FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-9818
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ALLIANCE CAPITAL MANAGEMENT L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3434400
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1345 Avenue of the Americas, New York, NY 10105
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(Address of principal executive offices)
(Zip Code)
(212) 969-1000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of Units representing assignments of beneficial ownership of Limited
Partnership Interests outstanding as of September 30, 1995 was 80,930,151 Units.
ALLIANCE CAPITAL MANAGEMENT L.P.
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS PAGE
Condensed Consolidated Statements of Financial Condition 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Changes in
Partners' Capital 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-13
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 14
Item 2. CHANGES IN SECURITIES 14
Item 3. DEFAULTS UPON SENIOR SECURITIES 14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF 14
SECURITY HOLDERS
Item 5. OTHER INFORMATION 14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 14
1
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
ASSETS 9/30/95 12/31/94
------ --------- --------
Cash and cash equivalents....................... $139,778 $ 52,199
Fees receivable:
Alliance mutual funds......................... 34,224 31,366
Other affiliated clients...................... 1,749 14,238
Institutional clients......................... 41,169 39,265
Receivable from brokers and dealers for sale
of shares of Alliance mutual funds............ 26,180 17,984
Investments, available-for-sale................. 50,214 49,763
Furniture, equipment and leasehold
improvements, net............................. 44,082 43,830
Intangible assets, net.......................... 86,402 92,962
Deferred sales commissions, net................. 145,645 158,343
Other assets.................................... 17,689 18,419
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Total assets.............................. $587,132 $518,369
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-------- --------
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Liabilities:
Accounts payable and accrued expenses........... $ 72,143 $ 59,784
Payable to Alliance mutual funds for share
purchases..................................... 41,106 32,507
Accrued expenses under employee benefit plans... 70,639 40,878
Debt............................................ 3,483 3,871
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Total liabilities......................... 187,371 137,040
Partners' capital................................. 399,761 381,329
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Total liabilities and partners' capital... $587,132 $518,369
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-------- --------
See accompanying notes to condensed consolidated financial statements.
2
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per Unit amounts)
Three Months Ended Nine Months Ended
------------------ ------------------
9/30/95 9/30/94 9/30/95 9/30/94
-------- -------- -------- --------
Revenues
Investment advisory and services fees:
Alliance mutual funds............................ $ 61,417 $ 54,429 $168,566 $158,046
Other affiliated clients......................... 9,610 10,131 33,451 30,629
Institutional clients............................ 46,600 41,226 129,017 120,865
Distribution plan fees from Alliance mutual funds.. 33,388 34,159 93,036 102,944
Shareholder servicing and administration fees...... 10,825 10,226 32,115 30,251
Other revenues..................................... 2,826 1,799 7,285 6,673
-------- -------- -------- --------
164,666 151,970 463,470 449,408
-------- -------- -------- --------
Expenses:
Employee compensation and benefits................. 43,950 43,120 125,477 129,074
Promotion and servicing:
Distribution plan payments to financial
intermediaries:
Affiliated..................................... 6,222 5,222 17,061 15,185
Unaffiliated................................... 22,707 20,910 62,680 64,212
Amortization of deferred sales commissions....... 12,645 13,273 38,172 38,136
Other............................................ 9,244 10,197 29,822 33,076
General and administrative......................... 23,211 18,274 62,724 51,226
Interest........................................... 238 2,469 877 7,193
Amortization of intangible assets.................. 2,186 2,186 6,560 6,263
-------- -------- -------- --------
120,403 115,651 343,373 344,365
-------- -------- -------- --------
Income before income taxes........................... 44,263 36,319 120,097 105,043
Income taxes....................................... 3,256 1,634 7,806 6,663
-------- -------- -------- --------
Net income........................................... $ 41,007 $ 34,685 $112,291 $ 98,380
-------- -------- -------- --------
-------- -------- -------- --------
Net income per Unit.................................. $ 0.50 $ 0.43 $ 1.37 $ 1.27
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of Units and Unit
equivalents outstanding............................ 81,596 80,393 81,456 76,703
-------- -------- -------- --------
-------- -------- -------- --------
See accompanying notes to condensed consolidated financial statements.
3
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of
Changes in Partners' Capital
(unaudited)
(in thousands)
Three Months Ended Nine Months Ended
------------------ ------------------
9/30/95 9/30/94 9/30/95 9/30/94
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Partners' capital - beginning of period............. $391,854 $271,615 $381,329 $214,045
Net income........................................ 41,007 34,685 112,291 98,380
Capital contribution received from Alliance
Capital Management Corporation.................. 902 883 2,720 2,260
Distributions to partners......................... (35,150) (31,233) (101,987) (91,120)
Proceeds from sale of Units....................... - 100,000 - 150,000
Unit options exercised............................ 1,950 1,088 4,000 3,462
Issuance of Units to employees.................... - - 1,920 -
Unrealized loss on investments.................... (799) - (525) -
Foreign currency translation adjustment........... (3) 1 13 12
-------- -------- -------- ---------
Partners' capital - end of period................... $399,761 $377,039 $399,761 $377,039
-------- -------- -------- ---------
-------- -------- -------- ---------
See accompanying notes to condensed consolidated financial statements.
4
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands, except per unit amounts)
Nine Months Ended
--------------------
9/30/95 9/30/94
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Cash flows from operating activities:
Net income ................................................ $112,291 $ 98,380
Adjustments to reconcile net income to
net cash provided from operating activities:
Amortization and depreciation............................ 50,982 50,047
Other, net............................................... 4,389 4,475
Changes in assets and liabilities:
Decrease in fees receivable from Alliance
mutual funds, other affiliated clients and
institutional clients................................ 7,727 8,759
(Increase) decrease in receivables from brokers and
dealers for sale of shares of Alliance mutual funds.. (8,196) 65,327
(Increase) in deferred sales commissions............... (25,474) (60,428)
(Increase) decrease in other assets.................... 1,268 (384)
Increase in accounts payable and accrued expenses...... 12,742 4,884
Increase (decrease) in payable to Alliance
mutual funds for share purchases..................... 8,599 (90,771)
Increase in accrued expenses under employee benefit
plans, less deferred compensation.................... 27,509 35,189
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Net cash provided from operating activities........ 191,837 115,478
-------- --------
Cash flows from investing activities:
Purchase of investments................................... (34,086) (30,437)
Proceeds from sale of investments......................... 33,110 54,137
Acquisition of Shields and Regent ........................ - (73,570)
Additions to furniture, equipment and
leasehold improvements, net............................. (5,724) (15,223)
-------- -------
Net cash (used in) investing activities............ (6,700) (65,093)
-------- -------
Cash flows from financing activities:
Proceeds from borrowing.................................. 87 100,093
Repayment of debt......................................... (141) (205,176)
Distributions to partners................................. (101,987) (91,120)
Proceeds from sale of Units............................... - 150,000
Capital contribution received from Alliance Capital
Management Corporation.................................. 470 398
Unit options exercised.................................... 4,000 3,462
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Net cash (used in) financing activities............ (97,571) (42,343)
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Effect of exchange rate changes on cash and
cash equivalents.......................................... 13 12
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Net increase in cash and cash equivalents................... 87,579 8,054
Cash and cash equivalents at beginning of period............ 52,199 96,315
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Cash and cash equivalents at end of period.................. $139,778 $104,369
-------- --------
-------- --------
See accompanying notes to condensed consolidated financial statements.
5
ALLIANCE CAPITAL MANAGEMENT L.P.
Notes to Condensed Consolidated Financial Statements
September 30, 1995
(unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of
Alliance Capital Management L.P. ("Partnership") included herein have been
prepared in accordance with the instructions to Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of (a)
financial position at September 30, 1995, (b) results of operations for the
three and nine months ended September 30, 1995 and 1994 and (c) cash flows
for the nine months ended September 30, 1995 and 1994, have been made.
2. RECLASSIFICATION
Certain prior period amounts have been reclassified to conform to the
current period presentation.
3. DEFERRED SALES COMMISSIONS
Sales commissions paid to financial intermediaries in connection with the
sale of shares of open-end mutual funds managed by the Partnership
("Alliance mutual funds") sold without a front-end sales charge are
capitalized and amortized over periods not exceeding five and one half
years, which approximate the periods of time during which deferred sales
commissions are expected to be recovered from distribution plan payments
received from certain Alliance mutual funds and contingent deferred sales
charges received from shareholders of those Alliance mutual funds upon the
redemption of their shares. Contingent deferred sales charges reduce
unamortized deferred sales commissions when received.
4. CONTINGENCIES
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
("Complaint") was filed against the Alliance North American Government
Income Trust, Inc. (the "Fund"), the Partnership and certain other
defendants affiliated with the Partnership, alleging violations of federal
securities laws, fraud and breach of fiduciary duty in connection with the
Fund's investments in Mexican and Argentine securities. The Complaint seeks
certification of a plaintiff class of persons who purchased or owned Class
A, B or C shares of the Fund from March 27, 1992 through December 23, 1994.
The Complaint seeks an unspecified amount of damages, costs, attorneys'
fees and punitive damages. 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
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
6
asset value to decline to the detriment of the Fund's shareholders. The
Partnership believes that the allegations in the Complaint are without
merit and intends to vigorously defend against these claims. While the
ultimate results of this action cannot be determined, management of the
Partnership does not expect that this action will have a material adverse
effect on the Partnership's business.
5. INCOME TAXES
The Partnership is a publicly traded partnership for Federal income tax
purposes and, accordingly, is not currently subject to Federal and state
corporate income taxes but is subject to the New York City unincorporated
business tax. Current law generally provides that certain publicly traded
partnerships, including the Partnership, will be taxable as a corporation
beginning in 1998.
Domestic corporate subsidiaries of the Partnership, which are subject to
Federal, state and local income taxes, file a consolidated Federal income
tax return and separate state and local income tax returns. Foreign
corporate subsidiaries are generally subject to taxes in the foreign
jurisdictions where they are located.
6. NET INCOME PER UNIT
Net income per Unit is derived by reducing net income for each period by 1%
for the general partnership interest held by the General Partner and
dividing the remaining 99% by the weighted average number of Units, Units
issuable upon conversion of the Class A Limited Partnership Interest and
Unit equivalents outstanding during each period.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
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Interest................... $ 182 $1,788 $ 523 $6,801
Income taxes............... 3,241 1,892 8,159 8,051
The 1994 consolidated statement of cash flows does not include the issuance
by the Partnership of new Units to key employees of Shields Asset
Management, Incorporated and its wholly-owned subsidiary, Regent Investor
Services, Incorporated, having an aggregate value of approximately $15
million in connection with their entering into long-term employment
agreements since this transaction did not provide or use cash.
7
8. SUBSEQUENT EVENTS
On October 19, 1995, the Partnership sold $15.0 million of its $21.3 million
principal amount of Tax and Revenue Anticipation Notes Series A issued by
Orange County, California ("Orange County Obligations"). The sale proceeds
approximated the carrying value of the Orange County Obligations.
On October 24, 1995, the Finance Committee of the Board of Directors of the
General Partner declared a distribution of $39,287,000 or $0.48 per Unit
representing the Available Cash Flow (as defined in the Partnership
Agreement) of the Partnership for the three months ended September 30, 1995.
The distribution will be paid on November 13, 1995 to holders of record on
November 6, 1995.
On October 24, 1995, the Partnership announced that it had reached an
agreement in principle to acquire the business of Cursitor-Eaton Asset
Management Company and Cursitor Holdings Limited (collectively, "Cursitor"),
for $141.5 million in cash and Units, part of which will be payable over the
next four years, and substantial additional consideration which will be
determined at a later date. The transaction is subject to the execution of
definitive agreements, approvals by boards of directors, consents and
regulatory approvals, and certain other closing conditions, including client
approval of the transfer of Cursitor accounts.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Alliance Capital Management L.P. (the "Partnership") derives substantially all
of its revenues and net income from fees for investment advisory, distribution
and other services provided to its sponsored mutual funds, The Hudson River
Trust ("HRT") and cash management accounts and from fees for investment advisory
services provided to institutional clients and The Equitable Life Assurance
Society of the United States ("ELAS"), a wholly-owned subsidiary of The
Equitable Companies Incorporated, and certain of its subsidiaries. The
Partnership offers a diversified range of investment management products and
services to meet the varied needs and objectives of individual and institutional
investors.
On March 7, 1994, the Partnership acquired the business and substantially all of
the assets of Shields Asset Management, Incorporated ("Shields") and its wholly-
owned subsidiary, Regent Investor Services, Incorporated ("Regent"). The
acquisition was accounted for under the purchase method with the results of
Shields and Regent included in the Partnership's condensed consolidated
financial statements from the acquisition date. The acquisition expanded the
Partnership's presence in the multi-employer, or Taft-Hartley, pension market
and the individual "wrap fee" business.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
(Dollars & Units in millions, Three months ended Nine months ended
except per Unit amounts) 9/30/95 9/30/94 % Change 9/30/95 9/30/94 % Change
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Net income $41.0 $34.7 18.2% $112.3 $98.4 14.1%
Net income per Unit $0.50 $0.43 16.3 $1.37 $1.27 7.9
Weighted average number of Units
and Unit equivalents outstanding 81.6 80.4 1.5 81.5 76.7 6.3
Operating margin 29.1% 26.2% 28.3% 25.6%
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The increases in net income are primarily attributable to increases in
investment advisory and services fees due to higher average assets under
management, principally from market appreciation. During the first quarter of
1995, management of the Partnership implemented a series of cost reduction
initiatives which resulted in lower operating expenses. The reduction in
operating expenses combined with the increase in investment advisory and
services fees resulted in a significant increase in the Partnership's operating
margins from the prior year periods.
ASSETS UNDER MANAGEMENT
(Dollars in billions) 9/30/95 9/30/94 $ Change % Change
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Institutional $ 74.5 $62.7 $11.8 18.8%
Other affiliated clients 22.2 20.3 1.9 9.4
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96.7 83.0 13.7 16.5
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Alliance mutual funds:
Load mutual funds 22.9 23.0 (0.1) (0.4)
Cash management services 13.1 8.8 4.3 48.9
Hudson River Trust 11.2 8.3 2.9 34.9
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47.2 40.1 7.1 17.7
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Total $143.9 $123.1 $20.8 16.9%
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9
AVERAGE ASSETS UNDER MANAGEMENT
Three months ended Nine months ended
(Dollars in billions) 9/30/95 9/30/94 % Change 9/30/95 9/30/94 %Change
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Institutional $ 74.3 $ 63.7 16.6% $ 68.7 $ 62.5 9.9%
Other affiliated clients 22.1 20.4 8.3 21.9 20.5 6.8
Mutual funds 45.3 40.0 13.3 41.6 39.6 5.1
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Total $141.7 $124.1 14.2% $132.2 $122.6 7.8%
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The most significant developments during the first three quarters of 1995 have
been the substantial increase in U.S. equity markets and the marked improvement
in both domestic and international fixed income markets. The Partnership's
assets under management were $143.9 billion at September 30, 1995, an increase
of $8.1 billion and $20.8 billion from June 30, 1995 and September 30, 1994,
respectively, primarily as a result of market appreciation.
Institutional assets under management, including other affiliated assets
(principally, Equitable general accounts) increased from September 30, 1994
due principally to market appreciation of $15.0 billion, offset partially by
net institutional asset withdrawals of $1.3 billion. Mutual fund assets
under management at September 30, 1995 were $47.2 billion, an increase of
$7.1 billion or 17.7% from September 30, 1994, due principally to market
appreciation of $3.6 billion and net mutual fund sales of $3.5 billion. Cash
management services assets under management increased $4.3 billion due to
substantial net sales from existing and new financial intermediary
relationships. The increase in The Hudson River Trust assets under
management is primarily due to market appreciation of $1.6 billion and net
sales of $1.3 billion. The Partnership's load mutual fund assets decreased
$0.1 billion, primarily as a result of net mutual fund redemptions of $2.1
billion, offset partially by market appreciation of $2.0 billion.
REVENUES
Three months ended Nine months ended
(Dollars in millions) 9/30/95 9/30/94 % Change 9/30/95 9/30/94 % Change
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Investment advisory and
services fees:
Alliance mutual funds $ 61.4 $ 54.5 12.7% $168.6 $158.0 6.7%
Other affiliated clients 9.6 10.1 (5.0) 33.4 30.7 8.8
Institutional clients 46.6 41.2 13.1 129.0 120.9 6.7
Distribution plan fees from
Alliance mutual funds 33.4 34.2 (2.3) 93.1 102.9 (9.5)
Shareholder servicing and
administration fees 10.8 10.2 5.9 32.1 30.2 6.3
Other revenues 2.9 1.8 61.1 7.3 6.7 9.0
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Total Revenues $164.7 $152.0 8.4% $463.5 $449.4 3.1%
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Investment advisory and services fees increased $11.8 million or 11.2% for the
three months and $21.4 million or 6.9% for the nine months due primarily to
higher average assets under management resulting principally from market
appreciation. In general, the Partnership's investment advisory and services
fees are based on the market value of assets under management and vary with the
type of account managed. Investment advisory agreements for certain accounts
provide for performance fees in addition to a base fee. Performance fees are
earned when investment performance exceeds a contractually agreed upon benchmark
and, accordingly, may increase the volatility of both the Partnership's revenues
and earnings.
Investment advisory fees from Alliance mutual funds increased for the three and
the nine months primarily due to higher average assets under management of 13.3%
and 5.1%, respectively.
10
Other affiliated client advisory fees decreased for the three months primarily
as a result of significant performance fees earned on high yield fixed income
assets under management in the third quarter of 1994, offset partially by higher
average general account assets under management. Other affiliated client
advisory fees increased for the nine months principally due to an increase in
performance fees earned on leveraged buy-out portfolios and the addition of new
high yield fixed income accounts.
Investment advisory and services fees from institutional clients increased for
the three and nine months principally due to an increase in average assets under
management of 16.6% and 9.9%, respectively. The increase in institutional
assets is primarily a result of market appreciation and the Shields and Regent
acquisition in March 1994.
Distribution plan fees decreased for the three and nine months due principally
to lower average load mutual fund assets attributable to Class B and Class C
Shares under the Partnership's mutual fund distribution system described under
"Capital Resources and Liquidity". This decrease was principally due to net
redemptions of load mutual fund shares during the latter part of 1994 and early
1995.
Increases in shareholder servicing and administration fees were primarily due to
the 7.5% increase in the number of mutual fund shareholder accounts serviced by
the Partnership's subsidiary, Alliance Fund Services, Inc. ("AFS"). At
September 30, 1995, AFS serviced approximately 1.9 million shareholder accounts.
Other revenues, consisting primarily of commissions, interest, and dividends,
increased for the quarter and the nine months primarily due to an increase in
interest earned on short-term investments. The increase in other revenues for
the nine months was offset partially by a decrease in commissions since
substantial commissions were earned during March 1994 in connection with the
launching of The Global Privatization Fund.
EXPENSES
Three months ended Nine months ended
(Dollars in millions) 9/30/95 9/30/94 % Change 9/30/95 9/30/94 % Change
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Employee compensation and benefits $ 44.0 $ 43.1 2.1% $125.5 $129.1 (2.8)%
Promotion and servicing 50.8 49.6 2.4 147.7 150.6 (1.9)
General and administrative 23.2 18.3 26.8 62.7 51.2 22.5
Interest 0.2 2.5 (92.0) 0.9 7.2 (87.5)
Amortization of intangible assets 2.2 2.2 0.0 6.6 6.3 4.8
- --------------------------------------------------------------------------------------------------
Total expenses $120.4 $115.7 4.1% $343.4 $344.4 (0.3)%
- ---------------------------------------------------------------------------------------------------
Employee compensation and benefits increased for the three months primarily as a
result of higher incentive compensation attributable to increased operating
earnings and higher commission expense as a result of increased mutual fund
sales. Employee compensation and benefits decreased for the nine months
principally due to lower incentive compensation expense accruals due to cost
reduction initiatives and lower commission expense, offset partially by
nonrecurring severance costs of $2.7 million incurred in connection with the
cost reduction initiatives.
Promotion and servicing expenses include distribution plan payments to financial
intermediaries for distribution of the Partnership's mutual fund and cash
management services products, amortization of deferred sales commissions paid to
brokers for the sale of Class B Shares, travel and entertainment, advertising
and promotional materials. Promotion and servicing expenses increased for the
11
quarter primarily as a result of an increase in distribution plan payments due
principally to higher average cash management assets, offset partially by lower
travel and other promotional expenses resulting from the cost reduction
initiatives implemented in 1995. Promotion and servicing expenses decreased for
the nine months primarily due to the cost reduction initiatives and significant
nonrecurring printing and mailing costs incurred in March 1994 in connection
with the launching of The Global Privatization Fund.
Increases in general and administrative expenses for the three and nine months
were due principally to higher legal fees attributable to pending litigation and
consulting fees incurred with certain technology initiatives, as well as higher
occupancy costs incurred in connection with the expansion of the Partnership's
New York headquarters.
Interest expense decreased for the three and nine months primarily as a result
of the prepayment of the Partnership's senior notes during August 1994.
Amortization of intangibles increased for the nine months due to the
amortization of goodwill associated with the March 1994 Shields and Regent
acquisition.
The provision for income taxes increased for the three and the nine months
primarily as a result of the increase in income before income taxes for the
Partnership and certain of its domestic corporate subsidiaries.
CAPITAL RESOURCES AND LIQUIDITY
The Partnership's cash and cash equivalents increased by $87.6 million for the
nine months ended September 30, 1995. Cash provided by operating activities of
$191.8 million was the Partnership's principal source of working capital during
the nine month period ended September 30, 1995. Cash outflows included
distributions to Unitholders of $102.0 million and capital expenditures of $5.7
million.
The Partnership's mutual fund distribution system (the "System") includes three
distribution options. The System permits the 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 CDSC and higher distribution fees payable by the funds ("Class B
Shares"), or (c) without either a front-end sales charge or the CDSC but with
higher distribution fees payable by the funds ("Class C Shares"). During the
nine months ended September 30, 1995, payments made to financial intermediaries
in connection with the sale of Class B shares under the System, net of CDSC
received, totaled $25.5 million.
On July 19, 1995, the Partnership purchased approximately $21.3 million
principal amount of Tax and Revenue Anticipation Notes Series A issued by Orange
County, California ("Orange County Obligations") from two money market fund
portfolios sponsored by the Partnership. As a result, letters of credit issued
in favor of the portfolios, under which the Partnership was contingently liable,
were terminated. On October 19, 1995, the Partnership sold $15.0 million
principal amount of the Orange County Obligations. The sale proceeds
approximated the carrying value of the Orange County Obligations.
12
On October 24, 1995 the Partnership announced that it had reached an agreement
in principle to acquire the business of Cursitor-Eaton Asset Management Company
and Cursitor Holdings Limited (collectively, "Cursitor"), for $141.5 million in
cash and Units, part of which will be payable over the next four years, and
substantial additional consideration which will be determined at a later date.
The transaction is subject to the execution of definitive agreements, approvals
by boards of directors, consents and regulatory approvals, and certain other
closing conditions, including client approval of the transfer of Cursitor
accounts.
As of September 30, 1995, the Partnership had not issued any commercial paper
under its $100 million commercial paper program and there were no amounts
outstanding under the Partnership's revolving credit facilities. The revolving
credit facilities contain covenants which require the Partnership, among other
things, to meet certain financial ratios.
Management of the Partnership believes that the Partnership has sufficient
financial resources to take advantage of growth opportunities and to finance
capital requirements for mutual fund sales.
CASH DISTRIBUTIONS
The Partnership is required to distribute all of its Available Cash Flow, as
defined in the Partnership Agreement, to the General Partner and Unitholders
(including the holder of the Class A Limited Partnership Interest based on Units
issuable upon conversion of the Class A Limited Partnership Interest). The
Partnership's Available Cash Flow was as follows:
Three Months Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
- -----------------------------------------------------------------------------------------
Available Cash Flow (in thousands) $39,287 $32,865 $107,891 $94,327
Available Cash Flow Per Unit $0.48 $0.41 $1.32 $1.23
- -----------------------------------------------------------------------------------------
13
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On September 26, 1995 the defendants in the purported class action
styled IN RE ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST, INC.
SECURITIES LITIGATION filed a motion to dismiss the Consolidated and
Supplemental Class Action Complaint. This legal proceeding was
described previously in the Form 10-K for the year ended December 31,
1994, the Form 8-K dated January 12, 1995 and the Form 10-Q for the
quarter ended June 30, 1995.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
Alliance Capital Management L.P. ("Partnership") filed a report
on Form 8-K dated October 24, 1995 with respect to the
Partnership's agreement in principle to acquire the business of
Cursitor-Eaton Asset Management Company and Cursitor Holdings
Limited, for $141.5 million in cash and Units and substantial
additional consideration which will be determined at a later
date.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANCE CAPITAL MANAGEMENT L.P.
Dated: November 9, 1995 By: Alliance Capital Management
Corporation, its General Partner
By: /s/ Robert H. Joseph, Jr.
------------------------------
Robert H. Joseph, Jr.
Senior Vice President &
Chief Financial Officer
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