FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-9818
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ALLIANCE CAPITAL MANAGEMENT L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3434400
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1345 Avenue of the Americas, New York, NY 10105
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(Address of principal executive offices)
(Zip Code)
(212) 969-1000
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(Registrant's telephone number, including area code)
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
------- -------
The number of Units representing assignments of beneficial ownership of Limited
Partnership Interests outstanding as of June 30, 1999 was 171,136,403 Units.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements Page
Condensed Consolidated Statements of Financial Condition 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Changes in
Partners' Capital 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-16
Part II
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Financial Condition
(in thousands)
<TABLE>
ASSETS 6/30/99 12/31/98
------ ----------- --------
(unaudited)
<S> <C> <C>
Cash and cash equivalents.................................................... $ 88,301 $ 75,186
Receivable from brokers and dealers for sale
of shares of Alliance mutual funds........................................ 182,885 159,095
Fees receivable:
Alliance mutual funds..................................................... 98,687 80,167
Separately managed accounts:
Affiliated clients...................................................... 9,372 6,682
Third party clients..................................................... 89,214 86,166
Investments, available-for-sale.............................................. 183,582 94,743
Furniture, equipment and leasehold improvements, net......................... 114,422 96,401
Intangible assets, net....................................................... 100,216 102,001
Deferred sales commissions, net.............................................. 514,020 375,293
Other assets................................................................. 76,018 56,858
--------- ---------
Total assets.............................................................. $1,456,717 $1,132,592
========= =========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Liabilities:
Payable to Alliance mutual funds for share purchases...................... $ 238,797 $ 199,316
Accounts payable and accrued expenses..................................... 187,343 202,980
Accrued compensation and benefits......................................... 205,008 106,929
Debt...................................................................... 356,311 190,210
Minority interests in consolidated subsidiaries .......................... 2,196 2,884
Total liabilities....................................................... 989,655 702,319
Partners' capital......................................................... 467,062 430,273
--------- ---------
Total liabilities and partners' capital................................. $1,456,717 $1,132,592
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per Unit amounts)
<TABLE>
Three Months Ended Six Months Ended
-------------------- -------------------
6/30/99 6/30/98 6/30/99 6/30/98
Revenues: ------- ------- ------- -------
<S> <C> <C> <C> <C>
Investment advisory and services fees:
Alliance mutual funds...................................... $185,928 $145,174 $380,827 $287,705
Separately managed accounts:
Affiliated clients....................................... 14,171 16,780 26,894 30,186
Third party clients...................................... 91,176 75,845 188,972 155,369
Distribution revenues........................................ 105,218 76,108 198,830 142,289
Shareholder servicing fees................................... 15,500 11,093 28,797 19,581
Other revenues .............................................. 6,948 7,120 14,364 13,007
-------- -------- -------- --------
418,941 332,120 838,684 648,137
-------- -------- -------- --------
Expenses:
Employee compensation and benefits........................... 102,693 82,203 220,972 170,030
Promotion and servicing:
Distribution plan payments to financial intermediaries:
Affiliated............................................... 25,191 19,272 50,875 36,726
Third party.............................................. 57,728 46,664 109,869 86,128
Amortization of deferred sales commissions................. 40,017 25,649 74,698 48,496
Other...................................................... 28,093 23,555 54,896 44,869
General and administrative................................... 45,403 41,258 87,739 83,397
Interest..................................................... 4,479 2,187 7,980 4,154
Amortization of intangible assets............................ 964 1,039 1,927 1,920
-------- -------- -------- --------
304,568 241,827 608,956 475,720
-------- -------- -------- --------
Income before income taxes...................................... 114,373 90,293 229,728 172,417
Income taxes................................................. 17,159 14,452 34,460 27,592
-------- -------- -------- --------
Net income...................................................... $ 97,214 $ 75,841 $ 195,268 $ 144,825
======== ========= ======== ========
Net income per Unit:
Basic...................................................... $ 0.56 $ 0.44 $ 1.13 $ 0.85
======== ========= ======== ========
Diluted.................................................... $ 0.55 $ 0.43 $ 1.10 $ 0.82
======== ========= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of
Changes in Partners' Capital
and Comprehensive Income
(unaudited)
(in thousands)
<TABLE>
Three Months Ended Six Ended Ended
---------------------- ---------------------
6/30/99 6/30/98 6/30/99 6/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Partners' capital - beginning of period....................... $458,949 $403,202 $430,273 $398,051
Comprehensive income:
Net income............................................. 97,214 75,841 195,268 144,825
Unrealized gain on investments, net.................... 327 21 1,151 885
Foreign currency translation adjustment, net........... - - 3 -
------- ------- ------- -------
Comprehensive income................................... 97,541 75,862 196,422 145,710
Capital contribution received from Alliance Capital
Management Corporation................................... 90 860 1,066 1,720
Cash distributions to partners............................. (93,316) (65,095) (167,364) (135,173)
Proceeds from Unit options exercised....................... 3,798 2,079 6,665 6,600
------- ------- ------- -------
Partners' capital - end of period............................. $467,062 $416,908 $467,062 $416,908
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
Six Months Ended
----------------------
6/30/99 6/30/98
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................ $ 195,268 $ 144,825
Adjustments to reconcile net income to net cash provided
from operating activities:
Amortization and depreciation....................................... 86,151 58,295
Other, net.......................................................... 9,339 5,945
Changes in assets and liabilities:
(Increase) in receivable from brokers and dealers for sale
of shares of Alliance mutual funds.............................. (23,790) (43,764)
(Increase) in fees receivable from Alliance mutual funds,
affiliated clients and third party clients...................... (24,258) (24,023)
(Increase) in deferred sales commissions.......................... (213,425) (121,585)
(Increase) in other assets........................................ (20,326) (19,987)
Increase in payable to Alliance mutual funds for share
purchases....................................................... 39,481 65,097
Increase (decrease) in accounts payable and accrued expenses...... (17,535) 47,155
Increase in accrued compensation and benefits, less
deferred compensation.......................................... 95,607 79,599
-------- --------
Net cash provided from operating activities.................. 126,512 191,557
-------- --------
Cash flows from investing activities:
Purchase of investments............................................... (514,538) (211,660)
Proceeds from sale of investments..................................... 426,850 195,007
Additions to furniture, equipment and leasehold
improvements, net................................................... (27,290) (16,653)
Other ............................................................. (142) -
-------- --------
Net cash used in investing activities........................ (115,120) (33,306)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings.............................................. 905,231 434,605
Repayment of debt..................................................... (743,375) (363,375)
Distributions to partners............................................. (167,364) (135,173)
Capital contribution received from Alliance Capital Management
Corporation......................................................... 566 220
Unit options exercised................................................ 6,665 6,600
-------- --------
Net cash provided from (used in) financing activities........ 1,723 (57,123)
-------- --------
Effect of exchange rate changes on cash and cash equivalents ............ - -
-------- --------
Net increase in cash and cash equivalents................................ 13,115 101,128
Cash and cash equivalents at beginning of period......................... 75,186 63,761
-------- --------
Cash and cash equivalents at end of period............................... $ 88,301 $ 164,889
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Notes to Condensed Consolidated Financial Statements
June 30, 1999
(unaudited)
1. Basis of Presentation
The unaudited interim condensed consolidated financial statements of
Alliance Capital Management L.P. (the "Partnership") included herein have
been prepared in accordance with the instructions to Form 10-Q pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation of (a) financial position at
June 30, 1999, (b) results of operations for the three months and six
months ended June 30, 1999 and 1998 and (c) cash flows for the six months
ended June 30, 1999 and 1998, have been made.
2. Reclassification
Certain prior period amounts have been reclassified to conform with the
current period presentation.
3. Proposed Reorganization
The Partnership has announced a proposed reorganization of its business
that will give Unitholders in the Partnership the choice between (1)
continuing to hold liquid Units of the Partnership listed on the New York
Stock Exchange that are subject to a federal tax on the Partnership's gross
business income and (2) holding a highly illiquid interest in a new private
limited partnership that is not subject to that tax. The proposed
reorganization will require the approval of a majority of the Partnerships'
unaffiliated public Unitholders and certain other contractual and
regulatory approvals. The Partnership expects that the reorganization and
exchange offer will be completed in the fourth quarter of 1999.
4. Deferred Sales Commissions
Sales commissions paid to financial intermediaries in connection with the
sale of shares of open-end mutual funds managed by the Partnership sold
without a front-end sales charge are capitalized and amortized over periods
not exceeding five and one-half years, the period of time estimated by
management of the Partnership 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.
5. Commitments and Contingencies
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"), the Partnership and certain other
defendants affiliated with the Partnership 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
5
<PAGE>
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
mortgaged-backed derivative securities and that certain advertisements used
by the Fund misrepresented the risks of investing in the Fund.
The Partnership believes that the allegations in the proposed amended
complaint are without merit and intends to vigorously defend against this
action. While the ultimate outcome of this matter cannot be determined at
this time, management of the Partnership does not expect that it will have
a material adverse effect on the Partnership's results of operations or
financial condition.
6. Income Taxes
The Partnership is a publicly traded partnership for federal income tax
purposes and, accordingly, is not subject to federal or state corporate
income taxes. However, the Partnership is subject to the New York City
unincorporated business tax and a 3.5% federal tax on partnership gross
income from the active conduct of a trade or business. Domestic corporate
subsidiaries of the Partnership, which are subject to federal, state and
local income taxes, file a consolidated federal income tax return and
separate state and local income tax returns. Foreign corporate subsidiaries
are generally subject to taxes in the foreign jurisdictions where they are
located.
7. Net Income Per Unit
Basic net income per Unit is derived by reducing net income for each period
by 1% for the general partnership interest held by the General Partner and
dividing the remaining 99% by the weighted average number of Units
outstanding during each period. Diluted net income per Unit is derived by
reducing net income for each period by 1% for the general partnership
interest held by the General Partner and dividing the remaining 99% by the
total of the weighted average number of Units outstanding during each
period and the dilutive Unit equivalents resulting from outstanding
employee Unit options.
<TABLE>
Three Months Ended Six Months Ended
---------------------- -------------------
6/30/99 6/30/98 6/30/99 6/30/98
------- ------- ------- -------
(in thousands, except per Unit amounts)
<S> <C> <C> <C> <C>
Net income........................................ $ 97,214 $ 75,841 $195,268 $144,825
======= ======= ======= =======
Weighted average Units outstanding-
Basic net income per Unit....................... 171,043 169,914 170,804 169,609
Dilutive effect of employee Unit options.......... 5,325 5,444 5,164 5,340
------- ------- ------- -------
Weighted average Units outstanding-
Diluted net income per Unit..................... 176,368 175,358 175,968 174,949
======= ======= ======= =======
Basic net income per Unit......................... $ 0.56 $ 0.44 $ 1.13 $ 0.85
======= ======= ======= =======
Diluted net income per Unit....................... $ 0.55 $ 0.43 $ 1.10 $ 0.82
======= ======= ======= =======
</TABLE>
6
<PAGE>
8. Supplemental Cash Flow Information
Cash payments for interest and income taxes were as follows (in thousands):
<TABLE>
Three Months Ended Six Months Ended
---------------------- -------------------
6/30/99 6/30/98 6/30/99 6/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest.................. $ 1,747 $ 764 $ 4,108 $ 2,518
Income taxes.............. 56,875 6,246 64,274 10,181
</TABLE>
9. Accounting Pronouncement
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. Management of the Partnership 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 its results of operations, liquidity, or
capital resources.
10. Cash Distribution
On July 29, 1999, the General Partner declared a distribution of
$93,347,000 or $0.54 per Unit representing the Available Cash Flow (as
defined in the Partnership Agreement) of the Partnership for the three
months ended June 30, 1999. The distribution is payable on August 16, 1999
to holders of record on August 9, 1999.
11. Subsequent Event
On July 21, 1999, the Partnership entered into a new $200 million three
year revolving credit facility with a group of commercial banks that
increased the Partnership's borrowing capacity to $625 million. The new
revolving credit facility, the terms of which are generally similar to the
existing $425 million credit facility, will be used to fund commission
payments to financial intermediaries for the sale of back-end load shares
under the Partnership's mutual fund distribution system and for general
working capital purposes. The new facility contains covenants which require
the Partnership to, among other things, meet certain financial ratios.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Alliance Capital Management L.P. (the "Partnership") offers a broad range of
investment management products and services to meet the varied needs and
objectives of individual and institutional investors. The Partnership derives
substantially all of its revenues and net income from fees received for
providing: (a) investment advisory, distribution and related services to the
Alliance mutual funds, (b) investment advisory services to affiliated clients
including The Equitable Life Assurance Society of the United States ("ELAS"), a
wholly-owned subsidiary of The Equitable Companies Incorporated ("Equitable"),
and certain other Equitable affiliates and (c) investment advisory services to
separately managed accounts for unaffiliated institutional investors and
high-net-worth individuals ("third party clients"). The Alliance mutual funds
consist primarily of a broad range of open-end load and closed-end mutual funds
("mutual funds"), variable life insurance and annuity products, including The
Hudson River Trust, cash management products, principally money market funds,
and certain structured products and hedge funds.
The Partnership's revenues are largely dependent on the total value and
composition of assets under its management. Assets under management grew to
$321.0 billion as of June 30, 1999, an increase of 22.3% from June 30, 1998
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 57% of total assets under
management, grew 32%. Active fixed income account assets under management, which
comprise approximately 34% of total assets under management, increased by 9%.
In the second quarter of 1999, sales of Alliance mutual fund shares, excluding
cash management products, grew 30.2% to $13.8 billion compared to sales of $10.6
billion in the second quarter of 1998. The increase in mutual fund sales,
principally domestic U.S. equity mutual funds, offset partially by an increase
in mutual fund redemptions, resulted in net mutual fund sales of $7.1 billion,
an increase of 6.0% from $6.7 billion in the second quarter of 1998.
Assets Under Management (1):
(Dollars in billions) 6/30/99 6/30/98 $ Change % Change
- --------------------------------------------------------------------------------
Alliance mutual funds:
Mutual funds $ 77.6 $ 53.5 $24.1 45.0%
Variable products 36.0 28.9 7.1 24.6
Cash management products 27.3 24.7 2.6 10.5
- --------------------------------------------------------------------------------
140.9 107.1 33.8 31.6
- --------------------------------------------------------------------------------
Separately managed accounts:
Affiliated clients 29.7 29.6 0.1 0.3
Third party clients 150.4 125.8 24.6 19.6
- --------------------------------------------------------------------------------
180.1 155.4 24.7 15.9
- --------------------------------------------------------------------------------
Total $321.0 $262.5 $58.5 22.3%
- --------------------------------------------------------------------------------
Assets under management at June 30, 1999 were $321.0 billion, an increase of
$58.5 billion or 22.3% from June 30, 1998. The Partnership's mutual fund assets
under management at June 30, 1999 were $140.9 billion, an increase of $33.8
billion or 31.6% from June 30, 1998, due principally to net sales of mutual
funds and variable products of $20.5 billion and market appreciation of $11.5
billion. Separately managed account assets under management at June 30, 1999 for
third party clients and affiliated clients were $180.1 billion, an increase of
$24.7 billion or 15.9% from June 30, 1998. The increase was primarily due to
market appreciation of $25.0 billion.
8
<PAGE>
Assets Under Management(1):
(Dollars in billions) 6/30/99 6/30/98 % Change
- --------------------------------------------------------------------------------
Active equity & balanced
Domestic $161.5 $123.9 30.3%
Global & international 20.1 13.4 50.0
Active fixed income
Domestic 92.0 86.3 6.6
Global & international 15.6 12.0 30.0
Index
Domestic 26.9 23.5 14.5
Global & international 4.9 3.4 44.1
- --------------------------------------------------------------------------------
Total $321.0 $262.5 22.3%
- --------------------------------------------------------------------------------
Average Assets Under Management (1):
<TABLE>
Three months ended Six months ended
------------------------------- ------------------------------
(Dollars in billions) 6/30/99 6/30/98 % Change 6/30/99 6/30/98 % Change
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alliance mutual funds $ 131.5 $ 101.6 29.4% $ 126.7 $ 95.7 32.4%
Separately managed accounts:
Affiliated clients 29.9 29.4 1.7 29.7 29.3 1.4
Third party clients 145.5 122.2 19.1 143.7 117.0 22.8
- ---------------------------------------------------------------------------------------------------
Total $306.9 $253.2 21.2% $ 300.1 $242.0 24.0%
- ---------------------------------------------------------------------------------------------------
</TABLE>
Changes in Asset Under Management(1):
<TABLE>
(Dollars in billions) 1999 1998
- ---------------------------------------------------------------------------------------------
Separately Alliance Separately Alliance
Managed Mutual Managed Mutual
Accounts Funds Total Accounts Funds Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, $168.1 $118.6 $286.7 $133.7 $85.0 $218.7
- ---------------------------------------------------------------------------------------------
New business/sales 3.6 25.5 29.1 5.0 18.3 23.3
Terminations/redemptions (1.7) (12.1) (13.8) (3.0) (7.0) (10.0)
Net cash management sales - 0.8 0.8 - 4.0 4.0
Cash flow (2.5) (0.6) (3.1) 1.7 (0.6) 1.1
Transfers (0.5) 0.5 - - - -
Appreciation 13.1 8.2 21.3 18.0 7.4 25.4
- ---------------------------------------------------------------------------------------------
Net change 12.0 22.3 34.3 21.7 22.1 43.8
- ---------------------------------------------------------------------------------------------
Balance at June 30, $180.1 $140.9 $321.0 $155.4 $107.1 $262.5
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 100% of assets under management by unconsolidated joint venture
subsidiaries and affiliates. Includes $2.2 billion mutual fund assets and $0.5
billion separately managed account assets at June 30, 1999 and $0.9 billion
mutual fund assets and $0.4 billion separately managed account assets at June
30, 1998.
Assets under management at June 30, 1999 were $321.0 billion, an increase of
$19.7 billion or 6.5% from March 31, 1999 and an increase of $34.3 billion or
12.0% from December 31, 1998.
Alliance mutual fund assets under management at June 30, 1999 were $140.9
billion, an increase of $13.6 billion or 10.7% from March 31, 1999 and an
increase of $22.3 billion or 18.8% from December 31, 1998. The increase from
March 31, 1999 was principally due to net sales of mutual funds and cash
management products of $6.6 billion and $0.7 billion, respectively, and market
appreciation of $5.6 billion. The increase from December 31, 1998 was due
principally to net sales of mutual funds and variable products of $12.4 billion
and $1.1 billion, respectively, and market appreciation of $8.2 billion.
9
<PAGE>
Separately managed account assets under management at June 30, 1999 for third
party clients and affiliated clients were $180.1 billion, an increase of $6.0
billion or 3.4% from March 31, 1999 and an increase of $12.0 billion or 7.1%
from December 31, 1998. The increase from March 31, 1999 was primarily due to
market appreciation of $7.4 billion and new client accounts of $1.9 billion,
reduced by net asset outflows from affiliated client accounts of $0.3 billion,
net third party client account terminations and asset withdrawals of $2.5
billion and transfers out of affiliated client accounts of $0.5 billion into
mutual funds. The increase from December 31, 1998 was primarily due to market
appreciation of $13.1 billion and new client accounts of $3.6 billion, net asset
additions to affiliated client accounts of $1.2 billion offset by net third
party client account terminations and asset withdrawals of $5.4 billion and
transfers out of affiliated client accounts of $0.5 billion into mutual funds.
<TABLE>
Consolidated Results of Operations
Three months ended Six months ended
(Dollars & Units in millions, -------------------------------- --------------------------------
except per Unit amounts) 6/30/99 6/30/98 % Change 6/30/99 6/30/98 % Change
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $97.2 $75.8 28.2% 195.3 $ 144.8 34.9%
Net income per Unit(1):
Basic $0.56 $0.44 27.3 $1.13 $ 0.85 32.9
Diluted $0.55 $0.43 27.9 $1.10 $ 0.82 34.1
Weighted average number of Units outstanding:
Basic 171.0 169.9 0.6 170.8 169.6 0.7
Diluted 176.4 175.4 0.6 176.0 174.9 0.6
Pre-tax margin(2): 36.5% 35.3% - 35.9% 34.1% -
- -------------------------------------------------------------------------------------------------------------------
(1) Unit and per Unit amounts for all periods prior to the two-for-one Unit
split in 1998 have been restated.
(2) Calculated after netting distribution revenues against total expenses.
</TABLE>
Net income for the three months ended June 30, 1999 increased $21.4 million or
28.2% to $97.2 million from $75.8 million for the three months ended June 30,
1998. The increase was principally due to an increase in investment advisory and
services fees resulting primarily from higher average assets under management.
Revenues
<TABLE>
Three months ended Six months ended
-------------------------------- --------------------------------
(Dollars in millions) 6/30/99 6/30/98 % Change 6/30/99 6/30/98 % Change
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment advisory and services fees:
Alliance mutual funds $185.9 $145.2 28.0% $ 380.8 $287.7 32.4%
Separately managed accounts:
Affiliated clients 14.2 16.8 (15.5) 26.9 30.2 (10.9)
Third party clients 91.2 75.8 20.3 189.0 155.4 21.6
Distribution revenues 105.2 76.1 38.2 198.8 142.3 39.7
Shareholder servicing fees 15.5 11.1 39.6 28.8 19.5 47.7
Other revenues 6.9 7.1 (2.8) 14.4 13.0 10.8
- -------------------------------------------------------------------------------------------------------------------
Total $418.9 $332.1 26.1% $838.7 $648.1 29.4%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISORY AND SERVICES FEES
Investment advisory and services fees, the largest component of the
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.
Certain investment advisory agreements provide for performance fees in addition
to a base fee. Performance fees are earned when investment performance exceeds a
contractually agreed upon benchmark, or calculated as a percentage of investment
returns of a portfolio. Accordingly, these fees may increase the volatility of
the Partnership's revenues and earnings and are more likely to be higher in
favorable markets and lower in unfavorable markets. Performance fees increased
to $50.6 million for the six months ended June 30, 1999 from $43.0 million for
the six months ended June 30, 1998. Performance fees were $8.0 million for the
three
10
<PAGE>
months ended June 30, 1999 compared to $8.7 million for the three months
ended June 30, 1998.
Investment advisory and services fees from Alliance mutual funds increased by
$40.7 million or 28.0% for the three months ended June 30, 1999, primarily as a
result of a 29.4% increase in average assets under management. Investment
advisory and services fees from Alliance mutual funds increased by $93.1 million
or 32.4% for the six months ended June 30, 1999, primarily as a result of a
32.4% increase in average assets under management and a $9.1 million increase in
performance fees from certain hedge funds.
Investment advisory and services fees from affiliated clients, primarily the
General Accounts of ELAS, decreased by $2.6 million or 15.5% and $3.3 million or
10.9% for the three months and six months ended June 30, 1999, respectively, due
to lower performance fees partially offset by increased base investment advisory
and services fees.
Investment advisory and services fees from third party clients increased by
$15.4 million or 20.3% and $33.6 million or 21.6% for the three and six months
ended June 30, 1999 principally due to an increase in average assets under
management of 19.1% and 22.8%, respectively. The increase in third party client
assets under management was primarily a result of market appreciation.
DISTRIBUTION REVENUES
The 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 38.2% for the three months and 39.7% for the six
months ended June 30, 1999 principally due to higher average mutual fund assets
under management resulting from strong sales of Back-End Load Shares under the
Partnership's mutual fund distribution system (the "System") described under
"Capital Resources and Liquidity" and market appreciation.
SHAREHOLDER SERVICING FEES
The 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 39.6% for the three months and 47.7% for
the six months ended June 30, 1999, the result of increases in the number of
mutual fund shareholder accounts serviced and increases in fee rates. The number
of shareholder accounts serviced increased to approximately 4.5 million as of
June 30, 1999 compared to 3.5 million as of June 30, 1998.
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
the six months ended June 30, 1999, principally as a result of increased market
values of the Partnership's hedge fund investments and interest and dividend
income. Other revenues decreased for the three months ended June 30, 1999,
principally as a result of a smaller increase in the market value of hedge fund
investments offset by increased interest and dividend income.
<TABLE>
EXPENSES
Three months ended Six months ended
----------------------------------- -------------------------------
(Dollars in millions) 6/30/99 6/30/98 % Change 6/30/99 6/30/98 % Change
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employee compensation and benefits $102.7 $ 82.2 24.9% $221.0 $170.0 30.0%
Promotion and servicing 151.0 115.1 31.2 290.4 216.2 34.3
General and administrative 45.4 41.3 9.9 87.7 83.4 5.2
Interest 4.5 2.2 104.5 8.0 4.2 90.5
Amortization of intangible assets 1.0 1.0 - 1.9 1.9 -
- ---------------------------------------------------------------------------------------------------------------
Total $304.6 $241.8 26.0% $609.0 $475.7 28.0%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE COMPENSATION AND BENEFITS
Employee compensation and benefits 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.
11
<PAGE>
Employee compensation and benefits increased 24.9% for the three months and
30.0% for the six months ended June 30, 1999 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 Partnership's mutual fund and
technology areas combined with salary increases. The Partnership had 2,288
employees at June 30, 1999 compared to 1,902 at June 30, 1998. Commissions
increased primarily due to higher mutual fund sales.
PROMOTION AND SERVICING
Promotion and servicing expenses include distribution plan payments to financial
intermediaries for distribution of the Partnership's 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 Partnership's mutual fund products.
Promotion and servicing expenses increased 31.2% for the three months and 34.3%
for the six months ended June 30, 1999 primarily due to increased distribution
plan payments resulting from higher average domestic, offshore and cash
management mutual fund assets under management. An increase in amortization of
deferred sales commissions as a result of higher sales of Back-End Load Shares
(see "Capital Resources and Liquidity") also contributed to the increase in
promotion and servicing expense. Other promotion and servicing expenses
increased 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 include technology, professional fees,
occupancy, communications, equipment and similar expenses. General and
administrative expenses increased 9.9% and 5.2% for the three and six months
ended June 30, 1999 due principally to higher expenses incurred in connection
with the Year 2000 project and other technology initiatives and increased
occupancy costs. A $10.0 million provision was recorded in March 1998 for the
future acquisition of the minority interest in Cursitor Alliance. See "Capital
Resources and Liquidity".
INTEREST
Interest expense is incurred on the Partnership's borrowings and on deferred
compensation owed to employees. Interest expense increased primarily as a result
of higher debt and an increase in deferred compensation liabilities. See
"Capital Resources and Liquidity".
TAXES ON INCOME
The Partnership is a publicly traded partnership for federal income tax purposes
and, accordingly, is not subject to federal or state corporate income taxes.
However, the Partnership is subject to the New York City unincorporated business
tax and a 3.5% federal tax on partnership gross income from the active conduct
of a trade or business. Domestic corporate subsidiaries of the Partnership,
which are subject to federal, state and local income taxes, file a consolidated
federal income tax return and separate state and local income tax returns.
Foreign corporate subsidiaries are generally subject to taxes in the foreign
jurisdictions where they are located. Income tax expense increased primarily as
a result of higher pre-tax income.
CAPITAL RESOURCES AND LIQUIDITY
Partners' capital was $467.1 million at June 30, 1999, an increase of $36.8
million or 8.6% from $430.3 at December 31, 1998 and an increase of $8.2 million
or 1.8% from $458.9 at March 31,1999.
Cash flow from operations and proceeds from borrowings have been the
Partnership's principal sources of working capital. The Partnership's cash and
cash equivalents increased by $13.1 million for the six months ended June 30,
1999. Cash inflows for the first six months included $126.5 million from
operations, proceeds from borrowings net of debt repayments of $161.9 million
and $6.7 million of proceeds from
12
<PAGE>
exercises of Unit options. Cash outflows included $167.4 million in
distributions to Unitholders, $27.3 million in capital expenditures and net
purchases of investments of $87.7 million.
Under certain circumstances through February 28, 2006, the Partnership has an
option to purchase the minority interest in Cursitor Alliance LLC ("Cursitor
Alliance "), a subsidiary of the Partnership formed in connection with an
acquisition in 1996, and the holders of the minority interest have an option to
sell the minority interest to the Partnership for cash, 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 substantial decline in Cursitor Alliance
revenues through March 1998, management of the Partnership estimated that the
Buyout Price for the minority interest will be $10.0 million, which will be
substantially higher than its estimated fair value. Accordingly, the Partnership
recorded a $10.0 million provision for the Buyout Price in the first quarter of
1998.
The Partnership's mutual fund distribution system (the "System") includes a
multi-class share structure. The System permits the 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 $213.4 million and $121.6 million for the six
months ended June 30, 1999 and June 30, 1998, respectively. Management of the
Partnership 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.
On July 21, 1999, the Partnership entered into a new $200 million three year
revolving credit facility with a group of commercial banks that increased the
Partnership's borrowing capacity under all facilities to $625 million. The new
revolving credit facility, the terms of which are generally similar to the
previously existing $425 million credit facility, will be used to fund
commission payments to financial intermediaries for the sale of Back-End Load
Shares under the Partnership's mutual fund distribution system and for general
working capital purposes. Both facilities contain covenants which require the
Partnership to, among other things, meet certain financial ratios.
The Partnership has a $425 million revolving credit facility with a group of
commercial banks and a $425 million commercial paper program. Borrowings under
this facility and the Partnership's commercial paper program may not exceed $425
million in the aggregate. The $425 million revolving credit facility is used to
provide backup liquidity for commercial paper issued under the Partnership's
commercial paper program, to fund commission payments to financial
intermediaries for the sale of Back-End Load Shares under the Partnership's
mutual fund distribution system, and for general working capital purposes. As of
June 30, 1999, the Partnership had $352 million principal amount of commercial
paper outstanding, an increase of $172 million from December 31, 1998, to fund
commission payments to financial intermediaries and for capital expenditures.
There are no borrowings outstanding under either of the Partnership's revolving
credit facilities.
The Partnership's substantial equity base and access to public and private debt,
at competitive interest rates and other terms, should provide adequate liquidity
for its general business needs. Management of the Partnership believes that cash
flow from operations and the issuance of debt and Units will provide the
Partnership with the financial resources to meet its capital requirements for
mutual fund sales, capital expenditures and its other working capital
requirements.
13
<PAGE>
Proposed Reorganization
The Partnership announced a proposed reorganization of its business that will
give Unitholders in the Partnership the choice between (1) continuing to hold
liquid Units of the Partnership listed on the New York Stock Exchange that are
subject to a federal tax on the Partnership's gross business income and (2)
holding a highly illiquid interest in a new private limited partnership that is
not subject to that tax. The proposed reorganization will require the approval
of a majority of the Partnerships' unaffiliated public Unitholders and certain
other contractual and regulatory approvals. The Partnership expects that the
reorganization and exchange offer will be completed in the fourth quarter of
1999.
Year 2000
Many computer systems and applications that process transactions use two digit
date fields for the year of a transaction, rather than the full four digits. If
these systems are not modified and replaced, transactions occurring after 1999
may be processed as year "1900", which could result in processing inaccuracies
and inoperability at or after the Year 2000. The Partnership utilizes a number
of computer systems and applications that it either has developed internally or
licensed from third-party suppliers. In addition, the Partnership is dependent
on third-party suppliers for certain systems applications and for the electronic
receipt of information critical to its business.
The Year 2000 issue is a high priority for the Partnership. During 1997, the
Partnership began a formal Year 2000 initiative, which established a structured
and coordinated process to deal with the Year 2000 issue. As part of its
initiative, the Partnership established a Year 2000 project office to manage the
Year 2000 initiative focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
Audit Committee of the Board of Directors and executive management to review the
status of the Year 2000 efforts. The Partnership has also retained the services
of a number of consulting firms which have expertise in advising and assisting
with regard to Year 2000 issues.
By June 30, 1998, the Partnership had completed its inventory and assessment of
its domestic and international computer systems and applications, identified
mission critical systems (those systems where loss of their function would
result in an immediate stoppage or significant impairment to core business
units) and nonmission critical systems and determined which of these systems is
not Year 2000 compliant. All third-party suppliers of mission critical computer
systems and applications and nonmission critical systems were contacted to
verify whether their systems and applications will be Year 2000 compliant and
their responses are being evaluated. Substantially all of those contacted have
responded and approximately 90% have informed the Partnership that their systems
and applications are or will be Year 2000 compliant. All mission critical and
nonmission critical systems supplied by third parties have been tested with the
exception of those third parties not able to comply with the Partnership's
testing schedule. The Partnership expects that all testing will be completed
before the end of 1999.
The Partnership has remediated, replaced or retired all of its noncompliant
mission critical systems and applications with the exception of one portfolio
management system, which will be replaced by a Year 2000 compliant system by
August 31, 1999. All nonmission critical systems have been remediated.
After each system has been remediated, it is tested with 19XX dates to determine
if it still performs its intended business function correctly. Next, each system
undergoes a simulation test using dates occurring after December 31, 1999.
Inclusive of the replacement and retirement of some of its systems, the
Partnership has completed these testing phases for 98% of mission critical
systems and 100% of nonmission critical systems. Integrated systems tests were
conducted to verify that the systems would continue to work together. Full
integration testing of all mission critical and nonmission critical systems is
complete. Testing of interfaces with third-party suppliers has begun and will
continue throughout 1999.
The Partnership has completed an inventory of its facilities and related
technology applications and has begun
14
<PAGE>
to evaluate and test these systems. The Partnership anticipates these systems
will be fully operable in the Year 2000.
The Partnership has deferred certain other planned information technology
projects until after the Year 2000 initiative is completed. Such delay is not
expected to have a material adverse effect on the Partnership's financial
condition or results of operations.
The Partnership, with the assistance of a consulting firm, has developed Year
2000 specific contingency plans with emphasis on mission critical functions.
These plans seek to provide alternative methods of processing in the event of a
failure that is outside the Partnership's control.
The current cost estimate of the Year 2000 initiative ranges from approximately
$40 million to $45 million. These costs consist principally of modification and
testing and costs to develop formal Year 2000 specific contingency plans. These
costs, which will generally be expensed as incurred, will be funded from the
Partnership's operations and the issuance of debt. Through June 30, 1999, the
Partnership had incurred approximately $36.0 million of costs related to the
Year 2000 initiative. At this time, management of the Partnership believes that
the costs associated with resolving the Year 2000 issue will not have a material
adverse effect on the Partnership's results of operations, liquidity or capital
resources.
There are many risks associated with Year 2000 issues, including the risk that
the Partnership's computer systems and applications will not operate as intended
and that the systems and applications of third parties will not be Year 2000
compliant. Likewise, there can be no assurance the compliance schedules outlined
above will be met or that the actual costs incurred will not exceed the current
cost estimate. Should the Partnership's significant computer systems and
applications or the systems of its important third-party suppliers be unable to
process date sensitive information accurately after 1999, the Partnership may be
unable to conduct its normal business operations and to provide its clients with
the required services. In addition, the Partnership may incur unanticipated
expenses, regulatory actions, and legal liabilities. The Partnership cannot
determine which risks, if any, are most reasonably likely to occur or the
effects of any particular failure to be Year 2000 compliant.
Readers are cautioned that forward-looking statements contained in "Year 2000"
should be read in conjunction with the disclosure set forth under
"Forward-Looking Statements". To the fullest extent permitted by law, the
foregoing Year 2000 discussion is a "Year 2000 Readiness Disclosure" within the
meaning of The Year 2000 Information and Readiness Disclosure Act, 15 U.S.C.
Sec. 1 (1998).
COMMITMENTS AND CONTINGENCIES
The 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
("Original Complaint") was filed against Alliance North American Government
Income Trust, Inc. (the "Fund"), the Partnership and certain other defendants
affiliated with the Partnership 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
15
<PAGE>
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 mortgaged-backed derivative
securities and that certain advertisements used by the Fund misrepresented the
risks of investing in the Fund.
The Partnership believes that the allegations in the proposed amended complaint
are without merit and intends to vigorously defend against this action. While
the ultimate outcome of this matter cannot be determined at this time,
management of the Partnership does not expect that it will have a material
adverse effect on the Partnership's results of operations or financial
condition.
Four money market mutual funds sponsored by the Partnership (the "Money Market
Funds") own an aggregate of $570 million of funding agreements issued by General
American Life Insurance Company ("General American"). The funding agreements
mature on July 10, 2000 but permit the holder to redeem the principal amount
thereof on seven days written notice. The funding agreements comprise less than
3.83% of the net assets of any of the four Money Market Funds. The Money
Market Funds gave written notices on August 2, 1999.
On August 10, 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. General American stated that it has adequate assets to
fulfill the redemption requests but that it has inadequate cash to meet the
redemption requests at this time.
ELAS has obtained letters of credit in favor of the Money Market Funds under
which the Money Market Funds may first 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 if General American continues not to honor the
redemption requests. These letters of credit are intended to prevent the net
asset value in any Fund from dropping below $1.00 per share in the event General
American continues not to honor the redemption requests. The Partnership has
entered into a reimbursement agreement with ELAS under which it is obligated to
reimburse ELAS for all amounts drawn down by the Money Market Funds under the
letters of credit and to pay certain fees and expenses to ELAS. The Partnership
may satisfy its financial obligations to ELAS in cash or Units valued in
accordance with the Partnership Agreement. The reimbursement agreement is set
forth in its entirety as an exhibit hereto. The Partnership is unable to
determine at this time whether or to what extent the Money Market Funds will
draw down funds under the letters of credit. While the ultimate outcome of this
matter cannot be determined at this time, management of the Partnership does not
expect that it will have a material adverse effect on the Partnership's
consolidated financial condition.
CHANGES IN ACCOUNTING PRINCIPLES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 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. Management of the Partnership
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 its results of
operations, liquidity, or capital resources.
CASH DISTRIBUTIONS
The Partnership is required to distribute all of its Available Cash Flow, as
defined in the Partnership Agreement, to the General Partner and Unitholders.
The Partnership's Available Cash Flow and Distributions per Unit for the three
and six months ended June 30, 1999 and 1998 were as follows:
<TABLE>
Three months ended Six months ended
------------------- -------------------
6/30/99 6/30/98 6/30/99 6/30/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available Cash Flow (in thousands) $93,347 $72,200 $186,663 $137,294
Distributions Per Unit $ 0.54 $ 0.42 $ 1.08 $ 0.80
- ---------------------------------------------------------------------------------------
</TABLE>
FORWARD-LOOKING STATEMENTS
Certain statements provided by the Partnership 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 the Partnership's sponsored investment products and
separately managed accounts, general economic conditions, future acquisitions,
competitive conditions, government regulations, including changes in tax rates,
and the risks associated with Year 2000 issues. The Year 2000 issues include
uncertainties regarding among other things, the inability to locate, correct and
successfully test all relevant computer code, the continued availability of
certain resources including personnel and timely and accurate responses and
corrections by third parties. These uncertainties may result in unanticipated
costs associated with Year 2000 issues and failure to meet schedules for Year
2000 compliance. The Partnership cautions readers to carefully consider such
factors. Further, such forward-looking statements speak only as of the date on
which such statements are made; the Partnership undertakes no obligation to
update any forward-looking statements to reflect events or circumstances after
the date of such statements.
16
<PAGE>
Part II
OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
There have been no material developments in the legal
proceeding reported in the Alliance Capital Management L.P.
Form 10-K for the year ended December 31, 1998.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote
of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. Reimbursement Agreement dated as of August 16, 1999
between Alliance Capital Management L.P. and The
Equitable Life Assurance Society of the United States.
2. The Revolving Credit Agreement dated as of July 21, 1999
among Alliance Capital Management L.P., 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 is filed as Exhibit 10.43 to the
Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on August 3, 1999 by
Alliance Capital Management L.P. II.
(b) Reports on Form 8-K
None.
17
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
Dated: August 16, 1999 By: Alliance Capital Management
Corporation, its General Partner
By: /s/ Robert H. Joseph, Jr.
-------------------------------------
Robert H. Joseph, Jr.
Senior Vice President &
Chief Financial Officer
18
REIMBURSEMENT AGREEMENT
Reimbursement Agreement, dated as of August 16, 1999, between Alliance Capital
Management L.P., a Delaware limited partnership (the "Company"), and The
Equitable Life Assurance Society of the United States, a New York stock life
insurance corporation (together with its successors and assignees, "Equitable").
In consideration of Equitable entering into one or more standby letter of credit
applications and/or agreements (each, an "Application") pursuant to which one or
more banks (each, a "Bank") shall issue irrevocable standby letters of credit
(each, a "Letter of Credit") in favor of one or more funds of which the Company
is the investment adviser (each such fund, a "Beneficiary") in an aggregate face
amount of up to $570,000,000, the Company and Equitable hereby agree as follows:
1. Payments: The Company agrees to reimburse Equitable for each payment made
by Equitable to a Bank in reimbursement of any drawing made under a Letter
of Credit, together with interest on such amount until payment in full
hereunder. Subject to Section 10 hereof, each such reimbursement obligation
of the Company, together with accrued interest thereon, shall become due
and payable on the 90th day after the date of the applicable drawing under
such Letter of Credit (such 90th day, the "Maturity Date"); provided that
the Company may prepay any such reimbursement obligation, together with
accrued interest thereon, in cash at any time. On any Maturity Date, so
long as the Company complies with the immediately succeeding sentence, the
Company may, and if not repaid in cash on or prior to the applicable
Maturity Date the Company shall, on such Maturity Date (but not prior to
such date) and in lieu of all or any portion of reimbursement payments in
cash required hereby, make such reimbursement payment to Equitable by (i)
issuing to Equitable (or its permitted designee) limited partnership units
of the Company having an aggregate Fair Market Value on such Maturity Date
equal to such reimbursement amount and (ii) paying, in cash, all accrued
and unpaid interest on such reimbursement amount to such Maturity Date. The
Company covenants and agrees that (i) any limited partnership units to be
issued in lieu of cash payments shall be duly authorized and validly issued
in accordance with the requirements of the Company's partnership agreement
at the time of issuance, shall be fully paid and non-assessable (or the
equivalent thereof for Delaware limited partnerships) and shall be
delivered to Equitable free of any adverse claim and that it shall deliver
to Equitable prior to such issuance one or more certificates or opinions of
counsel, in form and substance reasonably satisfactory to Equitable, to
such effect, (ii) concurrently with any such issuance, it shall deliver to
Equitable a certificate or certificates evidencing such limited partnership
units and (iii) prior to each Maturity Date on which limited partnership
units are issued to Equitable hereunder, the Company shall have obtained
all consents and approvals necessary (including without limitation any
unitholder approvals required pursuant to the rules of the New York Stock
Exchange) in order to issue and deliver such limited partnership units to
Equitable on such Maturity Date (and Equitable agrees to vote, and to cause
its subsidiaries to vote, in favor of any such unitholder resolution of the
Company required by the rules of the New York Stock Exchange). For purposes
hereof, "Fair Market Value" of a limited partnership unit of the Company as
of any date, including any Maturity Date, shall mean a price per limited
<PAGE>
partnership unit of the Company equal to the "Unit Price" on such date as
defined in Article 1 of the Company's limited partnership agreement as in
effect on the date hereof.
2. Fees: The Company will pay Equitable a per annum fee of 0.15% on the daily
average of the amount available for drawing under each Letter of Credit,
calculated based on a 360 day year, in each case for the actual number of
days occurring in the period for which such fee is payable, payable
quarterly in arrears on the last day of each March, June, September and
December, and on the expiration or termination date of such Letter of
Credit.
3. Interest on Payments: The Company will pay Equitable interest on each
reimbursement amount outstanding under Section 1 above, from the date
Equitable reimburses the applicable Bank to the date such payment becomes
due hereunder, at a rate per annum equal to the cost to Equitable of
obtaining such funds as of the date of such reimbursement by Equitable for
a 90-day period as determined by Equitable in good faith (the "Cost of
Funds Rate"). Such interest shall be payable on the date of any prepayment
of such reimbursement amount (to the extent accrued on such prepaid
amount), if the applicable Maturity Date is extended beyond 90 days,
quarterly on the last day of each quarter from the date such interest first
accrued, and at maturity. Notwithstanding the foregoing, the Company shall
pay Equitable, on demand, interest on any amount which remains outstanding
after the same becomes due and owing hereunder at a rate equal to the Cost
of Funds Rate plus 2.00% per annum. Interest will be calculated based on
the actual days outstanding and a 360 day year.
4. Costs and Expenses; Indemnity: (a) The Company will absolutely, irrevocably
and unconditionally indemnify and hold Equitable harmless against all
costs, expense, claims and losses suffered or incurred by Equitable
howsoever arising from or in connection with the preparation, negotiation,
execution and delivery, performance or enforcement of this Agreement, each
Application, each Letter of Credit, any syndication of any Letter of
Credit, any other agreement (relating to a Letter of Credit or an
Application) of Equitable with or for the benefit of a Bank, or otherwise
arising from or in connection with the transactions contemplated hereby or
thereby, including without limitation the reasonable fees and expenses of
counsel to Equitable.
(b)(i) In addition to the obligations of the Company pursuant to Section 1
above, the Company agrees to reimburse Equitable, on demand, for each
payment made by Equitable under or pursuant to any Application, any
syndication of any Letter of Credit or any other agreement (relating to a
Letter of Credit or an Application) of Equitable with or for the benefit of
a Bank (in any case, other than to reimburse the applicable Bank for draws
under a Letter of Credit but including any interest accrued and payable
with respect to such draws), including without limitation, any and all
fees, commissions, administrative charges, indemnification payments,
increased costs and reserve charges payable to a Bank.
(b) (ii) The Company shall, subject to the limitation set forth below in
this paragraph, promptly pay to Equitable from time to time as specified by
Equitable, such amounts as Equitable determines in its reasonable judgment
are necessary to compensate it for costs, to the extent such costs are
attributable to this Agreement or its issuing or having outstanding an
Application resulting from the application of any law or regulation
applicable to
2
<PAGE>
Equitable, regarding any reserve, assessment, capitalization or similar
requirement relating to contingent obligations or reimbursement agreements
with respect to letters of credit, provided that such costs are incurred by
Equitable as a result of a change in applicable law after the date hereof.
The Company acknowledges that there may be various methods of allocating
such reserves, assessments, capitalization or similar costs referred to
above and agrees that the allocations by Equitable, for purposes of
determining such costs, shall be conclusive and binding upon the Company,
provided that such allocations are made in good faith by a reasonable
method, Equitable provides the Company with a certification in reasonable
detail of the method used for such allocation, and notifies the Company
promptly of any change in the law imposing such additional costs.
(c) In the event that the Company's obligations under this Section 4 at any
time exceed, in the aggregate, $20,000,000, the Company shall have the
option, subject to the covenants and agreements of the Company contained in
the penultimate sentence of Section 1 hereof, to pay such excess amount to
Equitable when due in additional limited partnership units having an
aggregate Fair Market Value on such due date equal to such excess amount
then due and owing.
(d) The provisions of this Section 4 shall survive any payment of the
Company's obligations and liabilities hereunder and any termination of this
Agreement.
5. Method of Payments. Except as otherwise expressly provided in Sections 1
and 4(c) hereof (as limited by the immediately succeeding sentence), the
Company agrees to pay all payments, fees and charges when due pursuant to
the terms of this Agreement in United States dollars by wire transfer of
immediately available funds to the account designated in writing by
Equitable from time to time. In the event that the Company fails to issue
any limited partnership units on any Maturity Date in accordance with
Section 1 hereof or on the date such obligations become due in accordance
with Section 4(c) hereof for any reason whatsoever (other than by reason of
any action or inaction by Equitable in violation of this Agreement) and, in
any case, such failure continues for a period of ten business days, then
notwithstanding provisions of Section 1 or Section 4(c) to the contrary,
the Company's right to pay such amounts in limited partnership units shall
terminate and such amounts shall only be payable in cash as provided in the
first sentence of this Section 5.
6. Liability of Equitable: As long as its actions do not constitute gross
negligence or wilful misconduct, Equitable shall not be responsible for
verifying the existence of any act, condition or statement made by any Bank
or any Beneficiary in relation to any drawing or presentment under any
Letter of Credit or demands made under any Application, for the validity or
genuineness of certificates or other documents delivered under or in
connection with any Letter of Credit or any Application, even if such
certificates or other documents should in fact prove to be invalid,
fraudulent or forged, for any breach of contract between any Bank, any
Beneficiary and the Company, or for any other consequences beyond
Equitable's control, so long as Equitable acts in good faith and in
accordance with applicable law. In furtherance of and not in limitation of
the foregoing, the Company agrees that any action, inaction or omission
taken or suffered by Equitable in good faith without gross negligence or
wilful misconduct, and in accordance with applicable law in connection with
an Application, a Letter of Credit, any syndication of any Letter of Credit
4
<PAGE>
or any other agreement (relating to a Letter of Credit or an Application)
of Equitable with or for the benefit of a Bank, or related drafts or
documents, shall be binding on the Company.
7. Obligation Absolute: Subject to Equitable's compliance with the terms of
this Agreement, the Company's obligation to make each payment under this
Agreement shall be absolute and unconditional and shall not be subject to
any defense or be affected by any right of set off, counterclaim or
recoupment which the Company may now or hereafter have against any Bank,
any Beneficiary, Equitable or any other person for any reason whatsoever.
8. Representations and Warranties: The Company represents and warrants to
Equitable that (a) it is a limited partnership duly organized, validly
existing, and in good standing under the laws of the State of Delaware, (b)
the execution, delivery and performance of this Agreement are within its
powers, that all necessary actions, other than any unitholder approvals
required pursuant to the rules of the New York Stock Exchange, have been
taken or obtained, and that no governmental approval is required, (c)
entering into and performing its obligations under this Agreement do not
contravene (i) its limited partnership certificate or agreement, or other
organizational documents or (ii) any law or any contractual restriction
binding on or affecting it or its property, other than any such
contraventions of any contractual restrictions that would not, individually
or in the aggregate, have a material adverse effect on the financial
condition or business of the Company and its subsidiaries taken as a whole,
on the ability of the Company to fulfill its obligations hereunder or on
the rights of Equitable hereunder (or as a holder of the limited
partnership units issued in connection herewith) and (d) this Agreement is
a legal, valid and binding obligation enforceable against it in accordance
with its terms except as enforceability may be limited by laws affecting
creditors rights generally and by general principles of equity.
9. Covenants: So long as any Letter of Credit remains outstanding, any
obligation of Equitable under any Application or any other agreement
(relating to a Letter of Credit or an Application) of Equitable with or for
the benefit of a Bank remains outstanding, or any amount owing to Equitable
hereunder remains outstanding, the Company agrees that it will, unless
Equitable consents in writing, continue to preserve, renew and keep in full
force and effect its existence and its rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as may
be contemplated by the Reorganization (as defined in Section 16 hereof).
10. Events of Default: If any of the following events (an "Event of Default")
shall have occurred and be continuing, unless waived in writing by
Equitable pursuant to the terms hereof:
(a) Any representation or warranty made by the Company in this Agreement or
in any certificate, financial or other statement furnished by the Company
pursuant to this Agreement shall prove to have been untrue or incomplete in
any material respect when made; or
(b) The Company shall fail to pay when due any amount specified in Section
1 of this Agreement and such failure shall remain unremedied for three
business days after written notice thereof shall have been given by
Equitable to the Company, or the Company shall
4
<PAGE>
fail to pay when due any other amount specified in this Agreement and any
such failure shall remain unremedied for ten business days after written
notice thereof shall have been given by Equitable to the Company; or
(c) The Company shall fail to perform or observe any other term, covenant
or provision under this Agreement, and any such failure shall remain
unremedied for fifteen business days after written notice thereof shall
have been given by Equitable to the Company; or
(d) Any material provision of this Agreement shall at any time and for any
reason cease to be valid and binding on the Company, or shall be declared
to be null and void, or the validity or enforceability thereof shall be
contested by the Company or any governmental agency or authority or the
Company shall, prior to the satisfaction of the Company's obligations
hereunder, deny that it has any or further liability or obligation under
this Agreement; or
(e) The Company or Alliance Capital Management Corporation (the "General
Partner") shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian or the like of itself or all or a
substantial amount of its property, (ii) fail to pay its debts when they
become due, (iii) make a general assignment for the benefit of creditors,
(iv) be adjudicated bankrupt or insolvent, or (v) commence a voluntary case
under the federal bankruptcy laws of the United States of America or file a
voluntary petition or answer seeking reorganization or an arrangement with
creditors under an insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or partnership or corporate action
shall be taken by it for the purpose of effecting any of the foregoing; or
(f) If without the application, approval or consent of the Company or the
General Partner a proceeding shall be instituted in any court of competent
jurisdiction under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking in respect of the Company or
the General Partner an order of relief or an adjudication in bankruptcy,
reorganization, dissolution, winding-up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Company or
the General Partner or of all or any substantial part of the assets of the
Company or the General Partner or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is being
contested by the Company and the General Partner in good faith, the same
shall (i) result in the entry of an order of relief or any such
adjudication or appointment or (ii) continue undismissed, or pending and
unstayed, for any period of 60 consecutive days; or
(g) The Company shall default in the performance or observance of any
provision, covenant or restriction contained in any agreement with respect
to indebtedness for borrowed money in excess of $150,000,000 beyond
applicable days of grace and the effect of such default is to cause the
acceleration of maturity of such indebtedness; or
(h) A judgment or order for the payment of money in excess of $150,000,000
shall be rendered against the Company (or for which the Company becomes
liable or otherwise responsible to reimburse) and such judgment or order
shall continue unsatisfied and the
5
<PAGE>
execution of enforcement thereof shall no longer be effectively stayed for
a period of ten days; or
(i) any of the following: (i) the Company (if required to be so registered)
shall fail to be duly registered as an "investment adviser" under the
Investment Advisers Act of 1940 or (ii) Alliance Fund Distributors, Inc.
("Alliance Distributors") shall cease to be duly registered as a
"broker/dealer" under the Securities Exchange Act of 1934 or shall cease to
be a member in good standing of the National Association of Securities
Dealers, Inc.; or
(j) the Company, Alliance Distributors, or the General Partner, or any
material subsidiary of any of the foregoing companies, shall either (i) be
indicted for a federal or state crime and, in connection with such
indictment, government authorities shall seek to seize or attach, or seek a
civil forfeiture of, property of the Company, Alliance Distributors, the
General Partner, or any such material subsidiary, having a fair market
value in excess of $20,000,000, or (ii) be found guilty of, or shall plead
guilty, no contest, or nolo contendere to, any federal or state crime, a
punishment for which could include a ---------------- fine, penalty, or
forfeiture of any assets of the Company, Alliance Distributors, the General
Partner, or any such material subsidiary, having in any such case a fair
market value in excess of $20,000,000;
then, in any such event, Equitable may by written notice to the Company
declare all reimbursement amounts then outstanding under Section 1 hereof,
all interest thereon and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon such reimbursement amounts, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Company; provided,
however, that in the event of an actual or deemed entry of an order for
relief with respect to the Company or the General Partner under the Federal
Bankruptcy Code or other applicable bankruptcy or insolvency law, all such
reimbursement amounts, all such interest and all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived
by the Company.
11. Notices: Notices and demands under this Agreement shall be in writing and
will be sufficient if delivered by hand, by United States registered or
certified mail or by facsimile receipt of which is confirmed by telephone.
Notices and demands shall be effective when received and shall be addressed
if to the Company to:
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Attn: Robert H. Joseph, Jr.
Senior Vice President and
Chief Financial Officer
Tel. No.: (212) 969-2384
Fax No.: (212) 969-2386
and
Attn: David R. Brewer, Jr.
Senior Vice President and General Counsel
6
<PAGE>
Tel. No.: (212) 969-1327
Fax No.: (212) 969-1334
if to Equitable to: The Equitable Life Assurance Society
of the United States
1290 Avenue of the Americas
New York, New York 10104
Attn: Stanley B. Tulin
Vice Chairman and Chief Financial Officer
Tel. No.: (212) 314-4515
Fax No.: (212) 707-1920
12. No Waivers, Remedies: This Agreement may not be amended, waived or modified
except in writing duly signed by Equitable and the Company. Equitable may
elect in its sole discretion not to consent to the renewal of a Letter of
Credit for additional periods or to any other amendment to an Application
or a Letter of Credit; provided that, so long as no Event of Default then
exists, Equitable shall not enter into any written amendment to an
Application or Letter of Credit without the prior written consent of the
Company, which consent shall not be unreasonably withheld. This Agreement
and the terms, covenants and conditions hereof shall be binding upon and
inure to the benefit of Equitable and the Company and their respective
successors and permitted assigns. Equitable may assign (or participate) any
and all of its rights and interests herein (i) to an affiliated entity
without notice to or the consent of the Company and (ii) to a
non-affiliated entity only with the prior written consent of the Company,
such consent not to be unreasonably withheld. No failure on Equitable's
part to exercise, and no delay on Equitable's part in exercising, any
rights, powers or remedies hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such rights, powers or remedies
by Equitable preclude any other or further exercising thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and not exclusive of any other remedies provided by law.
13. Severability: Any provision of this Agreement which is prohibited,
unenforceable or not authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent required by law without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction.
14. Jurisdiction/Waiver of Jury Trial: (a) Any legal action or proceeding
against the Company or Equitable with respect to this Agreement, any
Application, any Letter of Credit or any of the agreements, documents or
instruments delivered in connection herewith or therewith may be brought in
the courts of the State of New York or of the United States of America for
the Southern District of New York as the party commencing such action or
proceeding may elect. By execution and delivery hereof, each party accepts
and consents to, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Nothing herein
shall limit the right of the Company or Equitable to bring proceedings
against the other party in the courts of any other jurisdiction.
(b) The Company and Equitable knowingly, voluntarily and intentionally waive
any and all rights the Company or Equitable, as the case may be, may have
to a trial by jury in respect of any litigation between the parties hereto
based on, or arising out of, under or in
7
<PAGE>
connection with, this Agreement, any Application, any Letter of Credit or
any other documents and instruments executed in connection herewith.
15. Construction and Interpretation: This Agreement shall be governed by and
construed in accordance with the laws of the State of New York. The
headings of the Sections of this Agreement are for convenience only and
shall not by themselves determine the interpretation of this Agreement.
16. Company Assignment: In the event the reorganization contemplated by the
registration statement on Form S-4, including the proxy
statement/prospectus, as filed by Alliance Capital Management L.P. II, a
Delaware limited partnership ("Alliance II"), with the Securities and
Exchange Commission on August 3, 1999 (the "Reorganization") is
consummated, the Company shall assign, and Alliance II shall assume, all of
the rights, liabilities and obligations of the Company hereunder pursuant
to a written assignment agreement in form and substance satisfactory to
Equitable, whereupon (i) each reference herein to "the Company" shall be
deemed a reference to Alliance II and each reference herein to "limited
partnership unit" shall be deemed a reference to a limited partnership
interest of Alliance II, including without limitation in Sections 1 and
4(c) hereof; provided that, "Fair Market Value" of a limited partnership
interest of Alliance II as of any date thereafter, including any Maturity
Date, shall mean a price per limited partnership interest of Alliance II
equal to the "LP Interest Price" on such date as defined in Article 1 of
Alliance II's limited partnership agreement as in effect on the date of the
foregoing assignment and assumption and (ii) the assignor, Alliance Capital
Management L.P., shall be released from all liabilities and obligations
hereunder. Except as expressly provided in the preceding sentence, the
Company may not assign or delegate any of its rights or obligations
hereunder without the prior written consent of Equitable.
17. Entire Agreement/Counterparts: This Agreement on and as of the date hereof
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between the parties hereto with
respect to such subject matter are hereby superseded in their entireties.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute but one and the same
instrument.
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date set forth above by the undersigned
thereunto authorized.
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
its general partner
By: /s/ John D. Carifa
--------------------------------------------
Name: John D. Carifa
Title: President
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/ Stanley B. Tulin
--------------------------------------------
Name: Stanley B. Tulin
Title: Vice Chairman and
Chief Financial Officer
9
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