
<S> <C> <C>
Differences between book and tax treatment of deferred compensation plans $ 6,587 $3,287
Differences between book and tax basis of intangible assets 1,690 1,847
Other, primarily accruals deductible when paid 1,955 2,056
10,232 7,190
Deferred tax liability:
Differences between book and tax basis of furniture, equipment and leasehold improvements 411 290
Differences between book and tax basis of investment partnerships 736 --
1,147 290
Net deferred tax asset 9,085 6,900
Valuation allowance 8,185 6,000
Deferred tax asset, net of valuation allowance $ 900 $ 900
</TABLE>
The net change in the valuation allowance for the year ended December
31, 1999 was $2,185,000. The valuation allowance primarily relates to
uncertainties on the deductibility for UBT purposes of certain compensation
related items and the amortization expense related to certain intangibles. The
deferred tax asset is included in other assets.
16. Business Segment Information
Alliance Holding adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information", in these consolidated financial statements. SFAS 131 establishes
standards for the way a public enterprise reports information about operating
segments in its annual and interim financial statements. It also establishes
standards for related enterprise-wide disclosures about products and services,
geographic areas and major customers. Generally, financial information is
required to be reported on a basis used by management to allocate resources and
assess performance.
<PAGE>
Management has assessed the requirements of SFAS 131 and determined that,
because the Operating Partnership utilizes a consolidated approach to assess
performance and allocate resources, it has only one operating segment.
Enterprise-wide disclosures as of and for the years ended December 31, 1999,
1998 and 1997 were as follows:
Services
Total revenues derived from the Operating Partnership's and, prior to the
Reorganization, Alliance Holding's investment management services for the years
ended December 31, were (in millions):
1999 1998 1997
Separately managed accounts $ 453 $ 373 $323
Alliance mutual funds
Mutual funds 1,090 674 432
Variable products 124 93 68
Cash management services 187 175 146
Other 15 9 6
Total $1,869 $1,324 $975
Geographic Information
Total revenues, long-lived assets and assets under management related to the
Operating Partnership's and, prior to the Reorganization, Alliance Holding's
domestic and foreign operations as of and for the years ended December 31, were
(in millions):
1999 1998 1997
Total revenues:
United States $ 1,541 $ 1,122 $ 884
International 328 202 91
Total $ 1,869 $ 1,324 $ 975
Long-lived assets:
United States $ 803 $ 536 $ 400
International 40 38 29
Total $ 843 $ 574 $ 429
Assets under management:
United States $316,919 $250,894 $197,292
International 51,402 35,765 21,362
Total $368,321 $286,659 $218,654
Major Customers
The Alliance mutual funds are distributed to individual investors through
broker-dealers, insurance sales representatives, banks, registered investment
advisers, financial planners and other financial intermediaries. AXA Advisors,
LLC ("AXA Advisors"), a wholly-owned subsidiary of AXA Financial that uses
members of the AXA Financial insurance agency sales force as its registered
representatives, has entered into a selected dealer agreement with AFD and has
been responsible for 4%, 5% and 7% of U.S. and offshore mutual fund sales in
1999, 1998, and 1997, respectively. Subsidiaries of Merrill Lynch & Co., Inc.
("Merrill Lynch") were responsible for approximately 26%, 26% and 24% of U.S.
and offshore mutual fund sales in 1999, 1998, and 1997, respectively. Citigroup,
Inc. ("Citigroup"), parent company of Salomon Smith Barney, was responsible for
approximately 6% of U.S. and offshore mutual fund sales in 1999 and 1998 and 7%
in 1997. AXA Advisors, Merrill Lynch and Citigroup are under no obligation to
sell a specific amount of fund shares and each also sells shares of mutual funds
that it sponsors and which are sponsored by unaffiliated organizations.
AXA and the general and separate accounts of ELAS (including investments by the
separate accounts of ELAS in the funding vehicles EQ Advisors Trust and The
Hudson River Trust for certain periods) accounted for approximately 20%, 22% and
26% of total assets under management at December 31, 1999, 1998 and 1997,
respectively, and approximately 8%, 11% and 14% of total revenues for the years
ended December 31, 1999, 1998 and 1997, respectively. No single institutional
client other than AXA and ELAS accounted for more than 1% of total revenues for
the years ended December 31, 1999, 1998 and 1997, respectively.
17. Related Party Transactions
Investment management, distribution, and shareholder and administrative services
are provided to the Alliance mutual funds. Substantially all of these services
are provided under contracts that set forth the services to be provided and the
fees to be charged. The contracts are subject to annual review and approval by
each of the Alliance mutual funds' boards of directors or trustees and, in
certain circumstances, by the Alliance mutual funds' shareholders.
<PAGE>
Revenues for services provided to the Alliance mutual funds are as follows (in
thousands):
Years Ended December 31,
1999 1998 1997
Investment advisory and services fees $887,443 $588,396 $384,759
Distribution revenues 441,772 301,846 216,851
Shareholder servicing fees 62,332 43,475 36,327
Other revenues 9,935 8,572 8,579
Investment management and administration services are provided to AXA
and to AXA Financial and certain of its subsidiaries other than the Operating
Partnership (the "AXA Financial Subsidiaries") and certain of their affiliates.
In addition, certain AXA Financial Subsidiaries distribute Alliance mutual
funds, for which they receive commissions and distribution payments. Sales of
Alliance mutual funds through the AXA Financial Subsidiaries, excluding cash
management products, aggregated approximately $1,228 million, $859 million and
$594 million for the years ended December 31, 1999, 1998 and 1997, respectively.
The Operating Partnership and its employees are covered by various insurance
policies maintained by the AXA Financial Subsidiaries. In addition, the
Operating Partnership pays fees for other services and technology provided by
AXA and the AXA Financial Subsidiaries.
Aggregate amounts included in the consolidated financial statements for
transactions with the AXA Financial Subsidiaries and certain of their affiliates
are as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
Revenues:
<S> <C> <C> <C>
Investment advisory and services fees $ 54,647 $58,051 $52,930
Other revenues 8,003 7,931 7,739
Expenses:
Distribution payments to financial intermediaries 106,170 82,444 56,118
General and administrative 4,950 5,076 5,819
</TABLE>
18. Supplemental Cash Flow Information
Cash payments for interest and income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
<S> <C> <C> <C>
Interest $ 10,206 $ 4,043 $ 1,803
Income taxes 68,369 15,460 15,724
</TABLE>
19. Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". Under this Statement, an entity is required
to recognize derivative instruments as either assets or liabilities in the
statement of financial condition and measure those instruments at fair value. In
addition, any entity that elects to apply hedge accounting is required to
establish at the inception of the hedge the method it will use for assessing
effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge. In June 1999, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 137 ("SFAS 137"), which deferred the effective date of SFAS 133 to all
fiscal quarters of all fiscal years beginning after June 15, 2000. Management
intends to adopt this Statement on January 1, 2001 and does not believe that the
adoption of the Statement will have a material effect on the Operating
Partnership's results of operations, liquidity, or capital resources.
<PAGE>
20. Cash Distribution
On January 13, 2000, the General Partner declared a total distribution of
$157,974,000 representing a distribution from Available Cash Flow (as defined in
the Alliance Capital Partnership Agreement) of the Operating Partnership of
$121,519,000 for the two months ended December 31, 1999 and a special
distribution of $36,455,000. The distribution is payable on February 14, 2000 to
holders of record on February 1, 2000.
<PAGE>
Independent Auditors' Report
The General Partner and Unitholders~Alliance Capital Management L.P.
We have audited the accompanying consolidated statement of financial condition
of Alliance Capital Management L.P. and subsidiaries ("Alliance Capital") as of
December 31, 1999, and the related consolidated statements of income, changes in
partners' capital and comprehensive income and cash flows for the two-month
period ended December 31, 1999. We have also audited the statement of financial
condition of Alliance Capital Management Holding L.P., the predecessor to
Alliance Capital, at December 31, 1999 and the related consolidated statements
of income, changes in partners' capital and comprehensive income and cash flows
for the ten-month period ended October 29, 1999 (date of Reorganization -- Note
1) and the consolidated statements of income, changes in partners' capital and
comprehensive income and cash flows for each of the years in the two-year period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the management of Alliance Capital Management Corporation,
General Partner. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Alliance Capital and
Alliance Capital Management Holding L.P. as of December 31, 1999 and 1998,
respectively, and the results of their operations and their cash flows for each
of the periods presented in conformity with generally accepted accounting
principles.
New York, New York
February 2, 2000
SUBSIDIARIES OF ALLIANCE CAPITAL
--------------------------------
Alliance Capital Management
Corporation of Delaware
(Delaware)
ACM Software Services Ltd.
(Delaware)
Alliance Capital Asset Management
(India) Private Ltd.
(India)
Alliance Capital Management
Australia Limited
(Australia)
Alliance Capital Management
(Asia) Ltd.
(Delaware)
Alliance Capital (Mauritius)
Private Limited
(Mauritius)
Alliance Corporate Finance
Group Incorporated
(Delaware)
Alliance Capital Management
(Brasil) Ltda.
(Brazil)
Alliance Capital Management
(India) Ltd.
(Delaware)
ACAM Trust Company Private Limited
(India)
Alliance Capital Management
Canada, Inc.
(Canada)
<PAGE>
Alliance Capital Management
(Turkey) Ltd.
(Delaware)
Alliance Capital (Luxembourg) S.A.
(Luxembourg)
Alliance Eastern Europe Inc.
(Delaware)
Alliance Capital Global
Derivatives Corporation
(Delaware)
Alliance Barra Research
Institute, Inc.
(Delaware)
Alliance Fund Distributors, Inc.
(Delaware)
Alliance Fund Services, Inc.
(Delaware)
Alliance Capital Oceanic Corporation
(Delaware)
Alliance Capital Management
(Japan) Inc.
(Delaware)
ACM Fund Services, S.A.
(Luxembourg)
ACM Fund Services (Espana) S.L.
(Spain)
ACSYS Software India Pvt. Ltd.
(India)
Alliance Capital Limited
(UK)
Alliance Capital Services Limited
(UK)
<PAGE>
Cursitor Alliance LLC
(Delaware)
Alliance Cecogest
(France)
Cursitor-Eaton Asset
Management Company
(New York)
Cursitor Alliance Holdings Limited
(UK)
Cursitor Management Co. SA
(Luxembourg)
Alliance Asset Allocation Limited
(UK)
Dimensional Trust Management Limited
(UK)
Draycott Partners, Ltd.
(Massachusetts)
Meiji-Alliance Capital Corporation
(Delaware)
New-Alliance Asset Management
(Asia) Limited
(Hong Kong)
ACM New-Alliance (Luxembourg) S.A.
(Luxembourg)
Cursitor Alliance Services Limited
(UK)
East Fund Managementberatung GmbH
(Austria)
East Fund Management (Cyprus) LTD
(Cyprus)
EFM Consultanta Financiara Bucuresti SRL
(Romania)
<PAGE>
ACM CIIC Investment Management Limited
(Cayman Islands)
BCN Alliance Capital Management S.A.
(Brazil)
Alliance Capital Management (Singapore) Ltd.
(Singapore)
Alliance Capital Investment Trust Management
Limited K.K.
(Japan)
Alliance Odyssey Capital Management (Proprietary) Limited
(South Africa)
Alliance-Odyssey Capital Management (Namibia)(Proprietary) Limited
(Namibia)
Alliance-MBCA Capital (Prfivate) Limited
(Zimbabwe)
Alliance Capital Whittingdale Limited
(UK)
ACM Investments Limited
(UK)
Whittingdale Holdings Limited
(UK)
Whittingdale Nominees Limited
(UK)
Independent Auditors' Consent
The Board of Directors
Alliance Capital Management L.P.:
We consent to the use of our report dated February 2, 2000 relating to the
consolidated statements of financial condition of Alliance Capital Management
L.P. and subsidiaries ("Alliance Capital") as of December 31, 1999, and the
related consolidated statements of income, changes in partners' capital and
comprehensive income, and cash flows for the two-month period ended December 31,
1999; and the consolidated statements of financial condition of Alliance Capital
Management Holding L.P., the predecessor to Alliance Capital at December 31,
1999, and the related consolidated statements of income, changes in partners'
capital and comprehensive income, and cash flows for the ten-month period ended
October 29, 1999 (date of reorganization) and the consolidated statements of
income, changes in partners' capital and comprehensive income, and cash flows
for each of the years in the two-year period ended December 31, 1998,
incorporated herein by reference in the annual report on Form 10-K of Alliance
Capital.
/s/ KPMG LLP
New York, New York
March 28, 2000
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Luis Javier Bastida
-----------------------
Luis Javier Bastida
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Donald H. Brydon
--------------------
Donald H. Brydon
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Kevin C. Dolan
------------------
Kevin C. Dolan
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Denis Duverne
-----------------
Denis Duverne
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Herve Hatt
--------------
Herve Hatt
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Alfred Harrison
-------------------
Alfred Harrison
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Michael Hegarty
-------------------
Michael Hegarty
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Benjamin D. Holloway
------------------------
Benjamin D. Holloway
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Edward D. Miller
--------------------
Edward D. Miller
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Peter D. Noris
------------------
Peter D. Noris
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Stanley B. Tulin
--------------------
Stanley B. Tulin
<PAGE>
POWER-OF-ATTORNEY
KNOWN TO ALL MEN BY THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Robert B. Zoellick
----------------------
Robert B. Zoellick
<PAGE>
POWER-OF-ATTORNEY
KNOWN BY ALL MEN TO THESE PRESENTS, that the person whose signature
appears below hereby revokes all prior powers granted by the undersigned to the
extent inconsistent herewith and constitutes and appoints Bruce W. Calvert, John
D. Carifa and David R. Brewer, Jr., and each of them, to act severally as
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned in any and all capacities, for the sole
purpose of signing the Alliance Capital Management L.P. Annual Report on Form
10-K for the fiscal year ended December 31, 1999 and filing the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause to
be done by virtue hereof.
Date: February 14, 2000
/s/ Henri de Castries
---------------------
Henri de Castries
<TABLE> <S> <C>
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<NAME> Alliance Capital Management L.P.
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<RECEIVABLES> 528,418
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<TOTAL-LIABILITY-AND-EQUITY> 1,661,061
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