UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the Fiscal Year Ended December 31,
2008
OR
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period
from to
Commission file number
001-09818
AllianceBernstein Holding l.p.
(Exact name of registrant as specified
in its charter)
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Delaware
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13-3434400
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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1345
Avenue of the Americas, New York, N.Y.
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10105
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s telephone number,
including area code: (212)
969-1000
Securities registered pursuant to
Section 12(b) of the Act:
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Title
of Class
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Name
of each exchange on which registered
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units
representing assignments of beneficial ownership of limited partnership
interests
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New
York Stock
Exchange
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes x No ¨
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 (§229.405 of this chapter) 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. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of
the Act. (Check one):
Large
accelerated filer x Accelerated
filer ¨ Non-accelerated
filer ¨ Smaller
reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ¨ No x
The
aggregate market value of the units representing assignments of beneficial
ownership of limited partnership interests held by non-affiliates computed by
reference to the price at which such units were last sold on the New York Stock
Exchange as of June 30, 2008 was approximately $4.544 million.
The
number of units representing assignments of beneficial ownership of limited
partnership interests outstanding as of February 2, 2009 was 91,910,013. (This
figure includes 100,000 units of general partnership interest having economic
interests equivalent to the economic interests of the units representing
assignments of beneficial ownership of limited partnership
interests.)
DOCUMENTS
INCORPORATED BY REFERENCE
This Form
10-K does not incorporate any document by reference.
Table of Contents
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ii
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Part
I
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Item
1.
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1
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1
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2
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5
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5
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6
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6
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7
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15
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15
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15
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16
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17
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17
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19
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19
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Item
1A.
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20
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Item
1B.
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26
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Item
2.
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27
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Item
3.
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28
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Item
4.
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29
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Part
II
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Item
5.
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30
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Item
6.
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32
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32
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33
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Item
7.
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34
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34
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35
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37
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Item
7A.
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51
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51
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51
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Item
8.
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53
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53
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64
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Item
9.
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97
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Item
9A.
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98
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Item
9B.
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99
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Part
III
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Item
10.
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100
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Item
11.
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108
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Item
12.
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122
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Item
13.
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126
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Item
14.
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129
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Part
IV
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Item
15.
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130
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132
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Glossary of Certain Defined Terms
“AllianceBernstein” –
AllianceBernstein L.P. (Delaware limited partnership formerly known as Alliance
Capital Management L.P., “Alliance Capital”), the
operating partnership, and its subsidiaries and, where appropriate, its
predecessors, Holding and ACMC, Inc. and their respective
subsidiaries.
“AllianceBernstein
Investments” – AllianceBernstein Investments, Inc. (Delaware
corporation), a wholly-owned subsidiary of AllianceBernstein that services
retail clients and distributes company-sponsored mutual funds.
“AllianceBernstein Partnership
Agreement” – the Amended and Restated Agreement of Limited Partnership of
AllianceBernstein, dated as of October 29, 1999 and as amended February 24,
2006.
“AllianceBernstein Units” –
units of limited partnership interest in AllianceBernstein.
“AUM” – assets under
management for clients.
“AXA” – AXA (société anonyme organized
under the laws of France), the holding company for an international group of
insurance and related financial services companies engaged in the financial
protection and wealth management businesses.
“AXA Equitable” – AXA
Equitable Life Insurance Company (New York stock life insurance company), an
indirect wholly-owned subsidiary of AXA Financial, and its subsidiaries other
than AllianceBernstein and its subsidiaries.
“AXA Financial” – AXA
Financial, Inc. (Delaware corporation), a wholly-owned subsidiary of
AXA.
“Bernstein GWM” – Bernstein
Global Wealth Management, a unit of AllianceBernstein that services private
clients.
“Bernstein Transaction” – on
October 2, 2000, AllianceBernstein’s acquisition of the business and assets of
SCB Inc., formerly known as Sanford C. Bernstein Inc. (“Bernstein”), and
assumption of the liabilities of the Bernstein business.
“Exchange Act” – the
Securities Exchange Act of 1934, as amended.
“ERISA” – the Employee
Retirement Income Security Act of 1974, as amended.
“General Partner” –
AllianceBernstein Corporation (Delaware corporation), the general partner of
AllianceBernstein and Holding and a wholly-owned subsidiary of AXA Equitable,
and, where appropriate, ACMC, Inc., its predecessor.
“Holding” – AllianceBernstein
Holding L.P. (Delaware limited partnership).
“Holding Partnership
Agreement” – the Amended and Restated Agreement of Limited Partnership of
Holding, dated as of October 29, 1999 and as amended February 24,
2006.
“Holding Units” – units
representing assignments of beneficial ownership of limited partnership
interests in Holding.
“Investment Advisers Act” –
the Investment Advisers Act of 1940, as amended.
“Investment Company Act” – the
Investment Company Act of 1940, as amended.
“NYSE” – the New York Stock
Exchange, Inc.
“Partnerships” –
AllianceBernstein and Holding together.
“SCB” – SCB LLC and SCBL
together.
“SCB LLC” – Sanford C.
Bernstein & Co., LLC (Delaware limited liability company), a wholly-owned
subsidiary of AllianceBernstein that provides institutional research services in
the United States.
“SCBL” – Sanford C. Bernstein
Limited (U.K. company), a wholly-owned subsidiary of AllianceBernstein that
provides institutional research services primarily in Europe.
“SEC” – the United States
Securities and Exchange Commission.
“Securities Act” – the
Securities Act of 1933, as amended.
PART I
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Item
1.
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Business
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The words
“we” and “our” in this Form 10-K refer collectively to Holding and
AllianceBernstein, or to their officers and employees. Similarly, the words
“company” and “firm” refer to both Holding and AllianceBernstein. Where the
context requires distinguishing between Holding and AllianceBernstein, we
identify which of them is being discussed. Cross-references are in
italics.
We use
“global” in this Form 10-K to refer to all nations, including the United States;
we use “international” or “non-U.S.” to refer to nations other than the United
States.
We use
“emerging markets” in this Form 10-K to refer to countries considered to be
developing countries by the international financial community and countries
included in the MSCI emerging markets index. As of February 2, 2009, examples of
such countries are Argentina, Brazil, Chile, Columbia, Czech Republic, Egypt,
Hungary, India, Indonesia, Israel, Jordan, Malaysia, Mexico, Pakistan, the
People’s Republic of China, Peru, the Philippines, Poland, Russia, South Africa,
South Korea, Taiwan, Thailand and Turkey.
We use
the term “hedge funds” in this Form 10-K to refer to private investment
partnerships we sponsor that invest in various alternative strategies such as
leverage, short selling of securities and utilizing forward contracts, currency
options and other derivatives.
Recent
Developments
2008
Overview
The
collapse of the U.S. sub-prime mortgage market in the second half of 2007
triggered in 2008 dramatic capital market losses and financial sector
dislocation that led to the loss of tens of trillions of dollars of wealth and
severely impaired the business dynamics of our industry and our firm. Equity
returns across the capital markets were sharply negative in 2008, declining 20%
or more in the fourth quarter. The S&P 500, down 22.6% for the
fourth quarter and 38.5% for the year (excluding reinvested dividends), posted
its worst quarter since the fourth quarter of 1987 and its worst year since
1931. There was little discrimination across styles or geographies in
2008, as the Russell 1000 Value and Russell 1000 Growth indices declined 36.8%
and 38.4% for the year, respectively, and global equities declined more than 40%
for the year. 2008 was the worst year for the MSCI EAFE Index (down
43.4%) since its inception in 1969, while the MSCI World and MSCI Emerging
Markets indices fell 40.7% and 53.3%, respectively.
Within
the capital markets, we have recently seen some signs of improving credit
conditions, as stronger corporate credits have been able to access capital
markets, credit spreads have tightened slightly, and liquidity has improved in
some areas. At the same time, however, economic conditions continue
to deteriorate; housing, credit, employment, GDP levels and retail sales all
continue to show significant weakness. Furthermore, the balance sheets of the
world’s largest banks continue to be under acute financial stress and lending
activities remain sporadic.
Governments
and central banks around the globe are focused on creating demand for goods and
services and stimulating credit. Historically, when governmental
stimulus efforts take hold they produce increased lending
activity. Of course, the timing of any recovery will depend
significantly on when and how government stimulus funds are spent.
At
AllianceBernstein, the financial crisis had a significant adverse effect on our
business in 2008. Our assets under management have declined 42.3% from $800.4
billion at December 31, 2007 to $462.0 billion at December 31,
2008. This decline in assets under management, as well as market
losses on our deferred compensation plan-related investments, were the primary
factors producing a 22.3% decline in net revenues and a 33.4% decline in net
income during 2008. Our unit price declined 72.4%, from $75.25 at the
end of 2007 to $20.79 at the end of 2008.
Change
in Leadership
On
December 19, 2008, the Board of Directors (“Board”) of the General Partner named
Peter S. Kraus Chairman of the Board of the General Partner and Chief Executive
Officer (“CEO”) of the General Partner, AllianceBernstein and
Holding. Mr. Kraus replaced Lewis A. Sanders, former Chairman of the
Board of the General Partner and CEO of the General Partner, AllianceBernstein
and Holding, who announced his retirement on December 19, 2008.
For
additional information about Mr. Kraus, see “Directors and Executive
Officers” in Item 10 and “Compensation Discussion and Analysis (“CD&A”)” in
Item 11.
Clients
AllianceBernstein
provides research, diversified investment management and related services
globally to a broad range of clients, including:
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•
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institutional
clients, including unaffiliated corporate and public employee pension
funds, endowment funds, domestic and foreign institutions and governments,
and various affiliates;
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retail
clients;
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private
clients, including high-net-worth individuals, trusts and estates,
charitable foundations, partnerships, private and family corporations, and
other entities; and
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•
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institutional
investors seeking independent research and related
services.
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We also
provide distribution, shareholder servicing, and administrative services to our
sponsored mutual funds.
Our
primary objective is to have more investment knowledge and to use it better than
our competitors to help our clients achieve their investment goals and financial
peace of mind.
Research
Our
high-quality, in-depth, fundamental research is the foundation of our business.
We believe that our global team of research professionals gives us a competitive
advantage in achieving investment success for our clients.
Our
research disciplines include fundamental research, quantitative research,
economic research, and currency forecasting capabilities. In addition, we have
created several specialized research units, including one unit that examines
global strategic changes that can affect multiple industries and geographies,
and another dedicated to identifying potentially successful innovations within
early-stage companies.
Products
and Services
We offer
a broad range of investment products and services to our clients:
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•
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To
our institutional clients, we offer separately managed accounts,
sub-advisory relationships, structured products, collective investment
trusts, mutual funds, hedge funds and other investment vehicles
(“Institutional Investment
Services”);
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•
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To
our retail clients, we offer retail mutual funds sponsored by
AllianceBernstein, our subsidiaries and our affiliated joint venture
companies, sub-advisory relationships with mutual funds sponsored by third
parties, separately managed account programs sponsored by various
financial intermediaries worldwide (“Separately Managed Account Programs”)
and other investment vehicles (collectively, “Retail
Services”);
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•
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To
our private clients, we offer diversified investment management services
through separately managed accounts, hedge funds, mutual funds and other
investment vehicles (“Private Client Services”);
and
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•
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To
institutional investors, we offer independent research, portfolio strategy
and brokerage-related services (“Institutional Research
Services”).
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These
services are provided by a group of investment professionals with significant
expertise in their respective disciplines (see “Employees” in this Item
1). Our buy-side research analysts, who are located around the world,
support our portfolio managers. Together, they oversee a number of different
types of investment services within various vehicles (discussed above) and
strategies (discussed
below). Our sell-side research analysts provide the foundation for our
Institutional Research Services.
Our
services include:
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Value
equities, generally targeting stocks that are out of favor and that may
trade at bargain prices;
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Growth
equities, generally targeting stocks with under-appreciated growth
potential;
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Fixed
income securities, including both taxable and tax-exempt
securities;
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Blend
strategies, combining style-pure investment components with systematic
rebalancing;
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Passive
management, including both index and enhanced index
strategies;
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Alternative
investments, such as hedge funds, currency management strategies and
venture capital; and
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Asset
allocation services, by which we offer specifically-tailored investment
solutions for our clients (e.g., customized target-date fund retirement
services for institutional defined contribution plan
clients).
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We manage
these services using various investment disciplines, including market
capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-,
intermediate- and short-duration debt securities), and geographic location
(e.g., U.S., international, global and emerging markets), as well as local and
regional disciplines in major markets around the world.
Blend
strategies are a key component of our product line. As of December 31, 2008,
blend AUM was $85 billion (representing 18% of our company-wide AUM), a decrease
of 52% from $175 billion as of December 31, 2007 and 37% from $134 billion as of
December 31, 2006.
We market
and distribute alternative investment products (which include hedge funds,
venture capital and currency management strategies) globally to high-net-worth
clients and, more recently, to institutional investors. Alternative product AUM
totaled $6.6 billion as of December 31, 2008, $3.3 billion of which was private
client AUM (primarily hedge funds) and $3.3 billion of which was institutional
AUM (primarily currency services). Our hedge fund AUM constitutes only a small
portion of our company-wide AUM, but can have a disproportionately large effect
on our revenues because of the performance-based fees we may be eligible to
earn. For additional information about these fees, see “Revenues” in this Item 1, “Risk
Factors” in Item 1A, and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Item
7.
Sub-advisory
client mandates span our investment strategies, including growth, value, fixed
income and blend. We serve as sub-adviser for retail mutual funds, insurance
products, retirement platforms and institutional investment
products.
In
addition, in August 2008, we created a new initiative called
AllianceBernstein Defined Contribution Investments (“ABDC”) focused on
expanding our firm’s capabilities in the defined contribution (“DC”) market.
ABDC seeks to provide the most effective DC investment solutions in the industry
as measured by product features, reliability, cost and flexibility to meet
specialized client needs by integrating research and investment design, product
strategy, strategic partnerships (e.g., record-keeper
partnerships and operations collaboration), and client implementation and
service. As of December 31, 2008, our DC assets under management,
which are spread across our three distribution channels, totaled $18.2 billion
and our pipeline of won but unfunded DC mandates was $3.5 billion.
Global
Reach
We serve
clients in major global markets through operations in 47 cities in 25 countries.
Our client base includes investors throughout the Americas, Europe, Asia, Africa
and Australia. We utilize an integrated global investment platform that provides
our clients with access to local (country-specific), international, and global
research and investment strategies.
Assets
under management by client domicile and investment service as of December 31,
2008, 2007 and 2006 were as follows:
By
Client Domicile ($ in billions):
By
Investment Service ($ in billions):
Our
international client base decreased by 43% during 2008 and increased 23% during
2007. Our global and international AUM decreased by 47% during 2008
and increased 27% during 2007. In addition, approximately 76%, 80% and 76% of
our gross asset inflows (sales / new accounts) during 2008, 2007 and 2006,
respectively, were invested in global and international investment services. The
shift in AUM mix towards U.S. assets and away from Global / International
assets, which is the opposite of the trend we had been experiencing in the last
few years, is due to investment performance and
currency fluctuations.
Revenues
We earn
revenues primarily by charging fees for managing the investment assets of, and
providing research to, our clients.
We
generally calculate investment advisory fees as a percentage of the value of AUM
at a specific point in time or as a percentage of the value of average AUM for
the applicable billing period, with these fees varying by type of investment
service, size of account, and total amount of assets we manage for a particular
client. Accordingly, fee income generally increases or decreases as AUM
increases or decreases. Increases in AUM generally result from market
appreciation, positive investment performance for clients, or net asset inflows
from new and existing clients. Similarly, decreases in AUM generally result from
market depreciation, negative investment performance for clients, or net asset
outflows due to client redemptions, account terminations, or asset
withdrawals.
We are
eligible to earn performance-based fees on hedge fund services, as well as some
long-only services for our institutional clients. In these situations, we charge
a base advisory fee and are eligible to earn an additional performance-based fee
or incentive allocation that is calculated as either a percentage of absolute
investment results or a percentage of investment results in excess of a stated
benchmark over a specified period of time. In addition, some performance-based
fees include a high-watermark provision, which generally provides that if a
client account underperforms relative to its performance target (whether
absolute or relative to a specified benchmark), it must gain back such
underperformance before we can collect future performance-based fees. Therefore,
if we underperform our performance target for a particular period, we will not
earn a performance-based fee for that period and, for accounts with a
high-watermark provision, we will impair our ability to earn future
performance-based fees. If the percentage of our AUM subject to
performance-based fees grows, seasonality and volatility of revenue and earnings
are likely to become more significant. Our performance-based fees in 2008 were
$13.4 million, in 2007 were $81.2 million and in 2006 were $235.7 million. For
additional information about performance-based fees, see “Risk Factors” in Item 1A
and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
Item 7.
We
sometimes experience periods when the number of new accounts or the amount of
AUM increases or decreases significantly. These shifts result from wide-ranging
factors, including conditions of financial markets, our investment performance
for clients and changes in our clients’ investment preferences.
We earn
revenues from clients to whom we provide fundamental research and
brokerage-related services generally in the form of transaction fees calculated
as either “cents per share” or a percentage of the value of the securities
traded for these clients.
Our
revenues may fluctuate for a number of reasons; see “Risk Factors” in Item 1A
and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
Item 7.
Employees
During
the fourth quarter of 2008, we reduced headcount and announced our intention to
reduce capital outlays in 2009 in order to lower our expense base in light of
declines in assets under management and net revenues. As a result of this
workforce reduction, headcount was 4,997 as of December 31, 2008, compared to a
high of 5,660 (reflecting an 11.7% reduction) as of September 30, 2008, and
5,580 (reflecting a 10.4% reduction) as of December 31, 2007.
Our
firm’s 4,997 full-time employees, who are located in 25 countries, include 325
research analysts, 171 portfolio managers, 44 traders and 31 professionals with
other investment-related responsibilities. We have employed these professionals
for an average period of approximately eight years, and their average investment
experience is approximately 16 years. We consider our employee relations to be
good.
Institutional
Investment
Services
We serve
our institutional clients primarily through AllianceBernstein Institutional
Investments (“Institutional Investments”), a unit of AllianceBernstein, and
through other units in our international subsidiaries and one of our joint
ventures (institutional relationships of less than $25 million are generally
serviced by Bernstein GWM, our Private Client channel, discussed below).
Institutional Investment Services include actively managed equity accounts
(including growth, value, and blend accounts), fixed income accounts, and
balanced accounts (which combine equity and fixed income), as well as passive
management of index and enhanced index accounts. These services are provided
through separately managed accounts, sub-advisory relationships, structured
products, collective investment trusts, mutual funds, and other investment
vehicles. As of December 31, 2008, institutional AUM was $291 billion, or 63% of
our company-wide AUM. For more information concerning institutional AUM,
revenues and fees, see “Assets
Under Management, Revenues and Fees” in this Item 1.
Our
institutional client base includes unaffiliated corporate and public employee
pension funds, endowment funds, domestic and foreign institutions and
governments, and certain of our affiliates (AXA and its subsidiaries), as well
as certain sub-advisory relationships with unaffiliated sponsors of various
other investment products. We manage approximately 2,329 mandates for these
clients, which are located in 46 countries. As of December 31, 2008, we managed
employee benefit plan assets for 49 of the Fortune 100
companies, and we managed public pension fund assets for 38 states and /or
municipalities in those states.
As of
December 31, 2008, our institutional AUM invested in global and international
investment services was $180 billion, or 62% of institutional AUM, as compared
to $341 billion, or 67% of institutional AUM, as of December 31, 2007 and $270
billion, or 59% of institutional AUM, as of December 31, 2006. As of December
31, 2008, the AUM we invested for clients domiciled outside the United States
was $152 billion, or 52% of institutional AUM, as compared to $269 billion, or
53% of institutional AUM, as of December 31, 2007 and $214 billion, or 47% of
institutional AUM, as of December 31, 2006.
Retail
Services
We
provide investment management and related services to a wide variety of
individual retail investors, both in the U.S. and internationally, through
retail mutual funds sponsored by our company, our subsidiaries and affiliated
joint venture companies; mutual fund sub-advisory relationships; Separately
Managed Account Programs; and other investment vehicles (“Retail Products and
Services”). As of December 31, 2008, retail AUM was $102 billion, or 22% of our
company-wide AUM. For more information concerning retail AUM, revenues and fees,
see “Assets Under Management,
Revenues and Fees” in this Item 1.
Our
Retail Products and Services are designed to provide disciplined, research-based
investments that contribute to a well-diversified investment portfolio. We
distribute these products and services through financial intermediaries,
including broker-dealers, insurance sales representatives, banks, registered
investment advisers, and financial planners.
As of
December 31, 2008, our retail AUM invested in global and international
investment services was $61 billion, or 60% of retail AUM, as compared to $110
billion, or 60% of retail AUM, as of December 31, 2007 and $86 billion, or 52%
of retail AUM, as of December 31, 2006. As of December 31, 2008, the AUM we
invested for clients domiciled outside the U.S. was $25 billion, or 24% of
retail AUM, as compared to $44 billion, or 24% of retail AUM, as of December 31,
2007 and $40 billion, or 24% of retail AUM, as of December 31,
2006.
Our
Retail Products and Services include open-end and closed-end funds that are
either (i) registered as investment companies under the Investment Company Act
(“U.S. Funds”), or (ii) not registered under the Investment Company Act and
generally not offered to United States persons (“Non-U.S. Funds” and
collectively with the U.S. Funds, “AllianceBernstein Funds”). They provide a
broad range of investment options, including local and global growth equities,
value equities, blend strategies and fixed income securities. They also include
Separately Managed Account Programs, which are sponsored by financial
intermediaries and generally charge an all-inclusive fee covering investment
management, trade execution, asset allocation, and custodial and administrative
services. We also provide distribution, shareholder servicing, and
administrative services for our Retail Products and Services.
Our U.S.
Funds, which include retail funds, our variable products series fund (a
component of an insurance product) and the Sanford C. Bernstein Funds
(principally Private Client Services products), currently offer 106 different
portfolios to U.S. investors. As of December 31, 2008, retail U.S. Funds AUM was
approximately $39 billion, or 38% of total retail AUM. Because of the way they
are marketed and serviced, we report substantially all of the AUM in the Sanford
C. Bernstein Funds (“SCB Funds”), which totaled $21 billion as of December 31,
2008, as private client AUM.
Our
Non-U.S. Funds are distributed internationally by local financial intermediaries
to non-U.S. investors by means of distribution agreements in most major
international markets. As of December 31, 2008, these funds consisted
of 67 different portfolios and AUM in these funds was $11 billion. We
also offer local-market funds that we distribute in Japan through financial
intermediaries. As of December 31, 2008, retail AUM in these funds
was $2 billion.
AllianceBernstein
Investments serves as the principal underwriter and distributor of the U.S.
Funds. AllianceBernstein Investments employs approximately 130 sales
representatives who devote their time exclusively to promoting the sale of U.S.
Funds and certain other Retail Products and Services by financial
intermediaries.
AllianceBernstein
(Luxembourg) S.A. (“AllianceBernstein Luxembourg”), a Luxembourg management
company and one of our wholly-owned subsidiaries, generally serves as the
placing or distribution agent for the Non-U.S. Funds. AllianceBernstein
Luxembourg employs approximately 66 sales representatives who devote their time
exclusively to promoting the sale of Non-U.S. Funds and other Retail Products
and Services by financial intermediaries.
Private
Client
Services
Bernstein
GWM combines the former private client services group of Bernstein, which has
served private clients for more than 40 years, and the former private client
group of Alliance Capital. As of December 31, 2008, private client AUM was $69
billion, or 15% of our company-wide AUM. For more information concerning private
client AUM, revenues and fees, see “Assets Under Management,
Revenues and Fees” in this Item 1.
Through
Bernstein GWM, we provide Private Client Services to high-net-worth individuals,
trusts and estates, charitable foundations, partnerships, private and family
corporations, and other entities by means of separately managed accounts, hedge
funds, mutual funds and other investment vehicles. We target investors with
financial assets of $1 million or more, although we have a minimum opening
account size of $500,000.
Our
Private Client Services are built on a sales effort that involves 299 financial advisors.
These advisors do not manage money, but work with private clients and their tax,
legal, and other advisors to assist clients in determining a suitable mix of
U.S. and non-U.S. equity securities and fixed income investments. The
diversified portfolio created for each client is intended to maximize after-tax
investment returns, in light of the client’s individual investment goals, income
requirements, risk tolerance, tax situation, and other relevant factors. In
creating these portfolios, we utilize all of our resources, including research
reports, investment planning services, and our Wealth Management Group, which
has in-depth knowledge of trust, estate and tax planning
strategies.
Our financial advisors are based
in 18 cities in the U.S.: New York City,
Atlanta, Boston, Chicago, Cleveland, Dallas, Denver, Houston, Los Angeles,
Miami, Minneapolis, Philadelphia, San Diego, San Francisco, Seattle, Tampa,
Washington, D.C. and West Palm Beach. We also have financial advisors based in
London, England. As part of our reduction in force (for additional information,
see
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Item 7), we
reduced our financial advisor staff by 9% in 2008. However, we kept
both the best and highest potential professionals that service our private
clients and we intend to begin hiring new financial advisors in
2009.
As of
December 31, 2008, our private client AUM invested in global and international
investment services was $18 billion, or 26% of private client AUM, as compared
to $38 billion, or 35% of private client AUM, as of December 31, 2007 and $29
billion, or 30% of private client AUM, as of December 31, 2006.
Institutional
Research
Services
Institutional
Research Services (“IRS”) consist of fundamental research, quantitative services
and brokerage-related services provided to institutional investors such as
pension fund, hedge fund and mutual fund managers, and other institutional
investors. Brokerage-related services are provided by SCB LLC in the United
States and SCBL primarily in Europe. For more information concerning the
revenues we derive from IRS, see “Assets Under Management,
Revenues and Fees” in this Item 1.
SCB
provides fundamental company and industry research along with disciplined
research into securities valuation and factors affecting stock-price movements.
Our analysts are consistently among the highest ranked research analysts in
industry surveys conducted by third-party organizations.
Assets Under Management,
Revenues and Fees
The
following tables summarize our AUM and revenues by distribution
channel:
Assets Under
Management(1)
|
December
31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||
|
Institutional
Investment Services
|
$ | 291,361 | $ | 508,081 | $ | 455,095 | (42.7 | )% | 11.6 | % | ||||||||||
|
Retail
Services
|
101,643 | 183,165 | 166,928 | (44.5 | ) | 9.7 | ||||||||||||||
|
Private
Client Services
|
68,947
|
109,144
|
94,898
|
(36.8 | ) | 15.0 | ||||||||||||||
|
Total
|
$ | 461,951 | $ |
800,390
|
$ | 716,921 | (42.3 | ) | 11.6 | |||||||||||
|
(1)
|
Excludes
certain non-discretionary client
relationships.
|
Revenues
|
Years Ended December
31,
|
% Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||
|
Institutional
Investment Services
|
$ | 1,240,636 | $ | 1,481,885 | $ | 1,221,780 | (16.3 | )% | 21.3 | % | ||||||||||
|
Retail
Services
|
1,227,538 | 1,521,201 | 1,303,849 | (19.3 | ) | 16.7 | ||||||||||||||
|
Private
Client Services
|
849,830 | 960,669 | 882,881 | (11.5 | ) | 8.8 | ||||||||||||||
|
Institutional
Research Services
|
471,716 | 423,553 | 375,075 | 11.4 | 12.9 | |||||||||||||||
|
Other(1)
|
(239,037 | ) |
332,441
|
354,655 | n/m | (6.3 | ) | |||||||||||||
|
Total
Revenues
|
3,550,683 | 4,719,749 | 4,138,240 | (24.8 | ) | 14.1 | ||||||||||||||
|
Less:
Interest Expense
|
36,524 |
194,432
|
187,833 | (81.2 | ) | 3.5 | ||||||||||||||
|
Net
Revenues
|
$ | 3,514,159 | $ | 4,525,317 | $ | 3,950,407 | (22.3 | ) | 14.6 | |||||||||||
|
(1)
|
Other
revenues primarily consist of dividend and interest income, investment
gains (losses) and shareholder servicing fees. For additional information,
see “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
in Item 7.
|
AXA and
its subsidiaries, whose AUM consists primarily of fixed income investments,
together constitute our largest client. Our affiliates represented approximately
20%, 15% and 17% of our company-wide AUM as of December 31, 2008, 2007 and 2006,
respectively. We also earned approximately 5% of our company-wide net revenues
from our affiliates for each of 2008, 2007 and 2006. We manage this AUM as part
of our Institutional Investment Services and our Retail Services.
Institutional
Investment Services
The
following tables summarize our Institutional Investment Services AUM and
revenues:
Institutional
Investment Services Assets Under Management(1)
(by
Investment Service)
|
December
31,
|
% Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ | 22,598 | $ | 49,235 | $ | 55,562 | (54.1 | )% | (11.4 | )% | ||||||||||
|
Global
and International
|
84,787
|
192,472
|
158,572
|
(55.9 | ) | 21.4 | ||||||||||||||
|
107,385
|
241,707
|
214,134
|
(55.6 | ) | 12.9 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
16,075 | 31,908 | 36,668 | (49.6 | ) | (13.0 | ) | |||||||||||||
|
Global
and International
|
38,034
|
88,691
|
66,242
|
(57.1 | ) | 33.9 | ||||||||||||||
|
54,109
|
120,599
|
102,910
|
(55.1 | ) | 17.2 | |||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
66,151 | 73,240 | 73,414 | (9.7 | ) | (0.2 | ) | |||||||||||||
|
Global
and International
|
51,043
|
53,978
|
39,166
|
(5.4 | ) | 37.8 | ||||||||||||||
|
117,194
|
127,218
|
112,580
|
(7.9 | ) | 13.0 | |||||||||||||||
|
Other
(2):
|
||||||||||||||||||||
|
U.S.
|
6,617 | 12,426 | 19,942 | (46.7 | ) | (37.7 | ) | |||||||||||||
|
Global
and International
|
6,056 | 6,131 | 5,529 | (1.2 | ) | 10.9 | ||||||||||||||
|
12,673
|
18,557
|
25,471
|
(31.7 | ) | (27.1 | ) | ||||||||||||||
|
Total:
|
||||||||||||||||||||
|
U.S.
|
111,441 | 166,809 | 185,586 | (33.2 | ) | (10.1 | ) | |||||||||||||
|
Global
and International
|
179,920
|
341,272
|
269,509
|
(47.3 | ) | 26.6 | ||||||||||||||
|
Total
|
$ | 291,361 | $ | 508,081 | $ | 455,095 | (42.7 | ) | 11.6 | |||||||||||
|
(1)
|
Excludes
certain non-discretionary client
relationships.
|
|
(2)
|
Includes
index, structured and asset allocation
services.
|
Revenues
from Institutional Investment Services
(by
Investment Service)
|
Years Ended
December 31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||
|
Investment
Advisory and Services Fees:
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ |
108,921
|
$ | 153,747 | $ | 154,163 | (29.2 | )% | (0.3 | )% | ||||||||||
|
Global
and International
|
607,431
|
747,957
|
570,185
|
(18.8 | ) | 31.2 | ||||||||||||||
|
716,352
|
901,704
|
724,348
|
(20.6 | ) | 24.5 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
70,119
|
108,691 | 122,132 | (35.5 | ) | (11.0 | ) | |||||||||||||
|
Global
and International
|
276,676
|
311,727
|
226,293
|
(11.2 | ) | 37.8 | ||||||||||||||
|
346,795
|
420,418
|
348,425
|
(17.5 | ) | 20.7 | |||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
85,333 | 91,144 | 97,452 | (6.4 | ) | (6.5 | ) | |||||||||||||
|
Global
and International
|
78,197
|
54,021
|
38,825
|
44.8 | 39.1 | |||||||||||||||
|
163,530
|
145,165
|
136,277
|
12.7 | 6.5 | ||||||||||||||||
|
Other
(1):
|
||||||||||||||||||||
|
U.S.
|
2,883 | 4,441 | 4,993 | (35.1 | ) | (11.1 | ) | |||||||||||||
|
Global
and International
|
11,076 |
9,865
|
7,177 | 12.3 | 37.5 | |||||||||||||||
|
13,959
|
14,306
|
12,170 | (2.4 | ) | 17.6 | |||||||||||||||
|
Total
Investment Advisory and Services Fees:
|
||||||||||||||||||||
|
U.S.
|
267,256 |
358,023
|
378,740 | (25.4 | ) | (5.5 | ) | |||||||||||||
|
Global
and International
|
973,380
|
1,123,570
|
842,480
|
(13.4 | ) | 33.4 | ||||||||||||||
| 1,240,636 | 1,481,593 | 1,221,220 | (16.3 | ) | 21.3 | |||||||||||||||
|
Distribution
Revenues
|
— | 292 | 560 | (100.0 | ) | (47.9 | ) | |||||||||||||
|
Total
|
$ |
1,240,636
|
$ |
1,481,885
|
$ | 1,221,780 | (16.3 | ) | 21.3 | |||||||||||
|
(1)
|
Includes
index, structured and asset allocation
services.
|
As of
December 31, 2008, 2007 and 2006, Institutional Investment Services represented
approximately 63% of our company-wide AUM. The fees we earned from these
services represented approximately 35%, 33% and 31% of our company-wide net
revenues for 2008, 2007 and 2006, respectively.
We manage
assets for AXA and its subsidiaries, which together constitute our largest
institutional client. These assets accounted for approximately 16%, 16% and 17%
of our total institutional AUM as of December 31, 2008, 2007 and 2006,
respectively, and approximately 8%, 7% and 7% of our total institutional
revenues for 2008, 2007 and 2006, respectively.
The
institutional AUM we manage for our affiliates, along with our nine other
largest institutional accounts, accounts for approximately 36% of our total
institutional AUM as of December 31, 2008 and approximately 16% of our total
institutional revenues for the year ended December 31, 2008. No single
institutional client other than AXA and its subsidiaries accounted for more than
approximately 1% of our company-wide net revenues for the year ended December
31, 2008.
We manage
the assets of our institutional clients through written investment management
agreements or other arrangements, all of which are generally terminable at any
time or upon relatively short notice by either party. In general, our written
investment management agreements may not be assigned without client
consent.
We are
compensated principally on the basis of investment advisory fees calculated as a
percentage of assets under management. The percentage we charge varies with the
type of investment service, the size of the account, and the total amount of
assets we manage for a particular client.
We are
eligible to earn performance-based fees on approximately 14% of institutional
assets under management, which are primarily invested in long-only equity and
fixed income services rather than hedge funds. Performance-based fees provide
for a relatively low asset-based fee plus an additional fee based on investment
performance. For additional information about performance-based fees, see “General—Revenues” in this Item
1 and “Risk
Factors” in
Item 1A.
Retail
Services
The
following tables summarize our Retail Services AUM and revenues:
Retail
Services Assets Under Management
(by
Investment Service)
|
December
31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ |
12,086
|
$ |
33,488
|
$ |
35,749
|
(63.9 | )% | (6.3 | )% | ||||||||||
|
Global
and International
|
28,053
|
56,560
|
38,797
|
(50.4 | ) | 45.8 | ||||||||||||||
|
40,139
|
90,048
|
74,546
|
(55.4 | ) | 20.8 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
8,494 | 24,637 | 28,587 | (65.5 | ) | (13.8 | ) | |||||||||||||
|
Global
and International
|
11,544
|
23,530
|
19,937
|
(50.9 | ) | 18.0 | ||||||||||||||
|
20,038
|
48,167
|
48,524
|
(58.4 | ) | (0.7 | ) | ||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
9,857 | 10,627 | 11,420 | (7.2 | ) | (6.9 | ) | |||||||||||||
|
Global
and International
|
20,178
|
29,855
|
27,614
|
(32.4 | ) | 8.1 | ||||||||||||||
|
30,035
|
40,482
|
39,034
|
(25.8 | ) | 3.7 | |||||||||||||||
|
Other
(1):
|
||||||||||||||||||||
|
U.S.
|
9,851 | 4,468 | 4,824 | 120.5 | (7.4 | ) | ||||||||||||||
|
Global
and International
|
1,580
|
—
|
— | n/m | — | |||||||||||||||
|
11,431
|
4,468 | 4,824 | 155.8 | (7.4 | ) | |||||||||||||||
|
Total:
|
||||||||||||||||||||
|
U.S.
|
40,288 | 73,220 | 80,580 | (45.0 | ) | (9.1 | ) | |||||||||||||
|
Global
and International
|
61,355
|
109,945
|
86,348
|
(44.2 | ) | 27.3 | ||||||||||||||
|
Total
|
$ |
101,643
|
$ |
183,165
|
$ |
166,928
|
(44.5 | ) | 9.7 | |||||||||||
|
(1)
|
Includes
index, structured and asset allocation
services.
|
Revenues
from Retail Services
(by
Investment Service)
|
Years Ended
December 31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||
|
Investment
Advisory and Services Fees:
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ | 88,394 | $ |
129,125
|
$ |
123,355
|
(31.5 | )% | 4.7 | % | ||||||||||
|
Global
and International
|
216,561
|
262,369
|
133,314
|
(17.5 | ) | 96.8 | ||||||||||||||
|
304,955
|
391,494
|
256,669
|
(22.1 | ) | 52.5 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
84,651 | 119,880 | 143,344 | (29.4 | ) | (16.4 | ) | |||||||||||||
|
Global
and International
|
130,247
|
168,817
|
152,883
|
(22.8 | ) | 10.4 | ||||||||||||||
|
214,898
|
288,697
|
296,227
|
(25.6 | ) | (2.5 | ) | ||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
30,888 | 39,644 | 43,705 | (22.1 | ) | (9.3 | ) | |||||||||||||
|
Global
and International
|
195,373
|
224,335
|
186,196
|
(12.9 | ) | 20.5 | ||||||||||||||
|
226,261
|
263,979
|
229,901
|
(14.3 | ) | 14.8 | |||||||||||||||
|
Other
(1):
|
||||||||||||||||||||
|
U.S.
|
3,702 | 1,868 | 1,673 | 98.2 | 11.7 | |||||||||||||||
|
Global
and International
|
1,297
|
— | 3,363 | n/m | (100.0 | ) | ||||||||||||||
| 4,999 | 1,868 | 5,036 | 167.6 | (62.9 | ) | |||||||||||||||
|
Total
Investment Advisory and Services Fees:
|
||||||||||||||||||||
|
U.S.
|
207,635 | 290,517 | 312,077 | (28.5 | ) | (6.9 | ) | |||||||||||||
|
Global
and International
|
543,478
|
655,521
|
475,756
|
(17.1 | ) | 37.8 | ||||||||||||||
| 751,113 | 946,038 | 787,833 | (20.6 | ) | 20.1 | |||||||||||||||
|
Distribution
Revenues(2)
|
376,372 | 471,031 | 418,780 | (20.1 | ) | 12.5 | ||||||||||||||
|
Shareholder
Servicing Fees(2)
|
100,053
|
104,132
|
97,236
|
(3.9 | ) | 7.1 | ||||||||||||||
|
Total
|
$ |
1,227,538
|
$ |
1,521,201
|
$ |
1,303,849
|
(19.3 | ) | 16.7 | |||||||||||
|
(1)
|
Includes
index, structured and asset allocation
services.
|
|
(2)
|
For
a description of distribution revenues and shareholder servicing fees,
see
below.
|
Investment
advisory fees and distribution fees for our Retail Products and Services are
generally charged as a percentage of average daily AUM. In the past, as certain
of the U.S. Funds grew, we revised our fee schedules to provide lower
incremental fees above certain asset levels. Fees paid by the U.S. Funds, EQ
Advisors Trust (“EQAT”), AXA Enterprise Multimanager Funds Trust (“AXA
Enterprise Trust”) and AXA Premier VIP Trust are reflected in the applicable
investment management agreement, which generally must be approved annually by
the boards of directors or trustees of those funds, including by a majority of
the independent directors or trustees. Increases in these fees must be approved
by fund shareholders; decreases need not be, including any decreases implemented
by a fund’s directors or trustees. In general, each investment management
agreement with the AllianceBernstein Funds, EQAT, AXA Enterprise Trust and AXA
Premier VIP Trust provides for termination by either party at any time upon 60
days’ notice.
Fees paid
by Non-U.S. Funds are reflected in investment management agreements that
continue until they are terminated. Increases in these fees must generally be
approved by the relevant regulatory authority depending on the domicile and
structure of the fund, and Non-U.S. Fund shareholders must be given advance
notice of any fee increases.
Revenues
from Retail Services represented approximately 35%, 34% and 33% of our
company-wide net revenues for the years ended December 31, 2008, 2007 and 2006,
respectively.
Our
Retail Products and Services include open-end mutual funds designed to fund
benefits under variable annuity contracts and variable life insurance policies
offered by life insurance companies (“Variable Product Series Fund”). We manage
the AllianceBernstein Variable Products Series Fund, Inc., which serves as the
investment vehicle for insurance products offered by unaffiliated insurance
companies, and we sub-advise variable product mutual funds sponsored by
affiliates. As of December 31, 2008, we managed or sub-advised approximately $28
billion of Variable Product Series Fund AUM.
The
mutual funds we sub-advise for AXA and its subsidiaries together constitute our
largest retail client. They accounted for approximately 21%, 22% and 24% of our
total retail AUM as of December 31, 2008, 2007 and 2006, respectively, and
approximately 7% of our total retail revenues for each of 2008, 2007 and
2006.
Our
mutual fund distribution system (the “System”) includes a multi-class share
structure that permits open-end AllianceBernstein Funds to offer investors
various options for the purchase of mutual fund shares, including both front-end
load shares and back-end load shares. For front-end load shares,
AllianceBernstein Investments generally pays sales commissions to financial
intermediaries distributing the funds from the front-end sales charge it
receives from investors at the time of the sale. For back-end load shares,
AllianceBernstein Investments pays sales commissions to financial intermediaries
at the time of sale and also receives higher ongoing distribution services fees
from the mutual funds. In addition, investors who redeem back-end load shares
before the expiration of the minimum holding period (which ranges from one year
to four years) pay a contingent deferred sales charge (“CDSC”) to
AllianceBernstein Investments. We expect to recover sales commissions for
back-end load shares over periods not exceeding five and one-half years through
receipt of a CDSC and/or the higher ongoing distribution services fees we
receive from holders of back-end load shares. Payments of sales commissions made
to financial intermediaries in connection with the sale of back-end load shares
under the System, net of CDSC received of $33.7 million, $31.1 million and $23.7
million, totaled approximately $9.1 million, $84.1 million and $98.7 million
during 2008, 2007 and 2006, respectively. Effective January 31, 2009,
back-end load shares are no longer offered to new investors in U.S.
Funds.
The rules
of the Financial Industry Regulatory Authority, Inc. (“FINRA”), the successor to
the National Association of Securities Dealers, Inc., effectively cap the
aggregate sales charges that may be received from each U.S. Fund by
AllianceBernstein Investments. The cap is 6.25% of cumulative gross sales (plus
interest at the prime rate plus 1% per annum) in each share class of the
open-end U.S. Funds.
Most
open-end U.S. Funds have adopted a plan under Rule 12b-1 of the Investment
Company Act that allows the fund to pay, out of assets of the fund, distribution
and service fees for the distribution and sale of its shares (“Rule 12b-1
Fees”). The open-end AllianceBernstein Funds have entered into agreements with
AllianceBernstein Investments under which they pay a distribution services fee
to AllianceBernstein Investments. AllianceBernstein Investments has entered into
selling and distribution agreements pursuant to which it pays sales commissions
to the financial intermediaries that distribute our open-end U.S. Funds. These
agreements are terminable by either party upon notice (generally 30 days) and do
not obligate the financial intermediary to sell any specific amount of fund
shares.
In
addition to Rule 12b-1 Fees, AllianceBernstein Investments, at its own expense,
currently provides additional payments under distribution services and
educational support agreements to firms that sell shares of our funds, a
practice sometimes referred to as revenue sharing. Although the amount of
payments made to each qualifying firm in any given year may vary, the total
amount paid to a financial intermediary in connection with the sale of shares of
U.S. Funds will generally not exceed the sum of (i) 0.25% of the current year’s
fund sales by that firm, and (ii) 0.10% of average daily net assets attributable
to that firm over the course of the year. These sums may result from a financial
intermediary including our funds on its list of preferred funds or may be
otherwise associated with the financial intermediary’s marketing and other
support activities, such as client education meetings and training efforts
relating to our funds.
Financial
intermediaries and record keepers that provide accounting or record-keeping
services with respect to their customers’ investments in AllianceBernstein Funds
may receive specified payments from these funds or from affiliates of
AllianceBernstein, including AllianceBernstein Investor Services, Inc. (one of
our wholly-owned subsidiaries, “AllianceBernstein Investor Services”) and
AllianceBernstein Investments.
During
2008, the 10 financial intermediaries responsible for the largest volume of
sales of open-end AllianceBernstein Funds were responsible for 43% of such
sales. AXA Advisors, LLC (“AXA Advisors”), a wholly-owned subsidiary of AXA
Financial that utilizes members of AXA Equitable’s insurance sales force as its
registered representatives, was responsible for approximately 4%, 2% and 2% of
total sales of shares of open-end AllianceBernstein Funds in 2008, 2007 and
2006, respectively. AXA Advisors is under no obligation to sell a specific
amount of AllianceBernstein Fund shares and also sells shares of mutual funds
sponsored by other affiliates and unaffiliated organizations.
Merrill
Lynch & Co., Inc. (and its subsidiaries, “Merrill Lynch”), which has been
acquired by Bank of America Corporation, was responsible for approximately 8%,
7% and 6% of open-end AllianceBernstein Fund sales in 2008, 2007 and 2006,
respectively. Citigroup Inc. (and its subsidiaries, “Citigroup”) was responsible
for approximately 7%, 7% and 5% of open-end AllianceBernstein Fund sales in
2008, 2007 and 2006, respectively. Neither Merrill Lynch nor Citigroup is under
any obligation to sell a specific amount of AllianceBernstein Fund shares and
each also sells shares of mutual funds that it sponsors and that are sponsored
by unaffiliated organizations.
No dealer
or agent has in any of the last three years accounted for more than 10% of total
sales of shares of our open-end AllianceBernstein Funds.
Based on
industry sales data reported by the Investment Company Institute, our market
share in the U.S. mutual fund industry is 1.2% of total industry assets and we
accounted for 0.1% of total open-end industry sales (and 0.3% of non-proprietary
manager sales) in the U.S. during 2008. The investment performance of the U.S.
Funds is an important factor in the sale of their shares, but there are also
other factors, including the level and quality of shareholder services (see below) and the amounts
and types of distribution assistance and administrative services payments made
to financial intermediaries. We believe that our compensation programs with
financial intermediaries are competitive with others in the
industry.
Each of
the U.S. Funds appointed an independent compliance officer reporting to the
board of directors of each U.S. Fund. The expense of this officer and his staff
is borne by AllianceBernstein.
AllianceBernstein
Investor Services provides transfer agency and related services for each
open-end U.S. Fund and provides shareholder servicing for each open-end U.S.
Fund’s shareholder accounts (approximately 4.0 million accounts in total).
(Transfer agency and related services are provided to the SCB Funds primarily by
Boston Financial Data Services.) AllianceBernstein Investor Services operates in
San Antonio, Texas and it receives a monthly fee under each of its servicing
agreements with the open-end U.S. Funds based on the number and type of
shareholder accounts serviced. Each servicing agreement must be approved
annually by the relevant open-end U.S. Fund’s board of directors or trustees,
including a majority of the independent directors or trustees, and may be
terminated by either party without penalty upon 60 days’ notice.
AllianceBernstein
Funds utilize our personnel to perform most legal, clerical and accounting
services. Payments to us by the U.S. Funds and certain Non-U.S. Funds for these
services must be specifically approved in advance by each fund’s board of
directors or trustees. Currently, AllianceBernstein Investor Services records
revenues for providing these services to the AllianceBernstein Funds at the rate
of approximately $7 million per year.
A unit of
AllianceBernstein Luxembourg (“ABIS Lux”) is the transfer agent for
substantially all of the Non-U.S. Funds. ABIS Lux, which bases its operations in
Luxembourg and is supported by operations in Singapore, Hong Kong and the United
States, receives a monthly fee for its transfer agency services and a
transaction-based fee under various services agreements with the Non-U.S. Funds
for which it provides these services. Each agreement may be terminated by either
party upon 60 days’ notice.
Private Client Services
The
following tables summarize Private Client Services AUM and
revenues:
Private
Client Services Assets Under Management
(by
Investment Service)
|
December
31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06
|
||||||||||||||||
|
(in
millions)
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ | 13,254 | $ | 25,259 | $ | 27,703 | (47.5 | )% | (8.8 | )% | ||||||||||
|
Global
and International
|
11,627 | 25,497 | 19,091 | (54.4 | ) | 33.6 | ||||||||||||||
| 24,881 | 50,756 | 46,794 | (51.0 | ) | 8.5 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
8,425 | 16,004 | 13,237 | (47.4 | ) | 20.9 | ||||||||||||||
|
Global
and International
|
5,709 | 12,175 | 9,418 | (53.1 | ) | 29.3 | ||||||||||||||
| 14,134 | 28,179 | 22,655 | (49.8 | ) | 24.4 | |||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
29,287 | 29,498 | 25,032 | (0.7 | ) | 17.8 | ||||||||||||||
|
Global
and International
|
606 | 676 | 328 | (10.4 | ) | 106.1 | ||||||||||||||
| 29,893 | 30,174 | 25,360 | (0.9 | ) | 19.0 | |||||||||||||||
|
Other
(1):
|
||||||||||||||||||||
|
U.S.
|
21 | 25 | 80 | (16.0 | ) | (68.8 | ) | |||||||||||||
|
Global
and International
|
18 | 10 | 9 | 80.0 | 11.1 | |||||||||||||||
| 39 | 35 | 89 | 11.4 | (60.7 | ) | |||||||||||||||
|
Total:
|
||||||||||||||||||||
|
U.S.
|
50,987 | 70,786 | 66,052 | (28.0 | ) | 7.2 | ||||||||||||||
|
Global
and International
|
17,960 | 38,358 | 28,846 | (53.2 | ) | 33.0 | ||||||||||||||
|
Total
|
$ | 68,947 | $ | 109,144 | $ | 94,898 | (36.8 | ) | 15.0 | |||||||||||
|
(1)
|
Includes
index, structured and asset allocation
services.
|
Revenues
from Private Client Services
(by
Investment Service)
|
Years Ended
December 31,
|
%
Change
|
|||||||||||||||||||
|
2008
|
2007
|
2006
|
2008-07
|
2007-06 | ||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||
|
Investment
Advisory and Services Fees:
|
||||||||||||||||||||
|
Value
Equity:
|
||||||||||||||||||||
|
U.S.
|
$ | 270,346 | $ | 322,366 | $ | 293,281 | (16.1 | )% | 9.9 | % | ||||||||||
|
Global
and International
|
181,665 | 233,964 | 260,529 | (22.4 | ) | (10.2 | ) | |||||||||||||
| 452,011 | 556,330 | 553,810 | (18.8 | ) | 0.5 | |||||||||||||||
|
Growth
Equity:
|
||||||||||||||||||||
|
U.S.
|
162,770 | 164,547 | 134,070 | (1.1 | ) | 22.7 | ||||||||||||||
|
Global
and International
|
98,409 | 113,379 | 83,615 | (13.2 | ) | 35.6 | ||||||||||||||
| 261,179 | 277,926 | 217,685 | (6.0 | ) | 27.7 | |||||||||||||||
|
Fixed
Income:
|
||||||||||||||||||||
|
U.S.
|
132,195 | 121,872 | 108,418 | 8.5 | 12.4 | |||||||||||||||
|
Global
and International
|
2,334 | 2,315 | 1,188 | 0.8 | 94.9 | |||||||||||||||
| 134,529 | 124,187 | 109,606 | 8.3 | 13.3 | ||||||||||||||||
|
Other
(1):
|
||||||||||||||||||||
|
U.S.
|
15 | 23 | 75 | (34.8 | ) | (69.3 | ) | |||||||||||||
|
Global
and International
|
43 | 91 | — | (52.7 | ) | — | ||||||||||||||
| 58 | 114 | 75 | (49.1 | ) | 52.0 | |||||||||||||||
|
Total
Investment Advisory and Services Fees:
|
||||||||||||||||||||
|
U.S.
|
565,326 | 608,808 | 535,844 | (7.1 | ) | 13.6 | ||||||||||||||
|
Global
and International
|
282,451 | 349,749 | 345,332 | (19.2 | ) | 1.3 | ||||||||||||||
| 847,777 | 958,557 | |||||||||||||||||||