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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 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9818
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ALLIANCE CAPITAL
MANAGEMENT L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3434400
(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:
NAME OF EACH EXCHANGE ON
TITLE OF CLASS WHICH REGISTERED
-------------- ------------------------
UNITS REPRESENTING ASSIGNMENTS OF BENEFICIAL NEW YORK STOCK EXCHANGE
OWNERSHIP OF LIMITED PARTNERSHIP INTERESTS
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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. [ ]
The aggregate market value of the Units representing assignments of
beneficial ownership of limited partnership interests held by non-affiliates of
the registrant as of March 1, 1997 (based on the closing price on the New York
Stock Exchange on February 28, 1997) was approximately $911,130,416.00.
The number of Units representing assignments of beneficial ownership of
limited partnership interests outstanding as of March 1, 1997 was 83,521,643
Units.
DOCUMENTS INCORPORATED BY REFERENCE
Certain pages of the Alliance Capital Management L.P. 1996 Annual Report to
Unitholders are incorporated by reference in Part II of this Form 10-K.
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GLOSSARY OF CERTAIN DEFINED TERMS
"Partnership" refers to Alliance Capital Management L.P., a Delaware
limited partnership, and its subsidiaries and, where appropriate, to its
predecessor ACMC and its subsidiaries.
"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.
"AXA-UAP" refers to AXA-UAP, a company organized under the laws of France.
"ECI" refers to 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 ECI, and its subsidiaries other than the
Partnership and its subsidiaries.
"General Partner" refers to Alliance in its capacity as general partner of
the Partnership, and, where appropriate, to ACMC, its predecessor, in its
capacity as general partner of the Partnership.
"Units" refer to units representing assignments of beneficial ownership of
limited partnership interests in the Partnership.
PART I
ITEM 1. BUSINESS
GENERAL
The Partnership 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
the Partnership in exchange for a 1% general partnership interest in the
Partnership and approximately 55% of the outstanding Units. In December 1991
ACMC transferred its 1% general partnership interest in the Partnership to
Alliance.
As of March 1, 1997 ECI and Equitable were the beneficial owners of
48,089,183 Units or approximately 57.86% of the issued and outstanding Units
including 551,395 Units issuable upon conversion of the Class A
2
Limited Partnership Interest issued to ECMC in 1993 when the business and
substantially all of the assets of ECMC were transferred to the Partnership.
The Class A Limited Partnership Interest is convertible into additional Units
valued at up to $14.5 million under a formula based on contingent incentive fees
received by the Partnership prior to April 1, 1998.
On February 29, 1996 the Partnership acquired substantially all of the
assets and assumed substantially all of the liabilities of Cursitor Holdings
L.P. and acquired all of the outstanding shares of Cursitor Holdings Limited
(collectively, "Cursitor") in exchange for 1,764,115 Units, $94.3 million in
cash, notes in the aggregate principal amount of $21.5 million which are payable
ratably over the next four years and substantial additional consideration which
will be determined at a later date.
Cursitor, an international investment management firm with offices in
London, Paris and Boston, managed approximately $10.1 billion in assets for both
U.S. and non-U.S. institutions, mainly pension plans on February 29, 1996.
Cursitor's investment style is global asset allocation: investing client funds
in stocks or bonds of the world's principal capital markets. A new subsidiary
of the Partnership, Cursitor Alliance LLC ("Cursitor Alliance") was formed for
purposes of the acquisition. Senior management of Cursitor acquired a minority
interest in Cursitor Alliance. See "Investment Management Services - Global
Asset Allocation".
As of March 1, 1997 AXA-UAP and its subsidiaries owned 60.7% of the issued
and outstanding shares of the capital stock of ECI. ECI is a public company
with shares traded on the New York Stock Exchange, Inc. ("NYSE"). ECI owns all
of the shares of Equitable.
AXA-UAP, a French company, is the holding company for an international
group of insurance and related financial services companies. AXA-UAP'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, and the
Asia/Pacific area. AXA-UAP 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.
Based on information provided by AXA-UAP, on March 1, 1997, 22.5% of the
issued ordinary shares (representing 33.0% of the voting power) of AXA-UAP were
controlled directly and indirectly by Finaxa, a French holding company. As of
March 1, 1997, 61.4% of the shares (representing 72.0% 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 34.9% of the
shares, representing 40.0% of the voting power), and 23.7% of the shares of
Finaxa (representing 14.6% of the voting power) were owned by Banque Paribas, a
French bank ("Paribas"). Including the ordinary shares owned by Finaxa, on
March 1, 1997, the Mutuelles AXA directly or indirectly controlled 26.0% of the
issued ordinary shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and Finaxa.
3
In November 1996, AXA offered (the "Exchange Offer") to acquire 100% of the
ordinary shares ("UAP Shares") of FF 10 each of Compagnie UAP, a societe anonyme
organized under the laws of France ("UAP"), in exchange for ordinary shares
("Shares") and Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer received two
Shares and two Certificates for every five UAP Shares so tendered. On January
24, 1997, AXA acquired 91.37% of the outstanding UAP Shares. AXA-UAP currently
intends to merge (the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will be issued in
connection with the Merger to UAP shareholders who did not tender UAP Shares in
the Exchange Offer. If the Merger had been completed at March 1, 1997, Finaxa
would have beneficially owned (directly and indirectly) approximately 21.7% of
the Shares (representing approximately 32.0% of the voting power), and the
Mutuelles AXA would have controlled (directly or indirectly through their
interest in Finaxa) 25.1% of the issued ordinary shares (representing 36.8% of
the voting power) of AXA-UAP.
On January 17, 1997, AXA announced its intention to redeem its outstanding
6% Bonds (the "Bonds"). Between February 14, 1997 and May 14, 1997, holders of
the Bonds will have the option to convert each Bond into 5.15 Shares. On May
15, 1997, each Bond still outstanding will be redeemed into cash at FF 1,285
plus FF 9.29 accrued interest. Finaxa currently owns 418,118 Bonds which it
intends to convert into 2,153,308 Shares. Assuming all outstanding Bonds are
converted into Shares and after giving effect to the Merger as if it had been
completed at March 1, 1997, Finaxa would have beneficially owned (directly and
indirectly) approximately 21.4% of the Shares (representing 31.3% of the voting
power), and the Mutuelles AXA would have controlled (directly or indirectly
through their interest in Finaxa) 24.7% of the issued ordinary shares
(representing 36.0% of the voting power) of AXA-UAP.
The Partnership, 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.
The Partnership's separately managed accounts consist primarily of the
active management of equity and fixed income accounts for institutions and high
net-worth individuals. The Partnership's institutional clients include
corporate and public employee pension funds, the general and separate accounts
of Equitable and its insurance company subsidiaries, endowment funds, and other
domestic and foreign institutions. The Partnership'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 the Partnership:
4
Assets Under Management
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(in millions)
December 31,
--------------------------------------------------------------------
1992 1993 1994 1995 1996
Separately Managed
Accounts (1) . . . . . . . . . . . . . . . $ 69,354 $ 76,615 $ 81,030 $ 97,275 $119,507
Mutual Funds Management:
Alliance Mutual Funds. . . . . . . . . . . 15,588 22,045 20,736 23,462 28,302
The Hudson River Trust . . . . . . . . . . 5,484 7,171 8,360 11,964 16,392
Cash Management Services (2) . . . . . . . 7,095 8,148 9,153 13,820 18,591
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . $ 97,521 $113,979 $119,279 $146,521 $182,792
-------- -------- -------- -------- --------
Revenues
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(in thousands)
Years Ended December 31,
--------------------------------------------------------------------
1992 1993 1994 1995 1996
Separately Managed
Accounts (1) . . . . . . . . . . . . . . . $178,289 $190,921 $212,306 $231,924 $280,537
Mutual Funds Management:
Alliance Mutual Funds. . . . . . . . . . . 196,964 221,005 291,975 278,328 330,356
The Hudson River Trust (3) . . . . . . . . 13,941 18,090 22,045 29,119 42,380
Cash Management Services (2) . . . . . . . 58,379 64,464 69,514 91,135 127,265
Other. . . . . . . . . . . . . . . . . . . . 5,698 5,037 5,112 8,749 7,979
Total. . . . . . . . . . . . . . . . . . . . $453,271 $499,517 $600,952 $639,255 $788,517
-------- -------- -------- -------- --------
(1) Includes the general and separate accounts of Equitable and its insurance
company subsidiaries.
(2) Includes money market deposit accounts brokered by the Partnership 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 is the funding vehicle.
SEPARATELY MANAGED ACCOUNTS
As of December 31, 1994, 1995 and 1996 separately managed accounts for
institutional and high net-worth individuals (other than investment companies
and deposit accounts) represented approximately 68%, 66% and 65%, respectively,
of total assets under management by the Partnership. The fees earned from the
management of these accounts represented approximately 35%, 36% and 36% of the
Partnership's revenues for 1994, 1995 and 1996, respectively.
5
Separately Managed Accounts Assets Under Management
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(in millions)
December 31,
--------------------------------------------------------------------
1992 1993 1994 1995 1996
Equity & Balanced:
Domestic . . . . . . . . . . . . . . . . . $ 27,066 $ 29,382 $ 30,063 $ 42,332 $ 50,835
International & Global . . . . . . . . . . 2,313 2,913 3,828 3,854 3,533
Fixed Income:
Domestic . . . . . . . . . . . . . . . . . 26,419 28,596 31,470 32,553 36,042
International & Global . . . . . . . . . . 2,344 2,252 2,602 1,891 1,546
Passive:
Domestic . . . . . . . . . . . . . . . . . 9,688 11,240 9,645 12,787 15,478
International & Global . . . . . . . . . . 1,116 1,760 3,028 3,484 3,411
Asset Allocation:
Domestic . . . . . . . . . . . . . . . . . 408 472 394 374 457
International & Global . . . . . . . . . . -- -- -- -- 8,205
Total. . . . . . . . . . . . . . . . . . . . $ 69,354 $ 76,615 $ 81,030 $ 97,275 $119,507
-------- -------- -------- -------- --------
Revenues From Separately Managed Accounts Management
----------------------------------------------------
(in thousands)
Years Ended December 31,
--------------------------------------------------------------------
1992 1993 1994 1995 1996
Investment Services:
Equity & Balanced:
Domestic . . . . . . . . . . . . . . . . . $ 88,326 $ 95,245 $107,581 $131,792 $156,690
International & Global . . . . . . . . . . 6,945 7,166 10,867 10,373 9,848
Fixed Income:
Domestic . . . . . . . . . . . . . . . . . 64,277 66,131 70,217 67,102 65,449
International & Global . . . . . . . . . . 3,902 4,895 5,180 3,784 3,901
Passive:
Domestic . . . . . . . . . . . . . . . . . 4,342 6,220 6,016 5,919 8,015
International & Global . . . . . . . . . . 2,292 2,790 4,052 3,870 3,612
Asset Allocation:
Domestic . . . . . . . . . . . . . . . . . 1,102 1,274 1,064 1,010 821
International & Global . . . . . . . . . . -- -- -- -- 24,096
171,186 183,721 204,977 223,850 272,432
Service and Other Fees . . . . . . . . . . . 7,103 7,200 7,329 8,074 8,105
Total. . . . . . . . . . . . . . . . . . . . $178,289 $190,921 $212,306 $231,924 $ 280,537
-------- -------- -------- -------- --------
INVESTMENT MANAGEMENT SERVICES
The Partnership's separately managed accounts consist primarily of the
active management of equity accounts, balanced (equity and fixed income)
accounts and fixed income accounts for institutions and high net-worth
individuals. The Partnership also provides active management for
6
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. The Partnership provides "passive"
management services for equity, fixed income and international accounts. As of
December 31, 1996 the Partnership's accounts were managed by 102 portfolio
managers with an average of 18 years of experience in the industry and 12 years
of experience with the Partnership.
EQUITY AND BALANCED ACCOUNTS AND HEDGE FUNDS. The Partnership's equity and
balanced accounts contributed approximately 20%, 22% and 21% of the
Partnership's total revenues for 1994, 1995 and 1996, respectively. Assets
under management relating to active equity and balanced accounts grew from
approximately $30.1 billion as of December 31, 1991 to approximately $54.4
billion as of December 31, 1996.
The Partnership has had a distinct and consistent style of equity
investing. The Partnership does not emphasize market timing as an investment
tool but instead emphasizes long-term trends and objectives, generally remaining
fully invested. The Partnership'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 the
Partnership'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.
The Partnership'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 the Partnership's portfolio
managers. The Partnership holds frequent investment strategy meetings in which
senior management, portfolio managers and analysts discuss investment strategy.
The Partnership's portfolio managers construct and maintain portfolios that
adhere to each client's guidelines and conform to the Partnership's current
investment strategy.
The Partnership'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.
As of December 31, 1996 the Partnership managed hedge funds and separately
managed accounts using similar strategies which had approximately $565 million
in assets under management. The Partnership's
7
hedge funds invest primarily in long positions in a limited number of
fundamentally researched, high quality growth companies. The portfolios of the
hedge funds consist of various types of securities (e.g. equities, convertible
securities, warrants, options, futures and long term equity anticipation
securities). The hedge funds engage in short sales in order to enhance overall
performance. The hedge funds take short positions, including the purchase of
put options on securities, market indices or futures. The hedge funds may
employ the use of leverage through securities exposure and borrowings.
FIXED INCOME ACCOUNTS. The Partnership's fixed income accounts contributed
approximately 13%, 11% and 9% of the Partnership's total revenues for 1994, 1995
and 1996, respectively. Assets under management relating to active fixed income
accounts increased from approximately $29.0 billion as of December 31, 1991 to
approximately $37.6 billion as of December 31, 1996.
The Partnership'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. The fixed income services also include managing
portfolios investing in foreign government securities and other foreign debt
securities. Sector concentrations and other portfolio characteristics are
heavily committed to areas that the Partnership's portfolio managers believe
have the best investment values. The Partnership also manages portfolios that
are limited to specialized areas of the fixed income markets, such as mortgage-
backed securities and high-yield bonds.
PRIVATE INVESTING SERVICES. In 1996 the Partnership acquired a 40%
interest in Albion Alliance LLC ("Albion Alliance") which is its 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 the Partnership, 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. Since Albion Alliance is now the Partnership'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.
8
ACFG manages two private mezzanine investment funds designed for
institutional investors, with an aggregate of approximately $449 million under
management as of December 31, 1996. As of that date Equitable and its insurance
company subsidiaries had investments of approximately $145 million in these
funds.
ACFG also manages two limited partnerships regulated as business
development companies under the Investment Company Act of 1940 ("Investment
Company Act") which invest primarily in private mezzanine financings. As of
December 31, 1996 these funds had net assets of approximately $196 million.
The Partnership 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, 1996 these funds had approximately $280 million under
management. As of that date ECI and its insurance company subsidiaries had
investments of approximately $247 million in these funds.
PASSIVE MANAGEMENT. The Partnership's strategy in passive portfolio
management is to provide customized portfolios to meet specialized client needs,
such as a portfolio designed to replicate an index of small-capitalization
stocks. In addition, the Partnership 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. The Partnership 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). A subsidiary of the Partnership is the
manager of four passive U.K. unit trusts which invest in small capitalization
common stocks on a global basis. As of December 31, 1996 the Partnership
managed approximately $18.9 billion in passive portfolios.
GLOBAL ASSET ALLOCATION. Cursitor Alliance and its subsidiaries provide
global asset allocation services to U.S. and non-U.S. institutions. Cursitor
Alliance's investment performance results in 1996 were poor and Cursitor
Alliance has experienced significant account terminations as a consequence
thereof. As of December 31, 1996 Cursitor Alliance and its subsidiaries managed
approximately $8.2 billion in global asset allocation portfolios and as of
February 28, 1997 assets under management of Cursitor Alliance portfolios had
decreased to less than $7 billion.
9
OTHER SERVICES. Subsidiaries of the Partnership maintain offices in
London, England, Paris, France, Mumbai, India, Istanbul, Turkey, Tokyo, Japan,
and Singapore which provide international and global investment management,
research, marketing and advisory services to institutional and other clients and
in Luxembourg, Sydney, Australia, Toronto, Canada, Sao Paolo, Brazil, and
Bahrain which market investment management services.
CLIENTS
The approximately 1,550 separately managed accounts for institutions and
high net-worth individuals (other than investment companies) for which the
Partnership acts as investment manager include corporate employee benefit plans,
public employee retirement systems, the general and separate accounts of
Equitable and its insurance company subsidiaries, endowment funds, foundations,
foreign governments, multi-employer pension plans and financial and other
institutions. Generally, the minimum size for a new separately managed account
is $10 million.
The general and separate accounts of Equitable and its insurance company
subsidiaries, which were transferred to the Partnership in 1993 in connection
with the acquisition of the business and substantially all of the assets of
ECMC, are the Partnership's largest institutional clients. As of December 31,
1996 these accounts, excluding investments made by these accounts in The Hudson
River Trust (See "Individual Investor Services - The Hudson River Trust"),
represented approximately 16% of total assets under management by the
Partnership and approximately 7% of the Partnership's total revenues for 1996.
As of December 31, 1996 corporate employee benefit plan accounts
represented approximately 15.5% of total assets under management by the
Partnership. 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 33.8% of total assets under management as of
December 31, 1996.
The following table lists the Partnership's ten largest institutional
clients, ranked in order of size of total assets under management as of December
31, 1996. Since the Partnership's fee schedules vary based on the type of
account, the table does not reflect the ten largest revenue generating clients.
10
Client or Sponsoring Employer Type of Account
----------------------------- ---------------
Equitable and its insurance
company subsidiaries . . . . . . . . Equity, Fixed Income, Passive
North Carolina Retirement System . . . Passive Equity, U.S. Equity,
Global Equity
A Foreign Government Central Bank. . . Equity, Global Equity,
Fixed Income, Global
Fixed Income
State Board of Administration
of Florida . . . . . . . . . . . . . Equity, Fixed Income
Ford Motor Company . . . . . . . . . . Equity, Venture Capital
Boeing Company . . . . . . . . . . . . Equity, Balanced
BellSouth Corporation. . . . . . . . . Passive Equity
New York State Common
Retirement System. . . . . . . . . . Equity
New York State Teacher's
Retirement System. . . . . . . . . . Passive Equity, Equity
Wyoming Retirement System. . . . . . . Equity
These institutional clients accounted for approximately 29% of the
Partnership's total assets under management at December 31, 1996 and
approximately 11% of the Partnership's total revenues for the year ended
December 31, 1996 (38% and 16%, respectively, if the investments by the separate
accounts of Equitable in The Hudson River Trust were included). No single
institutional client other than Equitable and its insurance company subsidiaries
accounted for more than approximately 1% of the Partnership's total revenues for
the year ended December 31, 1996. The general and separate accounts of
Equitable and its insurance company subsidiaries accounted for approximately 16%
of the Partnership's total assets under management at December 31, 1996 and
approximately 7% of the Partnership's total revenues for the year ended December
31, 1996 (25% and 12%, respectively, if the investments by the separate accounts
of Equitable in The Hudson River Trust were included).
Since its inception, the Partnership 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 the
Partnership'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
The Partnership's separately managed accounts are managed pursuant to a
written investment management agreement between the client and the Partnership,
which usually is terminable at any time or upon relatively short notice by
either party. In general, the Partnership's contracts may not be assigned
without the consent of the client.
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In providing investment management services to institutional clients, the
Partnership 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 0.75% (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 the
Partnership. With respect to approximately 4% of assets under management, the
Partnership charges performance-based fees, which consist of a relatively low
base fee plus an additional fee based on a percentage of assets 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 the Partnership on
a broader basis could create greater fluctuations in the Partnership's revenues.
ACFG's fees for corporate finance activities generally involve the payment
of a base management fee ranging from 0.10% to 1.00% of assets under management
per annum. In some cases ACFG receives incentive 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 subsidiaries the
Partnership provides ancillary accounting, valuation, reporting, treasury and
other services.
MARKETING
The Partnership's institutional products are marketed by marketing
specialists who solicit business for the entire range of the Partnership'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. The Partnership's
institutional marketing structure supports its commitment to provide
comprehensive and timely client service. A client service representative is
assigned to each
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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
The Partnership (i) manages and sponsors a broad range of open-end and
closed-end mutual funds other than The Hudson River Trust and markets wrap fee
accounts ("Alliance Mutual Funds"), (ii) manages The Hudson River Trust which is
the funding vehicle for variable annuity insurance and variable life insurance
products offered by Equitable and its insurance company subsidiaries, and (iii)
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.
The net assets comprising the Alliance Mutual Funds, The Hudson River Trust and
money market funds and deposit accounts on December 31, 1996 amounted to
approximately $63.3 billion. The assets of the Alliance Mutual Funds, The
Hudson River Trust and the money market funds are managed by the same investment
professionals who manage the Partnership's accounts of institutional and high
net-worth individuals.
Revenues From Mutual Funds Management
(in thousands)
Years Ended December 31,
--------------------------------------------------------------------
1992 1993 1994 1995 1996
Alliance Mutual Funds:
Investment Services. . . . . . . . . . . . . $100,057 $109,692 $147,496 $147,407 $175,465
Distribution Plan Fees . . . . . . . . . . . 78,455 89,253 117,509 105,405 126,930
Services and Other Fees. . . . . . . . . . . 14,149 16,901 23,491 23,779 25,607
Underwriting Commissions . . . . . . . . . . 4,303 5,159 3,479 1,737 2,354
-------- -------- -------- -------- --------
196,964 221,005 291,975 278,328 330,356
-------- -------- -------- -------- --------
The Hudson River Trust:
Investment Services (1). . . . . . . . . . . 13,814 17,148 21,655 28,680 41,696
Services and Other Fees. . . . . . . . . . . 127 942 390 366 500
Underwriting Commissions . . . . . . . . . . -- -- -- 73 184
-------- -------- -------- -------- --------
13,941 18,090 22,045 29,119 42,380
-------- -------- -------- -------- --------
Cash Management Services:
Investment Services (2). . . . . . . . . . . 36,788 40,202 42,018 56,642 74,441
Distribution Plan Fees . . . . . . . . . . . 14,530 16,007 18,104 23,328 39,481
Services and Other Fees. . . . . . . . . . . 6,721 7,890 9,383 11,165 13,343
Underwriting Commissions . . . . . . . . . . 340 365 9 -- --
-------- -------- -------- -------- --------
58,379 64,464 69,514 91,135 127,265
-------- -------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . $269,284 $303,559 $383,534 $398,582 $500,001
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
(1) 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 is the funding vehicle.
(2) Includes fees received by the Partnership in connection with its
distribution of money market deposit accounts for which no investment
management services are provided.
13
ALLIANCE MUTUAL FUNDS
The Partnership has been managing mutual funds since 1971. Since then, the
Partnership has sponsored open-end load mutual funds, closed-end mutual funds
and offshore funds. On December 31, 1996 net assets in the Alliance Mutual
Funds totalled approximately $28.3 billion.
Net Assets as of
December 31, 1996
Type of Alliance Mutual Funds (in millions)
----------------------------- -----------------
Open-End Funds:
Equity and Balanced. . . . . . . . . . $ 9,927.1
Taxable Fixed Income . . . . . . . . . 6,028.4
Tax Exempt Fixed Income. . . . . . . . 2,352.8
Closed-End Funds . . . . . . . . . . . . 4,443.4
Offshore Funds (Open and Closed-End) . . 2,939.6
Wrap Fee Programs. . . . . . . . . . . . 1,932.8
Variable Product Series Funds. . . . . . 678.0
Total. . . . . . . . . . . . . . . . . . $ 28,302.1
-----------
THE HUDSON RIVER TRUST
The Hudson River Trust is the funding vehicle for the variable annuity and
variable life insurance products offered by Equitable and its insurance company
subsidiaries. On December 31, 1996 the net assets of the portfolios of The
Hudson River Trust were as follows:
Net Assets as of
December 31, 1996
(in millions)
-----------------
Common Stock Portfolio . . . . . . . . . $ 6,626.6
Aggressive Stock Portfolio . . . . . . . 3,865.9
Balanced Portfolio . . . . . . . . . . . 1,637.9
Growth Investors Portfolio . . . . . . . 1,302.1
Global Portfolio . . . . . . . . . . . . 997.3
Money Market Portfolio . . . . . . . . . 466.6
Equity Index Fund. . . . . . . . . . . . 386.2
Conservative Investors Portfolio . . . . 282.5
Growth & Income Portfolio. . . . . . . . 232.1
High Yield Portfolio . . . . . . . . . . 199.9
Quality Bond Portfolio . . . . . . . . . 155.0
International Portfolio. . . . . . . . . 151.9
Intermediate Government Portfolio. . . . 88.3
Total. . . . . . . . . . . . . . . . . . $ 16,392.3
-----------
14
DISTRIBUTION. The Alliance Mutual Funds are distributed to individual
investors through broker-dealers, insurance sales representatives, banks and
other financial intermediaries. Alliance Fund Distributors, Inc. ("AFD"), a
registered broker-dealer and a wholly-owned subsidiary of the Partnership,
serves as the principal underwriter and distributor of the Alliance Mutual Funds
registered under the Investment Company Act of 1940 as "open-end" investment
companies ("U.S. Funds") and serves as a placing or distribution agent for most
of the Alliance Mutual Funds which are not registered under the Investment
Company Act and which are not publicly offered to United States persons
("Offshore Funds"). There are 54 sales representatives who devote their time
exclusively to promoting the sale of Alliance Mutual Fund shares by financial
intermediaries.
Many of the financial intermediaries that sell shares of Alliance Mutual
Funds also offer shares of funds not managed by the Partnership and frequently
offer shares of funds managed by their own affiliates.
The Partnership maintains a mutual fund distribution system (the "System")
which permits open-end Alliance Mutual Funds to offer investors the option of
purchasing shares (a) subject to a conventional front-end sales charge ("Class A
Shares"), (b) without a front-end sales charge but subject to a contingent
deferred sales charge payable by shareholders ("CDSC") and higher distribution
fees and transfer agent costs payable by the Alliance Mutual Funds ("Class B
Shares"), (c) without a front-end sales charge and, if the shares are held for
at least one year, CDSC but with higher distribution fees payable by the
Alliance Mutual Funds ("Class C Shares"), or (d) without a front-end sales
charge, CDSC or ongoing distribution fees payable by the Alliance Mutual Funds
("Advisor Class Shares"). If a shareholder purchases Class A Shares, AFD
compensates the financial intermediary distributing the Alliance Mutual Fund
from the front-end sales charge paid by the shareholder at the time of each
sale. If a shareholder purchases Class B Shares or Class C Shares, AFD does not
collect a front-end sales charge even though AFD is obligated to compensate the
financial intermediary at the time of each sale. Payments made to financial
intermediaries during 1996 in connection with the sale of Class B Shares and
Class C Shares under the System, net of CDSC received, totalled approximately
$78.7 million. Management of the Partnership believes AFD will recover the
payments made to financial intermediaries from the higher distribution fees and
CDSC it receives in respect of the Class B Shares and the Class C Shares over
periods not exceeding 5 1/2 years and one year, respectively. If a shareholder
purchases Advisor Class Shares AFD does not collect a front-end sales charge or
CDSC and the financial intermediary does not receive compensation from AFD.
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
15
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.
The open-end U.S. Funds and Offshore Funds have entered into agreements
with AFD under which AFD is paid a distribution services fee. The Partnership
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 1996 the ten financial intermediaries responsible for the largest
volume of sales of Alliance Mutual Funds were responsible for 69% of the total
sales of Alliance Mutual Funds. Equico Securities, Inc. ("Equico"), 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 open-end Alliance Mutual Fund sales (15% in 1996).
Equico 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 30%, 19% and 17% of Alliance Mutual Fund
sales in 1994, 1995 and 1996, respectively. Smith Barney Inc. ("Smith Barney")
was responsible for approximately 10% of Alliance Mutual Fund sales in 1995 and
1996. Neither Merrill Lynch nor Smith Barney 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 Equico, Merrill Lynch and Smith Barney has in
any year since 1990 accounted for more than 10% of the sales of open-end
Alliance Mutual Funds.
Based on market data reported by the Investment Company Institute (January
1997), the Partnership's market share in the U.S. mutual fund industry is 1.12%
of total industry assets and the Partnership accounted for .67% of total
open-end and closed-end fund sales force-derived industry sales in the U.S.
during 1996. 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"
16
below) and the amounts and types of distribution assistance and administrative
services payments. The Partnership 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 1996 banks and their affiliates accounted for approximately 6% of the
sales of shares of open-end Alliance Mutual Funds.
INVESTMENT MANAGEMENT AGREEMENTS AND FEES. Management fees from the
Alliance Mutual Funds and The Hudson River Trust vary between .20% and 1.80% 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 and The Hudson River Trust are fixed
annually by negotiation between the Partnership and the board of directors or
trustees of each U.S. Fund and The Hudson River Trust, including a majority of
the disinterested directors or trustees. Changes in fees must be approved by
the shareholders of each U.S. Fund and The Hudson River Trust. In general, the
investment management agreements with the U.S. Funds and The Hudson River Trust
provide for termination at any time upon 60 days notice.
Under each investment management agreement with a U.S. Fund, the
Partnership provides the U.S. Fund with investment management services, office
space and order placement facilities and pays all compensation of directors or
trustees and officers of the U.S. Fund who are affiliated persons of the
Partnership. 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, the Partnership absorbs such
excess through a reduction in the advisory fee. Currently, the Partnership
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 .97% to 5.88%. In connection with newly organized U.S. Funds,
the Partnership may also agree to reduce its fee or bear certain expenses to
limit a fund's expenses during an initial period of operations. The Partnership
does not expect, however, that state expense or voluntary limits, at current fee
and expense levels, will have a significant effect on the results of its
operations.
17
CASH MANAGEMENT SERVICES
The Partnership provides cash management services to individual investors
through a product line comprising eighteen money market fund portfolios and five
types of brokered money market deposit accounts. Net assets in these products
as of December 31, 1996 totalled approximately $18.6 billion.
Net Assets as of
December 31, 1996
(in millions)
-----------------
Money Market Funds:
Alliance Capital Reserves (two portfolios) . . . . $ 6,536.1
Alliance Government Reserves (two portfolios). . . 4,443.0
Alliance Municipal Trust (seven portfolios). . . . 2,382.0
Alliance Money Market Fund (three portfolios). . . 2,959.5
ACM Institutional Reserves (four portfolios) . . . 1,426.1
Money Market Deposit Accounts (five products) . . . . . 843.9
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $18,590.6
---------
The Partnership 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, the
Partnership 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 Alliance
Capital Reserves and Alliance Government Reserves, 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, the Partnership 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 the Partnership, the Partnership'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, 1996 more than 98% of the assets invested in the
Partnership'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, 1996 more than 500
18
financial intermediaries offered the Partnership's cash management services.
The Partnership's money market fund market share (not including deposit
products), as computed based on market data reported by the Investment Company
Institute (December 1996), has increased from 1.10% of total money market fund
industry assets at the end of 1991 to 1.99% at December 31, 1996.
The Partnership makes payments to financial intermediaries for distribution
assistance and shareholder servicing and administration. The Partnership's
money market funds pay fees to the Partnership 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 the Partnership in making
payments to financial intermediaries under the distribution assistance and
shareholder servicing and administration program. During 1996 such supplemental
payments totalled $44.4 million ($35.6 million in 1995). There are 7
employees of the Partnership who devote their time exclusively to marketing
the Partnership's cash management services.
A principal risk to the Partnership'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, 1996 the five largest participating financial intermediaries
were responsible for assets aggregating approximately $9.4 billion, or 50.4% of
the cash management services total. Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ Securities Corporation"), a subsidiary of ECI, was one of
these intermediaries and was responsible for assets aggregating approximately
$1.5 billion or 8.1% of the cash management services total.
Many of the financial intermediaries whose customers utilize the
Partnership'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 DLJ Securities Corporation. Pursuant
to an agreement between Pershing and the Partnership, Pershing recommends to
certain of its correspondent firms the use of the Partnership's money market
funds and other cash management products. In return, Pershing is paid a portion
of the revenues derived by the Partnership from sales through such Pershing
correspondents. During 1996 these payments to Pershing amounted to
approximately $5.6 million. As of December 31, 1996 DLJ Securities Corporation
and these Pershing correspondents were responsible for approximately 49% of the
Partnership's total cash management assets. Pershing may terminate its
agreement with the Partnership 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 the Partnership's cash management products and would be
free to recommend or assist in the sale of competitive products.
19
The Partnership'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 the
Partnership provide for an expense limitation of 1% per annum or less of average
daily net assets. See "Alliance Mutual Funds - Investment Management Agreements
and Fees".
SHAREHOLDER AND ADMINISTRATION SERVICES
Alliance Fund Services, Inc. ("AFS"), a wholly-owned subsidiary of the
Partnership, 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, 1996 AFS employed 243 people. AFS
operates out of offices in Secaucus, New Jersey. 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 and closed-end funds for which the Partnership acts as
investment manager utilize Partnership personnel to perform legal, clerical and
accounting services not required to be provided by the Partnership. 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, the Partnership 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 $8.3 million per
year.
ACM Fund Services S.A. ("ACMFS"), a wholly-owned subsidiary of the
Partnership, is the registrar and transfer agent of substantially all of the
Offshore Funds. As of December 31, 1996 ACMFS employed 8 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.
The Partnership 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.
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. The Partnership is subject to
20
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 the Partnership. The
Partnership 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
May, 1996 the Partnership was ranked 11th out of 250 managers based on tax-
exempt assets under management, 5th out of the 25 largest managers of
international index assets, 8th out of the 25 largest managers of domestic
equity index funds and 13th out of the 25 largest domestic bond index managers.
Many of the firms competing with the Partnership 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 the Partnership 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, The Hudson River Trust and money market funds is
maintained by custodian banks and central securities depositories.
The Partnership generally has the discretion to select the brokers or
dealers to be utilized to execute transactions for client accounts. Broker-
dealers affiliated with ECI 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
The Partnership, Albion Alliance, ACFG and Alliance are investment advisers
registered under the Investment Advisers Act of 1940. 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
21
AFD is registered with the SEC as a broker-dealer. AFD is subject to minimum
net capital requirements ($3.6 million at December 31, 1996) imposed by the SEC
on registered broker-dealers and had aggregate regulatory net capital of $10.5
million at December 31, 1996.
The relationships of Equitable and its insurance company subsidiaries with
the Partnership 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 subsidiaries and the Partnership 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.
The Partnership's assets under management and revenues derived from the
general accounts of Equitable and its insurance company subsidiaries 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) 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 the Partnership into categories with lower management fees.
All aspects of the Partnership's business are subject to various federal
and state laws and regulations and to the laws in the foreign countries in which
the Partnership'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, 1996 the Partnership and its subsidiaries employed 1,495
employees, including 194 investment professionals, of whom
22
102 are portfolio managers, 83 are research analysts, and 9 are order placement
specialists. The average period of employment of these professionals with the
Partnership is approximately 9 years and their average investment experience is
approximately 15 years. The Partnership considers its employee relations to be
good.
Service Marks
The Partnership 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
The Partnership's principal executive offices at 1345 Avenue of the
Americas, New York, New York are occupied pursuant to a lease which extends
until 2016. The Partnership currently occupies approximately 290,000 square
feet at this location. The Partnership also occupies approximately 79,700
square feet at 135 West 50th Street, New York, New York under leases expiring in
1998 and 1999. The Partnership also occupies approximately 22,800 square feet
at 709 Westchester Avenue, White Plains, New York under leases expiring in 1999
and 2000, respectively. The Partnership and its subsidiaries, AFD and AFS,
occupy approximately 114,000 square feet of space in Secaucus, New Jersey
pursuant to a lease which extends until 2016. The Partnership leases
substantially all of the furniture and office equipment at the New York City and
New Jersey offices.
The Partnership also leases space in San Francisco, California, Chicago,
Illinois, Greenwich, Connecticut, Minneapolis, Minnesota, and Beechwood, Ohio,
and its subsidiaries lease space in Boston, Massachusetts, London, England,
Paris, France, Tokyo, Japan, Sydney, Australia, Toronto, Canada, Luxembourg,
Singapore, Bahrain, Mumbai, India, Sao Paolo, Brazil, and Istanbul, Turkey.
ITEM 3. LEGAL PROCEEDINGS
On July 25, 1995 a Consolidated and Supplemental Class Action Complaint
("Complaint") entitled IN RE ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST,
INC. SECURITIES LITIGATION was filed in the United States District Court for the
Southern District of New York against the Alliance North American Government
Income Trust, Inc. ("Fund"), the Partnership, Alliance, AFD, ECI, certain
officers of the Fund, certain directors of the Fund, certain officers and
certain directors of Alliance alleging violations of federal securities laws,
fraud and breach of fiduciary duty in connection with the Fund's investments in
Mexican and Argentine
23
securities. The Complaint sought certification of a plaintiff class of all
persons who purchased or owned Class A, B or C shares of the Fund from March 27,
1992 through December 23, 1994. While the Complaint sought an unspecified
amount of damages, costs, attorneys' fees and punitive damages, it contains an
allegation that the Fund's losses exceeded $750 million.
The principal allegations of the Complaint are that the Fund purchased debt
securities issued by the Mexican and Argentine governments in amounts that were
not permitted by the Fund's investment policies and objective, and that there
was no shareholder vote to change the investment objective to permit purchases
in such amounts. The Complaint further alleges that the decline in the value of
the Mexican and Argentine securities held by the Fund caused the Fund's net
asset value to decline to the detriment of the Fund's shareholders. On
September 26, 1996, the Court granted the defendants' motion to dismiss all
counts of the Complaint. On October 11, 1996, plaintiffs filed a motion for
reconsideration of the Court's decision granting defendants' motion to dismiss
the Complaint. On November 25, 1996, the Court denied plaintiffs' motion for
reconsideration.
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
the Fund did not properly disclose the risks of its investments in mortgage-
backed derivative securities and that two advertisements used by the Fund
misrepresented the risks of the Fund. Plaintiffs also reiterated their
allegations that the Fund failed to hedge against the risks of investing in
Mexican and Argentine securities. The defendants have filed papers in
opposition to plaintiffs' motion for leave to file the proposed amended
complaint, and that motion is currently pending with the Court.
The Partnership believes that the allegations in the Complaint and the
proposed amended Complaint are without merit and intends to vigorously defend
against these claims. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1996.
24
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET FOR THE UNITS
The Units are traded on the New York Stock Exchange ("NYSE"). The high and
low sales prices on the NYSE during each quarter of the Partnership's two most
recent fiscal years were as follows:
1995 High Low
---- ---- ---
First Quarter 19 1/8 15 3/8
Second Quarter 20 1/8 17 1/8
Third Quarter 20 1/2 17 1/2
Fourth Quarter 23 1/4 19 1/4
1996 High Low
---- ---- ---
First Quarter 25 3/4 21 3/8
Second Quarter 25 3/8 23
Third Quarter 26 1/8 22 7/8
Fourth Quarter 29 1/4 25
On February 28, 1997 the closing price of the Units on the NYSE was
$28.00. As of February 28, 1997 there were approximately 1,680 Unitholders of
record.
CASH DISTRIBUTIONS
The Partnership distributes on a quarterly basis all of its Available Cash
Flow (as defined in the Partnership Agreement). During its two most recent
fiscal years the Partnership made the following distributions of Available Cash
Flow:
25
Quarter During 1995
With Respect to Which
a Cash Distribution Was Amount of
Paid from Available Cash Cash Distribution
Flow for that Quarter Per Unit Payment Date
------------------------ ----------------- ------------
First Quarter $ 0.41 May 22, 1995
Second Quarter 0.43 August 10, 1995
Third Quarter 0.48 November 13, 1995
Fourth Quarter 0.50 February 23, 1996
-------
$ 1.82
-------
Quarter During 1996
With Respect to Which
a Cash Distribution Was Amount of
Paid from Available Cash Cash Distribution
Flow for that Quarter Per Unit Payment Date
------------------------ ----------------- ------------
First Quarter $ 0.52 May 28, 1996
Second Quarter 0.53 August 22, 1996
Third Quarter 0.55 November 18, 1996
Fourth Quarter 0.59 March 4, 1997
-------
$ 2.19
-------
ITEM 6. SELECTED FINANCIAL DATA
The Selected Consolidated Financial Data which appears on page 43 of the
Alliance Capital Management L.P. 1996 Annual Report to Unitholders 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 44 through 52 of the Alliance Capital
Management L.P. 1996 Annual Report to Unitholders is 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 Peat Marwick LLP which appear on
pages 53 through 69 of the Alliance Capital Management L.P. 1996 Annual Report
to Unitholders are incorporated by reference in this Annual Report on Form 10-K.
26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
GENERAL PARTNER
The Partnership's activities are managed and controlled by Alliance as
General Partner and Unitholders do not have any rights to manage or control the
Partnership. The General Partner has agreed that it will conduct no active
business other than managing the Partnership, although it may make certain
investments for its own account.
The General Partner does not receive any compensation from the Partnership
for services rendered to the Partnership as General Partner. The General
Partner holds a 1% general partnership interest in the Partnership. As of March
1, 1997 Equitable, ACMC and ECMC, affiliates of the General Partner, held
48,089,183 Units (including 551,395 Units issuable upon conversion of the Class
A Limited Partnership Interest).
The General Partner is reimbursed by the Partnership for all expenses
incurred by it in carrying out its activities as General Partner, including
compensation paid by the General Partner to its directors and officers (to the
extent such persons are not compensated directly as employees of the
Partnership) 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 1996 except for directors' fees and directors and officers liability
insurance.
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 64 Chairman of the Board,Chief
Executive Officer and Director
Luis Javier Bastida 51 Director
Claude Bebear 61 Director
James M. Benson 50 Director
Bruce W. Calvert 50 Director, Vice Chairman and
Chief Investment Officer
John D. Carifa 52 Director, President and
Chief Operating Officer
27
Henri de Castries 42 Director
Kevin C. Dolan 43 Director
Denis Duverne 44 Director
Alfred Harrison 59 Director and Vice Chairman
Jean-Pierre Hellebuyck 49 Director
Benjamin D. Holloway 72 Director
Joseph J. Melone 65 Director
Peter D. Noris 41 Director
Frank Savage 58 Director
Jerry M. de St. Paer 55 Director
Madelon DeVoe Talley 65 Director
Reba W. Williams 60 Director
Robert B. Zoellick 43 Director
David R. Brewer, Jr. 51 Senior Vice President and General
Counsel
Robert H. Joseph, Jr. 49 Senior Vice President and
Chief Financial Officer
Mr. Williams joined Alliance in 1977 and has been the Chairman of the Board
and Chief Executive Officer since that time. He was elected a Director of
Equitable on March 21, 1991 and was elected to the ECI Board of Directors in May
of 1992. He is also a Senior Executive Vice President of AXA-UAP. AXA-UAP, ECI
and Equitable are parents of the Partnership. 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
Chief Financial Officer and a member of the Executive Committee of Banco Bilbao
Vizcaya, S.A., ("BBV"). Mr. Bastida has been with BBV since 1976. He is also a
director of several subsidiaries of BBV.
Mr. Bebear was elected a Director of Alliance in February 1996. In January
1997, Mr. Bebear was appointed Chairman of the Executive Board of AXA-UAP.
Prior thereto, he was Chairman and Chief Executive Officer of AXA since
February, 1989 and Chief Executive Officer of the AXA Group since 1974. Mr.
Bebear serves as Chairman or Director of numerous subsidiaries and affiliated
companies of the AXA Group. He is also a Director of Equitable Real Estate
Investment Management, Inc. ("Equitable Real Estate"), Saint-Gobain, Havas S.A.,
Schneider S.A., L.V.M.H. and serves as a member of the Supervisory Board of
Compagnie Financiere de Paribas. Mr. Bebear has been a Director of ECI since
May 1992 and a Director of Equitable since July 1991. He was elected non-
executive Chairman of ECI on February 14, 1996. AXA-UAP, Equitable and ECI are
parents of the Partnership.
Mr. Benson was elected a Director of Alliance in October 1993. He was
elected Chief Executive Officer of Equitable and Chief Operating Officer of ECI
on February 14, 1996. He is Senior Executive Vice President of ECI and has been
President of Equitable since February 1994. In January 1997, Mr. Benson was
elected Senior Executive Vice President of AXA-UAP. Mr. Benson was Chief
Operating Officer of Equitable from February 1994 until February 14, 1996. He
28
was a Senior Executive Vice President of Equitable from April 1993 until
February 1994. From January 1984 to April of 1993 he was President of the New
York office of Management Compensation Group. Mr. Benson is also a Director of
ECI and Equitable. AXA-UAP, ECI and Equitable are parents of the Partnership.
Mr. Calvert joined Alliance in 1973 as an equity portfolio manager and was
elected Vice Chairman and Chief Investment Officer 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. He has
been Senior Executive Vice President Financial Services and Life Insurance
Activities of AXA-UAP since 1996. Prior thereto he was 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 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 ECI, Equitable,
Donaldson Lufkin & Jenrette, Inc. ("DLJ") and Equitable Real Estate. Mr. de
Castries was elected non-executive Vice Chairman of ECI on February 14, 1996.
AXA-UAP, ECI and Equitable are parents of the Partnership. DLJ and Equitable
Real Estate are subsidiaries of ECI.
Mr. Dolan was elected a Director of Alliance in May 1995. He is Chief
Executive Officer of AXA Asset Management (France), a subsidiary of AXA-UAP.
Mr. Dolan has been with AXA-UAP since 1993. From 1983 to 1993 Mr. Dolan was
Deputy General Manager of BFCE. AXA-UAP is a parent of the Partnership.
Mr. Duverne was elected a Director of Alliance in February 1996. He has
been Senior Vice President - International Life of AXA-UAP since 1995. Prior to
that Mr. Duverne was a member of the Executive Committee in charge of 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 of the AXA Group. Mr. Duverne is
also a Director of DLJ and Equitable Real Estate. AXA-UAP is a parent of the
Partnership. DLJ and Equitable Real Estate are subsidiaries of ECI.
Mr. Harrison joined Alliance in 1978 and was elected Vice Chairman on May
3, 1993. Mr. Harrison is in charge of the Partnership's Minneapolis office and
is a senior portfolio manager. He was an Executive Vice President from 1986 to
29
1993 and a Senior Vice President from 1978 to 1986. He was a Director from 1978
to 1987 and from February 23, 1988 until July 27, 1988. He was elected a
Director of Alliance in 1992.
Mr. Hellebuyck was elected a Director of Alliance in October 1992. He is
the Chairman of AXA Asset Management (Europe). Mr. Hellebuyck is also a
Director of various subsidiaries of AXA-UAP and Societe Des Bourses Francaises.
AXA-UAP is a parent of the Partnership.
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 Mr. Holloway was also a Director of DLJ until March 1990. Mr.
Holloway was a Director of Rockefeller Center Properties, Inc. and is a Director
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).
Mr. Melone was elected a Director of Alliance in January 1991. Mr. Melone
was elected Chief Executive Officer of ECI on February 14, 1996. He is a
Director and President of ECI and has been Chairman of Equitable since February
1994. He was President and Chief Executive Officer of Equitable from November
1990 until February 1994. Mr. Melone was formerly Chief Operating Officer of
ECI and Chief Executive Officer of Equitable. From 1984 to 1990, he was
President of The Prudential Insurance Company of America. He is also a Director
of DLJ, AXA Equity & Law Life Assurance Society plc, Equitable Real Estate, AT&T
Capital Corporation and Foster Wheeler Corporation. AXA-UAP, ECI and Equitable
are parents of the Partnership.
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 ECI.
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.
Mr. Noris is also a Director of Equitable Real Estate. ECI and Equitable are
parents of the Partnership.
Mr. Savage was elected a Director of Alliance in May 1993. He has been
Chairman of Alliance Capital Management International, a division of the
Partnership, since May 1994. Mr. Savage is a Director of ACFG, a subsidiary of
the Partnership, and was Chairman of ACFG from July 1993 to August 1996. Prior
to this, 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
30
Director of Lockheed Martin Corporation, ARCO Chemical Company and Qualcomm
Incorporated.
Mr. de St. Paer was elected a Director of Alliance in June 1994. He has
been Senior Executive Vice President and Chief Financial Officer of ECI since
May 1996 and prior thereto was Executive Vice President and Chief Financial
Officer of Equitable since May 1992. Mr. de St. Paer has also served Equitable
as Senior Vice President and Treasurer from June to December 1990 and Vice
President from March 1988 to June 1990. In addition, he is a Director of
Equitable Real Estate, DLJ, National Mutual Asia Limited, Nicos Seimei Hoken and
Economic Sciences Corporation, and a member of the Advisory Boards of Directors
of Peter Wodtke (UK) and (US). ECI and Equitable are parents of the
Partnership.
Ms. Talley was elected a Director of Alliance in October 1993. She was with
Melhado Flynn from January 1987 to December 1989. Ms. Talley, a former Governor
of the National Association of Securities Dealers (1993-1996), is currently a
Commissioner of the Port Authority of New York State and New Jersey. She is
also a Vice Chairman of the Board of W.P. Carey & Co. as well as a trustee of
Smith Barney's TRAK and Equity & Income Funds. In addition she serves
as Director of Corporate Property Associates, Series 10-1 W.P. Carey Real Estate
Limited Partnerships, Schroeders Asian Growth Fund, the New York State Common
Retirement Fund and Global Asset Management Funds, Inc.
Mrs. Williams was elected a Director of Alliance in October 1993. She is
currently the Director of Special Projects of the Partnership. She serves on
the Boards of Directors of the India Liberalisation Fund, The Spain Fund, The
Austria Fund, The Southern Africa Fund and The Turkish Growth Fund. Mrs.
Williams, who has worked at McKinsey and Company, Inc. 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, Chief Executive Officer and a Director of Alliance.
Mr. Zoellick was elected a Director of Alliance in February 1997. He is
currently an Executive Vice President of Federal National Mortgage Association
and is its principal legal officer and the executive in charge of affordable
housing programs. 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. He served as the lead U.S. official in
the process of German unification and was also the President's personal
representative for the 1991 and 1992 G-7 Economic Summits. 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, Said Holdings, the German Marshall Fund, the European
Institute, the National Bureau of Asian Research, the Overseas Development
Council, and the Congressional Institute. Mr. Zoellick also serves on the
31
boards of directors of several non-profit entities including the Council on
Foreign Relations of the American Institute for contemporary German Studies.
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
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 the Partnership.
Certain executive officers of Alliance are also directors or trustees and
officers of various Alliance Mutual Funds and The Hudson River Trust and are
directors and officers of certain of the Partnership's subsidiaries.
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 Ms. Talley. The Audit Committee reports to the Board
of Directors with respect to the selection and terms of engagement of the
Partnership's independent auditors and reviews various matters relating to the
Partnership's accounting and auditing policies and procedures. The Audit
Committee held four meetings in 1996.
The General Partner has a Board Compensation Committee composed of Messrs.
Williams, Holloway and Melone. 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 Ms.
Talley, is responsible for granting options under the Partnership's Unit Option
Plan and 1993 Unit Option Plan. The Unit Option and Unit Bonus Committee,
consisting of Messrs. Holloway and Melone, is responsible for granting awards
under the Partnership's Unit Bonus Plan. The Board Compensation Committee,
Option Committee and Unit Option and Unit Bonus 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
32
AFD, is responsible for granting awards under the Partnership's Century Club
Plan.
The General Partner pays directors who are not employees of the
Partnership, Equitable or any affiliate of Equitable an annual retainer of
$18,000 plus $1,000 per meeting attended of the Board of Directors and $500 per
meeting of a committee of the Board of Directors not held in conjunction with a
Board of Directors meeting. The Partnership reimburses Messrs. Bastida,
Bebear, de Castries, Dolan, Duverne, Hellebuyck, Holloway and Zoellick and Ms.
Talley for certain expenses incurred in attending Board of Directors' meetings.
Other directors are not entitled to any additional compensation from the General
Partner for their services as directors. The Board of Directors meets
quarterly.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the General
Partner's directors and executive officers, and persons who own more than 10% of
the Units, to file with the SEC and NYSE initial reports of ownership and
reports of changes in ownership of Units. To the best of the Partnership's
knowledge, during the year ended December 31, 1996 all Section 16(a) filing
requirements applicable to its executive officers, directors and 10% beneficial
owners were complied with.
33
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth all plan and non-plan
compensation awarded to, earned by or paid to the Chairman of the Board and each
of the four most highly compensated executive officers of the General Partner at
the end of 1996 ("Named Executive Officers"):
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
------------------------------------------- ----------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($)(1) ($) (#Units) ($)(2) ($)(3)
- -------- ---- --------- -------- ------ --- -------- --- ---------
Dave H. Williams 1996 $263,443 $4,000,000 $ ---- $- 0 $ 0 $267,568
Chairman & Chief 1995 225,000 1,000,000 62,595 0 0 0 213,689
Executive Officer 1994 225,000 1,500,000 170,352 0 0 0 68,322
John D. Carifa 1996 238,461 3,000,000 54,752 0 0 0 426,398
President & Chief 1995 200,000 1,000,000 74,822 0 175,000 0 135,191
Operating Office 1994 200,000 1,500,000 75,927 0 200,000 76,250 4,043,576
Bruce W. Calvert 1996 238,461 3,000,000 ---- 0 0 0 425,101
Vice Chairman & 1995 200,000 1,000,000 ---- 0 150,000 0 138,048
Chief Investment Officer 1994 200,000 1,500,000 ---- 0 200,000 76,149 4,038,491
Robert H. Joseph, Jr. 1996 157,692 385,000 ---- 0 10,000 0 61,434
Senior Vice President 1995 150,000 312,500 ---- 0 30,000 0 24,066
& Chief Financial Officer 1994 147,461 290,000 682,195 0 20,000 0 23,685
David R. Brewer, Jr. 1996 146,538 395,750 ---- 0 10,000 0 62,108
Senior Vice President 1995 132,692 272,250 136,788 0 20,000 0 22,496
& General Counsel 1994 125,000 249,250 ---- 0 10,000 0 20,316
(1) Perquisites and personal benefits are not included in column (e) if the
aggregate amount did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported in columns (c) and (d). Column (e) for 1996 includes
for Mr. Carifa, among other perquisites and personal benefits, $26,775
34
representing interest rate subsidies equal to 3% per annum of the outstanding
balances of personal loans obtained by Mr. Carifa from commercial banks the
proceeds of which were used to pay withholding tax liabilities related to the
vesting of Units acquired in 1988 and $7,500, for personal tax services.
Column (e) for 1995 includes for (i) Mr. Carifa, among other perquisites
and personal benefits, $22,319 representing interest rate subsidies equal to 3%
per annum of the outstanding balances of personal loans obtained by Mr. Carifa
from commercial banks the proceeds of which were used to pay witholding tax
liabilities related to the vesting of Units acquired in 1988, (ii) Messrs.
Williams and Carifa, among other perquisites and personal benefits, $50,100 and
$33,400, respectively, for personal tax services, and (iii) Mr. Brewer, among
other perquisites and personal benefits, $129,562 representing the dollar value
of the difference between the exercise price and the fair market value of Units
acquired as a result of the exercise of options granted under the Partnership's
Unit Option Plan.
Column (e) for 1994 includes for (i) Messrs. Williams and Carifa, among
other perquisites and personal benefits, $122,943 and $19,282, respectively,
representing interest rate subsidies equal to 3% per annum of the outstanding
balances of personal loans obtained by Messrs. Williams and Carifa from
commercial banks the proceeds of which were used to pay withholding tax
liabilities related to the vesting of Units acquired in 1988, and (ii) Mr.
Joseph, among other perquisites and personal benefits, $677,563 representing the
dollar value of the difference between the exercise price and the fair market
value of Units acquired as a result of the exercise of options granted under the
Partnership's Unit Option Plan.
(2) Column (h) includes cash distributions paid in 1994 from Available Cash
Flow of the Partnership on unvested Units acquired in 1988 and payments in cash
of all or a portion of account balances under the Partners Plan, as provided by
the terms of that plan (See "Employee Benefit Plans - Partners Plan"), including
earnings included in column (i).
(3) Column (i) includes award amounts vested and earnings credited in 1996 in
respect of the Alliance Partners Compensation Plan. Column (i) does not include
any amounts in respect of awards made in 1996 in respect of the Alliance
Partners Compensation Plan since none of these awards have vested and no
earnings have been credited in respect of these awards. (See "Employee Benefit
Plans - Alliance Partners Compensation Plan"). Column (i) includes the
following amounts for 1996 (See "Employee Benefit Plans - Partners Plan,
Capital Accumulation Plan, Profit Sharing Plan and Alliance Partners
Compensation Plan"):
35
Vesting of Awards Vesting of Awards
Earnings Accrued and Accrued Earnings and Accrued Earnings Profit Sharing Term Life
On Partners Plan Under Capital Under Alliance Partners Plan Insurance
Balances Accumulation Plan Compensation Plan Contribution Premiums Total
---------------- -------------------- ----------------------- -------------- ---------- ----------
Dave H. Williams $ 13,557 $ 42,336 $ 184,634 $ 15,525 $ 11,516 $ 267,568
John D. Carifa 5,301 24,911 369,266 22,500 4,420 426,398
Bruce W. Calvert 4,676 25,989 369,266 22,500 2,670 425,101
Robert H. Joseph, Jr. 0 0 36,926 22,500 2,008 61,434
David R. Brewer, Jr. 0 0 36,926 21,981 3,201 62,108
OPTION GRANTS IN 1996
The table below shows information regarding grants of options made to the
Named Executive Officers under the Partnership's Unit Option Plan and 1993 Unit
Option Plan during 1996. 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 Unit prices of approximately $43.40 and $68.96,
respectively. The amounts shown as potential realizable values for all
Unitholders represent the corresponding increases in the market value of
83,336,109 outstanding Units held by all Unitholders as of December 31, 1996,
which would total approximately $1.4 billion and $3.6 billion, respectively. No
gain to the optionees is possible without an increase in Unit price which will
benefit all Unitholders proportionately. These potential realizable values are
based solely on assumed rates of appreciation required by applicable SEC
regulations. Actual gains, if any, on option exercises and Unitholdings are
dependent on the future performance of the Partnership's Units. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
Option Grants In 1996
Individual Grants (1) Potential Realizable Value at
Assumed Annual Rates of Unit
Price Appreciation for Option Term
---------------------------------------------------------- ----------------------------------
% of Total
Number of Options
Securities Granted to
Underlying Employees in Exercise
Options Granted Fiscal Year Price Expiration 5% 10%
Name (#) (2) ($/Unit) Date ($) ($)
- -------------------------------------------------------------------------------------------------------------------------------
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. 10,000 N/A 25.125 12/16/06 178,000 466,000
David R. Brewer, Jr. 10,000 N/A 25.125 12/16/06 178,000 466,000
- -------------------------------------------------------------------------------------------------------------------------------
36
(1) Options on Units are awarded at the fair market value of 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) 725,000 Units were subject to outstanding option grants.
Aggregated Option Exercises in 1996 and 1996 Year-End Option Values
The following table summarizes for each of the Named Executive Officers the
number of options exercised during 1996, the aggregate dollar value realized
upon exercise, the total number of Units subject to unexercised options held at
December 31, 1996, and the aggregate dollar value of in-the-money, unexercised
options held at December 31, 1996. Value realized upon exercise is the
difference between the fair market value of the underlying 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 Units on December 31, 1996, which was
$26.625 per Unit. These values, have not been, and may never be, realized. The
underlying options have not been, and may never be, exercised; and actual gains,
if any, on exercise will depend on the value of the Partnership's Units on the
date of exercise. There can be no assurance that these values will be realized.
Aggregated Option Exercises In 1996
and December 31, 1996 Option Values
Number of Units Value of Unexercised,
Underlying Unexercised In-the-Money Options
Options at December 31, 1996 at December 31, 1996 ($)(1)
Options Value ---------------------------- ------------------------------
Exercised Realized
Name (# Units) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
Dave H. Williams 0 N/A 0 0 0 0
John D. Carifa 0 N/A 115,000 260,000 801,875 1,857,500
Bruce W. Calvert 0 N/A 110,000 240,000 765,625 1,712,500
Robert H. Joseph, Jr. 0 N/A 37,000 48,000 430,750 268,375
David R. Brewer, Jr. 0 N/A 68,000 34,000 1,036,250 169,875
- -------------------------------------------------------------------------------------------------------------------------
(1) In-the-Money Options are those where the fair market value of the
underlying Units exceeds the exercise price of the option. The Named
Executive Officers hold no other options in respect of the Units.
COMPENSATION AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
In connection with the transfer of ACMC's business to the Partnership on
April 21, 1988 Messrs. Carifa and Calvert entered into employment agreements
37
with the Partnership. Each of these agreements provided for a base salary and
bonus eligibility. These agreements expired on December 31, 1996.
The employment agreements provided for discretionary bonus eligibility.
Bonus amounts are fixed by the Board Compensation Committee after receiving
recommendations from the Management Compensation Committee. The aggregate
amount available for bonuses and contributions and awards under various employee
plans to all employees is based on the annual adjusted consolidated net
operating earnings of the Partnership.
In connection with Equitable's 1985 acquisition of DLJ, the former parent
of ACMC, 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 $378,900, $522,036, and
$434,612, respectively. While the Partnership assumed responsibility for
payment of these deferred compensation obligations, ACMC and Alliance are
required, subject to certain limitations, to make capital contributions to the
Partnership 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 the Partnership are guaranteed, subject to certain limitations,
by Equitable Investment Corporation ("EIC"), a wholly-owned subsidiary of
Equitable, the parent of Alliance.
EMPLOYEE BENEFIT PLANS
UNIT OPTION PLAN. Pursuant to the Partnership's Unit Option Plan key
employees of the Partnership and its subsidiaries, other than Messrs. Williams,
Harrison, Carifa and Calvert, may be granted options to purchase up to 4,923,076
Units. Options may be granted only to employees who the Option Committee of the
General Partner, consisting of Mr. Holloway and Ms. Talley which administers the
Plan, after obtaining recommendations from the Management Compensation
Committee, determines materially contribute, or are expected to materially
contribute, to the growth and profitability of the Partnership's business. The
number of options to be granted to any employee is to be determined in the
discretion of the Board Compensation Committee. Options may be granted with
terms of up to ten years, and an employee's right to exercise each option will
vest at a rate no faster than 20% per year commencing on the first anniversary
of the date of grant. Each option will have an exercise price no less than the
fair market value of the Units subject to option at the time the option is
granted, payable in cash. Generally, options may only be exercisable while the
optionee is employed by the Partnership. Options may not be granted under the
Unit Option Plan after ten years from its adoption. See "Option Grants in 1996
and "Aggregated Option Exercises in 1996 and 1996 Year-End Option Values."
38
1993 UNIT OPTION PLAN. Pursuant to the Partnership's 1993 Unit Option Plan
key employees of the Partnership and its subsidiaries may be granted options to
purchase Units. The aggregate number of Units that may be the subject of
options granted or awarded under the 1993 Unit Option Plan, the Unit Bonus Plan
and the Century Club Plan may not exceed 3,200,000 Units ("Overall Limitation").
In addition the maximum aggregate number of Units that may be the subject of
options granted or awarded under the 1993 Unit Option Plan, the Unit Bonus Plan
and the Century Club Plan in any of the years ended July 22, 1994, 1995, 1996
and 1997 may not exceed 800,000 Units ("Annual Limitation"). The maximum number
of Units that may otherwise be the subject of options granted under the 1993
Unit Option Plan will be increased by the number of Units tendered to the
Partnership by employees in payment of either the exercise price or withholding
tax liabilities. Options may be granted only to employees who the Option
Committee of the General Partner, which administers the Plan, after obtaining
recommendations from the Management Compensation Committee, determines
materially contribute, or are expected to materially contribute, to the growth
and profitability of the Partnership's business. Options may be granted with
terms of up to ten years, and an employee's right to exercise each option will
vest at a rate no faster than 20% per year commencing on the first anniversary
of the date of grant. Each option will have an exercise price no less than the
fair market value of the Units subject to the option at the time the option is
granted, payable in cash. Generally, options may only be exercisable while the
optionee is employed by the Partnership or one of its subsidiaries. Options may
not be granted under the 1993 Unit Option Plan after ten years from its
adoption. See "Option Grants in 1996" and "Aggregated Option Exercises in 1996
and 1996 Year-End Option Values."
PROFIT SHARING PLAN. The Partnership maintains a qualified defined
contribution profit sharing plan covering most employees of the Partnership who
have attained age 21 and completed one year of service. Annual contributions
are determined by the Board of Directors in its sole discretion and are
allocated among participants who are employed by a participating employer on the
last business day of the calendar year involved by crediting each participant
with the same proportion of the contribution as the participant's base
compensation bears to the total base compensation of all participants. The plan
provides for a 401(k) salary reduction election under which the Partnership may
match a participant's election to reduce up to 5% of base salary. A
participant's interest in the plan is 100% vested after the participant has
completed three years of service although account balances deriving from salary
reductions are 100% vested at all times. The Partnership's contributions under
the plan for a given year may not exceed 15% of the aggregate compensation paid
to all participants for that year. Contributions to a participant's plan
account (including contributions made by a participant) for a particular year
may not exceed 25% of the participant's compensation for that year or $30,000,
whichever is less. The amount of the benefits ultimately distributed to an
employee is dependent on the investment performance of the employee's account
under the plan. Distribution of vested account balances under the plan is made
upon termination of employment either in a lump sum or in installments for a
specific period of years. If a participant dies prior to termination of his
employment,
39
the entire value of his account is paid to the participant's beneficiary. For
1996 vested contributions to the plan for the accounts of Messrs. Williams,
Carifa, Calvert, Joseph and Brewer were $15,525, $22,500, $22,500, $22,500 and
$21,981, respectively. These amounts are included in column (i) of the Summary
Compensation Table.
RETIREMENT PLAN. The Partnership maintains a qualified, non-contributory,
defined benefit retirement plan covering most employees of the Partnership 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 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 the Partnership 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 the Partnership. 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.
Estimated Annual Benefits
---------------------------------------------------------------------------------------------------
Average Final Years of Service at Retirement
---------------------------------------------------------------------------------------------------
Compensation 15 20 25 30 35 40 45
$100,000 $ 19,643 $ 26,190 $ 32,738 $ 39,286 $ 45,833 $ 50,833 $ 55,833
150,000 30,893 41,190 51,488 61,786 72,083 79,583 87,083
200,000 42,143 56,190 70,238 84,286 98,333 100,000 100,000
250,000 53,393 71,190 88,988 100,000 100,000 100,000 100,000
300,000 64,643 86,190 100,000 100,000 100,000 100,000 100,000
Assuming they are employed by the Partnership 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
40
compensation. The compensation for calculation of plan benefits for each of
these five individuals for 1996 is $150,000, $150,000, $150,000, $150,000 and
$135,000, respectively.
UNIT BONUS PLAN. Pursuant to the Partnership's Unit Bonus Plan the Unit
Option and Unit Bonus Committee may award Units to key employees of the
Partnership and its subsidiaries. The aggregate number of Units that may be the
subject of awards or grants under the Unit Bonus Plan, the 1993 Unit Option Plan
and the Century Club Plan may not exceed the Overall Limitation and the maximum
aggregate number of Units that may be the subject of awards or grants under the
Unit Bonus Plan, the 1993 Unit Option Plan and the Century Club Plan in any of
the years ended July 22, 1994, 1995, 1996 and 1997 may not exceed the Annual
Limitation. The number of Units that may otherwise be awarded under the Unit
Bonus Plan will increase by the number of Units tendered to the Partnership in
payment of withholding tax liabilities in respect of Unit Bonus Plan awards.
Units awarded under the Unit Bonus Plan may be vested or unvested (i.e., subject
to forfeiture) at the time of award. Unvested Units will vest or become
nonforfeitable in accordance with the conditions specified by the Board
Compensation Committee at the time of award.
CENTURY CLUB PLAN. Pursuant to the Partnership's Century Club Plan up to
200,000 Units may be awarded to employees of AFD or another subsidiary of the
Partnership who attain certain sales targets or sales criteria determined by the
Century Club Committee. The maximum aggregate number of Units that may be
awarded under the Century Club Plan, the 1993 Unit Option Plan and the Unit
Bonus Plan may not exceed the Overall Limitation and the maximum aggregate
number of Units that may be awarded under the Century Club Plan, the 1993 Unit
Option Plan and the Unit Bonus Plan in any of the years ended July 22, 1994,
1995, 1996 and 1997 may not exceed that Annual Limitation. Units awarded under
the Century Club Plan may be vested or unvested (i.e., subject to the
forfeiture) at the time of award. Unvested Units will vest or become
nonforfeitable in accordance with the conditions specified by the Century Club
Committee at the time of award.
None of the Named Executive Officers is eligible to receive an award under
the Century Club Plan.
ALLIANCE PARTNERS COMPENSATION PLAN. During 1995 the Partnership
established a nonqualified, unfunded deferred compensation program known as the
Alliance Partners Compensation Plan ("Partners Compensation Plan") under which
certain eligible employees are granted awards by the Management Compensation
Committee. The awards consist of cash amounts which are generally credited with
earnings based on the Partnership's earnings growth rate. The Partners
Compensation Plan is administered by the Management Compensation Committee which
determines the recipients of awards and the amount of awards. The Board of
Directors of the General Partner may terminate the Partners Compensation Plan at
any time without cause in which case the Partnership's liability would be
limited to the payment of vested awards. All awards granted in 1995 vest over
three years and all awards granted in 1996 and subsequent years vest over eight
41
years to the extent the grantee remains employed by the Partnership during such
three or eight year period. Payment of vested benefits generally will be made
in cash over a five year period commencing at retirement. The amount awarded in
1996 under the Partners Compensation Plan was $12,350,000 and for 1997 and
subsequent years the Partnership may award 4.5% and 5%, respectively, of
operating revenues less operating expenses under the Partners Compensation Plan.
Messrs. Carifa, Calvert, Joseph and Brewer were granted awards of $1,000,000,
$1,000,000, $250,000 and $250,000, respectively, under the Partners Compensation
Plan for 1996. These amounts are not included in column (i) of the Summary
Compensation Table since none of these awards have vested and no earnings have
been credited in respect of the awards.
PARTNERS PLAN. Since 1983 a nonqualified, unfunded deferred compensation
program known as the Partners Plan has been maintained under which certain key
employees received incentive awards pursuant to a formula set each year by the
Management Compensation Committee. No awards have been or will be made under
the Partners Plan for any year after 1987. All awards are fully vested. Unless
accelerated, award account balances generally are distributed upon resignation,
retirement, disability or death. The Board of Directors of the General Partner
has the right to accelerate vesting and make distributions of up to 90% of a
participant's account balance if the key employee agrees to extend the term of
his employment for a period of at least one year. Until distributed, the awards
are credited with interest based on prevailing market rates plus, for the years
prior to 1989, a premium if the Partnership's earnings growth rate exceeded
certain levels. Interest credited during 1996 for the accounts of Messrs.
Williams, Carifa and Calvert was $13,557, $5,301, and $4,676, respectively.
These amounts are included in column (i) of the Summary Compensation Table. No
amounts were distributed under the Partners Plan for any of the Named Executive
Officers in 1996.
CAPITAL ACCUMULATION PLAN. Since 1985 a nonqualified, unfunded deferred
compensation program known as the Capital Accumulation Plan has been
maintained to provide retirement benefits for key employees and their
beneficiaries which supplement their benefits under the Retirement Plan
described above. Under this plan, at the end of 1985, 1986 and 1987, awards
were made for each participant, selected on the basis of performance by the
Management Compensation Committee, equal to a percentage of the participant's
base salary and the participant's discretionary bonus for the year. The
amount awarded was credited to the participant's account on the Partnership's
books to which interest is thereafter credited, until distributed or
forfeited, based on prevailing market rates. A participant's account balance
vests based on the participant's years in the plan with no vesting for zero
to four years of participation, 30% vesting after five to seven years with
gradually increased vesting thereafter ranging to 87% after 35 years of
participation and 100% vesting at age 65 or death. Upon termination of
employment other than by reason of permanent disability or death, the
participant's vested account balance is to be paid out in ten equal annual
installments. In the event of permanent disability, the participant is to
receive the higher of the vested balance at the time of disability or 50% of
the total balance at the time of disability, in either case payable in ten
equal
42
annual installments. In the event of death, the participant's beneficiary is to
receive the higher of (i) the participant's account balance paid in ten equal
annual installments together with interest or (ii) annually 50% of the
participant's total cash compensation for the year prior to the year of the
participant's death payable until the participant would have attained age 65,
but in no event for less than ten years.
While the Partnership is responsible for the payment of all obligations
under the plan, ACMC and Alliance are required, subject to certain limitations,
to make capital contributions to the Partnership in an amount equal to the
payments. ACMC's obligations are guaranteed, subject to certain limitations, by
EIC. No additional awards will be made under this plan, but employees will
continue to vest in their existing account balances and to be credited with
interest at prevailing market rates on balances. A participant's total cash
compensation for 1987 increased by 5% per year, compounded annually, will be
considered his total cash compensation for purposes of determining the amount of
any death benefits payable in respect of the participant. The Board of
Directors of the General Partner intends to cancel this plan if tax legislation
is enacted which adversely affects certain benefits derived by ACMC from
insurance on the lives of certain of the Partnership's employees purchased in
connection with the plan. If the plan is cancelled, the Board of Directors of
the General Partner may, at its option, either pay each participant his then
vested account balance or continue to maintain the account balances for vesting
and distribution as described above as if the plan had not terminated, provided
that in such event no death benefit based on a participant's total cash
compensation will be paid. The plan account balances which became vested during
1996 for the accounts of Messrs. Williams, Carifa and Calvert were $42,336,
$24,911 and $25,989, respectively. These amounts are included in column (i) of
the Summary Compensation Table.
DEFERRAL PLAN. Under this plan, certain employees of the Partnership may
elect to defer for at least one year the receipt of base or bonus compensation
otherwise payable in a given year to January 31 of the year selected. Interest
is credited at prevailing market rates on the amounts deferred under this plan
until paid. In certain cases, 10% of a deferred amount is subject to forfeiture
if the employee's employment terminates prior to the January 31 payment date for
any reason other than death or disability. There was no compensation deferred
from 1996 to a subsequent year for the Named Executive Officers. During 1996
there were no payments of previously deferred compensation to or interest
credited on amounts deferred by any of the Named Executive Officers.
DLJ PLANS. Prior to Equitable's 1985 acquisition of DLJ, certain employees
of the Partnership participated in various DLJ employee benefit plans and
arrangements. Since the acquisition, no employer contributions or awards have
been made, nor in the future are any employer contributions or awards to be
made, under these plans or arrangements for any employee of the Partnership. No
deferral of compensation earned by any such employee for services rendered since
the acquisition has been permitted under any such plan or arrangement.
43
The Partnership has no liability for and will not bear the cost of any benefits
under these plans and arrangements.
In 1983 DLJ adopted an Executive Supplemental Retirement Program under
which certain employees of the Partnership 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 $ 41,825
John D. Carifa 114,597
Bruce W. Calvert 145,036
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SECURITY HOLDERS
The Partnership has no information that any person beneficially owns more
than 5% of the outstanding Units except (i) Equitable, ACMC and ECMC, wholly-
owned subsidiaries of ECI, and (ii) as reported on Schedule 13D dated October
22, 1996, filed with the SEC by AXA-UAP 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.
Name and Address of Amount and Nature of Beneficial Percent
Beneficial Owner Ownership Reported on Schedule of Class
- ---------------- ------------------------------ --------
AXA-UAP (1)(2)(3) 48,089,183 (4) 57.9%
9 Place Vendome,
75001 Paris,
France
ECI (3) 48,089,183 (4) 57.9%
787 Seventh Avenue
New York, New York 10019
44
(1) For insurance regulatory purposes the shares of capital stock of ECI
beneficially owned by AXA-UAP and its subsidiaries have been deposited into a
voting trust which has an initial term of 10 years ("Voting Trust") commencing
May 12, 1992. The Voting Trustees are Claude Bebear, Patrice Garnier and Henri
de Clermont-Tonnerre. The Voting Trustees have agreed to exercise their voting
rights to protect the legitimate economic interests of AXA-UAP, but with a view
to ensuring that certain minority shareholders of AXA-UAP do not exercise
control over ECI or certain of its insurance subsidiaries. See "Item 1.
Business-General".
(2) The Voting Trustees may be deemed to be beneficial owners of all Units
beneficially owned by AXA-UAP and its subsidiaries. In addition, the Mutuelles
AXA, as a group, and Finaxa may be deemed to be beneficial owners of all Units
beneficially owned by AXA-UAP and its subsidiaries. By virtue of the provisions
of the Voting Trust Agreement, AXA-UAP may be deemed to have shared voting power
with respect to the Units. AXA-UAP and its subsidiaries have the power to
dispose or direct the disposition of all shares of the capital stock of ECI
deposited in the Voting Trust. By reason of their relationship with AXA-UAP,
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
Units beneficially owned by AXA-UAP and its subsidiaries. The address of each
of AXA-UAP and the Voting Trustees is 9 Place Vendome, 75001 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 Assurances I.A.R.D.
Mutuelle and AXA Assurances Vie Mutuelle is 21 rue de Chateaudun, 75009 Paris,
France; the address of Alpha Assurances Vie Mutuelle is Tour Franklin, 100/101
Terrasse Boidlieu, Cedex 11, 92042 Paris La Defense, 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. See "Item 1. Business-
General".
(3) By reason of their relationship, AXA-UAP, the Voting Trustees, ECI,
Equitable, ACMC, ECMC, the Mutuelles AXA and Finaxa may be deemed to share the
power to vote or to direct the vote or to dispose or direct the disposition of
the 48,089,183 Units. See "Item 1. Business - General".
(4) Includes 551,395 Units which are issuable upon conversion of the Class A
Limited Partnership Interest held by ECMC.
MANAGEMENT
The following table sets forth, as of March 1, 1997, the beneficial
ownership of 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:
45
Name of Number of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- ----------------------------- ----------
Dave H. Williams (1)(2) 1,044,456 1.3%
Luis Javier Bastida 0 *
Claude Bebear (1) 0 *
James M. Benson (1) 0 *
Bruce W. Calvert (3) 754,500 *
John D. Carifa (4) 952,568 1.1%
Henri de Castries (1) 0 *
Kevin C. Dolan (1) 0 *
Denis Duverne (1) 0 *
Alfred Harrison 365,410 *
Jean-Pierre Hellebuyck (1) 0 *
Benjamin D. Holloway 5,800 *
Joseph J. Melone (1) 5,000 *
Peter D. Noris (1) 1,000 *
Frank Savage 50,000 *
Jerry M. de St. Paer (1) 500 *
Madelon DeVoe Talley 0 *
Reba W. Williams (5) 1,044,456 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. (6) 115,154 *
Robert H. Joseph, Jr. (7) 51,000 *
All Directors and executive 3,345,388 4.0%
officers of the General Partner
as a Group (21 persons)(8)
* Number of Units listed represents less than 1% of the Units outstanding.
(1) Excludes Units beneficially owned by AXA-UAP and ECI. Messrs. Williams,
Bebear, Benson, de Castries, Dolan, Duverne, Hellebuyck, Melone, Noris and
de St. Paer are directors and/or officers of AXA-UAP, ECI and/or Equitable.
(2) Includes 80,000 Units owned by Mrs. Reba W. Williams.
(3) Includes 135,000 Units which may be acquired within 60 days under the
Partnership's 1993 Unit Option Plan.
(4) Includes 145,000 Units which may be acquired within 60 days under the
Partnership's 1993 Unit Option Plan.
(5) Includes 964,456 Units owned by Mr. Dave H. Williams.
(6) Includes 70,000 Units which may be acquired within 60 days under the
Partnership's Unit Option Plan and 1993 Unit Option Plan.
(7) Includes 41,000 Units which may be acquired within 60 days under the
Partnership's Unit Option Plan and 1993 Unit Option Plan.
(8) Includes 391,000 Units which may be acquired within 60 days under the
Partnership's Unit Option Plan and 1993 Unit Option Plan.
46
The following tables set forth, as of March 1, 1997, the beneficial
ownership of the common stock of ECI, 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:
ECI Common Stock
Name of Number of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- ----------------------------- ----------
Dave H. Williams (1)(2) 60,000 *
Luis Javier Bastida 0 *
Claude Bebear (2) 0 *
James M. Benson (2)(3) 180,833 *
Bruce W. Calvert (4) 30,000 *
John D. Carifa (5) 30,000 *
Henri de Castries (2) 0 *
Kevin C. Dolan (2) 0 *
Denis Duverne (2) 0 *
Alfred Harrison 0 *
Jean-Pierre Hellebuyck (2) 0 *
Benjamin D. Holloway 108 *
Joseph J. Melone (2)(6) 260,186 *
Peter D. Noris (7) 20,000 *
Frank Savage 136 *
Jerry M. de St. Paer (8) 80,000 *
Madelon DeVoe Talley 0 *
Reba W. Williams (1) 60,000 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive 661,263 *
officers of the General Partner
as a Group (21 persons) (9)
* Number of shares listed represents less than one percent (1%) of the number
of shares of Common Stock outstanding.
(1) Represents 60,000 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-UAP. Messrs. Williams, Bebear,
Benson, de Castries, Dolan, Duverne, Hellebuyck and Melone are officers of
AXA-UAP.
(3) Includes 10,000 shares owned jointly by Mr. Benson and his spouse, Marlene
J. Benson, and 209 shares owned in the aggregate by Mr. Benson's two minor
children. Includes 170,000 shares subject to options held by Mr. Benson,
which options Mr. Benson has the right to exercise within 60 days.
(4) Represents 30,000 shares subject to options held by Mr. Calvert, which
options Mr. Calvert has the right to exercise within 60 days.
(5) Represents 30,000 shares subject to options held by Mr. Carifa, which
options Mr. Carifa has the right to exercise within 60 days.
(6) Includes 250,000 shares subject to options held by Mr. Melone, which
options Mr. Melone has the right to exercise within 60 days.
(7) Represents 20,000 shares subject to options held by Mr. Noris, which
options Mr. Noris has the right to exercise within 60 days.
47
(8) Represents 80,000 shares subject to options held by Mr. de St. Paer, which
options Mr. de St. Paer has the right to exercise within 60 days.
(9) Represents 640,000 shares subject to options, which options my be exercised
within 60 days.
AXA Common Stock
Name of Number of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- ----------------------------- ----------
Dave H. Williams 0 *
Luis Javier Bastida 0 *
Claude Bebear (1) 1,274,397 *
James M. Benson 1,000 *
Bruce W. Calvert 0 *
John D. Carifa 500 *
Henri de Castries (2) 33,188 *
Kevin C. Dolan (3) 9,561 *
Denis Duverne 1,000 *
Alfred Harrison 0 *
Jean-Pierre Hellebuyck (4) 22,532 *
Benjamin D. Holloway 0 *
Joseph J. Melone 1,000 *
Peter D. Noris 500 *
Frank Savage 0 *
Jerry M. de St. Paer 0 *
Madelon DeVoe Talley 0 *
Reba W. Williams 0 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive 1,343,678 *
officers of the General Partner
as a Group (21 persons) (5)
* Number of shares listed represents less than one percent (1%) of the
outstanding AXA-UAP common stock.
(1) Includes 22 shares owned by Mr. Bebear's wife, and 1,169,733 shares subject
to options held by Mr. Bebear, which options Mr. Bebear has the right to
exercise within 60 days.
(2) Includes 32,188 shares subject to options held by Mr. de Castries, which
options Mr. de Castries has the right to exercise within 60 days.
(3) Includes 8,370 shares subject to options held by Mr. Dolan, which options
Mr. Dolan has the right to exercise within 60 days.
(4) Includes 16,738 shares subject to options held by Mr. Hellebuyck, which
options Mr. Hellebuyck has the right to exercise within 60 days.
(5) Includes 1,227,029 shares subject to options, which options may be
exercised within 60 days.
48
Finaxa Common Stock
Name of Number of Units and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
---------------- ----------------------------- ----------
Dave H. Williams 0 *
Luis Javier Bastida 0 *
Claude Bebear (1) 466,670 *
James M. Benson 0 *
Bruce W. Calvert 0 *
John D. Carifa 0 *
Henri de Castries(2) 65,000 *
Kevin C. Dolan 0 *
Denis Duverne 0 *
Alfred Harrison 0 *
Jean-Pierre Hellebuyck 0 *
Benjamin D. Holloway 0 *
Joseph J. Melone 0 *
Peter D. Noris 0 *
Frank Savage 0 *
Jerry M. de St. Paer 0 *
Madelon DeVoe Talley 0 *
Reba W. Williams 0 *
Robert B. Zoellick 0 *
David R. Brewer, Jr. 0 *
Robert H. Joseph, Jr. 0 *
All Directors and executive 531,670 *
officers of the General Partner
as a Group (21 persons) (3)
* Number of shares listed represents less than one percent (1%) of the
outstanding AXA-UAP common stock.
(1) Includes 424,413 shares owned by Clauvalor, a French company controlled by
Mr. Bebear, and 42,250 shares subject to options held by Mr. Bebear, which
options Mr. Bebear has the right to exercise within 60 days.
(2) Represents 65,000 shares subject to options held by Mr. de Castries, which
options Mr. de Castries has the right to exercise within 60 days.
(3) Includes 107,250 shares subject to options, which options may be exercised
within 60 days.
The General Partner makes all decisions relating to the management of the
Partnership. The General Partner has agreed that it will conduct no business
other than managing the Partnership, although it may make certain investments
for its own account. Conflicts of interest, however, could arise between the
General Partner and the Unitholders.
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 Agreement of Limited Partnership of Alliance Capital Management L.P. (As
49
Amended and Restated)("Partnership Agreement") sets forth a more limited
standard of liability for the General Partner. The Partnership Agreement
provides that the General Partner is not liable for monetary damages to the
Partnership 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 to the Partnership, with
reckless disregard for the best interests of the Partnership or with actual bad
faith on the part of the General Partner, or constituted actual fraud. Whenever
the Partnership Agreement provides 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 the
Partnership or any Unitholder 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
Partnership Agreement or applicable law.
In addition, the Partnership Agreement grants broad rights of
indemnification to the General Partner and its directors and affiliates and
authorizes the Partnership to enter into indemnification agreements with the
directors, officers, partners, employees and agents of the Partnership and its
affiliates. The Partnership has granted broad rights of indemnification to
officers of the General Partner and employees of the Partnership. In addition,
the Partnership assumed indemnification obligations previously extended by
Alliance to its directors, officers and employees. The foregoing
indemnification provisions are not exclusive, and the Partnership is authorized
to enter into additional indemnification arrangements. The Partnership has
obtained directors and officers liability insurance.
The Partnership Agreement also allows transactions between the Partnership
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 the
Partnership than) those that would prevail with any unaffiliated party. The
Partnership Agreement provides 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 the Partnership and its
subsidiaries) 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 the Partnership than) those that would prevail in a transaction
with an unaffiliated party.
The Partnership Agreement expressly permits all affiliates of the General
Partner (including Equitable and its other subsidiaries) to compete, directly or
indirectly, with the Partnership, to engage in any business or other activity
and to exploit any opportunity, including those that may be available to the
Partnership. AXA-UAP, Equitable and certain of their subsidiaries currently
compete with the Partnership. See "Item 13. Certain Relationships and Related
50
Transactions-Competition." The Partnership Agreement further provides 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 the Partnership, 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 the
Partnership or otherwise involving any conflict of interest or breach of a duty
of loyalty or similar fiduciary obligation.
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
Partnership Agreement are enforceable under Delaware or federal law.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPETITION
AXA-UAP, Equitable and certain of their direct and indirect subsidiaries
provide financial services, some of which are competitive with those offered by
the Partnership. The Partnership Agreement specifically allows Equitable and
its subsidiaries (other than the General Partner) to compete with the
Partnership and to exploit opportunities that may be available to the
Partnership. AXA-UAP, Equitable and certain of their subsidiaries have
substantially greater financial resources than the Partnership or the General
Partner.
FINANCIAL SERVICES
The Partnership Agreement permits Equitable and its affiliates to provide
services to the Partnership on terms comparable to (or more favorable to the
Partnership than) those that would prevail in a transaction with an unaffiliated
third party. The Partnership believes that its arrangements with Equitable and
its affiliates are at least as favorable to the Partnership 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.
The Partnership acts as the investment manager for the general and separate
accounts of Equitable and its insurance company subsidiaries pursuant to
investment advisory agreements. During 1996 the Partnership received
approximately $56.8 million in fees pursuant to these agreements. In connection
with the services provided under these agreements the Partnership provides
ancillary accounting, valuation, reporting, treasury and other services under
service agreements. During 1996 the Partnership received approximately $8.1
million in fees pursuant to these agreements. Equitable provides certain legal
and other services to the Partnership relating to certain insurance and other
regulatory aspects of the general and separate accounts of Equitable and its
51
insurance company subsidiaries. During 1996 the Partnership paid approximately
$1.3 million to Equitable for these services.
During 1996 the Partnership paid Equitable approximately $18.2 million for
certain services provided with respect to the marketing of the variable annuity
insurance and variable life insurance products for which The Hudson River Trust
is the funding vehicle.
Equitable has issued to ACMC life insurance policies on certain employees
of the Partnership, the costs of which are to be borne by ACMC without
reimbursement by the Partnership. During 1996 ACMC paid approximately $5.7
million in insurance premiums on these policies.
The Partnership and its employees are covered under various insurance
policies maintained by Equitable and its other subsidiaries. The amount of
premiums for these group policies paid by the Partnership to Equitable was
approximately $357,000 for 1996.
The Partnership provides investment management services to certain employee
benefit plans of Equitable and DLJ. Advisory fees from these accounts totalled
approximately $4.5 million for 1996 including $2.0 million from the separate
accounts of Equitable.
In April 1996 the Partnership acquired the United States investing
activities and business of National Mutual Funds Management ("NMFM"), a
subsidiary of AXA-UAP for $4.6 million cash. In connection therewith the
Partnership entered into investment management agreements with National Mutual
Holdings Limited, the parent of NMFM and a subsidiary of AXA-UAP, and various of
its subsidiaries (collectively, the "NMH Group"). The NMH Group paid $1.6
million in advisory fees to the Partnership in 1996.
Equico was the Partnership's second largest distributor of U.S. Funds in
1996 for which it received sales concessions from the Partnership on sales of
$679 million. In 1996 Equico also distributed certain of the Partnership's cash
management products. Equico received distribution payments totalling $6.2
million in 1996 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, the Partnership and Pershing have an
agreement pursuant to which Pershing recommends to certain of its correspondent
firms the use of the Partnership's cash management products for which Pershing
is allocated a portion of the revenues derived by the Partnership from sales
through the Pershing correspondents. Amounts paid by the Partnership to DLJ
Securities Corporation, Pershing and Wood Struthers & Winthrop Management Corp.,
a subsidiary of DLJ, in connection with the above distribution services were
$24.3 million in 1996. DLJ and its subsidiaries also provide the Partnership
with brokerage and various other services, including clearing, investment
banking, research, data processing and administrative services. Brokerage, the
52
expense of which is borne by the Partnership's clients, aggregated approximately
$33,000 for 1996. During 1996 the Partnership paid $600,000 to DLJ and its
subsidiaries for all other services.
During 1996 the Partnership reimbursed Equitable in the amount of $3.7
million for rent and the use of certain services and facilities.
The Partnership provides investment management services to AXA Reinsurance
Company, a subsidiary of AXA-UAP pursuant to a discretionary investment advisory
agreement. AXA Reinsurance Company paid the Partnership approximately $552,000
during 1996 for such services. The Partnership provides investment management
services to Abeille Reassurances, a subsidiary of AXA-UAP. Abeille Reassurances
paid the Partnership approximately $11,000 during 1996 for such services.
OTHER TRANSACTIONS
During 1996 the Partnership paid certain legal and other expenses incurred
by Equitable and its insurance company subsidiaries relating to the general and
separate accounts of Equitable and such subsidiaries for which it has been or
will be fully reimbursed by Equitable. The largest amount of such indebtedness
outstanding during 1996 was approximately $1,719,000 which represents the amount
outstanding on March 31, 1996.
Equitable and its affiliates are not obligated to provide funds to the
Partnership, except for ACMC's and the General Partner's obligation to fund
certain of the Partnership's deferred compensation and employee benefit plan
obligations referred to under "Compensation Agreements with Named Executive
Officers" and "Capital Accumulation Plan". The Partnership Agreement permits
Equitable and its affiliates to lend funds to the Partnership at the lender's
cost of funds.
Mrs. Reba W. Williams, the wife of Dave H. Williams, was employed by the
Partnership during 1996 and received compensation in the amount of $100,000.
Certain of the hedge funds managed by the Partnership 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. The Partnership provides investment management
services to the hedge funds and is entitled to receive between 40% and 85% of
the carried interests or performance fees which aggregated approximately $9.2
million for 1996. Mr. Alfred Harrison, a Director and Vice Chairman of the
General Partner, received $323,125 in 1996 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 the Partnership in an amount equal to the
payments the Partnership 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 the Partnership to various
53
employees and their beneficiaries under the Partnership's Capital Accumulation
Plan. In 1996 ACMC made capital contributions to the Partnership in the amount
of $775,000 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 STATEMENTS, 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
Financial Statements in Annual Report
-------------------- ----------------
Consolidated Statements of Financial
Condition, December 31, 1996 and 1995 53
Consolidated Statements of Income,
Years ended December 31, 1996, 1995 and 1994 54
Consolidated Statements of Changes in
Partners' Capital, Years ended
December 31 1996, 1995 and 1994 55
Consolidated Statements of Cash Flows,
Years ended December 31, 1996, 1995, and 1994 56
Notes to Consolidated Financial Statements 57 - 68
Independent Auditors' Report 69
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.
A report on Form 8-K dated October 7, 1996 was filed during the last
quarter of 1996 reporting that the United States District Court for the Southern
District of New York granted the Partnership's and other defendants' motion to
dismiss all counts of the complaint for IN RE ALLIANCE NORTH AMERICAN GOVERNMENT
INCOME TRUST, INC. SECURITIES LITIGATION.
(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 13.8, incorporated by reference
herein:
54
Exhibit Description
- ------- -----------
10.92 Unit Option Plan Agreement dated December 16, 1996 with Robert H.
Joseph, Jr.
10.93 Unit Option Plan Agreement dated December 16, 1996 with David R.
Brewer, Jr.
10.94 First Amendment to Revolving Credit Agreement dated March 11,
1997 among Alliance Capital Management L.P., the First National
Bank of Boston and NationsBank N.A. (South)
10.95 Fourth Lease Modification dated June 18, 1996 by and between
Hartz Mountain Development Corporation and Alliance Capital
Management L.P.
10.96 Fifth Lease Modification dated July 18, 1996 by and between Hartz
Mountain Development Corporation and Alliance Capital Management
L.P.
13.8 Alliance Capital Management L.P. 1996 Annual Report to
Unitholders
22.8 Subsidiaries of the Registrant
24.7 Consent of KPMG Peat Marwick LLP
25.68 Power of Attorney by Claude Bebear
25.69 Power of Attorney by Luis Javier Bastida
25.70 Power of Attorney by James M. Benson
25.71 Power of Attorney by Henri de Castries
25.72 Power of Attorney by Kevin C. Dolan
25.73 Power of Attorney by Jean-Pierre Hellebuyck
25.74 Power of Attorney by Benjamin D. Holloway
25.75 Power of Attorney by Denis Duverne
25.76 Power of Attorney by Joseph J. Melone
25.77 Power of Attorney by Peter D. Noris
25.78 Power of Attorney by Jerry M. de St. Paer
25.79 Power of Attorney by Madelon DeVoe Talley
25.80 Power of Attorney by Robert B. Zoellick
27.01 Financial Data Schedule
55
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 25, 1997 By: /s/Dave H. Williams
-------------------------------
Dave H. Williams
Chairman
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 25, 1997 /s/John D. Carifa
-----------------------------------
John D. Carifa
President and Chief Operating Officer
Date: March 25, 1997 /s/Robert H. Joseph, Jr.
-----------------------------------
Robert H. Joseph, Jr.
Senior Vice President and Chief
Financial Officer
56
Directors
/s/Dave H. Williams *
- ------------------------------ ---------------------------------------
Dave H. Williams Jean-Pierre Hellebuyck
Chairman and Director Director
* *
- ------------------------------ ---------------------------------------
Luis Javier Bastida Benjamin D. Holloway
Director Director
* *
- ------------------------------ ---------------------------------------
Claude Bebear Joseph J. Melone
Director Director
* *
- ------------------------------ ---------------------------------------
James M. Benson Peter D. Noris
Director Director
/s/Bruce W. Calvert /s/Frank Savage
- ------------------------------ ---------------------------------------
Bruce W. Calvert Frank Savage
Director Director
/s/John D. Carifa *
- ------------------------------ ---------------------------------------
John D. Carifa Jerry M. de St. Paer
Director Director
* *
- ------------------------------ ---------------------------------------
Henri de Castries Madelon DeVoe Talley
Director Director
* /s/Reba W. Williams
- ------------------------------ ---------------------------------------
Kevin C. Dolan Reba W. Williams
Director Director
* *
- ------------------------------ ---------------------------------------
Denis Duverne Robert B. Zoellick
Director Director
/s/Alfred Harrison *By/s/David R. Brewer, Jr.
- ------------------------------ ---------------------------------------
Alfred Harrison David R. Brewer, Jr.
Director (Attorney-in-Fact)