ANNUAL REPORT 2011
2011 Financial Highlights
AllianceBernstein Holding (The Publicly Traded Partnership)
(USD Thousands, Except per Unit Data)
Equity in (Loss) Earnings of Operating Partnership
Net (Loss) Income
Diluted Net (Loss) Income per Unit
Distributions per Unit
AllianceBernstein (The Operating Partnership)
Assets Under Management (USD Millions)
Revenues (USD Thousands)
Net (Loss) Income (USD Thousands)
Employees
Assets Under Management (USD Billions)
Years Ended December 31
2011
$(65,581)
$(93,268)
$(0.90)
$1.14
2010
$162,217
$134,158
$1.32
$1.31
2009
$192,513
$167,189
$1.80
$1.77
Years Ended December 31
2011
$405,897
$2,749,891
$(174,768)
3,764
2010
$478,019
$2,948,557
$442,419
4,256
2009
$486,683
$2,906,879
$556,127
4,369
By Investment Service
By Channel
By Client Location
Other1,2
$63
Fixed Income2
Growth Equities2
$44
Private Client
17%
$69
Value Equities2
$81
$218
Retail
28%
$113
$224
Non-US
34%
$137
Institutions
55%
$269
US
66%
¹ Includes Index, Structured, Asset-Allocation Services and other non-actively managed AUM.
2 Fixed Income includes $5 billion of AUM utilized in Blend Strategies; Value Equities includes $19 billion utilized in Blend Strategies; Growth Equities includes $19 billion utilized in
Blend Strategies; Other includes $1 billion of AUM utilized in Blend Strategies.
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In Institutions, Customized Retirement Strategies (CRS),
our custom target-date solutions for defi ned contribution
plans, are truly unique in the space. With consistently
high client satisfaction ratings, we continue to win new
clients and new assets, and grew this business by double
digits in 2011. We are equally excited about Secure
Retirement Strategies (SRS), the multi-insurer-backed
guaranteed income offering that we were the fi rst to
introduce to the marketplace. We just partnered with our
fi rst SRS client, and our momentum is building. With our
differentiated offerings, we’re well positioned to capitalize
on the long-term promise of defi ned contribution.
Innovation is paying off for our clients in the Private
Client channel as well. Dynamic Asset Allocation (DAA),
a strategy for managing volatility that we introduced in
Private Client portfolios in April 2010, has consistently
delivered on what we designed it to do. By managing
equity exposure in changing market environments, we’ve
been able to reduce risk by 60 to 240 basis points across
client portfolios since inception. Equally important, DAA
has reinforced our role as trusted advisors to our clients
in turbulent times. We’ve kept clients properly invested,
resulting in very high retention levels for the industry.
• Achieve greater operating leverage and better fi nancial
results: Of course, our own fi nancial performance is
a primary focus—and the fi nal tenet of our long-term
strategy to position AllianceBernstein for a strong
future. Even in the challenging markets of 2011, we
made progress in areas like occupancy and information
technology costs—our two largest non-compensation
expenses. In 2011, we consolidated offi ce space in
London and continued to pursue opportunities to sublease
space in different markets. Over time, we’re aligning
our space—and the expense associated with it—with
our needs. We also outsourced some of our operating
services to State Street Corporation in 2011, which will
improve our effi ciency and reduce our operational risk
in a way that is seamless to our clients. In addition, we
reduced headcount by about 12% in 2011 in response to
trends in revenues and asset levels. We’ll remain vigilant
on expense and staff levels in 2012, with the goal of
restoring margins in a rising revenue environment.
Our People
Even as we’ve reduced headcount where necessary, we’ve
selectively hired as well, in order to build and grow our
businesses. We will continue to add talent in areas like
fi xed income, asset allocation, alternatives, specialty
equities and regionally in Asia and Europe, where we
are thriving. AllianceBernstein is an organization where
talented individuals feel they can build extraordinary
careers and contribute substantially to our long-term
growth initiatives. That will not change.
Looking Forward
I’m confi dent that by pursuing our strategic initiatives in
a consistent way, we will succeed in building a fi rm of the
future, one that can better deliver for our clients and our
unitholders over time, in any market environment.
Thank you for your continued trust.
Peter S. Kraus
Chairman and Chief Executive Offi cer
3
AllianceBernstein Directors and Executive Offi cers
Board of Directors
Peter S. Kraus 1, 3, 4
Chairman of the Board and
Chief Executive Offi cer
Dominique Carrel-Billiard
Chief Executive Offi cer,
AXA Investment Managers S.A.
Christopher M. Condron 1, 3, 4
Former Director, President and
Chief Executive Offi cer,
AXA Financial, Inc.
Henri de Castries 1, 4,*
Chairman and Chief Executive Offi cer, AXA
Chairman of the Board,
AXA Financial, Inc.
Director, AXA Equitable Life
Insurance Company
Denis Duverne 1, 3, 4
Deputy Chief Executive Offi cer, AXA
Director, AXA Financial, Inc.
Director, AXA Equitable Life
Insurance Company
Richard S. Dziadzio †
Senior Executive Vice President,
AXA Equitable Life Insurance Company
Chief Financial Offi cer,
AXA Financial, Inc. and AXA Equitable
Life Insurance Company
Steven G. Elliott 2, 4
Former Senior Vice Chairman,
The Bank of New York Mellon
Deborah S. Hechinger 3
Independent Consultant on
Non-Profi t Governance
Weston M. Hicks 2
Director, President and
Chief Executive Offi cer,
Alleghany Corporation
Kevin Molloy
Business Support and
Development Representative, AXA
Mark Pearson
Director, President and
Chief Executive Offi cer,
AXA Financial, Inc.
Chairman of the Board and
Chief Executive Offi cer,
AXA Equitable Life
Insurance Company
Lorie A. Slutsky 1, 3, 4
President and
Chief Executive Offi cer,
The New York Community Trust
Director, AXA Financial, Inc.
Director, AXA Equitable
Life Insurance Company
A.W. (Pete) Smith, Jr. 2, 4
President, Smith Compensation Consulting
Peter J. Tobin 1, 2
Former Special Assistant to the
President of St. John’s University
Executive Officers
Peter S. Kraus
Chairman of the Board and
Chief Executive Offi cer
James A. Gingrich
Chief Operating Offi cer
Laurence E. Cranch
General Counsel
Edward J. Farrell
Controller and Interim
Chief Financial Offi cer
Robert P. van Brugge
Chairman and Chief Executive Offi cer of
Sanford C. Bernstein & Co., LLC
Lori A. Massad
Head—Human Capital and
Chief Talent Offi cer
1Member of the Executive Committee
2Member of the Audit Committee
3Member of the Corporate Governance Committee
4Member of the Compensation Committee
*Mr. de Castries resigned from the Compensation Committee in February 2012.
†Mr. Dziadzio resigned from AXA Equitable and the Board effective April 13, 2012.
4
AllianceBernstein Holding L.P.
Form 10-K 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
FORM 10-K
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2011
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-09818
ALLIANCEBERNSTEIN HOLDING L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
1345 Avenue of the Americas, New York, N.Y.
(Address of principal executive offices)
13-3434400
(I.R.S. Employer
Identification No.)
10105
(Zip Code)
Registrant’s telephone number, including area code: (212) 969-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
units representing assignments of beneficial ownership
of limited partnership interests
Name of each exchange on which registered
New York Stock Exchange
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 È 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 È
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 È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes È 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. ‘
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 definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer È
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 È
The aggregate market value of the units representing assignments of beneficial ownership of limited partnership interests held
Non-accelerated filer ‘
Accelerated filer ‘
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, 2011 was approximately $1.96 billion.
The number of units representing assignments of beneficial ownership of limited partnership interests outstanding as of
December 31, 2011 was 105,173,342. (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
Glossary of Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ii
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1
General
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Institutional Services
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Retail Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
Private Client Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Bernstein Research Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Assets Under Management, Revenues and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custody and Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Service Marks
Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
History and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Proceedings
(Removed and Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
AllianceBernstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 40
Executive Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
AllianceBernstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
AllianceBernstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
AllianceBernstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . .127
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . .159
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . .165
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .168
Item 15.
Signatures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .169
Exhibits, Financial Statement Schedules
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171
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), an indirect wholly-owned sub-
sidiary 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 (sociu˘tu˘ 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), an indirect 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., and assumption of the liabilities of that 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 an indirect wholly-owned subsidiary of AXA Equitable, and, where appropriate, ACMC, LLC, 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, SCBL and Sanford C. Bernstein (Hong Kong) Limited, together.
“SCB LLC” – Sanford C. Bernstein & Co., LLC (Delaware limited liability company), an indirect wholly-owned subsidiary of
AllianceBernstein that provides Bernstein Research Services in the United States.
“SCBL” – Sanford C. Bernstein Limited (U.K. company), an indirect wholly-owned subsidiary of AllianceBernstein that provides
Bernstein Research Services primarily in Europe.
“SEC” – the United States Securities and Exchange Commission.
“Securities Act” – the Securities Act of 1933, as amended.
ii
PART I
Item 1.
Business
The words “we” and “our” in this Form 10-K refer collectively to Holding and AllianceBernstein and its subsidiaries, or to their
officers and employees. Similarly, the words “company” and “firm” refer to both Holding and AllianceBernstein. Where the con-
text 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 Morgan Stanley Capital International (“MSCI”) emerging markets index. As of
December 31, 2011, examples of such countries were Brazil, Chile, China, Columbia, Czech Republic, Egypt, Hungary, India,
Indonesia, Israel, Malaysia, Mexico, Morocco, 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 funds we sponsor that utilize various alternative
strategies such as leverage, short selling of securities, and the use of forward contracts, currency options and other derivatives.
General
Mission
Our firm’s mission is to be the most trusted investment firm in the world by placing our clients’ interests first and foremost, utilizing
our research capabilities to have more knowledge than any other investment firm, and using and sharing knowledge better than our
competitors to help our clients achieve financial peace of mind and investment success.
Clients
AllianceBernstein provides research, diversified investment management and related services globally to a broad range of clients,
including:
•
•
institutional clients, including unaffiliated corporate and public employee pension funds, endowment funds, domestic and for-
eign institutions and governments, and various affiliates;
retail clients, including U.S. and offshore mutual funds, variable annuities, insurance products and sub-advisory relationships;
• private clients, including high-net-worth individuals, trusts and estates, charitable foundations, partnerships, private and family
corporations, and other entities; and
•
institutional investors seeking high-quality research, portfolio analysis and brokerage-related services, and issuers of publicly-
traded securities seeking equity capital markets services.
We also provide distribution, shareholder servicing and administrative services to our sponsored mutual funds.
Research
Our high-quality, in-depth 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. In addi-
tion, we have several specialized research initiatives, including research examining global strategic changes that can affect multiple
industries and geographies.
Annual Report 2011
1
Products and Services
We offer a broad range of investment products and services to our clients:
• 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 Services”);
• To our retail clients, we offer retail mutual funds sponsored by AllianceBernstein and our subsidiaries, sub-advisory services to
mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide
(“Separately-Managed Account Programs”) and other investment vehicles (collectively, “Retail Services”);
• 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
• To institutional investors, we offer research, portfolio analysis and brokerage-related services, and, to issuers of publicly-traded
securities, we offer equity capital markets services (“Bernstein Research Services”).
These services are provided by teams of investment professionals with significant expertise in their respective disciplines (see
“Employees” in this Item 1). Our buy-side research analysts support our portfolio managers and, 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 Bernstein Research Services.
Our services include:
• Value equities, generally targeting stocks that are out of favor and considered undervalued;
• Growth equities, generally targeting stocks with under-appreciated growth potential;
• Fixed income securities, including taxable and tax-exempt securities;
• Blend strategies, combining style-pure investment components with systematic rebalancing;
• Passive management, including both index and enhanced index strategies;
• Alternative investments, including hedge funds, currency management strategies and private capital (e.g., direct real estate
investing); and
• Asset allocation services, including dynamic asset allocation, customized target date funds, target risk funds and other strategies
tailored to help clients meet their investment goals.
Sub-advisory client mandates span our investment strategies, including value, growth, fixed income and blend. We serve as
sub-adviser for retail mutual funds, insurance products, retirement platforms and institutional investment products.
We provide our 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.
We market and distribute alternative investment products globally to high-net-worth clients and institutional investors. Alternative
product AUM totaled $12.0 billion as of December 31, 2011, $10.5 billion of which was institutional AUM, $1.4 billion of which
was private client AUM and $0.1 billion of which was retail AUM.
In 2008, we created a unit 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. In November 2010, we introduced Secure Retirement Strategies (“SRS”), a multi-manager target-
date solution. SRS provides guaranteed lifetime retirement income backed by multiple insurers to participants of large DC plans.
We anticipate our first SRS client funding during the second quarter of 2012.
2
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4
Separately-Managed Account Programs; and other investment vehicles (“Retail Products and Services”). As of December 31,
2011, retail AUM was $113 billion, or 28% of our company-wide AUM, as compared to $127 billion, or 27%, as of December 31,
2010 and $121 billion, or 25%, as of December 31, 2009. 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. These 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 invest-
ment options, including local and global value equities, growth 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 retail
share classes of the Sanford C. Bernstein Funds (principally Private Client Services products), currently offer 120 different portfolios
to U.S. investors. As of December 31, 2011, retail U.S. Funds AUM was approximately $41 billion, or 36% of total retail AUM, as
compared to $46 billion, or 36%, as of December 31, 2010 and $45 billion, or 37%, as of December 31, 2009. 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 $29 billion as of December 31, 2011, as private client AUM.
Our Non-U.S. Funds are distributed internationally by local financial intermediaries to non-U.S. investors in most major interna-
tional markets by means of distribution agreements. As of December 31, 2011, these funds consisted of 77 different portfolios and
AUM in these funds was $34 billion, $5 billion of which was invested in local-market funds that we distribute in Japan through
financial intermediaries.
AllianceBernstein Investments serves as the principal underwriter and distributor of the U.S. Funds. AllianceBernstein Investments
employs 126 sales representatives who devote their time to promoting the sale of U.S. Funds and certain other Retail Products and
Services offered by financial intermediaries.
AllianceBernstein (Luxembourg) S.A. (“AllianceBernstein Luxembourg”), a Luxembourg management company and one of our
wholly-owned subsidiaries, generally serves as the distributor for the Non-U.S. Funds.
We have an international sales force of 65 sales representatives who devote some or all of their time to promoting the sale of
Non-U.S. Funds and other Retail Products and Services offered by financial intermediaries.
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 unaffiliated life insurance companies (“Sub-Advised Variable Products”), and we
sub-advise variable product mutual funds sponsored by affiliates. As of December 31, 2011, we managed or sub-advised approx-
imately $29 billion of Sub-Advised Variable Product AUM.
Private Client Services
Through Bernstein GWM, we provide Private Client Services to high-net-worth individuals, trusts and estates, charitable founda-
tions, partnerships, private and family corporations, and other entities by means of separately-managed accounts, hedge funds,
mutual funds and other investment vehicles. As of December 31, 2011, private client AUM was $69 billion, or 17% of our
company-wide AUM, as compared to $78 billion, or 16%, as of December 31, 2010 and $75 billion, or 15%, as of December 31,
2009. For more information concerning private client AUM, revenues and fees, see “Assets Under Management, Revenues and Fees” in
this Item 1.
Annual Report 2011
5
Our Private Client Services are built on a sales effort that involves approximately 264 financial advisors based in 18 cities in the U.S.
and in London, England. These advisors do not manage money, but work with private clients and their tax, legal and other advisors
to assist them 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 our
research reports, investment planning services, the dynamic asset allocation service and Bernstein GWM, which has in-depth
knowledge of trust, estate and tax planning strategies.
Bernstein Research Services
Bernstein Research Services consist of fundamental research, quantitative services and brokerage-related services in equities and
listed options 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, with research
services also provided by Sanford C. Bernstein (Hong Kong) Limited (an indirect wholly-owned subsidiary of AllianceBernstein,
“SCB Hong Kong”), in Asia. For more information concerning the revenues we derive from Bernstein Research Services, see
“Assets Under Management, Revenues and Fees” in this Item 1.
We provide fundamental company and industry research along with disciplined research into securities valuation and factors affect-
ing stock-price movements. Our analysts are consistently among the highest ranked research analysts in industry surveys conducted
by third-party organizations.
Additionally, we provide equity capital markets services to issuers of publicly-traded securities, primarily in initial public offerings
and follow-on offerings, acting as manager, syndicate member or selling group member.
Assets Under Management, Revenues and Fees
The following tables summarize our AUM and revenues by distribution channel:
End of Period Assets Under Management
Institutions
Retail
Private Client
Total
Institutions
Retail
Private Client
Total
6
2011
$ 223,874
112,605
69,418
$405,897
December 31,
2010
(in millions)
2009
2011-10
2010-09
% Change
$ 272,928
127,045
78,046
$478,019
$ 291,233
120,697
74,753
$486,683
(18.0)%
(6.3)%
(11.4)
(11.1)
(15.1)
5.3
4.4
(1.8)
Average Assets Under Management
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
(in millions)
$ 252,597
$ 277,109
$ 272,569
(8.8)%
1.7%
124,012
75,323
122,756
74,686
105,137
68,613
$451,932
$474,551
$446,319
1.0
0.9
(4.8)
16.8
8.9
6.3
AllianceBernstein
Institutional Services
Retail Services
Private Client Services
Bernstein Research Services
Other(1)
Total Revenues
Less: Interest Expense
Net Revenues
Revenues
Years Ended December 31,
2010
2011
(in thousands)
2009
2011-10
2010-09
% Change
$
616,787
$
764,847
$
811,164
(19.4)%
(5.7)%
1,092,561
1,068,869
652,097
437,414
(46,418)
2,752,441
2,550
$2,749,891
651,218
430,521
36,650
2,952,105
3,548
$2,948,557
888,256
589,665
434,605
187,600
2,911,290
4,411
$2,906,879
2.2
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(28.1)
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1.4
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1.4
(1) Other revenues primarily consist of investment gains (losses) and dividend and interest income. 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 23%, 22% and 20% of our company-wide AUM as of December 31, 2011, 2010 and 2009,
respectively. We earned approximately 4%, 5% and 5% of our company-wide net revenues from our affiliates in 2011, 2010 and
2009, respectively. Affiliated AUM is included in our Institutions and Retail buy-side distribution channels.
Annual Report 2011
7
Institutional Services
The following tables summarize our Institutional Services AUM and revenues:
Institutional Services Assets Under Management
(by Investment Service)
Value Equity:
U.S.
Global and International
Growth Equity:
U.S.
Global and International
Fixed Income:
U.S.
Global and International
Other(1):
U.S.
Global and International
Total:
U.S.
Global and International
Total
Affiliated
Non-affiliated
Total
2011
December 31,
2010
(in millions)
2009
2011-10
2010-09
% Change
$
7,469
37,316
44,785
$ 13,955
74,668
88,623
$ 19,028
88,758
107,786
5,541
7,417
12,958
86,329
44,983
131,312
11,278
23,541
34,819
110,617
113,257
$223,874
$ 69,071
154,803
$223,874
10,921
22,507
33,428
78,101
44,766
122,867
9,980
18,030
28,010
112,957
159,971
$272,928
$ 74,672
198,256
$272,928
18,124
34,762
52,886
71,832
41,083
112,915
9,677
7,969
17,646
118,661
172,572
$291,233
$ 69,734
221,499
$291,233
(46.5)%
(50.0)
(49.5)
(49.3)
(67.0)
(61.2)
10.5
0.5
6.9
13.0
30.6
24.3
(2.1)
(29.2)
(18.0)
(7.5)
(21.9)
(18.0)
(26.7)%
(15.9)
(17.8)
(39.7)
(35.3)
(36.8)
8.7
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8.8
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(4.8)
(7.3)
(6.3)
7.1
(10.5)
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Includes index, structured, asset allocation services and certain other alternative investments.
8
AllianceBernstein
of these companies are 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.
Based on industry sales data reported by the Investment Company Institute, our market share in the U.S. mutual fund industry was
approximately 1% of total industry assets in the U.S. during 2011. 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 our shareholder services (see below)
and the amounts and types of distribution assistance and administrative services payments we make to financial intermediaries, which
we believe are competitive with others in the industry.
AllianceBernstein Investor Services, which operates in San Antonio, Texas, provides transfer agency and related services for each
open-end U.S. Fund (except the SCB Funds) and provides shareholder servicing for each open-end U.S. Fund’s shareholder
accounts (approximately three million accounts in total), for which it receives a monthly fee under servicing agreements with each
open-end U.S. Fund 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, which approximate $6 million per year, must be specifically approved in
advance by each fund’s board of directors or trustees.
A unit of AllianceBernstein Luxembourg (“ABIS Lux”) is the transfer agent for substantially all of the Non-U.S. Funds. ABIS Lux,
based in Luxembourg and supported by operations in Singapore, Hong Kong and the United States, receives a monthly asset-based
fee for its transfer agency services and a transaction-based fee under various services agreements with the Non-U.S. Funds. Each
agreement may be terminated by either party upon 60 days’ notice.
Annual Report 2011
13
Private Client Services
The following tables summarize Private Client Services AUM and revenues:
Private Client Services Assets Under Management
(by Investment Service)
Value Equity:
U.S.
Global and International
Growth Equity:
U.S.
Global and International
Fixed Income:
U.S.
Global and International
Other(1):
U.S.
Global and International
Total:
U.S.
Global and International
Total
2011
December 31,
2010
(in millions)
2009
2011-10
2010-09
% Change
$ 9,912
7,971
17,883
$ 13,082
11,714
24,796
$ 14,137
11,751
25,888
(24.2)%
(32.0)
(27.9)
7,735
5,859
13,594
32,147
2,360
34,507
319
3,115
3,434
50,113
19,305
9,626
7,492
17,118
32,485
1,658
34,143
236
1,753
1,989
55,429
22,617
10,384
6,941
17,325
30,862
621
31,483
15
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55,398
19,355
$69,418
$78,046
$74,753
(19.6)
(21.8)
(20.6)
(1.0)
42.3
1.1
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72.6
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(11.1)
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(4.2)
(7.3)
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Includes index, structured, asset allocation services and certain other alternative investments.
14
AllianceBernstein
Revenues From Private Client Services
(by Investment Service)
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
(in thousands)
$ 134,149
$ 143,591
$ 143,390
104,260
238,409
108,269
78,927
187,196
182,928
12,166
195,094
2,160
24,870
27,030
427,506
220,223
647,729
3,165
1,203
116,254
259,845
114,081
79,651
193,732
177,310
7,141
184,451
292
9,368
9,660
435,274
212,414
647,688
2,393
1,137
113,908
257,298
106,131
68,693
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Investment Advisory and Services Fees:
Value Equity:
U.S.
Global and International
Growth Equity:
U.S.
Global and International
Fixed Income:
U.S.
Global and International
Other(1):
U.S.
Global and International
Total Investment Advisory and Services Fees:
U.S.
Global and International
Distribution Revenues(2)
Shareholder Servicing Fees(2)
Total
(1)
Includes index, structured, asset allocation services and certain other alternative investments.
(2) For a description of distribution revenues and shareholder servicing fees, see “Retail Services” above.
Private client accounts generally are managed pursuant to a written investment advisory agreement among the client,
AllianceBernstein and SCB LLC, which usually is terminable at any time or upon relatively short notice by any party. In general,
these contracts may not be assigned without the consent of the client. We are compensated under these contracts by fees calculated
as a percentage of AUM at a specific date or as a percentage of the value of average assets under management for the applicable bill-
ing period, with these fees varying based on the types of investment services and the size of the account. The aggregate fees we
charge for managing hedge funds may be higher than the fees we charge for managing other assets in private client accounts because
hedge fund fees include performance-based fees, incentive allocations or carried interests in addition to asset-based fees. We are
eligible to earn performance-based fees on approximately 3% of private client AUM, substantially all of which is held in hedge
funds.
Revenues from Private Client Services represented approximately 24%, 22% and 20% of our company-wide net revenues for the
years ended December 31, 2011, 2010 and 2009, respectively.
Annual Report 2011
15
Bernstein Research Services
The following table summarizes Bernstein Research Services revenues:
Revenues From Bernstein Research Services
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
(in thousands)
Bernstein Research Services
$437,414
$430,521
$434,605
1.6%
(0.9)%
We earn revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients
compensate us principally by directing SCB to execute brokerage transactions on their behalf, for which we earn commissions.
These services accounted for approximately 16%, 15% and 15% of our company-wide net revenues for the years ended
December 31, 2011, 2010 and 2009, respectively.
Fee rates charged for brokerage transactions have declined significantly in recent years, but increases in transaction volume in both
the U.S. and Europe have often offset these decreases. For additional information, see “Risk Factors” in Item 1A and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in Item 7.
We also earn revenues from the equity capital markets services we provide to issuers of publicly-traded securities. Depending on our
role in a particular equity issuance, these revenues may take the form of underwriting fees, management fees and/or selling
concessions.
Custody and Brokerage
Custody
SCB LLC acts as custodian for the majority of AllianceBernstein’s private client AUM and some of AllianceBernstein’s institutional
AUM. Other custodial arrangements are maintained by client-designated banks, trust companies, brokerage firms or custodians.
Brokerage
AllianceBernstein generally has the discretion to select the broker-dealers that execute securities transactions for client accounts.
When selecting brokers, we are required to obtain “best execution”. Although there is no single statutory definition, SEC releases
and other legal guidelines make clear that the duty to obtain best execution requires us to seek “the most advantageous terms
reasonably available under the circumstances for a customer’s account”. In addition to the commission rate charged, we take into
account such factors as current market conditions, the broker’s financial viability, and the ability and willingness of the broker to
commit capital by taking positions in order to execute transactions.
While we select brokers primarily on the basis of their execution capabilities, we may also take into consideration the quality and
amount of research services a broker provides to us for the benefit of our clients. These research services, which are paid for with
client commissions and which we purchase to augment our own research capabilities, are governed by Section 28(e) of the
Exchange Act. We use broker-dealers that provide these services in consideration for commissions paid for the execution of client
trades, subject at all times to our duty to seek best execution, and with respect to which we reasonably conclude, in good faith, that
the value of the execution and other services we receive from the broker-dealer is reasonable in relation to the amount of commis-
sions paid. The commissions charged by these full-service brokers are generally higher than those charged by electronic trading
networks and other “low-touch” trading venues.
16
AllianceBernstein
We regularly execute transactions for our private clients through SCB, our affiliated broker-dealers, because these clients have gen-
erally subscribed to an all-inclusive package of services that includes brokerage, custody and investment advice. We sometimes
execute institutional client transactions through SCB LLC or SCBL. We do so only when our clients have consented to our use of
affiliated broker-dealers or we are otherwise permitted to do so, and only when we can execute these transactions in accordance
with applicable law (i.e., our obligation to obtain “best execution”).
We may use third-party brokers to execute client transactions that also sell shares of AllianceBernstein Funds or third party funds we
sub-advise; however, we prohibit our investment professionals who place trades from considering these other relationships or the
sale of fund shares as a factor when selecting brokers.
Our Brokerage Allocation Committee has principal oversight responsibility for evaluating equity-related brokerage matters, includ-
ing how to use research services we receive in a manner that is in the best interests of our clients and consistent with current regu-
latory requirements.
Service Marks
We have registered a number of service marks with the U.S. Patent and Trademark Office and various foreign trademark offices,
including the combination of an “AB” design logo with the mark “AllianceBernstein”.
In connection with the Bernstein Transaction, we acquired all of the rights and title in, and to, the Bernstein service marks, includ-
ing the mark “Bernstein”.
Regulation
Virtually all aspects of our business are subject to various federal and state laws and regulations, rules of various securities regulators
and exchanges, and laws in the foreign countries in which our subsidiaries conduct business. These laws and regulations are primar-
ily intended to benefit clients and fund shareholders and generally grant supervisory agencies broad administrative powers, including
the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Possible sanctions that
may be imposed include the suspension of individual employees, limitations on engaging in business for specific periods, the revoca-
tion of the registration as an investment adviser or broker-dealer, censures and fines.
AllianceBernstein, Holding, the General Partner, SCB LLC, AllianceBernstein Global Derivatives Corporation (an indirect wholly-
owned subsidiary of AllianceBernstein, “Global Derivatives”) and Alliance Corporate Finance Group Incorporated (an indirect
wholly-owned subsidiary of AllianceBernstein) are investment advisers registered under the Investment Advisers Act. SCB LLC and
Global Derivatives are also registered with the Commodity Futures Trading Commission as commodity pool operators.
Each U.S. Fund is registered with the SEC under the Investment Company Act and the shares of most U.S. Funds are qualified for
sale in all states in the United States and the District of Columbia, except for U.S. Funds offered only to residents of a particular
state. AllianceBernstein Investor Services is registered with the SEC as a transfer and servicing agent.
SCB LLC and AllianceBernstein Investments are registered with the SEC as broker-dealers, and both are members of FINRA. SCB
LLC is also a member of the NYSE and other principal U.S. exchanges. SCBL is a broker regulated by the Financial Services Authority
of the United Kingdom (“FSA”) and is a member of the London Stock Exchange. SCB Hong Kong is regulated by the Hong Kong
Securities and Futures Commission (“SFC”) and is an exchange participant of The Stock Exchange of Hong Kong Limited.
AllianceBernstein Trust Company, LLC (“ABTC”), a wholly-owned subsidiary of AllianceBernstein, is a non-depository trust
company chartered under New Hampshire law as a limited liability company. ABTC is authorized to act as trustee, executor, trans-
fer agent, assignee, receiver, custodian, investment adviser and in any other capacity authorized for a trust company under New
Hampshire law. As a state-chartered trust company exercising fiduciary powers, ABTC must comply with New Hampshire laws
applicable to trust company operations (such as New Hampshire Revised Statutes Annotated), certain federal laws (such as ERISA
and sections of the Bank Secrecy Act), and New Hampshire banking laws. The primary fiduciary activities of ABTC consist of serv-
ing as trustee to a series of collective investment funds, the investors of which currently are defined benefit and defined contribution
retirement plans.
Annual Report 2011
17
Holding Units are listed on the NYSE and trade publicly under the ticker symbol “AB”. As an NYSE-listed company, Holding is
subject to applicable regulations promulgated by the NYSE.
Our relationships with AXA and its subsidiaries are subject to applicable provisions of the insurance laws and regulations of New
York and other states. Under such laws and regulations, the terms of certain investment advisory and other agreements we enter
into with AXA or its subsidiaries are required to be fair and equitable, charges or fees for services performed must be reasonable,
and, in some cases, are subject to regulatory approval.
Some of our subsidiaries are subject to the oversight of regulatory authorities in Europe, including the FSA in the U.K., and in Asia,
including the Financial Services Agency in Japan, the SFC in Hong Kong and the Monetary Authority of Singapore. While the
requirements of these foreign regulators are often comparable to the requirements of the SEC and other U.S. regulators, they are
sometimes more restrictive and may cause us to incur substantial expenditures of time and money in our efforts to comply. As of
December 31, 2011, each of our subsidiaries subject to a minimum net capital requirement satisfied the applicable requirement.
Taxes
Holding, having elected under Section 7704(g) of the Internal Revenue Code of 1986, as amended (“Code”), to be subject to a
3.5% federal tax on partnership gross income from the active conduct of a trade or business, is a “grandfathered” publicly-traded
partnership for federal income tax purposes. Holding is also subject to the 4.0% New York City unincorporated business tax
(“UBT”), net of credits for UBT paid by AllianceBernstein. In order to preserve Holding’s status as a “grandfathered” publicly-
traded partnership for federal income tax purposes, management ensures that Holding does not directly or indirectly (through
AllianceBernstein) enter into a substantial new line of business. A “new line of business” includes any business that is not closely
related to AllianceBernstein’s historical business of providing research and diversified investment management and related services to
its clients. A new line of business is “substantial” when a partnership derives more than 15% of its gross income from, or uses more
than 15% of its total assets to support the new line of business.
AllianceBernstein is a private partnership for federal income tax purposes and, accordingly, is not subject to federal and state corpo-
rate income taxes. However, AllianceBernstein is subject to the 4.0% UBT. Domestic corporate subsidiaries of AllianceBernstein,
which are subject to federal, state and local income taxes, are generally included in the filing of a consolidated federal income tax
return with separate state and local income tax returns also being filed. Foreign corporate subsidiaries are generally subject to taxes at
higher rates in the foreign jurisdictions where they are located so, as our business increasingly operates in countries other than the
U.S., our effective tax rate continues to increase.
For additional information, see “Risk Factors” in Item 1A.
History and Structure
We have been in the investment research and management business for approximately 40 years. Alliance Capital was founded in
1971 when the investment management department of Donaldson, Lufkin & Jenrette, Inc. (since November 2000, a part of Credit
Suisse Group) merged with the investment advisory business of Moody’s Investor Services, Inc. Bernstein was founded in 1967.
In April 1988, Holding “went public” as a master limited partnership. Holding Units, which trade under the ticker symbol “AB”,
have been listed on the NYSE since that time.
In October 1999, Holding reorganized by transferring its business and assets to AllianceBernstein, a newly-formed operating partner-
ship, in exchange for all of the AllianceBernstein Units (“Reorganization”). Since the date of the Reorganization,
AllianceBernstein has conducted the business formerly conducted by Holding and Holding’s activities have consisted of owning
AllianceBernstein Units and engaging in related activities. As stated above, Holding Units trade publicly; AllianceBernstein Units do
not trade publicly and are subject to significant restrictions on transfer. The General Partner is the general partner of both
AllianceBernstein and Holding.
18
AllianceBernstein
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Item 1A. Risk Factors
Please read this section along with the description of our business in Item 1, the competition section just above and
AllianceBernstein’s financial information contained in Items 6, 7 and 8. The majority of the risk factors discussed below directly affect
AllianceBernstein. These risk factors also affect Holding because Holding’s principal source of income and cash flow is attributable
to its investment in AllianceBernstein. See also “Cautions Regarding Forward-Looking Statements” in Item 7.
Our ability to retain clients and increase our AUM depends, in part, on our absolute and relative investment performance.
Our largest equity services continued to underperform during 2011. Poor investment performance, should it continue, will
lead to the continued loss of clients and an ongoing decline in AUM and revenues, and could lead to a downgrade in our
credit ratings and a reduced ability to access credit on reasonable terms.
Since the financial crisis of 2008, we have underperformed benchmarks in many of our services, particularly our large cap equities
services. In 2011, extreme volatility in the global equity and corporate and high yield fixed income markets reduced investor con-
fidence and made it difficult for most asset managers, including our firm, to produce returns that met client expectations. It is likely
that our underperformance in many of our services during 2011 will place continued pressure on our flows during 2012, particularly
in our Institutions channel.
Our ability to achieve investment returns for clients that meet or exceed investment returns for comparable asset classes and compet-
ing investment services is a key consideration when clients decide to keep their assets with us or invest additional assets, and when a
prospective client is deciding whether to invest with us. Poor investment performance, both in absolute terms and/or relative to
peers and stated benchmarks, has resulted, and is likely to continue to result, in clients withdrawing assets and in prospective clients
choosing to invest with competitors. The resulting lower AUM levels have led, and are likely to continue to lead, to lower invest-
ment management fees, including minimal or no performance-based fees; lower investment management fees have resulted, and are
likely to continue to result, in revenue declines.
Our access to credit on reasonable terms is partially dependent on our firm’s credit ratings. Both Standard & Poor’s Ratings Services
(“S&P”) and Moody’s Investors Service (“Moody’s”) affirmed AllianceBernstein’s long-term senior debt rating during 2011, but
each rating agency changed our firm’s outlook to “negative” from “stable” primarily due to continued outflows and weak invest-
ment performance. S&P, in its press release, cited factors that could result in a downgrade to our firm’s long-term rating, including
continued net outflows during 2012, a spike in net outflows in a particular quarter and a decline in AUM due to substantial market
depreciation, affecting our firm’s profitability and cash flow. Moody’s, in its press release, also cited factors that could result in a
downgrade to our firm’s long-term rating, including the persistence of outflows, a decline in average AUM to below $375 billion
and investment performance of key services that continues to fall materially below applicable benchmarks. A downgrade to our
credit ratings is likely to increase our borrowing costs and limit our access to the capital markets.
Volatility in and disruption of the global capital and credit markets, and adverse changes in the global economy, are likely
to significantly affect our AUM; any significant reduction in our AUM can have a material adverse effect on our results of
operations and business prospects.
The mix, market value and level of our AUM are affected by the performance of financial markets (both domestic and
international), global economic conditions, industry trends, interest rates, inflation rates, tax regulation changes and other factors that
are difficult to predict. Investment advisory and services fees, the largest component of our revenues, are generally calculated as a
percentage of the value of AUM and vary with the type of account managed. Accordingly, fee income generally increases or
decreases as AUM increase or decrease and is affected by market appreciation or depreciation, inflow of new client assets (including
purchases of mutual fund shares) and outflow of client assets (including redemption of mutual fund shares). In addition, changing
market conditions and investment trends, particularly with respect to retirement savings, may reduce interest in certain of our
investment products and may result in a reduction in AUM.
In 2011, particularly during the third quarter, the capital and credit markets continued to experience volatility and disruption
worldwide as the escalation of Europe’s sovereign debt crisis, the U.S. debt ceiling debate and resulting S&P downgrade of U.S.
credit, and further weakening in the U.S. economy led to equity declines not seen since the financial crisis. Corporate and high
yield fixed income markets experienced extreme volatility. These conditions, combined with net outflows across our three buy-side
distribution channels, resulted in significant decreases in our AUM, revenues and net income. Future disruption of the capital and
Annual Report 2011
21
credit markets is likely to result in further net outflows, which may severely impact our results of operations and financial condition.
If we are unable to obtain funds and/or financing, we may be forced to incur unanticipated costs or revise our strategic plans, which
could have a material adverse effect on our financial condition, results of operations and business prospects.
The amount and mix of our AUM are subject to significant fluctuations, which may adversely affect our fee levels and
results of operations.
Fluctuations in the amount and mix of our AUM may be attributable in part to conditions outside of our control that have had, and
in the future may have, a negative effect on our revenues and income. We derive substantially all of our revenues and income from
providing investment research and management and related services, so a decrease in the level of our AUM, whether resulting from
negative investment performance, client outflows or other factors, would adversely affect our revenues and income.
A shift from active equity services towards fixed income services and passive services has resulted, and may continue to result, in a
corresponding decline in our revenues and income because we generally earn higher fees from assets invested in our active equity
services than in our fixed income services or passive services. A shift from global and international services to U.S. services is likely
to have a similar effect. The global economic turmoil experienced during the third quarter of 2011 caused some investors to further
shift their investment preferences from active equities to fixed income, passive and money market products (some of which we do
not offer). This trend continued during the fourth quarter of 2011 and may continue or accelerate in the future. Conversely,
increases in interest rates, particularly if rapid, or high interest rates, as well as uncertainty in the future direction of interest rates,
may adversely affect our fixed income services because rising interest rates and interest rate uncertainty typically decrease the total
return of many bond investments due to lower market valuations of existing bonds.
In addition, we may be required to reduce our fee levels, or restructure the fees we charge, because of, among other things, regu-
latory initiatives (whether industry-wide or specifically targeted), court decisions and competitive considerations. A reduction in fees
would reduce our revenues. A reduction in revenues, without a commensurate reduction in expenses, will adversely affect our
results of operations.
An impairment of goodwill may occur.
As a result of increased uncertainty and current market dynamics, determining whether an impairment of the goodwill asset exists is
increasingly difficult and requires management to exercise significant judgment. In addition, to the extent that securities valuations
are depressed for prolonged periods of time and market conditions stagnate or worsen, or if we continue to experience significant
net redemptions, our AUM, revenues, profitability and unit price may continue to be adversely affected. Although the price of a
Holding Unit is just one factor in the calculation of fair value, if current Holding Unit price levels continue or decline further,
reaching the conclusion that fair value exceeds carrying value will, over time, become more difficult. As a result, subsequent
impairment tests are likely to occur more frequently and be based on more negative assumptions and future cash flow projections,
which may result in an impairment of goodwill. An impairment may result in a material charge to our earnings. For additional
information about our impairment testing, see Item 7.
Our business is dependent on investment advisory, selling and distribution agreements that are subject to termination or
non-renewal on short notice.
We derive most of our revenues pursuant to written investment management agreements (or other arrangements) with institutional
investors, mutual funds and private clients, and selling and distribution agreements between AllianceBernstein Investments and
financial intermediaries that distribute AllianceBernstein Funds. Generally, the investment management agreements (and other
arrangements) are terminable at any time or upon relatively short notice by either party. The selling and distribution 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, investors in AllianceBernstein Funds can redeem their investments without notice. Any termination of,
or failure to renew, a significant number of these agreements, or a significant increase in redemption rates, could have a material
adverse effect on our results of operations and business prospects.
Furthermore, the investment management agreements pursuant to which we manage the U.S. Funds must be renewed and
approved by the Funds’ boards of directors annually. A significant majority of the directors are independent. Consequently, there
22
AllianceBernstein
can be no assurance that the board of directors of each fund will approve the fund’s investment management agreement each year,
or will not condition its approval on revised terms that may be adverse to us.
Our ability to establish new client relationships and maintain existing ones is partly dependent on our relationships with
various financial intermediaries and consultants that are not obligated to continue to work with us.
Our ability to market our Retail Products and Services, sub-advisory services and certain other investment services is partly depend-
ent on our access to securities firms, brokers, banks and other intermediaries. These intermediaries generally offer their clients
investment products that compete with our products. In addition, certain institutional investors rely on consultants to advise them
on choosing an investment adviser, and our large cap equity Institutional Services currently are not considered among the best
choices by consultants. Also, our Private Client Services group relies on referrals from financial planners, registered investment
advisers and other professionals. We cannot be certain that we will continue to have access to, or receive referrals from, these third
parties. Loss of such access or referrals could have a material adverse effect on our results of operations and business prospects. For
example, a number of investment consultants have advised their clients to move their assets away from us to other investment
advisers, which has contributed to significant net outflows. This trend may continue.
We may be unable to continue to attract, motivate and retain key personnel, and the cost to retain key personnel could
put pressure on our operating margin.
Our business depends on our ability to attract, motivate and retain highly skilled, and often highly specialized, technical, managerial
and executive personnel; there is no assurance that we will be able to do so.
The market for qualified research analysts, portfolio managers, financial advisers, traders and other professionals is extremely com-
petitive and is characterized by frequent movement of these investment professionals among different firms. In 2011, some of our
senior professionals left the firm; additional departures may occur. Portfolio managers and financial advisers often maintain strong,
personal relationships with their clients so their departure could cause us to lose client accounts, which could have a material adverse
effect on our results of operations and business prospects.
If our revenues continue to decline during 2012, it will place significant added pressure on our ability to pay our employees at
competitive levels. As a result, we will continue to be vigilant about scaling our cost structure (including headcount) to our revenue
base.
Our operating margin may decline if we increase compensation to retain key personnel without a commensurate increase in
revenues.
Performance-based fee arrangements with our clients cause greater fluctuations in our revenues.
We sometimes charge our clients performance-based fees. 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 per-
formance 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 fail to achieve the 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, our ability to earn future
performance-based fees will be impaired.
We are eligible to earn performance-based fees on approximately 11% of the assets we manage for institutional clients and approx-
imately 3% of the assets we manage for private clients (in total, approximately 7% of our company-wide AUM). 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 2011, 2010 and 2009 were $16.5 million, $20.5 million and $29.8 million, respectively.
Annual Report 2011
23
We may engage in strategic transactions that could pose risks.
As part of our business strategy, we consider potential strategic transactions, including acquisitions, dispositions, consolidations, joint
ventures and similar transactions, some of which may be material. These transactions, if undertaken, may involve a number of risks
and present financial, managerial and operational challenges, including:
• adverse effects on our earnings if acquired intangible assets or goodwill become impaired;
• existence of unknown liabilities or contingencies that arise after closing; and
• potential disputes with counterparties.
Acquisitions also pose the risk that any business we acquire may lose customers or employees or could underperform relative to
expectations. Additionally, the acquisition of investment personnel (such as the equity investment management team we acquired in
May 2011) poses the risk that we may lose the AUM we expected to manage, which could adversely affect our results of operations.
Furthermore, strategic transactions may require us to increase our leverage or, if we issue AllianceBernstein Units or Holding Units
to fund an acquisition, dilute the holdings of our existing Unitholders.
Because many of our subsidiary operations are located outside of the United States and have functional currencies other
than the U.S. dollar, changes in exchange rates to the U.S. dollar affect our reported financial results from one period to
the next.
Although significant portions of our net revenues and expenses, as well as our AUM, are presently derived from the United States,
we have subsidiaries outside of the United States with functional currencies other than the U.S. dollar. As a result, fluctuations in
exchange rates to the U.S. dollar affect our reported financial results from one period to the next. We may not be successful in our
efforts to hedge our exposure to such fluctuations, which could have a negative effect on our reported financial results.
We enter into various futures, forward and swap contracts to economically hedge certain of our seed money investments
and may be exposed to market risk and credit-related losses in the event of non-performance by counterparties to these
derivative instruments.
By using derivative financial instruments, our firm is exposed to market risk and counterparty risk. We enter into various futures,
forward and swap contracts to economically hedge certain of our seed money investments. In addition, we have currency forwards
that economically hedge certain cash accounts. We may be exposed to credit-related losses in the event of non-performance by
counterparties to these derivative financial instruments. We also may be exposed to market risk from forward foreign currency
exchange contracts as a result of fluctuations in currency exchange rates.
The individuals, counterparties or issuers on which we rely in the course of performing services for us or our clients may
be unable or unwilling to honor their contractual obligations to us.
We rely on various third party counterparties and other vendors to fulfill their obligations to us, whether specified by contract,
course of dealing or otherwise. Default rates, downgrades and disputes with counterparties as to the valuation of collateral increase
significantly in times of market stress. Furthermore, disruptions in the financial markets and other economic challenges, like those
presented by the global financial turmoil during the third quarter of 2011, may cause our counterparties and other vendors to
experience significant cash flow problems or even render them insolvent, which may expose us to significant costs.
Maintaining adequate liquidity for our general business needs depends upon certain factors, including operating cash flows
and our access to credit on reasonable terms.
Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets,
our ability to maintain and grow AUM and other factors beyond our control. Our ability to issue public or private debt on reason-
able terms may be limited by adverse market conditions, our profitability, our creditworthiness as perceived by lenders and changes
in government regulations, including tax rates and interest rates. Furthermore, our access to bank credit or the debt markets depends
significantly on our credit ratings. A downgrade to our credit ratings is likely to increase our borrowing costs and limit our access to
the capital markets. If we are unable to obtain funds and/or financing, we may be forced to incur unanticipated costs or revise our
strategic plans, which could have a material adverse effect on our financial condition, results of operations and business prospects.
24
AllianceBernstein
Unpredictable events, including natural disaster, dangerous weather conditions, technology failure, terrorist attack and
political unrest, may adversely affect our ability to conduct business.
War, terrorist attack, political unrest in the Middle East, the Pacific Rim and elsewhere, power failure, climate change, natural dis-
aster and rapid spread of serious disease could interrupt our operations by:
• causing disruptions in U.S. or global economic conditions, thereby decreasing investor confidence and making investment
products generally less attractive;
inflicting loss of life;
triggering massive technology failures or delays; and
requiring substantial capital expenditures and operating expenses to remediate damage and restore operations.
•
•
•
Our operations require experienced, professional staff. Loss of a substantial number of such persons or an inability to provide prop-
erly equipped places for them to work may, by disrupting our operations, adversely affect our financial condition, results of oper-
ations and business prospects.
We are highly dependent on various software applications, technologies and other systems for our business to function
properly and to safeguard confidential information; any significant limitation, failure or security breach of these systems
could constrain our operations.
We utilize software and related technologies throughout our business, including both proprietary systems and those provided by
outside vendors. We use our technology to, among other things, obtain securities pricing information, process client transactions,
and provide reports and other customer services to the clients of the funds we manage. Although we take protective measures,
including measures to effectively secure information through system security technology and established and tested business con-
tinuity plans, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war and third-
party failures. We cannot predict with certainty all of the adverse effects that could result from our failure, or the failure of a third
party, to efficiently address and resolve these delays and interruptions. These adverse effects could include the inability to perform
critical business functions or failure to comply with financial reporting and other regulatory requirements, which could lead to loss
of client confidence, harm to our reputation, exposure to disciplinary action and liability to our clients. Accordingly, potential sys-
tem failures and the cost necessary to correct those failures could have a material adverse effect on our results of operations and
business prospects.
In addition, we could be subject to losses if we fail to properly safeguard sensitive and confidential information. As part of our
normal operations, we maintain and transmit confidential information about our clients as well as proprietary information relating to
our business operations. Although we take protective measures, our systems could still be vulnerable to unauthorized access, com-
puter viruses or other events that have a security impact, such as an authorized employee or vendor inadvertently or intentionally
causing us to release confidential or proprietary information. Such disclosure could, among other things, allow competitors access to
our proprietary business information and require significant time and expense to investigate and remediate the breach. Moreover,
loss of confidential client information could harm our reputation and subject us to liability under laws that protect confidential per-
sonal data, resulting in increased costs or loss of revenues.
Also, although we take precautions to password protect and encrypt our laptops and other mobile electronic hardware, if such
hardware is stolen, misplaced or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible
security risk and resulting in potentially costly actions. Most of the software applications that we use in our business are licensed
from, and supported, upgraded and maintained by, third-party vendors. A suspension or termination of certain of these licenses or
the related support, upgrades and maintenance could cause temporary system delays or interruption. In addition, technology rapidly
evolves and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products
and services, which may place us at a competitive disadvantage and adversely affect our results of operations and business prospects.
Annual Report 2011
25
The quantitative models we use in certain of our investment services may contain errors, resulting in imprecise risk assess-
ments and unintended output.
We use quantitative models in a variety of our investment services, generally in combination with fundamental research. Our quanti-
tative models are validated by senior quantitative professionals. In 2010, we formed our Model Risk Working Group, the purpose
of which is to formalize and oversee a quantitative model governance framework, including minimum validation standards. How-
ever, due to the complexity of such models, it is possible that errors in the models could exist and our controls could fail to detect
such errors. Failure to detect errors could result in client losses and damage to our reputation.
Our own operational failures or those of third parties we rely on, including failures arising out of human error, could dis-
rupt our business, damage our reputation and reduce our revenues.
Weaknesses or failures in our internal processes or systems could lead to disruption of our operations, liability to clients, exposure to
disciplinary action or harm to our reputation. Our business is highly dependent on our ability to process, on a daily basis, large
numbers of transactions, many of which are highly complex, across numerous and diverse markets. These transactions generally
must comply with investment guidelines, as well as stringent legal and regulatory standards.
Despite the contingency plans and facilities we have in place, our ability to conduct business may be adversely affected by a dis-
ruption in the infrastructure that supports our operations and the communities in which they are located. This may include a dis-
ruption involving electrical, communications, transportation or other services we may use or third parties with which we conduct
business. If a disruption occurs in one location and our employees in that location are unable to occupy our offices or communicate
with or travel to other locations, our ability to conduct business with and on behalf of our clients may suffer, and we may not be
able to successfully implement contingency plans that depend on communication or travel.
Our obligations to clients require us to exercise skill, care and prudence in performing our services. Despite our employees being
highly trained and skilled, the large number of transactions we process makes it highly likely that errors will occasionally occur.
Should we make a mistake in performing our services that costs a client money, we have a duty to act promptly to put the client in
the position the client would have been in had we not made the error. The occurrence of mistakes, particularly significant ones, can
have a material adverse effect on our reputation, results of operations and business prospects.
We may not accurately value the securities we hold on behalf of our clients or our company investments.
In accordance with applicable regulatory requirements, contractual obligations or client direction, we employ procedures for the
pricing and valuation of securities and other positions held in client accounts or for company investments. We have established a
Valuation Committee, composed of senior officers and employees, which oversees pricing controls and valuation processes. Where
market quotations for a security are not readily available, the Valuation Committee determines a fair value for the security.
Extraordinary volatility in financial markets, significant liquidity constraints or our not adequately accounting for one or more fac-
tors when fair valuing a security based on information with limited market observability could result in our failing to properly value
securities we hold for our clients or investments accounted for on our balance sheet. Improper valuation would likely result in our
basing fee calculations on inaccurate AUM figures, our striking incorrect net asset values for company-sponsored mutual funds,
hedge funds or, in the case of company investments, our inaccurately calculating and reporting our financial condition and operating
results. Although the overall percentage of our AUM that we fair value based on information with limited market observability is
not significant, inaccurate fair value determinations can harm our clients, create regulatory issues and negatively affect our
reputation.
We may not have sufficient information to confirm or review the accuracy of valuations provided to us by underlying
external managers for the funds in which certain of our alternative investment products invest.
Certain of our alternative investment services invest in funds managed by external managers (“External Managers”) rather than
investing directly in securities and other instruments. As a result, our abilities will be limited to (i) monitor such investments,
(ii) regularly obtain complete, accurate and current information with respect to such investments and (iii) exercise control over such
investments. Accordingly, we may not have sufficient information to confirm or review the accuracy of valuations provided to us
by External Managers. In addition, we will be required to rely on External Managers’ compliance with any applicable investment
26
AllianceBernstein
guidelines and restrictions. Any failure of an External Manager to operate within such guidelines or to provide accurate information
with respect to the investment, could subject our alternative investment products to losses and cause damage to our reputation.
Our results of operations and reputation could continue to suffer if we are unable to deliver consistent, competitive invest-
ment performance.
Our business is based on the trust and confidence of our clients, and we are dedicated to earning and maintaining this trust and con-
fidence. Damage to our reputation can substantially reduce our AUM and impair our ability to maintain or grow our business.
Our continued underperformance over the last few years in our largest equity investment services damaged our reputation among
many clients, prospects and consultants. We are focused on delivering consistent, competitive investment performance in 2012 and,
in so doing, rebuilding our reputation. Failure in this endeavor, however, could have a material adverse effect on our reputation,
results of operations and business prospects.
We may not always successfully manage actual and potential conflicts of interest that arise in our business.
We increasingly must manage actual and potential conflicts of interest, including situations where our services to a particular client
conflict, or are perceived to conflict, with the interests of another client, as well as situations where certain of our employees have
access to material non-public information that may not be shared with all employees of our firm. Failure to adequately address
potential conflicts of interest could adversely affect our reputation, results of operations and business prospects.
We have procedures and controls that are designed to identify and mitigate conflicts of interest, including those designed to prevent
the improper sharing of information. However, appropriately managing conflicts of interest is complex and difficult, and our reputa-
tion could be damaged and the willingness of clients to enter into transactions in which such a conflict might arise may be affected if
we fail, or appear to fail, to deal appropriately with conflicts of interest. In addition, potential or perceived conflicts could give rise
to litigation or regulatory enforcement actions.
Rates we charge for brokerage transactions have declined significantly over the last several years, and declines may con-
tinue. In addition, turmoil in global capital markets and economies may reduce market volumes. Combined, these two
factors may adversely affect Bernstein Research Services revenue.
Electronic, or “low-touch”, trading approaches represent a significant percentage of buy-side trading activity and produce trans-
action fees for execution-only services that are a small fraction of traditional full service fee rates. As a result, blended pricing for the
industry and SCB has declined over the last several years. In addition, fee rates charged by SCB and other brokers for traditional
brokerage services have also historically experienced price pressure, and we expect these trends to continue. While increases in
transaction volume and market share have in the past often offset decreases in rates, this may not continue. Recent economic and
market turmoil has severely impacted much of SCB’s client base, which in the near-term may adversely affect transaction volume
generally.
Despite our efforts to manage exposures from principal positions taken by our sell-side business, these positions are subject
to market risk.
Our sell-side business may use the firm’s capital to facilitate customer transactions, primarily relating to our trading activities in listed
options. The resulting principal positions are exposed to market risk. We seek to manage this risk both by engaging in transactions
designed to hedge the market risk and by maintaining a risk platform that includes the measurement and monitoring of financial
exposures and operational processes. Our ability to manage this risk may be limited, however, by adverse changes in the liquidity of
the security or the hedging instrument and in the correlation of price movements between the security and the hedging instrument.
Similarly, the risk monitoring and risk mitigation techniques we employ and the related judgments we make cannot anticipate every
possible economic and financial circumstance and outcome. Consequently, we may incur losses, which would require us to increase
our regulatory capital and could adversely affect our results of operations.
Our insurance policies may be insufficient to protect us against large losses.
We can make no assurance that a claim or claims will be covered by our insurance policies or, if covered, will not exceed the limits
of available insurance coverage, or that our insurers will remain solvent and meet their obligations.
Annual Report 2011
27
Our business is subject to pervasive, complex and frequently evolving global regulation, the compliance with which could
involve substantial expenditures of time and money, and the violation of which may result in material adverse
consequences.
Virtually all aspects of our business are subject to federal and state laws and regulations, rules of securities regulators and exchanges,
and laws and regulations in the foreign jurisdictions in which our subsidiaries conduct business. If we violate these laws or regu-
lations, we could be subject to civil liability, criminal liability or sanction, including revocation of our and our subsidiaries’ registra-
tions as investment advisers or broker-dealers, revocation of the licenses of our employees, censures, fines, or temporary suspension
or permanent bar from conducting business. Any such liability or sanction could have a material adverse effect on our financial
condition, results of operations, and business prospects. A regulatory proceeding, even if it does not result in a finding of wrong-
doing or sanction, could require substantial expenditures of time and money.
These laws and regulations generally grant supervisory agencies and bodies broad administrative powers, including, in some cases,
the power to limit or restrict doing business for failure to comply with such laws and regulations. Moreover, regulators in non-U.S.
jurisdictions could change their policies or laws in a manner that might restrict or otherwise impede our ability to market, distribute,
or register investment products in their respective markets. These local requirements could increase the expenses we incur in a spe-
cific jurisdiction without any corresponding increase in revenues from operating in the jurisdiction.
In addition, there is uncertainty associated with the regulatory environments in which we operate, including uncertainty created by
the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). The
Dodd-Frank Act fundamentally changed the U.S. financial regulatory landscape and may impose additional restrictions and limi-
tations on our business as the various rules and regulations required for implementation continue to be adopted.
Changes to the rules governing Rule 12b-1 Fees may affect the revenues we derive from our Retail Services.
In July 2010, the SEC proposed a new rule and rule amendments that would alter Rule 12b-1 Fees. The new rule and amendments
would continue to allow funds to bear promotional costs within certain limits and would also preserve the ability of funds to pro-
vide investors with alternatives for paying sales charges (e.g., at the time of purchase, at the time of redemption or through a
continuing fee charged to fund assets). Unlike the current Rule 12b-1 framework, however, the proposed rules would limit the
cumulative sales charges each investor pays, regardless of how they are imposed.
If rules are adopted as proposed, changes in Rule 12b-1 Fees for a number of share classes offered by company-sponsored mutual
funds would be required, which would reduce the net fund distribution revenues we receive from company-sponsored mutual
funds. The impact of this rule change is dependent upon the final rules adopted by the SEC, any phase-in or grandfathering period,
and any other changes made with respect to share class distribution arrangements.
The financial services industry is intensely competitive.
We compete on the basis of a number of factors, including our array of investment services, our investment performance for our
clients, innovation, reputation and price. By having a global presence, we may face competitors with more experience and more
established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our
ability to expand. Furthermore, our continued poor investment performance during 2011, and what may be diminished confidence
in our services on the part of clients and consultants, may make it more difficult for us to compete effectively. For additional
information regarding competitive factors, see “Competition” in Item 1.
We are involved in various legal proceedings and regulatory matters and may be involved in such proceedings in the
future, any one or combination of which could have a material adverse effect on our financial condition, results of oper-
ations and business prospects.
We are involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege
substantial damages, and we may be involved in additional matters in the future. Litigation is subject to significant uncertainties,
particularly when plaintiffs allege substantial or indeterminate damages, or when the litigation is highly complex or broad in scope.
28
AllianceBernstein
Structure-related Risks
The partnership structure of Holding and AllianceBernstein limits Unitholders’ abilities to influence the management and
operation of AllianceBernstein’s business and is highly likely to prevent a change in control of Holding and
AllianceBernstein.
The General Partner, as general partner of both Holding and AllianceBernstein, generally has the exclusive right and full authority
and responsibility to manage, conduct, control and operate their respective businesses, except as otherwise expressly stated in their
respective Amended and Restated Agreements of Limited Partnership. Holding and AllianceBernstein Unitholders have more lim-
ited voting rights on matters affecting AllianceBernstein than do holders of common stock in a corporation. Both Amended and
Restated Agreements of Limited Partnership provide that Unitholders do not have any right to vote for directors of the General
Partner and that Unitholders can only vote on certain extraordinary matters (including removal of the General Partner under certain
extraordinary circumstances). Additionally, the AllianceBernstein Partnership Agreement includes significant restrictions on transfers
of AllianceBernstein Units and provisions that have the practical effect of preventing the removal of the General Partner, which are
highly likely to prevent a change in control of AllianceBernstein’s management.
AllianceBernstein Units are illiquid.
There is no public trading market for AllianceBernstein Units and AllianceBernstein does not anticipate that a public trading market
will ever develop. The AllianceBernstein Partnership Agreement restricts our ability to participate in a public trading market or
anything substantially equivalent to one by providing that any transfer which may cause AllianceBernstein to be classified as a
“publicly traded partnership” as defined in Section 7704 of the Code shall be deemed void and shall not be recognized by
AllianceBernstein. In addition, AllianceBernstein Units are subject to significant restrictions on transfer; all transfers of
AllianceBernstein Units are subject to the written consent of AXA Equitable and the General Partner pursuant to the
AllianceBernstein Partnership Agreement. Generally, neither AXA Equitable nor the General Partner will permit any transfer that it
believes would create a risk that AllianceBernstein would be treated as a corporation for tax purposes. AXA Equitable and the
General Partner have implemented a transfer program that requires a seller to locate a purchaser, and imposes annual volume
restrictions on transfers. You may request a copy of the transfer program from our corporate secretary
(corporate_secretary@alliancebernstein.com). Also, we have filed the transfer program as Exhibit 10.08 to this Form 10-K.
Changes in the partnership structure of Holding and AllianceBernstein and/or changes in the tax law governing partner-
ships would have significant tax ramifications.
Holding, having elected under Section 7704(g) of the Code to be subject to a 3.5% federal tax on partnership gross income from
the active conduct of a trade or business, is a “grandfathered” publicly-traded partnership (“PTP”) for federal income tax purposes.
Holding is also subject to the 4.0% UBT, net of credits for UBT paid by AllianceBernstein. In order to preserve Holding’s status as
a “grandfathered” publicly-traded partnership for federal income tax purposes, management ensures that Holding does not directly
or indirectly (through AllianceBernstein) enter into a substantial new line of business. A “new line of business” includes any business
that is not closely related to AllianceBernstein’s historical business of providing research and diversified investment management and
related services to its clients. A new line of business is “substantial” when a partnership derives more than 15% of its gross income
from, or uses more than 15% of its total assets in, the new line of business.
AllianceBernstein is a private partnership for federal income tax purposes and, accordingly, is not subject to federal and state corpo-
rate income taxes. However, AllianceBernstein is subject to the 4.0% UBT. Domestic corporate subsidiaries of AllianceBernstein,
which are subject to federal, state and local income taxes, are generally included in the filing of a consolidated federal income tax
return with separate state and local income tax returns being filed. Foreign corporate subsidiaries are generally subject to taxes in the
foreign jurisdiction where they are located. As our business increasingly operates in countries other than the U.S.,
AllianceBernstein’s effective tax rate continues to increase because our international subsidiaries are subject to corporate level taxes
in the jurisdictions where they are located.
In order to preserve AllianceBernstein’s status as a private partnership for federal income tax purposes, AllianceBernstein Units must
not be considered publicly traded. The AllianceBernstein Partnership Agreement provides that all transfers of AllianceBernstein
Annual Report 2011
29
Units must be approved by AXA Equitable and the General Partner; AXA Equitable and the General Partner approve only those
transfers permitted pursuant to one or more of the safe harbors contained in relevant treasury regulations. If such units were consid-
ered readily tradable, AllianceBernstein would be subject to federal and state corporate income tax on its net income. Furthermore,
as noted above, should AllianceBernstein enter into a substantial new line of business, Holding, by virtue of its ownership of
AllianceBernstein, would lose its status as a grandfathered publicly-traded partnership and would become subject to corporate
income tax as set forth above.
In years prior to 2010, Congress proposed tax legislation that would have caused certain PTPs to be taxed as corporations, thus
subjecting their income to a higher level of income tax. Holding is a PTP that derives its income from investment management
services through its ownership interest in AllianceBernstein. The legislation, in the form proposed, would not have affected Hol-
ding’s tax status. However, we cannot predict whether, or in what form, tax legislation will be proposed in future years, and are
unable to determine what effect any new legislation might have on us. If Holding were to lose its federal tax status as a grand-
fathered PTP, it would be subject to corporate income tax, which would reduce materially its net income and quarterly dis-
tributions to Holding Unitholders.
The proposed legislation discussed above would not have affected AllianceBernstein because it is a private partnership.
30
AllianceBernstein
Item 1B. Unresolved Staff Comments
Neither AllianceBernstein nor Holding has unresolved comments from the staff of the SEC to report.
Annual Report 2011
31
Item 2.
Properties
Our principal executive offices at 1345 Avenue of the Americas, New York, New York are occupied pursuant to a lease expiring in
2019 with options to extend to 2029. At this location, we currently lease approximately 1,033,984 square feet of space, within
which we currently occupy 865,975 square feet of space and have sub-let (or are seeking to sub-let) 168,009 square feet of space.
We also lease approximately 312,301 square feet of space at 135 West 50th Street, New York, New York under a lease expiring in
2019 with options to extend to 2029. Within our leased space at 135 West 50th Street, we currently occupy 59,367 square feet of
space and have sub-let (or are seeking to sub-let) 252,934 square feet of space.
In addition, we lease approximately 263,083 square feet of space at One North Lexington, White Plains, New York under a lease
expiring in 2021 with options to extend to 2031. At this location, we currently occupy 249,217 square feet of space and have
sub-let 13,866 square feet of space.
AllianceBernstein Investments and AllianceBernstein Investor Services occupy approximately 92,067 square feet of space in San
Antonio, Texas under a lease expiring in 2019 with options to extend to 2029.
We also lease space in 19 other cities in the United States.
Our subsidiaries lease space in 27 cities outside the United States, the most significant of which are in London, England under leases
expiring between 2013 and 2022, and in Tokyo, Japan under a lease expiring in 2018. In London, we currently lease approximately
110,865 square feet of space, within which we currently occupy 99,205 square feet of space and have sub-let 11,660 square feet of
space. In Tokyo, we currently lease approximately 56,941 square feet of space.
32
AllianceBernstein
AllianceBernstein L.P.
Income Statement Data:
Revenues:
Investment advisory and services fees
Bernstein research services
Distribution revenues
Dividend and interest income
Investment gains (losses)
Other revenues
Total revenues
Less: interest expense
Net revenues
Expenses:
Employee compensation and benefits:
Employee compensation and benefits
Deferred compensation charge
Promotion and servicing:
Distribution-related payments
Amortization of deferred sales commissions
Other
General and administrative:
General and administrative
Real estate charges
Interest on borrowings
Amortization of intangible assets
Total expenses
Operating (loss) income
Non-operating income
(Loss) income before income taxes
Income taxes
Net (loss) income
Net (loss) income of consolidated entities attributable to non-controlling
interests
Net (loss) income attributable to AllianceBernstein Unitholders
Basic net (loss) income per AllianceBernstein Unit
Diluted net (loss) income per AllianceBernstein Unit
Operating margin(2)
Cash Distributions Per AllianceBernstein Unit(3)(4)
Balance Sheet Data At Period End:
Total assets
Debt
Total Capital
Assets Under Management at Period End (in millions)
Selected Consolidated Financial Data
2011
2010(1)
Years Ended December 31,
2009(1)
2008(1)
2007(1)
(in thousands, except per unit amounts and unless otherwise indicated)
$1,916,419
437,414
351,621
21,499
(82,081)
107,569
2,752,441
2,550
2,749,891
$2,051,692
430,521
338,597
22,902
(1,410)
109,803
2,952,105
3,548
2,948,557
$1,920,332
434,605
277,328
26,730
144,447
107,848
2,911,290
4,411
2,906,879
$2,839,526
471,716
378,425
91,752
(349,172)
118,436
3,550,683
36,524
3,514,159
1,248,497
587,131
1,322,221
—
1,297,753
—
1,454,391
—
302,684
37,675
217,598
533,578
7,235
2,545
21,417
2,958,360
(208,469)
—
(208,469)
3,098
(211,567)
(36,799)
$ (174,768)
(0.62)
$
(0.62)
$
n/m
1.38
$
$7,705,938
$ 444,903
$4,021,557
$ 405,897
286,676
47,397
192,096
516,185
101,698
2,078
21,344
2,489,695
458,862
6,760
465,622
38,523
427,099
(15,320)
$ 442,419
1.59
$
1.58
$
16.1%
1.58
$
$7,579,387
$ 224,991
$4,493,151
$ 478,019
234,203
54,922
176,703
520,372
8,276
2,696
21,126
2,316,051
590,828
33,657
624,485
45,977
578,508
22,381
$ 556,127
2.07
$
2.07
$
19.6%
2.06
$
$7,214,940
$ 248,987
$4,701,955
$ 486,683
307,890
79,111
200,375
513,098
—
13,077
20,716
2,588,658
925,501
18,728
944,229
95,803
848,426
9,186
$ 839,240
3.18
$
3.18
$
26.1%
3.07
$
$8,503,459
$ 284,779
$4,486,826
$ 448,808
$ 3,386,188
423,553
473,435
284,014
29,690
122,869
4,719,749
194,432
4,525,317
1,833,213
—
378,547
95,481
215,997
568,145
—
23,970
20,716
3,136,069
1,389,248
15,756
1,405,004
127,845
1,277,159
16,715
$1,260,444
4.80
$
4.77
$
30.3%
4.77
$
$ 9,368,754
$
533,872
$ 4,688,878
$ 790,478
(1) Certain prior-year amounts have been reclassified to conform to our 2011 presentation. See Note 2 to AllianceBernstein’s consolidated financial statements in
Item 8 for a discussion of reclassifications.
(2) Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues.
(3) AllianceBernstein is required to distribute all of its Available Cash Flow, as defined in the AllianceBernstein Partnership Agreement, to its unitholders and the
General Partner.
(4) The 2011 distribution excludes the $587.1 million one-time, non-cash deferred compensation charge. See Note 2 to AllianceBernstein’s consolidated financial
statements in Item 8 for a discussion of this charge.
Annual Report 2011
39
Item 7.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Percentage change figures are calculated using assets under management rounded to the nearest million and financial statement amounts rounded to
the nearest thousand.
Executive Overview
The fourth quarter of 2011 proved to be a difficult finish to a challenging year for our firm. The year was characterized by global
market volatility, which caused risk aversion on the part of equity investors. While markets partially recovered from prior lows
during the fourth quarter of 2011, ongoing investment underperformance in our largest equity services led to further client
redemptions, a reduction in our assets under management (“AUM”) for the year, and a decline in revenues that outpaced a decrease
in expenses (excluding the one-time, non-cash deferred compensation charge).
Our total AUM as of December 31, 2011 was $405.9 billion, down $72.1 billion, or 15.1%, during 2011. The decrease in AUM
was driven by net outflows of $62.5 billion and market depreciation of $11.0 billion, partly offset by various acquisitions totaling
$1.4 billion. Net outflows occurred in our Value and Growth Equity services primarily in our Institutions channel, while our Fixed
Income and Other services experienced net inflows.
Institutional AUM decreased $49.0 billion, or 18.0%, to $223.9 billion during 2011, due to net outflows of $44.8 billion and mar-
ket depreciation of $5.4 billion, partly offset by various acquisitions and transfers of $1.2 billion. Our pipeline of won but unfunded
mandates decreased to $4.3 billion from $6.4 billion during 2011.
Retail AUM decreased $14.4 billion, or 11.4%, to $112.6 billion, during 2011 due to net outflows of $10.9 billion and market
depreciation of $3.7 billion, partly offset by various acquisitions of $0.2 billion. Gross sales in Retail decreased 6.6% year over year.
While the decrease occurred in Growth Equity, Value Equity and Fixed Income services, gross sales in Other services more than
doubled.
Private Client AUM decreased $8.7 billion, or 11.1%, to $69.4 billion, during 2011 due to net outflows of $6.8 billion and market
depreciation of $1.9 billion. Net outflows increased from $1.9 billion in 2010 to $6.8 billion in 2011 as redemptions and termi-
nations increased by $3.5 billion year over year, or nearly 60%, to $9.5 billion.
Bernstein Research Services revenues during 2011 were $437.4 million, up $6.9 million, or 1.6%, as compared to 2010. The
increase was driven by higher trading commissions in Europe and Asia, partially offset by lower trading commissions in the U.S.
During the fourth quarter of 2011, however, trading activity declined sharply, which adversely affected our sell-side revenues.
Our full year 2011 net revenues decreased $198.7 million, or 6.7%, compared to 2010, primarily due to a $135.3 million, or 6.6%,
decrease in investment advisory and services fees and a $80.7 million increase in investment losses. Offsetting these items was an
increase in distribution revenues of $13.0 million, or 3.8%. Full year 2011 operating expenses increased $468.7 million, or 18.8%,
compared to 2010 primarily due to a one-time, non-cash deferred compensation charge of $587.1 million and higher promotion
and servicing expenses of $31.8 million. Offsetting these items were decreases in real estate charges of $94.5 million and lower
employee compensation and benefits of $73.7 million (excluding the deferred compensation charge). Accordingly, 2011 diluted net
(loss) per Holding Unit was $(0.90), compared to diluted net income per Holding Unit of $1.32 for 2010. In comparison, our
adjusted income per Holding Unit of $1.14 reflects a 28.8% decrease compared to $1.60 in 2010, while our adjusted operating
margin decreased from 21.6% in 2010 to 17.0% in 2011.
Despite the many challenges we faced during 2011, we believe we progressed in our long-term strategy of improving investment
performance, introducing new, innovative products for our clients, diversifying our business and addressing our cost structure. In
fixed income, we continued our outperformance—more than 85% of our client assets are invested in products that beat their
respective benchmarks on a three-year basis—and added approximately $3.2 billion in net new client assets. During 2011, we
introduced a number of new products across our distribution channels. Several, including an emerging markets balanced product
and a Chinese currency-linked offering, have already earned industry awards for innovation and performed well since inception.
We delivered on our goal to reduce volatility without sacrificing returns in Private Client portfolios with our dynamic asset alloca-
tion service. We recently partnered with our first client in Secure Retirement Strategies—a multi-insurer-backed guaranteed
40
AllianceBernstein
income product we were the first to introduce in the industry—and expect funding during the second quarter of 2012. Our sell-
side business grew and gained market share in both Asia and Europe. And, we have modified our deferred compensation program
and managed our operations servicing and real estate expenses in ways that position our firm for improved financial results over the
long term. These achievements attest to the strength and talent of our people.
Ongoing Expense Reduction Initiatives
Since the fourth quarter of 2008, we consistently have taken steps to reduce our cost structure, including headcount reductions, in
response to declines in our assets under management and fee revenues. During 2012, we will continue to be vigilant about scaling
our cost structure (including headcount) to our revenue base.
Ongoing Strategy for Managing Infrastructure Costs
During the fourth quarter of 2011, we reached an agreement with State Street Corporation (“State Street”) a provider of financial
services to institutional investors, to provide investment operations outsourcing services covering more than $300 billion in client
assets. State Street will provide a range of services including trade settlement, portfolio administration and reconciliation, derivative
operations, client reporting, and performance measurement for our institutional accounts. As a result of this agreement, approx-
imately 100 employees were transitioned from AllianceBernstein to State Street to provide global servicing support. Over a
two-year period, certain AllianceBernstein technology platforms will be converted to similar platforms maintained by State Street.
Our research and investment management activities were not outsourced.
Holding
Holding’s principal source of income and cash flow is attributable to its investment in AllianceBernstein limited partnership Units.
The Holding financial statements and notes and management’s discussion and analysis of financial condition and results of operations
(“MD&A”) should be read in conjunction with those of AllianceBernstein.
Results of Operations
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
(in thousands, except per unit amounts)
Net (loss) income attributable to AllianceBernstein Unitholders
$(174,768)
$442,419
$556,217
(139.5)%
(20.4)%
Weighted average equity ownership interest
Equity in net (loss) income attributable to AllianceBernstein Unitholders
Net (loss) income of Holding
Diluted net (loss) income per Holding Unit
Distribution per Holding Unit(1)
37.5%
36.7%
34.6%
$ (65,581)
$ (93,268)
$
$
(0.90)
1.14
$162,217
$134,158
$
$
1.32
1.31
$192,513
$167,189
$
$
1.80
1.77
(140.4)
(169.5)
(168.2)
(13.0)
(15.7)
(19.8)
(26.7)
(26.0)
(1) The 2011 distribution excludes the impact of AllianceBernstein’s $587.1 million one-time, non-cash deferred compensation charge. See Note 2 to Holding’s
financial statements in Item 8 for a discussion of this charge.
Holding had a net loss of $93.3 million in 2011 as compared to net income of $134.2 million in 2010. The net loss in 2011 reflects
the impact of AllianceBernstein’s $587.1 million one-time, non-cash deferred compensation charge. Net income in 2010 decreased
$33.0 million to $134.2 million from net income of $167.2 million in 2009. The decrease reflects lower net income attributable to
AllianceBernstein Unitholders, partially offset by a higher ownership interest in AllianceBernstein, resulting from the acquisition of
additional AllianceBernstein Units in connection with the issuance of Holding Units to AllianceBernstein to fund deferred compen-
sation plan awards.
Annual Report 2011
41
Holding’s income taxes represent a 3.5% federal tax on its partnership gross income from the active conduct of a trade or business.
Holding’s partnership gross income is derived from its interest in AllianceBernstein. Holding’s income tax is computed by multi-
plying certain AllianceBernstein revenues (primarily U.S. investment advisory fees and SCB LLC equity commissions) by Holding’s
ownership interest in AllianceBernstein, multiplied by the 3.5% tax rate. Although Holding incurred an equity loss on its equity
method holding in AllianceBernstein during 2011, Holding had income tax expense as a result of the income tax calculation being
based on certain AllianceBernstein revenues. During 2010, both AllianceBernstein’s revenues and Holding’s ownership interest in
AllianceBernstein increased as compared to 2009, which increased Holding’s income tax provision in 2010 as compared to the prior
year. In addition, AllianceBernstein’s net income decreased significantly in 2010 primarily as a result of a real estate charge in the
third quarter of 2010, reducing Holding’s equity earnings in 2010 compared to the corresponding period in 2009. As a result of
these factors, Holding’s effective tax rate increased from 13.2% in 2009 to 17.3% in 2010.
As supplemental information, AllianceBernstein provides the performance measures “adjusted net revenue”, “adjusted operating
income” and “adjusted operating margin”, which are the principal metrics management uses in evaluating and comparing the
period-to-period operating performance of AllianceBernstein. Such measures are not based on generally accepted accounting
principles (“non-GAAP measures”). The impact of these non-GAAP measures on Holding’s net income and diluted net income
per Holding Unit are as follows:
Years Ended December 31,
2010
2011
2009
Net (loss) income—diluted, GAAP basis
Impact on net income of AllianceBernstein non-GAAP adjustments
Adjusted net income—diluted
Diluted net (loss) income per Holding Unit, GAAP basis
Impact of AllianceBernstein non-GAAP adjustments
Adjusted diluted net income per Holding Unit
(in thousands, except per unit amounts)
$ (93,268)
210,891
$117,623
$ (0.90)
2.04
1.14
$
$135,798
28,378
$164,176
$
$
1.32
0.28
1.60
$167,517
(38,830)
$128,687
$
$
1.80
(0.42)
1.38
The impact on Holding’s net income of AllianceBernstein’s non-GAAP adjustments reflects Holding’s share (based on its ownership
percentage of AllianceBernstein over the applicable period) of AllianceBernstein’s non-GAAP adjustments to its net income. These
non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin,
and they may not be comparable to non-GAAP measures presented by other companies. Management uses both the GAAP and
non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because they do
not include all of AllianceBernstein’s revenues and expenses.
Proposed Tax Legislation
See “Risk Factors” in Item 1A.
Capital Resources and Liquidity
During the year ended December 31, 2011, net cash provided by operating activities was $145.7 million, compared to $151.4 million
during the corresponding 2010 period. The decrease was primarily due to lower cash distributions received from AllianceBernstein of
$3.7 million. During the year ended December 31, 2010, net cash provided by operating activities was $151.4 million, compared to
$133.1 million during the corresponding 2009 period. The increase was primarily due to higher cash distributions received from
AllianceBernstein of $22.3 million.
During the years ended December 31, 2011, 2010 and 2009, net cash used in investing activities was $1.5 million, $8.3 million and
zero, respectively, reflecting investments in AllianceBernstein with proceeds from exercises of compensatory options to buy Holding
Units.
42
AllianceBernstein
During the year ended December 31, 2011, net cash used in financing activities was $144.2 million, compared to $143.1 million
during the corresponding 2010 period. The increase was due to lower proceeds from the exercise of compensatory options to buy
Holding Units of $6.8 million, offset by lower cash distributions paid to unitholders of $5.7 million. During the year ended
December 31, 2010, net cash used in financing activities was $143.1 million, compared to $133.1 million during the corresponding
2009 period. The increase was due to higher cash distributions paid to unitholders of $18.3 million, offset by proceeds from the
exercise of compensatory options to buy Holding Units during 2010 of $8.3 million.
Holding is required to distribute all of its Available Cash Flow, as defined in the Holding Partnership Agreement, to its unitholders
(including the General Partner). Typically, Available Cash Flow is the diluted earnings per unit for the quarter multiplied by the
number of units outstanding at the end of the quarter. However, the General Partner, in its sole discretion, can retain cash flow for
use in the business or release cash flow previously retained. The General Partner has eliminated the impact of AllianceBernstein’s
one-time, non-cash deferred compensation charge from Available Cash Flow for the fourth quarter 2011 unit distribution.
See “Deferred Compensation Charge” in this Item 7. See Note 2 to Holding’s financial statements in Item 8 for a description of Available
Cash Flow. Management believes that the cash flow realized from its investment in AllianceBernstein will provide Holding with the
resources to meet its financial obligations.
Commitments and Contingencies
See Note 7 to Holding’s financial statements in Item 8.
AllianceBernstein
Assets Under Management
Assets under management by distribution channel were as follows:
Institutions
Retail
Private Client
Total
As of December 31,
2010
2011
(in billions)
2009
2011-10
2010-09
% Change
$ 223.9
$ 272.9
$ 291.2
(18.0)%
(6.3)%
112.6
69.4
127.0
78.1
120.7
74.8
$405.9
$478.0
$486.7
(11.4)
(11.1)
(15.1)
5.3
4.4
(1.8)
Annual Report 2011
43
Assets under management by investment service were as follows:
Equity
Value:
U.S.
Global & international
Growth:
U.S.
Global & international
Total Equity
Fixed Income:
U.S.
Global & international
Other(1):
U.S.
Global & international
Total:
U.S.
Global & international
Total
As of December 31,
2010
2011
(in billions)
2009
2011-10
2010-09
% Change
$ 25.2
$ 37.8
$ 44.4
(33.5)%
(14.9)%
55.6
80.8
21.8
22.4
44.2
125.0
127.4
90.2
217.6
29.6
33.7
63.3
204.0
201.9
106.5
144.3
30.3
44.0
74.3
218.6
119.0
87.2
206.2
28.7
24.5
53.2
215.8
262.2
126.8
171.2
38.1
56.0
94.1
265.3
112.3
72.0
184.3
26.1
11.0
37.1
220.9
265.8
$405.9
$478.0
$486.7
(47.8)
(44.0)
(28.0)
(49.1)
(40.5)
(42.8)
7.0
3.5
5.5
3.2
37.6
19.1
(5.5)
(23.0)
(15.1)
(16.0)
(15.7)
(20.3)
(21.5)
(21.0)
(17.6)
6.0
21.1
11.9
9.9
122.3
43.2
(2.3)
(1.4)
(1.8)
(1)
Includes index, structured, asset allocation services and certain other alternative investments.
During the first quarter of 2011, AXA sold its 50% interest in our consolidated Australian joint venture to an unaffiliated third party as
part of a larger transaction. On March 31, 2011, we purchased that 50% interest from the unaffiliated third party for $21.4 million,
making our Australian entity a wholly-owned subsidiary. As a result, we eliminated $32.1 million of non-controlling interests in con-
solidated entities and increased partners’ capital attributable to AllianceBernstein unitholders by $10.7 million. As of December 31,
2011, we were managing in connection with this subsidiary approximately $9.0 billion for the unaffiliated third party. This party’s
commitment to continue to engage us as investment manager with respect to approximately 75% of the $9.0 billion expires on or
before March 31, 2012.
44
AllianceBernstein
Changes in assets under management during 2011 and 2010 were as follows:
Distribution Channel
Institutions
Retail
Private
Client
Total
Value
Equity
(in billions)
Investment Service
Fixed
Income
Growth
Equity
Other(1)
Total
Balance as of December 31, 2010
$ 272.9
$ 127.0
$ 78.1
$ 478.0
$144.3
$ 74.3
$ 206.2
$ 53.2
$ 478.0
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Transfers
Acquisitions
Market (depreciation) appreciation
Net change
17.3
(52.8)
(9.3)
(44.8)
0.1
1.1
(5.4)
(49.0)
31.0
(34.8)
(7.1)
(10.9)
—
0.2
(3.7)
(14.4)
7.3
(9.5)
(4.6)
(6.8)
(0.1)
0.1
(1.9)
(8.7)
55.6
(97.1)
(21.0)
(62.5)
—
1.4
(11.0)
(72.1)
6.5
(43.3)
(13.1)
(49.9)
—
—
(13.6)
(63.5)
5.2
(24.7)
(6.3)
(25.8)
—
1.2
(5.5)
(30.1)
31.4
(27.8)
(0.4)
3.2
—
0.2
8.0
11.4
12.5
(1.3)
(1.2)
10.0
—
—
0.1
10.1
55.6
(97.1)
(21.0)
(62.5)
—
1.4
(11.0)
(72.1)
Balance as of December 31, 2011
$223.9
$112.6
$69.4
$405.9
$ 80.8
$ 44.2
$217.6
$63.3
$405.9
Distribution Channel
Institutions
Retail
Private
Client
Total
Value
Equity
(in billions)
Investment Service
Fixed
Income
Growth
Equity
Other(1)
Total
Balance as of December 31, 2009
$ 291.2
$ 120.7
$ 74.8
$ 486.7
$ 171.2
$ 94.1
$ 184.3
$ 37.1
$ 486.7
Long-term flows:
Sales/new accounts
Redemptions/terminations
Cash flow/unreinvested dividends
Net long-term (outflows) inflows
Transfers
Acquisition
Market appreciation
Net change
19.2
(52.1)
(14.0)
(46.9)
(0.2)
8.0
20.8
(18.3)
33.2
(32.3)
(8.3)
(7.4)
—
—
13.7
6.3
7.6
(6.0)
(3.5)
(1.9)
0.2
—
5.0
3.3
60.0
(90.4)
(25.8)
(56.2)
—
8.0
39.5
(8.7)
11.0
(38.5)
(12.4)
(39.9)
—
—
13.0
(26.9)
Balance as of December 31, 2010
$272.9
$127.0
$78.1
$478.0
$144.3
(1)
Includes index, structured, asset allocation services and certain other alternative investments.
5.6
(26.2)
(7.3)
(27.9)
—
—
8.1
(19.8 )
$ 74.3
39.3
(23.7)
(6.6)
9.0
—
—
12.9
21.9
$206.2
4.1
(2.0)
0.5
2.6
—
8.0
5.5
16.1
$53.2
60.0
(90.4)
(25.8)
(56.2)
—
8.0
39.5
(8.7)
$478.0
Annual Report 2011
45
Average assets under management by distribution channel and investment service were as follows:
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
DistributionChannel:
Institutions
Retail
Private Client
Total
InvestmentService:
Value Equity
Growth Equity
Fixed Income
Other(1)
Total
(in billions)
$ 252.6
$ 277.1
$ 272.6
(8.8)%
1.7%
124.0
75.3
122.8
74.7
105.1
68.6
$451.9
$474.6
$446.3
$ 117.2
61.0
214.0
59.7
$ 153.5
81.3
198.9
40.9
$ 160.6
86.1
170.8
28.8
$451.9
$474.6
$446.3
1.0
0.9
(4.8)
(23.6)%
(25.0)
7.6
46.0
(4.8)
16.8
8.9
6.3
(4.4)%
(5.5)
16.4
41.7
6.3
(1)
Includes index, structured, asset allocation services and certain other alternative investments.
Our Institutions channel AUM declined $49.0 billion to $223.9 billion at the end of 2011, resulting in average AUM of $252.6 bil-
lion for 2011. The $49.0 billion decline in AUM during 2011 was primarily due to $44.8 billion of net outflows (consisting of net
outflows of $54.5 billion in Value and Growth Equity services, partly offset by net inflows of $9.7 billion in Fixed Income and
Other services) and market depreciation of $5.4 billion (consisting of market depreciation of $11.0 billion in Value and Growth
Equity services, partly offset by market appreciation of $5.6 billion in Fixed Income and Other services). During 2010, Institutional
AUM declined $18.3 billion to $272.9 billion at the end of 2010, resulting in average AUM of $277.1 billion for 2010. The $18.3
billion decrease in AUM was primarily due to net outflows of $46.9 billion (across all services except Fixed Income services), partly
offset by an additional inflow of $8.0 billion in October 2010 from the acquisition of an alternative investments group and market
appreciation of $20.8 billion (across all services).
Our Retail channel AUM declined $14.4 billion to $112.6 billion at the end of 2011, resulting in average AUM of $124.0 billion
for 2011. The $14.4 billion decline in AUM during 2011 was due to $10.9 billion of net outflows (consisting of net outflows of
$14.2 billion in Value and Growth Equity services, offset by net inflows of $3.3 billion in Fixed Income and Other services) and
market depreciation of $3.7 billion (primarily consisting of $4.7 billion in Value and Growth Equity services). During 2010, Retail
AUM increased $6.3 billion to $127.0 billion at the end of 2010, resulting in average AUM of $122.8 billion for 2010. The $6.3
billion increase in Retail AUM during 2010 was due to market appreciation of $13.7 billion (across all services), partly offset by net
outflows of $7.4 billion (consisting of net outflows of $13.0 billion in Value and Growth Equity services, partly offset by net inflows
of $4.7 billion in Fixed Income services).
Our Private Client channel AUM declined $8.7 billion to $69.4 billion at the end of 2011, resulting in average AUM of $75.3 bil-
lion. The $8.7 billion decrease in AUM during 2011 was primarily due to $6.8 billion of net outflows (consisting of net outflows
within all services, except Other services) and market depreciation of $1.9 billion (consisting of market depreciation across all serv-
ices except Fixed Income services). During 2010, Private Client AUM increased $3.3 billion to $78.1 billion. During the first half
of 2010, Private Client AUM declined to $70.9 billion due to market depreciation. This resulted in average AUM of $74.7 billion
for 2010. The increase in AUM during 2010 was due to market appreciation of $5.0 billion (across all services), partly offset by net
outflows of $1.9 billion (consisting of net outflows of $4.9 billion in Value and Growth Equity services, offset by net inflows of $3.0
billion in Fixed Income and Other services).
46
AllianceBernstein
Absolute investment composite returns and relative performance compared to benchmarks for certain representative Value, Growth,
Blend and Fixed Income services were as follows for the years ended December 31:
Global High Yield (fixed income)
Absolute return
Relative return (vs. 33% Barclays High Yield, 33% JPM EMBI Global and 33% JPM GBI-EM)
2011
2010
2009
0.2%
(2.1)
15.6%
2.2
60.6%
26.9
Strategic Core Plus (fixed income)
Absolute return
Relative return (vs. Barclays U.S. Aggregate)
Global Plus (fixed income)
Absolute return
Relative return (vs. Barclays Global Aggregate)
Emerging Market Debt (fixed income)
Absolute return
Relative return (vs. JMP EMBI Global)
Global Value
Absolute return
Relative return (vs. MSCI World Index—net)
International Value
Absolute return
Relative return (vs. MSCI EAFE Index—net)
Japan Value
Absolute return
Relative return (vs. TOPIX)
U.S. Diversified Value
Absolute return
Relative return (vs. Russell 1000 Value Index)
Global Research Growth
Absolute return
Relative return (vs. MSCI World Index—net)
Global Thematic Research Growth
Absolute return
Relative return (vs. MCSI ACWI—net)
International Large Cap Growth
Absolute return
Relative return (vs. MSCI EAFE Index—net)
U.S. Large Cap Growth
Absolute return
Relative return (vs. Russell 1000 Growth Index)
U.S. Small Cap Growth
Absolute return
Relative return (vs. Russell 2000 Growth Index)
Global Blend
Absolute return
Relative return (vs. MSCI World Index—net)
U.S. Style Blend
Absolute return
Relative return (vs. S&P 500 Index)
Emerging Market Blend
Absolute return
Relative return (vs. MSCI EM Index—net)
Annual Report 2011
7.1
(0.7)
6.2
0.6
6.0
(2.5)
(15.8)
(10.3)
(18.6)
(6.5)
(18.0)
(1.0)
(3.3)
(3.7)
(11.3)
(5.8)
(21.5)
(14.1)
(21.8)
(9.7)
(2.3)
(4.9)
4.4
7.3
(12.5)
(7.0)
(4.3)
(6.4)
(23.8)
(5.4)
9.5
2.9
8.3
2.8
14.7
2.7
6.5
(5.3)
3.4
(4.4)
3.8
2.8
12.6
(2.9)
8.8
(3.0)
20.0
7.3
4.2
(3.6)
9.8
(6.9)
37.1
8.0
7.2
(4.6)
10.1
(5.0)
14.7
(4.2)
18.8
12.8
13.9
7.0
44.3
16.1
35.8
5.8
36.1
4.3
15.5
7.9
21.2
1.5
31.9
1.9
55.4
20.7
32.3
0.5
36.9
(0.3)
41.9
7.4
34.3
4.3
32.9
6.4
88.8
10.3
47
Performance of our fixed income services during 2011 was mixed compared to relative benchmarks. Fixed income markets were
volatile, as the European sovereign-debt crisis threatened the global economy and investors sought less risky investments such as
U.S. Treasury Bills. Our U.S. fixed income portfolios lagged due to non-government bond exposures and our Emerging Market
debt portfolios underperformed due to country selection. In contrast, our Global fixed income portfolios outperformed, benefiting
from our underweight position in European bonds (i.e., our expectation that European bonds would underperform).
Our U.S. and global large cap equity services underperformed their benchmarks during 2011. We attribute this underperformance
to our adherence to our core investment discipline, which focuses on long-term value characteristics such as inexpensive cash flows
in value stocks and undervalued earnings growth potential in growth stocks. Although the short-term oriented equity markets have
not rewarded these characteristics, our core research approach has not wavered, and we believe that staying true to our beliefs is in
our clients’ best interest over the long term.
Consolidated Results of Operations
Years Ended December 31,
2010
2011
2009
Net revenues
Expenses
Operating (loss) income
Non-operating income
(Loss) income before income taxes
Income taxes
Net (loss) income
Net (loss) income of consolidated entities attributable to non-controlling interests
Net (loss) income attributable to AllianceBernstein Unitholders
Diluted net (loss) income per AllianceBernstein Unit
Distributions per AllianceBernstein Unit(1)
Operating margin(2)
(in millions, except per unit amounts)
$2,749.9
2,958.4
$2,948.6
2,489.7
$2,906.9
2,316.1
(208.5)
—
(208.5)
3.1
(211.6)
(36.8)
$ (174.8)
$ (0.62)
$
1.38
n/m
458.9
6.7
465.6
38.5
427.1
(15.3)
590.8
33.7
624.5
46.0
578.5
22.4
$ 442.4
$ 556.1
$
$
1.58
1.58
$
$
2.07
2.06
16.1%
19.6%
% Change
2011-10
2010-09
(6.7)%
18.8
(145.4)
(100.0)
(144.8)
(92.0)
(149.5)
140.2
(139.5)
(139.2)
(12.7)
1.4%
7.5
(22.3)
(79.9)
(25.4)
(16.2)
(26.2)
n/m
(20.4)
(23.7)
(23.3)
(1) The 2011 distribution excludes the $587.1 million one-time, non-cash deferred compensation charge.
(2) Operating income excluding net (loss) income attributable to non-controlling interests as a percentage of net revenues.
Net loss attributable to AllianceBernstein Unitholders for the year ended December 31, 2011 was $174.8 million, as compared to
net income attributable to AllianceBernstein unitholders of $442.4 million for the year ended December 31, 2010. The change was
primarily due to (in millions):
$(587.1) 2011 deferred compensation charge
(131.3) Lower investment advisory base fees
(47.4) 2011 deferred compensation investment losses versus 2010 gains
(25.5) Higher other promotion and servicing expenses
(12.4) 2011 seed money investment losses versus 2010 gains
(9.8) Higher portfolio services
94.5 Lower real estate charges
73.7 Lower employee compensation and benefits (excluding $587.1 million deferred compensation charge)
35.4 Lower income tax expense
10.7 2011 insurance proceeds
(18.0) Other
$(617.2)
48
AllianceBernstein
Net income attributable to AllianceBernstein Unitholders for the year ended December 31, 2010 decreased $113.7 million, or
20.4%, from the year ended December 31, 2009. The decrease was primarily due to (in millions):
$ (93.4) Lower deferred compensation investments gains
(93.4) Higher real estate charges
(27.0) Lower non-operating income
(24.4) Higher employee compensation and benefits
(11.8) Higher travel and entertainment
(9.8) Lower seed money investment gains
(9.3) Lower performance fees
140.7 Higher investment advisory base fees
16.3 Higher distribution revenues (net of plan payments and amortization)
(1.6) Other
$(113.7)
Real Estate Charges
During 2010, we performed a comprehensive review of our real estate requirements in New York in connection with our work-
force reductions commencing in 2008. As a result, during 2010 we decided to sub-lease over 380,000 square feet in New York
(approximately half of which has occurred) and largely consolidate our New York-based employees into two office locations from
three. We therefore recorded a pre-tax real estate charge of $89.6 million in the third quarter of 2010 that reflected the net present
value of the difference between the amount of our ongoing contractual operating lease obligations for this space and our estimate of
current market rental rates, as well as the write-off of leasehold improvements, furniture and equipment related to this space. We
periodically review the assumptions and estimates we used in recording this charge. The third quarter 2010 charge lowered our
occupancy related payments by approximately $17 million in 2011, which was partially offset by additional leases entered into
around the world since the third quarter of 2010. We estimate similar or slightly higher savings in future years. For additional
information, see “Cautions Regarding Forward-Looking Statements” in this Item 7. We also recorded a real estate charge of $12.0 million
in the first quarter of 2010.
During 2011, we recorded pre-tax real estate charges totaling $7.2 million for our office space in London, New York and other
U.S. locations. The London charge was $8.8 million, consisting of a $5.8 million payment to the party to which the lease was
assigned, as well as the write-off of $3.0 million of leasehold improvements, furniture and equipment related to the space. We also
wrote off an additional $1.5 million of leasehold improvements, furniture and equipment related to the New York space and had
miscellaneous charges of $0.4 million. These charges were offset by a $3.5 million credit we recorded in 2011 due to changes in
estimates of our third quarter 2010 charge.
Deferred Compensation Charge
On November 17, 2011, we announced that we implemented changes to our employee long-term incentive compensation award
program designed to better align the costs of employee compensation and benefits with the company’s current year financial per-
formance, and provide employees with a higher degree of certainty that they will receive the incentive compensation they are
awarded.
We amended all outstanding deferred incentive compensation awards of active employees (i.e., those employees who we employed
as of December 31, 2011), so that employees who terminate their employment or are terminated without cause may retain their
award, subject to compliance with certain agreements and restrictive covenants set forth in the applicable award agreement, includ-
ing restrictions on competition and employee and client solicitation, and a claw-back for failing to follow existing risk management
policies. Most equity replacement, sign-on or similar deferred compensation awards included in separate employment agreements or
arrangements have not been amended.
Annual Report 2011
49
We recognize compensation expense related to equity compensation grants in the financial statements using the fair value method.
Fair value of restricted Holding Unit awards is the closing price of a Holding Unit on the grant date; fair value of options is
determined using the Black-Scholes option valuation model. Under the fair value method, compensatory expense is measured at the
grant date based on the estimated fair value of the award and is recognized over the required service period. Prior to the amend-
ment made to the employee long-term incentive compensation award program in the fourth quarter of 2011, an employee’s service
requirement was typically the same as the delivery dates. This amendment eliminated employee service requirements but did not
modify delivery dates contained in the original award agreements.
As a result of this change, we recorded a one-time, non-cash charge of $587.1 million in the fourth quarter for all unrecognized
deferred incentive compensation on the amended outstanding awards from prior years. In addition, we recorded 100% of the
expense associated with our 2011 deferred incentive compensation awards of $159.9 million.
Awards granted in 2011 contained the provisions described above and we expect to add these provisions to deferred incentive
compensation awards in the future. Accordingly, our annual incentive compensation expense will reflect 100% of the expense asso-
ciated with the deferred incentive compensation awarded in each year. This approach to expense recognition will more closely
match the economic cost of awarding deferred incentive compensation to the period in which the related service is performed.
Management Operating Metrics
We are providing the non-GAAP measures “adjusted net revenues”, “adjusted operating income” and “adjusted operating margin”
because they are the principal metrics management uses in evaluating and comparing period-to-period operating performance and
we believe they are useful to investors.
Net revenues, GAAP basis
Exclude:
Deferred compensation-related investment (gains) losses
Deferred compensation-related dividends and interest
90% of consolidated venture capital fund investment (gains) losses
Distribution-related payments
Amortization of deferred sales commissions
Pass-through fees and expenses
Adjusted net revenues
Operating (loss) income, GAAP basis
Exclude:
Deferred compensation-related investment (gains) losses
Deferred compensation-related dividends and interest
Deferred compensation-related mark-to-market vesting expense (credit)
Deferred compensation-related dividends and interest expense
Deferred compensation charge
Net impact of deferred compensation-related items
Insurance proceeds
Real estate charge
Sub-total of non-GAAP adjustments
Net (loss) income of consolidated entities attributable to non-controlling interests
Adjusted operating income
Adjusted operating margin
Years Ended December 31,
2010
2011
2009
(in thousands)
$2,749,891
$2,948,557
$2,906,879
20,302
(4,364)
35,778
(302,684)
(37,675)
(35,103)
(27,053)
(6,513)
16,527
(286,676)
(47,397)
(32,684)
(120,501)
(8,526)
(20,630)
(234,203)
(54,922)
(26,302)
$2,426,145
$2,564,761
$2,441,795
$ (208,469)
$ 458,862
$ 590,828
20,302
(4,364)
(19,425)
5,054
587,131
588,698
(10,691)
7,235
585,242
(36,799)
(27,053)
(6,513)
2,791
8,540
—
(22,235)
—
101,698
79,463
(15,320)
(120,501)
(8,526)
(2,147)
7,734
—
(123,440)
—
8,276
(115,164)
22,381
$ 413,572
$ 553,645
$ 453,283
17.0%
21.6%
18.6%
50
AllianceBernstein
Adjusted operating income for the year ended December 31, 2011 decreased $140.1 million, or 25.3%, from the year ended
December 31, 2010, primarily as a result of lower investment advisory fees, higher seed money losses, higher general and admin-
istrative expenses (excluding real estate charges) and higher other promotion and servicing expenses, partially offset by higher
Bernstein Research Services revenues and lower compensation expense (excluding the impact of deferred compensation-related
items). Adjusted operating income for the year ended December 31, 2010 increased $100.4 million, or 22.1%, from the year ended
December 31, 2009, primarily as a result of higher investment advisory fees and net distribution revenues (net of plan payments and
amortization), partially offset by lower non-operating income and higher employee compensation expense (excluding the impact of
deferred compensation-related items).
These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating
margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both the GAAP
and non-GAAP measures in evaluating our financial performance. The non-GAAP measures alone may pose limitations because
they do not include all of our revenues and expenses.
Adjusted Net Revenues
Adjusted net revenues exclude investment gains and losses and dividends and interest on employee deferred compensation-related
investments, and 90% of the investment gains and losses of our consolidated venture capital fund attributable to non-controlling
interests. In addition, adjusted net revenues offset distribution-related payments to third parties as well as amortization of deferred
sales commissions against distribution revenues. We believe the offset of distribution-related payments from net revenues is useful
for our investors and other users of our financial statements because such presentation appropriately reflects the nature of these costs
as pass-through payments to third parties who perform functions on behalf of our sponsored mutual funds and/or shareholders of
these funds. Amortization of deferred sales commissions is offset against net revenues because such costs, over time, essentially offset
distribution revenues earned by the company. Beginning in the first quarter of 2011, we also excluded additional pass-through
expenses we incur (primarily through our transfer agent) that are reimbursed and recorded as fees in revenues. These fees have no
impact on operating income, but they do have an impact on our operating margin. As such, we exclude these fees from adjusted net
revenues.
Adjusted Operating Income
Adjusted operating income represents operating income on a GAAP basis excluding (1) the impact on net revenues and compensa-
tion expense of the mark-to-market gains and losses (as well as the dividends and interest) associated with employee deferred
compensation-related investments, (2) deferred compensation charges, (3) real estate charges, (4) insurance proceeds, and (5) the net
loss or income of consolidated entities attributable to non-controlling interests.
Prior to 2009, a large proportion of employee compensation was in the form of deferred awards that were notionally invested in
AllianceBernstein investment services and generally vested over a period of four years. AllianceBernstein has economically hedged
the exposure to market movements by purchasing and holding these investments on its balance sheet. The full value of the invest-
ments’ appreciation (depreciation) is recorded within investment gains and losses on the income statement in the current period.
U.S. GAAP requires the appreciation (depreciation) in the compensation liability to be expensed over the award vesting period in
proportion to the vested amount of the award as part of compensation expense. This creates a timing difference between the recog-
nition of the compensation expense and the investment gain or loss impacting operating income, which will fluctuate over the life
of the award and net to zero at the end of the multi-year vesting period. Although during periods of high market volatility these
timing differences have an impact on operating income and operating margin, over the life of the award any impact is ultimately
offset. Because these plans are economically hedged, management believes it is useful to reflect the offset ultimately achieved from
hedging the investments’ market exposure in the calculation of adjusted operating income, adjusted operating margin and adjusted
diluted net income per Holding Unit, which will produce core operating results from period to period. The non-GAAP measures
exclude gains and losses and dividends and interest on employee deferred compensation-related investments included in revenues
and compensation expense, thus eliminating the timing differences created by different treatment under U.S. GAAP of the market
movement on the expense and the investments. In the fourth quarter of 2011, we implemented changes to our employee long-term
incentive compensation award program. This resulted in a one-time, non-cash charge that is not considered part of our core operat-
ing results.
Annual Report 2011
51
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Investment gains (losses) are as follows:
Deferred compensation-related investments
Realized gains (losses)
Unrealized gains (losses)
Consolidated private equity fund investments
Realized gains (losses)
Unrealized gains (losses)
Seed capital and brokerage-related investments
Realized gains (losses)
Unrealized gains (losses)
Years Ended December 31,
2010
2009
2011
(in millions)
$ (8.3)
(12.0)
$(12.0)
39.1
$ (63.9)
184.4
(0.8)
(39.0)
3.4
(25.4)
21.2
(39.6)
(19.9)
9.8
17.2
5.8
(5.9)
6.9
$(82.1)
$ (1.4)
$144.5
Realized gains or losses on employee deferred compensation-related investments typically occur in December of each year, as well
as the first quarter, as award tranches vest and related investments are sold to provide cash for payments to employees. The unreal-
ized losses on employee deferred compensation-related investments during 2011 reflect unfavorable financial markets, while the
unrealized gains during 2010 and 2009 reflect the favorable financial markets during those periods.
Our consolidated private equity fund during 2011 incurred slightly higher mark-to-market losses relating to privately-held securities
held by the fund, offset by slightly lower mark-to-market losses relating to publicly-traded securities. During 2010, the fund
incurred higher mark-to-market losses relating to publicly-traded securities held by the fund. Also, 2010 and 2009 reflect gains on
the sale of securities in those years.
Seed money and brokerage-related investments had realized gains in 2011 as compared to realized losses in 2010, primarily as a
result of the derivatives we use to hedge our seed money investments. Also in 2011, equity trading securities had significant unreal-
ized losses as compared to unrealized gains in 2010.
Other Revenues
Other revenues consist of fees earned for transfer agency services provided to company-sponsored mutual funds, fees earned for
administration and recordkeeping services provided to company-sponsored mutual funds and the general accounts of AXA and its
subsidiaries, and other miscellaneous revenues. Other revenue decreased 2.0% in 2011 due primarily to lower shareholder servicing
fees. In 2010, other revenues increased 1.8% due primarily to higher shareholder servicing fees.
56
AllianceBernstein
Expenses
The following table summarizes the components of expenses:
Years Ended December 31,
2010
2011
2009
% Change
2011-10
2010-09
Employee compensation and benefits:
Employee compensation and benefits
Deferred compensation charge
Promotion and servicing:
Distribution-related payments
Amortization of deferred sales commissions
Other
General and administrative:
General and administrative
Real estate charges
Interest
Amortization of intangible assets
Total
(in millions)
$ 1,248.5
$ 1,322.2
$ 1,297.8
(5.6)%
587.1
1,835.6
—
1,322.2
—
1,297.8
302.7
37.7
217.6
558.0
533.6
7.2
540.8
2.6
21.4
286.7
47.4
192.1
526.2
516.2
101.7
617.9
2.1
21.3
234.2
54.9
176.7
465.8
520.4
8.3
528.7
2.7
21.1
$2,958.4
$2,489.7
$2,316.1
n/m
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7.5
Employee Compensation and Benefits
We had 3,764 full-time employees as of December 31, 2011 compared to 4,256 as of year-end 2010 and 4,369 as of year-end 2009.
Employee compensation and benefits consist of salaries (including severance), annual cash incentive awards, annual deferred
incentive compensation awards, commissions, fringe benefits and other employment costs (including recruitment, training, tempo-
rary help and meals).
As a result of the deferred compensation charge previously discussed, we recorded a one-time, non-cash charge of $587.1 million in
the fourth quarter for all unrecognized deferred incentive compensation on outstanding awards from prior years. In addition, we
recorded 100% of the expense associated with our 2011 deferred incentive compensation awards of $159.9 million.
Compensation expense as a percentage of net revenues was 45.4% (excluding the one-time, non-cash charge), 44.8% and 44.6% for
the years ended December 31, 2011, 2010 and 2009, respectively. Compensation expense generally is determined on a discretionary
basis and is primarily a function of our firm’s financial performance. Amounts are awarded to help us achieve our goal of attracting,
motivating and retaining top talent while also helping ensure that our firm’s unitholders receive an appropriate return on their
investment. Senior management, with the approval of the Compensation Committee of the Board (“Compensation Committee”),
confirmed that the appropriate metric to consider in determining the amount of incentive compensation is the ratio of adjusted
employee compensation and benefits expense to adjusted net revenues. During 2010, we defined adjusted employee compensation
and benefits expense as employee compensation and benefits expense minus other employment costs such as recruitment, meals,
temporary help, training and seminars. We defined adjusted revenues as net revenues minus distribution revenues. During the first
and fourth quarters of 2011, we made minor modifications to the adjusted compensation ratio calculation. Adjusted net revenues
used in the adjusted compensation ratio are now the same as the adjusted net revenues presented as a non-GAAP measure (discussed
earlier in this Item 7) less revenues associated with acquisitions over the last two years to implement strategic product initiatives.
Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other employ-
ment costs such as recruitment, training, temporary help and meals, and now excludes the impact of mark-to-market vesting
expense, as well as dividends and interest expense, associated with employee deferred compensation-related investments, the fourth
quarter 2011 deferred compensation charge discussed above and total compensation and certain amortization of equity-based awards
of personnel related to acquisitions over the last two years to implement strategic product initiatives. Senior management, with the
Annual Report 2011
57
approval of the Compensation Committee, also established as an objective that adjusted employee compensation and benefits
expense generally should not exceed 50% of our adjusted revenues except in unexpected or unusual circumstances. Our ratios of
adjusted compensation expense as a percentage of adjusted revenues were 50.3%, 49.7% and 51.9%, respectively, for the years ended
December 31, 2011, 2010 and 2009. The 2009 ratio exceeded 50% as a result of the first quarter 2011 modification to the
calculation.
In 2011, base compensation, fringe benefits and other employment costs increased $28.6 million, or 5.0%, primarily due to higher
salaries which resulted from annual merit increases partially offset by lower recruitment and severance. Commission expense
increased $75.5 million, or 36.8%, primarily due to the fourth quarter 2011 one-time, non-cash charge of $65.9 million (which is
included in the one-time, non-cash $587.1 million charge discussed above) and the full recognition of 2011 deferred incentive com-
pensation awards. Incentive compensation increased $409.3 million, or 75.2%, due to higher deferred compensation vesting expense
of $423.2 million (which includes $521.2 million of the one-time, non-cash charge) offset by lower cash incentive compensation
expense. In 2010, base compensation, fringe benefits and other employment costs decreased $11.6 million, or 2.0%, primarily due
to lower severance and salaries offset by higher recruitment costs and payroll taxes. Incentive compensation increased $31.0 million,
or 6.1%, primarily due to higher cash compensation. Commission expense increased $5.1 million, or 2.5%, primarily due to higher
retail sales volume. Since 2009, all deferred compensation awards to eligible employees, which typically vest ratably over four years,
have been made in the form of restricted Holding Units or deferred cash (in 2010, deferred cash was an option available only to
certain non-U.S. employees; this option was expanded to most employees in 2011). Prior to 2009, employees receiving deferred
compensation awards had the option to allocate a portion of their awards to notional investments in company-sponsored investment
products (primarily mutual funds). Increases in the value of the notional investments in company-sponsored investment products
increase the company’s compensation liability to employees, while decreases in the value of the investments decrease the company’s
liability. The company generally purchased an amount of these investments equivalent to the notional investments and held them in
a consolidated rabbi trust to economically hedge its exposure to valuation changes on its future obligations. Mark-to-market gains or
losses on these investments are recognized in investment gains and losses as they occur. However, prior to the amendments made to
the deferred incentive compensation program in 2011, the impact of cumulative mark-to-market gains or losses was recognized as
increases or decreases in compensation expense ratably over the remaining vesting period. As a result, there was not a direct correla-
tion between current period deferred compensation-related investment gains or losses recognized in revenues and the amortization
of cumulative mark-to-market investment gains or losses recognized in compensation expense. Although there can be significant
volatility from period to period as the value of these investments change, if a participant remained employed by the company over
the entire vesting period of the award, mark-to-market investment gains or losses recognized in revenues would, over that vesting
period, equal mark-to-market investment gains or losses recognized in compensation expense. As a result of the 2011 amendments,
mark-to-market investment gains or losses recognized in compensation expense will closely approximate mark-to-market invest-
ment gains and losses recognized in revenues.
The investment gains and losses on deferred compensation-related investments recognized in net revenues as compared to the amor-
tization of deferred compensation awards notionally invested in company-sponsored investment products are as follows:
Years Ended December 31,
2010
2011
2009
Investment gains (losses)
Amortization of awards notionally invested in company-sponsored investments products:
Original award
Prior periods mark-to-market
Current period mark-to-market
Total
Net operating income impact
(in millions)
$ (20.3)
$ 27.1
$120.5
105.0
18.0
(19.4)
103.6
119.7
(12.0)
14.8
122.5
159.2
(50.0)
47.9
157.1
$(123.9)
$(95.4)
$(36.6)
58
AllianceBernstein
Promotion and Servicing
Promotion and servicing expenses include distribution-related payments to financial intermediaries for distribution of
AllianceBernstein mutual funds and amortization of deferred sales commissions paid to financial intermediaries for the sale of
back-end load shares of AllianceBernstein mutual funds. Also included in this expense category are costs related to travel and enter-
tainment, advertising and promotional materials.
Promotion and servicing expenses increased $31.8 million, or 6.0%, in 2011. The increase reflects higher distribution-related pay-
ments of $16.0 million, an increase of 5.6%, which is generally in line with the 3.8% increase in distribution revenues. In addition,
travel and entertainment increased $8.1 million, trade and execution and clearing costs increased $8.1 million and transfer fees
increased $6.3 million, all attributable to increased business activity and new product launches. These increases were partially offset
by a decrease in amortization of deferred sales commissions of $9.7 million. Promotion and servicing expenses increased $60.4 mil-
lion, or 13.0%, in 2010. The increase reflected higher distribution-related payments of $52.5 million, an increase of 22.4%,
which was generally in line with the 22.1% increase in distribution revenues. In addition, travel and entertainment increased $11.8
million, which was partially offset by a decrease in amortization of deferred sales commissions of $7.5 million.
General and Administrative
General and administrative expenses include technology, professional fees, occupancy, communications and similar expenses. Gen-
eral and administrative expenses as a percentage of net revenues were 19.7% (19.4% excluding real estate charges), 21.0% (17.5%
excluding real estate charges) and 18.2% (17.9% excluding real estate charges) for the years ended December 31, 2011, 2010 and
2009, respectively. General and administrative expenses decreased $77.1 million, or 12.5%, in 2011, primarily due to lower real
estate charges, partially offset by higher portfolio services expenses (including market data services and sub-advisory fees). General
and administrative expenses increased $89.2 million, or 16.9%, in 2010, primarily due to higher real estate charges of $93.4 million
offset by lower professional fees.
Interest on Borrowings
Interest on our borrowings increased $0.5 million in 2011, primarily as a result of higher average debt outstanding. During 2010,
interest on our borrowings decreased $0.6 million as compared to 2009, primarily as a result of lower average debt outstanding and
interest rates.
Non-Operating Income
Non-operating income consists of contingent purchase price payments earned from the disposition in 2005 of our cash management
services. These payments terminated during the second quarter of 2010 pursuant to our agreement with Federated Investors, Inc.
Income Taxes
AllianceBernstein, a private limited partnership, is not subject to federal or state corporate income taxes. However, we are subject to
the New York City unincorporated business tax. Our domestic corporate subsidiaries are subject to federal, state and local income
taxes, and are generally included in the filing of a consolidated federal income tax return. Separate state and local income tax returns
are also filed. Foreign corporate subsidiaries are generally subject to taxes in the foreign jurisdictions where they are located.
Income tax expenses decreased $35.4 million, or 92.0%, in 2011 compared to 2010. Prior to the fourth quarter 2011 deferred
compensation charge of $587.1 million, our estimate of our full year 2011 effective tax rate was 7.1%. As a result of the deferred
compensation charge, as well as the immediate recognition of the 2011 deferred compensation incentive awards, we had a fourth
quarter 2011 effective tax rate of 3.8% (pre-tax loss of $540.2 million and income tax benefit of $20.3 million, that resulted in a full-
year 2011 pre-tax loss of $208.5 million and income tax expense of $3.1 million). The deferred compensation charge resulted in a
one-time change to the historical mix of business between AllianceBernstein, which incurs a 4.0% unincorporated business tax, and
its corporate subsidiaries that incur corporate level income taxes. In addition, the recorded tax benefit associated with the future
deliveries of vested Holding Units was based on the current market value in most jurisdictions, which was lower than the grant
price of the awards included in the deferred compensation charge. Both contributed to us incurring tax expense of $3.1 million
rather than a benefit at the full year estimated effective tax rate of 7.1%. Income tax expenses decreased $7.5 million, or 16.2%, in
Annual Report 2011
59
2010 compared to 2009. The decrease was primarily the result of lower pre-tax earnings, partially offset by a higher effective tax
rate due to a higher proportion of pre-tax earnings from our foreign subsidiaries where tax rates are generally higher.
Net Income (Loss) in Consolidated Entities Attributable to Non-Controlling Interests
Net income (loss) of consolidated entities attributable to non-controlling interests consists of limited partner interests owned by
other investors representing 90% of the total limited partner interests in our consolidated venture capital fund. It also includes the
50% interest owned by AXA and its subsidiaries in our consolidated joint venture in Australia through March 31, 2011, when we
purchased the remaining 50% interest in the Australian joint venture for $21.4 million. In 2011, we had a $36.8 million net loss of
consolidated entities attributable to non-controlling interests, due primarily to a $37.3 million net loss attributable to
non-controlling interests in our consolidated venture capital fund (as a result of $39.8 million of net investment losses). In 2010, we
had a net loss of consolidated entities attributable to non-controlling interests of $15.3 million as compared to net income of $22.4
million in 2009. Our consolidated venture capital fund experienced net losses of $18.4 million in 2010 as compared to gains of
$23.0 million in 2009, which was the primary driver of a net loss of the consolidated venture capital fund attributable to
non-controlling interests of $18.9 million in 2010 as compared to a corresponding net gain of $18.7 million in 2009.
Capital Resources and Liquidity
During 2011, net cash provided by operating activities was $583.9 million, compared with $832.3 million during 2010. The change
was primarily due to an increase in seed investments and a decrease in accounts payable and accrued expenses. During 2010, net
cash provided by operating activities was $832.3 million, compared with $625.5 million during 2009. The increase was primarily
due to higher non-cash adjustments to reconcile net income to net cash provided of $263.4 million, more than offsetting lower net
income of $151.4 million. In addition, accrued expenses increased $76.2 million as a result of the 2010 real estate charges.
During 2011, net cash used in investing activities was $76.7 million, compared to $33.5 million during 2010. During 2011, we
made three acquisitions for $41.8 million compared to our 2010 acquisition for $14.3 million. In addition, our net additions to
furniture, equipment and leasehold improvement also increased $14.8 million in 2011 as compared to 2010. During 2010, net cash
used in investing activities was $33.5 million, compared to $57.2 million during 2009. Our net additions to furniture, equipment
and leasehold improvements decreased $30.3 million in 2010 as compared to 2009 as a result of lower infrastructure needs due to
workforce reductions. The decrease also reflects net proceeds from sales of investments of $4.3 million during 2010 as compared to
net purchases of investments of $3.5 million during 2009. Offsetting these decreases was our purchase of a business in the fourth
quarter of 2010 for $14.3 million.
During 2011, net cash used in financing activities was $518.0 million, compared to $762.8 million during 2010. The decrease
reflects issuance of commercial paper of $219.4 million in 2011 compared to repayment of commercial paper of $24.2 million in
2010 and lower distributions to the General Partner and unitholders of $18.6 million as a result of lower earnings (distributions on
earnings are paid one quarter in arrears), offset by changes in overdrafts payable of $53.9 million. During 2010, net cash used in
financing activities was $762.8 million, compared to $544.5 million during 2009. The increase reflects higher purchases of Holding
Units to fund deferred compensation plans of $219.4 million and higher distributions to the General Partner and unitholders of
$30.4 million as a result of higher earnings (distributions on earnings are paid one quarter in arrears), offset by an increase of $32.1
million in overdrafts payable and lower repayment of commercial paper (net of issuances) of $12.5 million.
Debt and Credit Facilities
At December 31, 2011 and 2010, AllianceBernstein had $444.9 million and $225.0 million, respectively, in commercial paper out-
standing with weighted average interest rates of approximately 0.2% and 0.3%, respectively. The commercial paper and amounts
outstanding under the 2010 Credit Facility described below are short term in nature, and as such, recorded value is estimated to
approximate fair value. Average daily borrowings of commercial paper during 2011 and 2010 were $273.6 million and $104.2 mil-
lion, respectively, with weighted average interest rates of approximately 0.2% for both periods.
On December 9, 2010, AllianceBernstein entered into a committed, unsecured three-year senior revolving credit facility (the
“2010 Credit Facility”) with a group of commercial banks and other lenders in an original principal amount of $1.0 billion with
SCB LLC as an additional borrower.
60
AllianceBernstein
The 2010 Credit Facility replaced AllianceBernstein’s existing $1.95 billion of committed credit lines (comprised of two separate
lines—a $1.0 billion committed, unsecured revolving credit facility on behalf of AllianceBernstein, which had a scheduled expira-
tion date of February 17, 2011, and SCB LLC’s $950 million committed, unsecured revolving credit facility, which had a scheduled
expiration date of January 25, 2011), both of which were terminated upon the effectiveness of the 2010 Credit Facility.
AllianceBernstein has agreed to guarantee the obligations of SCB LLC under the 2010 Credit Facility.
The 2010 Credit Facility is available for AllianceBernstein’s and SCB LLC’s business purposes, including the support of
AllianceBernstein’s $1.0 billion commercial paper program. Both AllianceBernstein and SCB LLC can draw directly under the
2010 Credit Facility and management expects to draw on the 2010 Credit Facility from time to time.
The 2010 Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, includ-
ing, among other things, restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a max-
imum leverage ratio. We are in compliance with these covenants. The 2010 Credit Facility also includes customary events of default
(with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all
outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the
occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the 2010 Credit Facility would
automatically become immediately due and payable, and the lender’s commitments would automatically terminate.
The 2010 Credit Facility provides for possible increases in principal amount by up to an aggregate incremental amount of $250 mil-
lion (“accordion feature”), any such increase being subject to the consent of the affected lenders. Amounts under the 2010 Credit
Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. Voluntary prepayments
and commitment reductions requested by us are permitted at any time without fee (other than customary breakage costs relating to
the prepayment of any drawn loans) upon proper notice and subject to a minimum dollar requirement. Borrowings under the 2010
Credit Facility bear interest at a rate per annum, which will be, at our option, a rate equal to an applicable margin, which is subject
to adjustment based on the credit ratings of AllianceBernstein, plus one of the following indexes: London Interbank Offered Rate; a
floating base rate; or the Federal Funds rate.
On January 17, 2012, the 2010 Credit Facility was amended and restated. The principal amount was amended to $900 million from
the original principal amount of $1.0 billion. Also, the amendment increased the accordion feature from $250 million to $350 mil-
lion. In addition, the maturity date of the 2010 Credit Facility was extended from December 9, 2013 to January 17, 2017. There
were no other significant changes in terms and conditions included in this amendment.
As of December 31, 2011 and 2010, we had no amounts outstanding under the 2010 Credit Facility, respectively. Average daily
borrowings under the 2010 Credit Facility outstanding during 2011 and 2010 were $0.1 million and $65.6 million, respectively,
with weighted average interest rates of approximately 1.3% and 0.3%, respectively.
In addition, SCB LLC has five uncommitted lines of credit with four financial institutions. Two of these lines of credit permit us to
borrow up to an aggregate of approximately $200.0 million while three lines have no stated limit.
As December 31, 2011 and 2010, we had no uncommitted bank loans outstanding. Average daily borrowings of uncommitted bank
loans during 2011 and 2010 were $6.4 million and $2.4 million, respectively, with weighted average interest rates of approximately
1.3% and 1.5%, respectively.
Our financial condition and access to public and private debt markets should provide adequate liquidity for our general business
needs. Management believes that cash flow from operations and the issuance of debt and AllianceBernstein Units or Holding Units
will provide us with the resources necessary to meet our financial obligations. See “Risk Factors” in Item 1A and “Cautions Regarding
Forward-Looking Statements” in this Item 7 for a discussion of credit markets and our ability to renew our credit facilities at expiration.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
We have no off-balance sheet arrangements other than the guarantees and contractual obligations that are discussed below.
Annual Report 2011
61
Guarantees
Under various circumstances, AllianceBernstein guarantees the obligations of its consolidated subsidiaries.
AllianceBernstein maintains a guarantee in connection with the $1.0 billion 2010 Credit Facility, as amended and restated to $900
million in January 2012. If SCB LLC is unable to meet its obligations, AllianceBernstein will pay the obligations when due or on
demand.
AllianceBernstein maintains guarantees with a commercial bank, under which we guarantee $325 million of obligations in the ordi-
nary course of business of SCBL. During January 2012, this guarantee was replaced with an unlimited guarantee. We also maintain
two additional guarantees with other commercial banks, under which we guarantee $295 million of obligations for SCBL. In the
event SCBL is unable to meet its obligations, AllianceBernstein will pay the obligations when due.
We also have two smaller guarantees with a commercial bank totaling approximately $3 million, under which we guarantee certain
obligations in the ordinary course of business of two foreign subsidiaries.
We have not been required to perform under any of the above agreements and currently have no liability in connection with these
agreements.
Aggregate Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2011:
Commercial paper
Operating leases, net of sublease commitments
Funding commitments
Accrued compensation and benefits
Unrecognized tax benefits
Total
Total
Less than
1 Year
Contractual Obligations
1-3 Years
3-5 Years
(in millions)
$
444.9
1,975.1
69.2
503.2
4.0
$ 444.9
$ —
135.2
22.9
247.6
1.1
270.7
41.1
187.9
2.2
$ —
275.6
5.2
36.5
0.7
More than
5 Years
$
—
1,293.6
—
31.2
—
$2,996.4
$851.7
$501.9
$318.0
$1,324.8
During July 2009, we entered into a subscription agreement under which we committed to invest up to $40 million in a venture
capital fund over a six-year period. In December 2011, we sold 12.5% of our funded interest and commitment to an unaffiliated
third party for $2.0 million. As of December 31, 2011, we have funded $14.0 million, net of the sales proceeds, of our revised $35
million commitment.
Also during July 2009, we were selected by the U.S. Treasury Department as one of nine pre-qualified investment managers under
the Public-Private Investment Program. As part of the program, each investment manager is required to invest a minimum of $20
million in the Public-Private Investment Fund they manage. As of December 31, 2011, we had funded $18.0 million of this
commitment.
During 2010, as general partner of the AllianceBernstein U.S. Real Estate L.P. Fund, we committed to invest up to 2.5% of the
capital of the fund up to a maximum of $50 million. As of December 31, 2011, we had funded $3.8 million of this commitment.
Accrued compensation and benefits amounts in the table above exclude our accrued pension obligation. Offsetting our accrued
compensation obligations are deferred compensation-related investments and money markets we funded totaling $198.0 million,
which are included in our consolidated statement of financial condition. Any amounts reflected on the consolidated statement of
financial condition as payables (to broker-dealers, brokerage clients and company-sponsored mutual funds) and accounts payable and
accrued expenses are excluded from the table above.
We expect to make contributions to our qualified profit sharing plan of approximately $14 million in each of the next four years.
We currently estimate that we will contribute $5.9 million to the Retirement Plan during 2012.
62
AllianceBernstein
Contingencies
See Note 12 to AllianceBernstein’s consolidated financial statements in Item 8 for a discussion of our commitments and contingencies.
Critical Accounting Estimates
The preparation of the consolidated financial statements and notes to consolidated financial statements requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
Management believes that the critical accounting policies and estimates discussed below involve significant management judgment
due to the sensitivity of the methods and assumptions used.
Variable Interest Entities
In June 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities, effective January 1, 2010. This standard changed how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting should be consolidated. The determination of whether a company is
required to consolidate an entity is based on, among other things, an entity’s purpose and design, a company’s ability to direct the
activities of the entity that most significantly impact the entity’s economic performance, and whether a company is obligated to
absorb losses or receive benefits that could potentially be significant to the entity. The standard also requires ongoing assessments of
whether a company is the primary beneficiary of a variable interest entity (“VIE”).
Significant judgment is required in the determination of whether we are the primary beneficiary of a VIE. If we, together with our
related party relationships, are determined to be the primary beneficiary of a VIE, the entity will be consolidated within our con-
solidated financial statements. In order to determine whether we are the primary beneficiary of a VIE, management must make sig-
nificant estimates and assumptions of probable future cash flows and assign probabilities to different cash flow scenarios. Assumptions
made in such analyses include, but are not limited to, market prices of securities, market interest rates, potential credit defaults on
individual securities or default rates on a portfolio of securities, gain realization, liquidity or marketability of certain securities, dis-
count rates and the probability of certain other outcomes.
Goodwill
We have determined that AllianceBernstein has only one operating segment and reporting unit. As of December 31, 2011, goodwill
of $3.0 billion on the consolidated statement of financial condition is composed of $2.8 billion as a result of the Bernstein Trans-
action and $154 million in regard to various smaller acquisitions.
We test goodwill annually, as of September 30, for impairment. As of September 30, 2011, the impairment test indicated that
goodwill was not impaired. The carrying value of goodwill is also reviewed if facts and circumstances, such as significant declines
in AUM, revenues, earnings or our Holding Unit price, occur, suggesting possible impairment. During the fourth quarter of 2011,
the Holding Unit price was below our December 31, 2011 book value per unit for most of the quarter. As such, we re-performed
step one of the goodwill impairment test as of December 31, 2011.
The impairment analysis is a two-step process. The first step of the goodwill impairment test is used to identify potential impairment
by comparing the fair value of AllianceBernstein, the reporting unit, with its carrying value, including goodwill. If the fair value of
the reporting unit exceeds its carrying value, goodwill is considered not impaired and the second step of the impairment test is not
performed. However, if the carrying value of the reporting unit exceeds its fair value, the second step of the goodwill impairment
test is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of the report-
ing unit to the aggregated fair values of its individual assets and liabilities to determine the amount of impairment, if any.
AllianceBernstein estimates its fair value under both the market approach and income approach. Under the market approach, the
fair value of the reporting unit is based on its unadjusted market valuation (AllianceBernstein Units outstanding multiplied by the
price of a Holding Unit) and adjusted market valuations assuming a control premium and earnings multiples. Per the
AllianceBernstein Partnership Agreement, the price of a limited partnership interest is equal to the price of a Holding Unit. On an
unadjusted basis, AllianceBernstein’s fair value per unit as of December 31, 2011 was $13.08 (the price of a Holding Unit as of that
date) as compared to its carrying value, or book value, of $14.33 per unit. Also under the market approach, we assumed a control
premium for the reporting unit, which was determined based on an analysis of control premiums for relevant recent acquisitions, as
Annual Report 2011
63
well as applied comparable industry earnings multiples to our current earnings forecast. Under the income approach, the fair value
of the reporting unit is based on the present value of estimated future cash flows. Determining estimated fair value using a dis-
counted cash flow valuation technique consists of applying business growth rate assumptions over the estimated life of the goodwill
asset and then discounting the resulting expected cash flows using an estimated weighted average cost of capital of market partic-
ipants to arrive at a present value amount that approximates fair value. In our tests, our discounted expected cash flow model uses
management’s current four-year business plan, which factors in current market conditions and all material events that have
impacted, or that we believed at the time could potentially impact, future expected cash flows and a declining annual growth rate
thereafter.
Management has considered the results of the market approach and income approach analysis performed along with a number of
other factors (including current market conditions) and has determined that AllianceBernstein’s fair value exceeded its carrying value
as of December 31, 2011. As such, no goodwill impairment existed and the second step of the goodwill impairment test was not
required.
As a result of increased economic uncertainty and current market dynamics, determining whether an impairment of the goodwill
asset exists is increasingly difficult and requires management to exercise significant judgment. In addition, to the extent that secu-
rities valuations are depressed for prolonged periods of time and market conditions stagnate or worsen as a result of global debt fears
and the threat of another financial crisis, or if we continue to experience significant net redemptions, our AUM, revenues, profit-
ability and unit price may continue to be adversely affected. Although the price of a Holding Unit is just one factor in the calcu-
lation of fair value, if current Holding Unit price levels continue or decline further, reaching the conclusion that fair value exceeds
carrying value will, over time, become more difficult. As a result, subsequent impairment tests may be more frequent and be based
upon more negative assumptions and future cash flow projections, which may result in an impairment of this asset. Any impairment
could reduce materially the recorded amount of goodwill with a corresponding charge to our earnings.
Retirement Plan
We maintain a qualified, noncontributory, defined benefit retirement plan covering current and former employees who were
employed by the Company in the United States prior to October 2, 2000. The amounts recognized in the consolidated financial
statements related to the retirement plan are determined from actuarial valuations. Inherent in these valuations are assumptions
including expected return on plan assets, discount rates at which liabilities could be settled, rates of annual salary increases and mor-
tality rates. The assumptions are reviewed annually and may be updated to reflect the current environment. Key assumptions are
described in Note 15 to AllianceBernstein’s consolidated financial statements in Item 8. In accordance with U.S. generally accepted account-
ing principles, actual results that differ from those assumed are accumulated and amortized over future periods and, therefore, affect
expense recognized and liabilities recorded in future periods.
As of December 31, 2008, we amended the retirement plan to provide that participants will not accrue any additional benefits (i.e.,
service and compensation after December 31, 2008 will not be taken into account in determining participants’ retirement benefits).
In developing the expected long-term rate of return on plan assets of 8.0%, we considered the historical returns and future expect-
ations for returns for each asset category, as well as the target asset allocation of the portfolio. The expected long-term rate of return
on assets is based on weighted average expected returns for each asset class. We assumed a target allocation weighting of 50% to 70%
for equity securities, 20% to 40% for debt securities, and 0% to 10% for real estate investment trusts. Exposure of the total portfolio
to cash equivalents on average should not exceed 5% of the portfolio’s value on a market value basis. The plan seeks to provide a
rate of return that exceeds applicable benchmarks over rolling five-year periods. The benchmark for the plan’s large cap domestic
equity investment strategy is the S&P 500 Index; the small cap domestic equity investment strategy is measured against the Russell
2000 Index; the international equity investment strategy is measured against the MSCI EAFE Index; and the fixed income invest-
ment strategy is measured against the Barclays Aggregate Bond Index. The actual rates of return on plan assets were (9.3)%, 9.8%
and 29.4% in 2011, 2010 and 2009, respectively. A 25 basis point adjustment, up or down, in the expected long-term rate of return
on plan assets would have decreased or increased the 2011 net pension benefit of $0.3 million by approximately $0.2 million.
The objective of our discount rate assumption was to reflect the rate at which our pension obligations could be effectively settled.
In making this determination, we considered the timing and amount of benefits that would be payable under the plan’s lump sum
option. Our methodology for selecting the discount rate as of December 31, 2011 was to construct a hypothetical bond portfolio
64
AllianceBernstein
whose cash flow from coupons and maturities match the year-by-year, projected benefit cash flow from the plan. The selection of
the 5.1% discount rate as of December 31, 2011 represents the Mercer Human Resources (“Mercer”) Bond Model (to the nearest
five basis points). The discount rate as of December 31, 2010 was 5.5%, which was used in developing the 2011 net pension charge.
The discount rate as of December 31, 2010 represented the Mercer Yield Curve (to the nearest five basis points). The Mercer Yield
Curve matched the plan’s cash flows to that of a yield curve that provides the equivalent yields on zero-coupon corporate bonds for
each maturity. Benefit cash flows due in a particular year can be “settled” theoretically by “investing” them in the zero-coupon
bond that matures in the same year. The discount rate is the single rate that produces the same present value of cash flows. We
believe that the bond model approach is conceptually closer to the accounting guidance (of matching bond maturities and benefit
cash flows) than the yield curve approach. A lower discount rate increases pension expense and the present value of benefit obliga-
tions. A 25 basis point adjustment, up or down, in the discount rate (along with a corresponding adjustment in the assumed lump
sum interest rate) would have decreased or increased the 2011 net pension benefit of $0.3 million by approximately $0.1 million.
Loss Contingencies
Management continuously reviews with legal counsel the status of regulatory matters and pending or threatened litigation. We
evaluate the likelihood that a loss contingency exists and record a loss contingency if it is probable and reasonably estimable as of the
date of the financial statements. See Note 12 to AllianceBernstein’s consolidated financial statements in Item 8.
Accounting Pronouncements
See Note 24 to AllianceBernstein’s consolidated financial statements in Item 8.
Cautions Regarding Forward-Looking Statements
Certain statements provided by management in this report are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that
could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most
significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment per-
formance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future
acquisitions, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in
which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, such
forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any
forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding
these forward-looking statements and the factors that could cause actual results to differ, see “Risk Factors” in Item 1A. Any or all of
the forward-looking statements that we make in this Form 10-K, other documents we file with or furnish to the SEC, and any
other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in
“Risk Factors” and those listed below could also adversely affect our revenues, financial condition, results of operations and business
prospects.
The forward-looking statements referred to in the preceding paragraph include statements regarding:
• Our belief that the cash flow Holding realizes from its investment in AllianceBernstein will provide Holding with the resources neces-
sary to meet its financial obligations: Holding’s cash flow is dependent on the quarterly cash distributions it receives from
AllianceBernstein. Accordingly, Holding’s ability to meet its financial obligations is dependent on AllianceBernstein’s cash flow
from its operations, which is subject to the performance of the capital markets and other factors beyond our control.
• Our financial condition and ability to issue public and private debt providing adequate liquidity for our general business needs: Our
financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets,
our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to issue
public and private debt on reasonable terms, as well as the market for such debt or equity, may be limited by adverse market
conditions, our firm’s long-term credit ratings, our profitability and changes in government regulations, including tax rates and
interest rates.
Annual Report 2011
65
• The possible impairment of goodwill in the future: As a result of increased economic uncertainty and current market dynamics,
determining whether an impairment of the goodwill asset exists is increasingly difficult and requires management to exercise
significant judgment. In addition, to the extent that securities valuations are depressed for prolonged periods of time and market
conditions stagnate or worsen as a result of global debt fears and the threat of another financial crisis, or if we continue to
experience significant net redemptions, our AUM, revenues, profitability and unit price may continue to be adversely affected.
Although the price of a Holding Unit is just one factor in the calculation of fair value, if current Holding Unit price levels con-
tinue or decline further, reaching the conclusion that fair value exceeds carrying value will, over time, become more difficult.
As a result, subsequent impairment tests may be more frequent and be based upon more negative assumptions and future cash
flow projections, which may result in an impairment of this asset. Any impairment could reduce materially the recorded amount
of goodwill with a corresponding charge to our earnings.
• The outcome of litigation: Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated
that we do not expect certain legal proceedings to have a material adverse effect on our results of operations or financial con-
dition, any settlement or judgment with respect to a legal proceeding could be significant, and could have such an effect.
• Our anticipation that the proposed 12b-1 fee-related rule changes will not have a material effect on us: The impact of this rule
change is dependent upon the final rules adopted by the SEC, any phase-in or grandfathering period, and any other changes
made with respect to share class distribution arrangements.
• Our intention to continue to engage in open market purchases of Holding Units to help fund anticipated obligations under our
incentive compensation award program: The number of Holding Units needed in future periods to make incentive compensation
awards is dependent upon various factors, some of which are beyond our control, including the fluctuation in the price of a
Holding Unit (NYSE: AB).
• Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted revenues: Aggregate
employee compensation reflects employee performance and competitive compensation levels. Fluctuations in our revenues and/
or changes in competitive compensation levels could result in adjusted employee compensation expense being higher than 50%
of our adjusted revenues.
• The pipeline of new institutional mandates not yet funded: Before they are funded, institutional mandates do not represent legally
binding commitments to fund and, accordingly, the possibility exists that not all mandates will be funded in the amounts and at
the times currently anticipated.
• The degree to which the $89.6 million real estate charge we recorded during the third quarter of 2010 will reduce occupancy costs in
future years: The charge we recorded during the third quarter of 2010 and our estimates of reduced occupancy costs in future
years were based on existing sub-leases, as well as our then current assumptions of when we would be able to sub-lease the
remaining space and market rental rates that would then apply, which were factors largely beyond our control. If our assump-
tions prove to be incorrect, we may be forced to take an additional charge and/or our estimated occupancy cost reductions may
be less than we currently anticipate.
• The modification we made to deferred compensation and the management of operations servicing and real estate expenses in ways that
position our firm for improved financial results over the long term: Changes and volatility in political, economic, capital market or
industry conditions can result in changes in demand for our products and services or impact the value of our assets under man-
agement, all of which may adversely affect our results of operations. The actual performance of the capital markets and other
factors beyond our control will affect our investment success for clients and asset flows. Furthermore, improved flows depend
on a number of factors, including our ability to deliver consistent, competitive investment performance, which cannot be
assured, conditions of financial markets, consultant recommendations, and changes in our clients’ investment preferences, risk
tolerances and liquidity needs.
66
AllianceBernstein
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Holding
Market Risk, Risk Management and Derivative Financial Instruments
Holding’s sole investment is AllianceBernstein Units. Holding did not own, nor was it a party to, any derivative financial instru-
ments during the years ended December 31, 2011, 2010 and 2009.
AllianceBernstein
Market Risk, Risk Management and Derivative Financial Instruments
AllianceBernstein’s investments consist of trading and available-for-sale investments, and other investments. Trading and
available-for-sale investments include United States Treasury Bills, mutual funds, exchange-traded options and various separately-
managed portfolios consisting of equity and fixed income securities. Trading investments are purchased for short-term investment,
principally to fund liabilities related to deferred compensation plans and to seed new investment services. Although available-for-sale
investments are purchased for long-term investment, the portfolio strategy considers them available-for-sale from time to time due
to changes in market interest rates, equity prices and other relevant factors. Other investments include investments in hedge funds
sponsored by AllianceBernstein, our consolidated venture capital fund and other private equity investment vehicles.
We enter into various futures, forwards and swaps to economically hedge our seed money investments. In addition, we have cur-
rency forwards that economically hedge certain cash accounts. As of December 31, 2010, we also had seeded a product consisting
of currency forwards, which was liquidated during the first quarter of 2011. We do not hold any derivatives designated in a formal
hedge relationship under ASC 815-10, Derivatives and Hedging. See Note 7 to AllianceBernstein’s consolidated financial statements in
Item 8.
Trading and Non-Trading Market Risk Sensitive Instruments
Investments with Interest Rate Risk—Fair Value
The table below provides our potential exposure with respect to our fixed income investments, measured in terms of fair value, to
an immediate 100 basis point increase in interest rates at all maturities from the levels prevailing as of December 31, 2011 and 2010.
Such a fluctuation in interest rates is a hypothetical rate scenario used to calibrate potential risk and does not represent our view of
future market changes. While these fair value measurements provide a representation of interest rate sensitivity of our investments in
fixed income mutual funds and fixed income hedge funds, they are based on our exposures at a particular point in time and may not
be representative of future market results. These exposures will change as a result of ongoing changes in investments in response to
our assessment of changing market conditions and available investment opportunities:
Fixed Income Investments:
Trading
Available-for-sale and other investments
As of December 31,
2011
Effect of +100
Basis Point
Change
2010
Effect of +100
Basis Point
Change
Fair Value
Fair Value
(in thousands)
$171,691
6,983
$(8,464)
(344)
$208,129
6,536
$(10,219)
(321)
Annual Report 2011
67
Investments with Equity Price Risk—Fair Value
Our investments also include investments in equity securities, mutual funds and hedge funds. The following table provides our
potential exposure with respect to our equity investments, measured in terms of fair value, to an immediate 10% drop in equity
prices from those prevailing as of December 31, 2011 and 2010. A 10% decrease in equity prices is a hypothetical scenario used to
calibrate potential risk and does not represent our view of future market changes. While these fair value measurements provide a
representation of equity price sensitivity of our investments in equity securities, mutual funds and hedge funds, they are based on
our exposures at a particular point in time and may not be representative of future market results. These exposures will change as a
result of ongoing portfolio activities in response to our assessment of changing market conditions and available investment
opportunities:
Equity Investments:
Trading
Available-for-sale and other investments
As of December 31,
2011
Effect of -10%
Equity Price
Change
2010
Effect of -10%
Equity Price
Change
Fair Value
Fair Value
(in thousands)
$339,308
277,312
$(33,931)
(27,731)
$297,481
244,409
$(29,748)
(24,441)
68
AllianceBernstein
Item 8.
Financial Statements and Supplementary Data
AllianceBernstein Holding L.P.
Statements of Financial Condition
ASSETS
Investment in AllianceBernstein
Due from AllianceBernstein
Other assets
Total assets
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Payable to AllianceBernstein
Other liabilities
Total liabilities
Commitments and contingencies (SeeNote7)
Partners’ capital:
General Partner: 100,000 general partnership units issued and outstanding
Limited partners: 105,073,342 and 104,986,799 limited partnership units issued and outstanding
Holding Units held by AllianceBernstein to fund deferred compensation plans
Accumulated other comprehensive income (loss)
Total partners’ capital
Total liabilities and partners’ capital
December 31,
2011
2010
(in thousands, except unit amounts)
$ 1,619,980
$ 1,786,291
5,479
1,072
1,277
—
$1,626,531
$1,787,568
$
—
358
358
$
—
458
458
1,416
1,760,388
(121,186)
(14,445)
1,626,173
$1,626,531
1,648
1,997,642
(200,284)
(11,896)
1,787,110
$1,787,568
See Accompanying Notes to Financial Statements.
Annual Report 2011
69
AllianceBernstein Holding L.P.
Statements of Income
Equity in net (loss) income attributable to AllianceBernstein Unitholders
Income taxes
Net (loss) income
Net (loss) income per unit:
Basic
Diluted
Years Ended December 31,
2010
2009
2011
(in thousands, except per unit amounts)
$ (65,581)
$ 162,217
$ 192,513
27,687
28,059
25,324
$(93,268)
$134,158
$167,189
$ (0.90)
$ (0.90)
$
$
1.33
1.32
$
$
1.80
1.80
See Accompanying Notes to Financial Statements.
70
AllianceBernstein
AllianceBernstein Holding L.P.
Statements of Changes in Partners’ Capital and Comprehensive Income
General Partner’s Capital
Balance, beginning of year
Net (loss) income
Cash distributions to unitholders
Balance, end of year
Limited Partners’ Capital
Balance, beginning of year
Net (loss) income
Cash distributions to unitholders
Issuance of Holding Units to fund deferred compensation plan awards
Proceeds from exercise of compensatory options to buy Holding Units
Other
Balance, end of year
Holding Units held by AllianceBernstein to fund deferred compensation plans
Balance, beginning of year
Holding Units held by AllianceBernstein to fund deferred compensation plans
Balance, end of year
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year
Unrealized gain (loss) on investments, net of tax
Foreign currency translation adjustment, net of tax
Changes in employee benefit related items, net of tax
Balance, end of year
Total Partners’ Capital
Years Ended December 31,
2010
2011
2009
(in thousands)
$
1,648
$
1,668
$
1,633
(88)
(144)
1,416
131
(151)
1,648
179
(144)
1,668
1,997,642
1,927,991
1,621,168
(93,180)
(145,552)
—
1,478
—
134,027
(151,208)
78,545
8,287
—
167,010
(132,929)
272,167
—
575
1,760,388
1,997,642
1,927,991
(200,284)
79,098
(121,186)
(11,896)
149
2,979
(5,677)
(14,445)
(123,783)
(76,501)
(200,284)
(7,984)
139
(147)
(3,904)
(11,896)
(36,815)
(86,968)
(123,783)
(24,463)
1,461
13,043
1,975
(7,984)
$1,626,173
$1,787,110
$1,797,892
See Accompanying Notes to Financial Statements.
Annual Report 2011
71
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AllianceBernstein Holding L.P.
Notes to Financial Statements
The words “we” and “our” refer collectively to AllianceBernstein Holding L.P. (“Holding”) and AllianceBernstein L.P. and its subsidiaries
(“AllianceBernstein”), or to their officers and employees. Similarly, the word “company” refers 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.
1. Business Description and Organization
Holding’s principal source of income and cash flow is attributable to its investment in AllianceBernstein limited partnership interests.
AllianceBernstein provides research, diversified investment management and related services globally to a broad range of clients. Its
principal services include:
•
Institutional Services—servicing its institutional clients, including unaffiliated corporate and public employee pension funds,
endowment funds, domestic and foreign institutions and governments, and affiliates such as AXA and certain of its insurance
company subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective
investment trusts, mutual funds, hedge funds and other investment vehicles.
• Retail Services—servicing its retail clients, primarily by means of retail mutual funds sponsored by AllianceBernstein or an affili-
ated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs
sponsored by financial intermediaries worldwide and other investment vehicles.
• Private Client Services—servicing its private clients, including high-net-worth individuals, trusts and estates, charitable founda-
tions, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds,
mutual funds and other investment vehicles.
• Bernstein Research Services—servicing institutional investors seeking high-quality research, portfolio analysis and brokerage-
related services, and issuers of publicly-traded securities seeking equity capital markets services.
AllianceBernstein also provides distribution, shareholder servicing and administrative services to the mutual funds it sponsors.
AllianceBernstein’s high-quality, in-depth research is the foundation of its business. AllianceBernstein’s research disciplines include
fundamental research, quantitative research, economic research and currency forecasting. In addition, AllianceBernstein has created
several specialized research initiatives, including research examining global strategic changes that can affect multiple industries and
geographies.
AllianceBernstein provides a broad range of investment services with expertise in:
• Value equities, generally targeting stocks that are out of favor and considered undervalued;
• Growth equities, generally targeting stocks with under-appreciated growth potential;
• Fixed income securities, including taxable and tax-exempt securities;
• Blend strategies, combining style-pure investment components with systematic rebalancing;
• Passive management, including both index and enhanced index strategies;
• Alternative investments, including hedge funds, currency management strategies and private capital (e.g., direct real estate
investing); and
• Asset allocation services, including dynamic asset allocation, customized target date funds, target risk funds and other strategies
tailored to help clients meet their investment goals.
AllianceBernstein provides 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., interna-
tional, global and emerging markets), as well as local and regional disciplines in major markets around the world.
Annual Report 2011
73
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
As of December 31, 2011, AXA, a sociuˇtuˇ anonyme organized under the laws of France and the holding company for an international
group of insurance and related financial services companies, through certain of its subsidiaries (“AXA and its subsidiaries”) owned
approximately 1.4% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership
interests in Holding (“Holding Units”).
As of December 31, 2011, the ownership structure of AllianceBernstein, expressed as a percentage of general and limited partner-
ship interests, was as follows:
AXA and its subsidiaries
Holding
Unaffiliated Holders
60.9%
37.5
1.6
100.0%
AllianceBernstein Corporation (an indirect wholly-owned subsidiary of AXA, “General Partner”) is the general partner of both
Holding and AllianceBernstein. AllianceBernstein Corporation owns 100,000 general partnership units in Holding and a 1% general
partnership interest in AllianceBernstein. Including both the general partnership and limited partnership interests in Holding and
AllianceBernstein, AXA and its subsidiaries had an approximate 64.4% economic interest in AllianceBernstein as of December 31,
2011.
2. Summary of Significant Accounting Policies
Basis of Presentation
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America. The preparation of the financial statements requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Holding’s financial statements and notes should be read in conjunction with the consolidated financial statements and notes of
AllianceBernstein. AllianceBernstein’s consolidated financial statements and notes are included in Holding’s Form 10-K.
Investment in AllianceBernstein
We record our investment in AllianceBernstein using the equity method of accounting. Our investment is increased to reflect our
proportionate share of income of AllianceBernstein and decreased to reflect our proportionate share of losses of AllianceBernstein
and cash distributions made by AllianceBernstein to its unitholders. In addition, our investment is adjusted to reflect our propor-
tionate share of certain capital transactions of AllianceBernstein.
Cash Distributions
Holding is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of Limited
Partnership of Holding (“Holding Partnership Agreement”), to its unitholders pro rata in accordance with their percentage inter-
ests in Holding. Available Cash Flow is defined as the cash distributions Holding receives from AllianceBernstein minus such
amounts as the General Partner determines, in its sole discretion, should be retained by Holding for use in its business or plus such
amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow.
On February 10, 2012, the General Partner declared a distribution of $12.6 million, or $0.12 per unit, representing Available Cash
Flow for the three months ended December 31, 2011. Each general partnership unit in Holding is entitled to receive distributions
equal to those received by each Holding Unit. The distribution is payable on March 8, 2012 to holders of record at the close of
business on February 21, 2012. This distribution excludes the impact of AllianceBernstein’s one-time, non-cash deferred compensa-
tion charge of $587.1 million taken during the fourth quarter of 2011. See further discussion below in Deferred Compensation Plans.
74
AllianceBernstein
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
Total cash distributions per Unit paid to unitholders during 2011, 2010 and 2009 were $1.44, $1.51 and $1.44, respectively.
Deferred Compensation Plans
AllianceBernstein maintains several unfunded, non-qualified deferred compensation plans under which annual awards to employees
are generally made in the fourth quarter.
For awards made before 2009, participants were permitted to allocate their awards: (i) among notional investments in Holding
Units, certain of the investment services we provide to our clients and a money market fund or (ii) under limited circumstances, in
options to buy Holding Units.
• AllianceBernstein made investments in its services that were notionally elected by the participants and maintained them in a
consolidated rabbi trust or separate custodial account.
• Awards generally vested over four years but could vest more quickly depending on the terms of the individual award, the age of
the participant, or the terms of the participant’s employment, separation or retirement agreement. Upon vesting, awards are
distributed to participants unless they have made a voluntary long-term election to defer receipt.
• Quarterly cash distributions on unvested Holding Units for which a long-term deferral election had not been made are paid
currently to participants. Quarterly cash distributions on notional investments in Holding Units and income credited on
notional investments in our investment services or the money market fund for which a long-term deferral election has been
made are reinvested and distributed as elected by participants.
• Prior to a fourth quarter 2011 amendment made to all outstanding deferred incentive compensation awards of active employees
(discussed below), compensation expense for awards under the plans, including changes in participant account balances resulting
from gains and losses on related investments (other than in Holding Units and options to buy Holding Units), was recognized
on a straight-line basis over the applicable vesting periods. Mark-to-market gains or losses on investments made to fund deferred
compensation obligations (other than in Holding Units and options to buy Holding Units) are recognized currently as invest-
ment gains (losses) in the consolidated statements of income. In addition, our equity in the earnings of investments in limited
partnership hedge funds made to fund deferred compensation obligations is recognized currently as investment gains (losses) in
the consolidated statements of income.
Awards in 2010 and 2009 consisted solely of restricted Holding Units and deferred cash. (In 2010, deferred cash was an option avail-
able only to certain non-U.S. employees.)
• AllianceBernstein engaged in open-market purchases of, or issued, Holding Units that were awarded to the participants and
held them in a consolidated rabbi trust.
• Upon vesting, awards are distributed to participants unless they have made a voluntary long-term election to defer receipt.
• Quarterly cash distributions on unvested restricted Holding Units for which a long-term deferral election had not been made
are paid currently to participants. Quarterly cash distributions on vested and unvested restricted Holding Units for which a
long-term deferral election has been made are paid currently to participants.
• Prior to a fourth quarter 2011 amendment made to all outstanding deferred incentive compensation awards of active employees
(discussed below), compensation expense for awards under the plans was recognized on a straight-line basis over the applicable
vesting periods.
Awards in 2011 allowed employees to allocate their award between restricted Holding Units and deferred cash. Employees (except
certain members of senior management) generally could allocate up to 50% of their awards to deferred cash, not to exceed a total of
$250,000 per award, and had until January 13, 2012 to make their elections. The number of restricted Holding Units issued equal-
led the remaining dollar value of the award divided by the average of the closing prices of a Holding Unit for the five business day
period that commenced on January 13, 2012 and concluded on January 20, 2012.
Annual Report 2011
75
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
• Upon approval and communication of the dollar value of the 2011 awards in December 2011, AllianceBernstein recorded a
$159.9 million liability for the full dollar value of the awards. In January 2012, 8.7 million restricted Holding Units were issued
from the consolidated rabbi trust and AllianceBernstein reclassified $130.3 million of the liability to partners’ capital, and will
account for restricted Holding Units as equity-based awards.
• AllianceBernstein engages in open-market purchases of, or issues, Holding Units that are awarded to the participants and holds
them in a consolidated rabbi trust.
• Quarterly distributions on Holding Units are paid currently to participants.
•
Interest on deferred cash will be accrued monthly based on our monthly weighted average cost of funds.
On November 17, 2011, AllianceBernstein announced that it had implemented changes to its employee long-term incentive com-
pensation award program designed to better align the costs of employee compensation and benefits with the company’s current year
financial performance, and provide employees with a higher degree of certainty that they will receive the incentive compensation
they are awarded.
AllianceBernstein amended all outstanding deferred incentive compensation awards of active employees, so that employees who
terminate their employment or are terminated without cause may retain their award, subject to compliance with certain agreements
and restrictive covenants set forth in the applicable award agreement, including restrictions on competition and employee and client
solicitation, and a claw-back for failing to follow existing risk management policies. Most equity replacement, sign-on or similar
deferred compensation awards included in separate employment agreements or arrangements have not been amended.
AllianceBernstein recognizes compensation expense related to equity compensation grants in the financial statements using the fair
value method. Fair value of restricted Holding Unit awards is the closing price of a Holding Unit on the grant date; fair value of
options is determined using the Black-Scholes option valuation model. Under the fair value method, compensatory expense is
measured at the grant date based on the estimated fair value of the award and is recognized over the required service period. Prior
to the amendment made to the employee long-term incentive compensation award program in the fourth quarter of 2011, an
employee’s service requirement was typically the same as the delivery dates. This amendment eliminated employee service require-
ments but did not modify delivery dates contained in the original award agreements.
As a result of this change, AllianceBernstein recorded a one-time, non-cash charge of $587.1 million in the fourth quarter for all
unrecognized deferred incentive compensation on the amended outstanding awards from prior years. In addition, AllianceBernstein
recorded 100% of the expense associated with its 2011 deferred incentive compensation awards of $159.9 million.
Awards granted in 2011 contained the provisions described above and we expect to add these provisions to deferred incentive
compensation awards in the future. Accordingly, AllianceBernstein’s annual incentive compensation expense will reflect 100% of
the expense associated with the deferred incentive compensation awarded in each year. This approach to expense recognition will
more closely match the economic cost of awarding deferred incentive compensation to the period in which the related service is
performed.
Grants of restricted Holding Units and options to buy Holding Units are typically awarded to eligible members of the Board of
Directors (“Eligible Directors”) of the General Partner during the second quarter. Restricted Holding Units vest on the third
anniversary of the grant date and the options become exercisable ratably over three years. These restricted Holding Units and
options are not forfeitable. Due to there being no service requirement, we fully expense these awards on each grant date.
AllianceBernstein funds its restricted Holding Unit awards either by purchasing newly-issued Holding Units from Holding or purchas-
ing Holding Units on the open market, all of which are held in a consolidated rabbi trust until they are distributed to employees
upon vesting. In accordance with the AllianceBernstein Partnership Agreement, when Holding issues Holding Units to
AllianceBernstein, Holding is required to use the proceeds it receives from AllianceBernstein to purchase the equivalent number of
newly-issued AllianceBernstein Units, thus increasing its percentage ownership interest in AllianceBernstein. Holding Units held in
the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AllianceBernstein.
During 2011 and 2010, AllianceBernstein purchased 13.5 million and 8.8 million Holding Units for $220.8 million and $226.4 mil-
lion, respectively. These amounts reflect open-market purchases of 11.1 million and 7.4 million Holding Units for $192.1 million
76
AllianceBernstein
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
and $195.3 million, respectively, with the remainder primarily relating to purchases of Holding Units from employees to allow
them to fulfill statutory tax requirements at the time of distribution of long-term incentive compensation awards, offset by Holding
Units purchased by employees as part of a distribution reinvestment election.
During the third and fourth quarters of 2011, AllianceBernstein adopted a plan to repurchase Holding Units pursuant to Rule
10b5-1 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). A Rule 10b5-1 plan allows a company to
repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods
and because it possesses material non-public information. The broker selected by AllianceBernstein has the authority under the
terms and limitations specified in the plan to repurchase Holding Units on AllianceBernstein’s behalf in accordance with the terms
of the plan. Repurchases are subject to SEC regulations as well as certain price, market volume and timing constraints specified in
the plan. The amount of Holding Units AllianceBernstein buys each quarter also is subject to the trading volume of Holding Units
on the New York Stock Exchange. The plan adopted during the fourth quarter of 2011 does not specify an aggregate limitation and
expires at the close of business on February 10, 2012. AllianceBernstein intends to adopt additional Rule 10b5-1 plans so that the
firm can continue to engage in open market purchases of Holding Units to help fund anticipated obligations under its incentive
compensation award program and for other corporate purposes.
AllianceBernstein granted 1.7 million restricted Holding Units (not including 8.7 million restricted Holding Units granted in
January 2012 for 2011) and 13.1 million restricted Holding Unit awards to employees during 2011 and 2010, respectively. To fund
these awards, AllianceBernstein allocated previously repurchased Holding Units that had been held in the consolidated rabbi trust.
The 2011 incentive compensation awards allowed most employees to allocate their award between restricted Holding Units and
deferred cash. As a result, 8.7 million restricted Holding Unit awards for the December 2011 awards were issued from the con-
solidated rabbi trust in January 2012. There were approximately 13.6 million and 6.2 million unallocated Holding Units remaining
in the consolidated rabbi trust as of December 31, 2011 and January 31, 2012, respectively. The balance as of January 31, 2012 also
reflects repurchases and other activity during January 2012.
New Holding Units are also issued upon exercise of options. Proceeds received by Holding upon exercise of options are used to
acquire newly-issued AllianceBernstein Units, increasing Holding’s percentage ownership interest in AllianceBernstein. As of
December 31, 2011, there were 8,994,229 options to buy Holding Units outstanding, of which 3,316,961 were exercisable.
3. Net Income Per Unit
Basic net income per unit is derived by dividing net income by the basic weighted average number of units outstanding for each
year. Diluted net income per unit is derived by adjusting net income for the assumed dilutive effect of compensatory options (“Net
income—diluted”) and dividing by the diluted weighted average number of units outstanding for each year.
Years Ended December 31,
2010
2011
2009
Net (loss) income—basic
Additional allocation of equity in net (loss) income attributable to AllianceBernstein resulting from assumed dilutive effect of
compensatory options
Net (loss) income—diluted
Weighted average units outstanding—basic
Dilutive effect of compensatory options
Weighted average units outstanding—diluted
Basic net (loss) income per unit
Diluted net (loss) income per unit
(in thousands, except per unit amounts)
$ (93,268)
$134,158
$167,189
—
1,640
328
$ (93,268)
$135,798
$167,517
103,288
—
103,288
$ (0.90)
$ (0.90)
101,162
1,639
102,801
$
$
1.33
1.32
92,906
244
93,150
$
$
1.80
1.80
As of December 31, 2011, 2010 and 2009, we excluded 3,813,567, 4,783,472 and 5,752,877 options, respectively, from the diluted
net (loss) income per unit computation due to their anti-dilutive effect.
Annual Report 2011
77
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
The 2011 net loss per unit includes the impact of AllianceBernstein’s one-time, non-cash deferred compensation charge of $587.1
million taken in the fourth quarter. See further discussion above in Note 2, Deferred Compensation Plans.
4. Investment in AllianceBernstein
Changes in Holding’s investment in AllianceBernstein for the years ended December 31, 2011 and 2010 were as follows:
Investment in AllianceBernstein as of January 1,
Equity in net (loss) income attributable to AllianceBernstein Unitholders
Additional investments with proceeds from exercises of compensatory options to buy Holding Units, net
Changes in accumulated other comprehensive income (loss)
Cash distributions received from AllianceBernstein
Issuance of Holding Units to AllianceBernstein to fund deferred compensation plan awards
Change in Holding Units held by AllianceBernstein for deferred compensation plans
2011
2010
(in thousands)
$ 1,786,291
$ 1,800,065
(65,581)
1,478
(2,549)
(178,757)
—
79,098
162,217
8,287
(3,912)
(182,410)
78,545
(76,501 )
Investment in AllianceBernstein as of December 31,
$1,619,980
$1,786,291
5. Units Outstanding
Changes in Holding Units outstanding for the years ended December 31, 2011 and 2010 were as follows:
Outstanding as of January 1,
Options exercised
Units issued
Units forfeited
Outstanding as of December 31,
2011
2010
105,086,799
101,351,749
86,543
—
—
486,017
3,249,861
(828)
105,173,342
105,086,799
Units issued pertain to Holding Units newly issued under the AllianceBernstein 2010 Long Term Incentive Plan and could include:
(i) restricted Holding Unit awards to Eligible Directors, (ii) restricted Holding Unit awards to eligible employees, (iii) restricted
Holding Unit awards for recruitment, and (iv) restricted Holding Unit issuances in connection with certain employee separation
agreements.
6. Income Taxes
Holding is a “grandfathered” publicly-traded partnership for federal tax purposes and, accordingly, is not subject to federal or state
corporate income taxes. However, Holding is subject to the 4.0% New York City unincorporated business tax (“UBT”), net of
credits for UBT paid by AllianceBernstein, and to a 3.5% federal tax on partnership gross income from the active conduct of a trade
or business. Holding’s partnership gross income is derived from its interest in AllianceBernstein.
78
AllianceBernstein
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
The principal reasons for the difference between Holding’s effective tax rates and the UBT statutory tax rate of 4.0% are as follows:
UBT statutory rate
Federal tax on partnership gross business income
Credit for UBT paid by AllianceBernstein
Income tax expense and effective tax rate
2011
Years Ended December 31,
2010
(in thousands)
2009
$ (2,623)
27,687
2,623
$27,687
4.0%
$ 6,489
4.0%
$ 7,701
4.0%
(42.2)
(4.0)
(42.2)
28,059
(6,489)
$28,059
17.3
(4.0)
17.3
25,324
(7,701)
$25,324
13.2
(4.0)
13.2
Holding’s income tax is computed by multiplying certain AllianceBernstein revenues (primarily U.S. investment advisory fees and
SCB LLC commissions) by Holding’s ownership interest in AllianceBernstein, multiplied by the 3.5% tax rate. Although Holding
incurred an equity loss on its equity method holding in AllianceBernstein during 2011, Holding had income tax expense as a result
of the income tax computation being based on certain AllianceBernstein revenues. During 2010, both AllianceBernstein’s revenues
and Holding’s ownership interest in AllianceBernstein increased as compared to 2009, which increased Holding’s income tax provi-
sion in 2010 as compared to the prior year. In addition, AllianceBernstein’s net income decreased significantly in 2010 primarily as a
result of a real estate charge in the third quarter of 2010, reducing Holding’s equity earnings in 2010 compared to the corresponding
period in 2009. As a result of these factors, Holding’s effective tax rate increased from 13.2% in 2009 to 17.3% in 2010.
In order to preserve Holding’s status as a “grandfathered” publicly-traded partnership for federal income tax purposes, management
ensures that Holding does not directly or indirectly (through AllianceBernstein) enter into a substantial new line of business. If
Holding were to lose its status as a “grandfathered” publicly-traded partnership, it would be subject to corporate income tax, which
would reduce materially Holding’s net income and its quarterly distributions to Holding unitholders.
The effect of a tax position is recognized in the financial statements only if, as of the reporting date, it is “more likely than not” to
be sustained based solely on its technical merits. In making this assessment, a company must assume that the taxing authority will
examine the tax position and have full knowledge of all relevant information. Accordingly, we have no liability for unrecognized
tax benefits as of December 31, 2011, 2010 and 2009. A liability for unrecognized tax benefits, if required, would be recorded in
income tax expense and affect the company’s effective tax rate.
We are no longer subject to federal, state and local income tax examinations by tax authorities for all years prior to 2008. Currently,
there are no examinations in progress and to date we have not been notified of any future examinations by applicable taxing
authorities.
7. Commitments and Contingencies
Legal and regulatory matters described below pertain to AllianceBernstein and are included here due to their potential significance
to Holding’s investment in AllianceBernstein.
With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of
a negative outcome is probable, and the amount of the loss can be reasonably estimated, we record an estimated loss for the
expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we are able to determine an
estimate of the possible loss or range of loss, we disclose that fact together with the estimate of the possible loss or range of loss.
However, it is difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent
uncertainties, particularly when plaintiffs allege substantial or indeterminate damages, or when the litigation is highly complex or
broad in scope. In such cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.
We are involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege
significant damages. It is reasonably possible that we could incur some losses pertaining to these matters; however, we believe that
any such losses would be immaterial. Furthermore, although any inquiry, proceeding or litigation has the element of uncertainty,
management believes that the outcome of any one of these matters that is pending or threatened, or all of them combined, will not
have a material adverse effect on our results of operations or financial condition.
Annual Report 2011
79
AllianceBernstein Holding L.P.
Notes to Financial Statements (continued)
8. Quarterly Financial Data (Unaudited)
2011:
Equity in net (loss) income attributable to AllianceBernstein Unitholders
Net (loss) income
Basic net (loss) income per unit(1)
Diluted net (loss) income per unit(1)
Cash distributions per unit(2)(3)
2010:
Equity in net income attributable to AllianceBernstein Unitholders
Net income
Basic net income per unit(1)
Diluted net income per unit(1)
Cash distributions per unit(2)
Quarters Ended
December 31
September 30
June 30
March 31
(in thousands, except per unit amounts)
$(193,458)
$(199,463)
$
$
$
(1.97)
(1.97)
0.12
$ 50,168
$ 42,925
0.43
$
$
$
0.42
0.42
$34,074
$27,003
$
$
$
0.26
0.26
0.26
$18,914
$12,215
0.12
$
$
$
0.12
0.12
$42,745
$35,512
$
$
$
0.34
0.34
0.34
$38,925
$31,772
0.31
$
$
$
0.31
0.31
$51,058
$43,680
$
$
$
0.42
0.42
0.42
$54,210
$47,246
0.47
$
$
$
0.46
0.46
(1) Basic and diluted net (loss) income per unit are computed independently for each of the periods presented. Accordingly, the sum of the quarterly net (loss)
income per unit amounts may not agree to the total for the year.
(2) Declared and paid during the following quarter.
(3) The 2011 distribution excludes the impact of AllianceBernstein’s $587.1 million one-time, non-cash deferred compensation charge.
80
AllianceBernstein
Report of Independent Registered Public Accounting Firm
To the General Partner and Unitholders
AllianceBernstein Holding L.P.:
In our opinion, the accompanying statements of financial condition and the related statements of income, changes in partners’ capi-
tal and comprehensive income and cash flows present fairly, in all material respects, the financial position of AllianceBernstein Hold-
ing L.P. (“AllianceBernstein Holding”) at December 31, 2011 and 2010, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, AllianceBernstein Holding maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). AllianceBernstein Holding’s management
is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial
Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on AllianceBernstein
Holding’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effec-
tive internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit
of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projec-
tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 10, 2012
Annual Report 2011
81
AllianceBernstein L.P. and Subsidiaries
Consolidated Statements of Financial Condition
ASSETS
Cash and cash equivalents
Cash and securities segregated, at fair value (cost $1,279,779 and $1,109,785)
Receivables, net:
Brokers and dealers
Brokerage clients
Fees
Investments:
Deferred compensation-related
Other
Furniture, equipment and leasehold improvements, net
Goodwill
Intangible assets, net
Deferred sales commissions, net
Other assets
Total assets
LIABILITIES AND CAPITAL
Liabilities:
Payables:
Brokers and dealers
Securities sold not yet purchased
Brokerage clients
AllianceBernstein mutual funds
Accounts payable and accrued expenses
Accrued compensation and benefits
Debt
Total liabilities
Commitments and contingencies (SeeNote12)
Capital:
General Partner
Limited partners: 277,847,588 and 278,115,232 units issued and outstanding
Capital contributions receivable from General Partner
Holding Units held for deferred compensation plans
Accumulated other comprehensive income (loss)
Partners’ capital attributable to AllianceBernstein Unitholders
Non-controlling interests in consolidated entities
Total capital
Total liabilities and capital
See Accompanying Notes to Consolidated Financial Statements.
December 31,
2011
2010
(in thousands,
except unit amounts)
$
638,681
1,279,855
$
650,191
1,109,891
291,276
782,697
265,248
176,370
618,924
273,104
299,314
747,049
343,473
298,705
457,850
300,442
2,954,668
2,939,170
189,661
59,999
175,455
205,862
76,156
151,284
$7,705,938
$7,579,387
$
279,655
$
221,370
39,307
1,895,972
122,151
368,049
534,344
444,903
50,539
1,750,737
77,179
422,860
338,560
224,991
3,684,381
3,086,236
42,552
4,298,908
(12,135)
(323,382)
(38,413)
3,967,530
54,027
4,021,557
$7,705,938
48,964
4,902,854
(15,973)
(535,410)
(31,801)
4,368,634
124,517
4,493,151
$7,579,387
82
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Consolidated Statements of Income
Revenues:
Investment advisory and services fees
Bernstein research services
Distribution revenues
Dividend and interest income
Investment gains (losses)
Other revenues
Total revenues
Less: Interest expense
Net revenues
Expenses:
Employee compensation and benefits:
Employee compensation and benefits
Deferred compensation charge
Promotion and servicing:
Distribution-related payments
Amortization of deferred sales commissions
Other
General and administrative:
General and administrative
Real estate charges
Interest on borrowings
Amortization of intangible assets
Total expenses
Operating (loss) income
Non-operating income
(Loss) income before income taxes
Income tax expense
Net (loss) income
Net (loss) income of consolidated entities attributable to non-controlling interests
Net (loss) income attributable to AllianceBernstein Unitholders
Net (loss) income per AllianceBernstein Unit:
Basic
Diluted
Years Ended December 31,
2010
2011
2009
(in thousands, except per unit amounts)
$1,916,419
$2,051,692
$1,920,332
437,414
351,621
21,499
(82,081)
107,569
2,752,441
2,550
430,521
338,597
22,902
(1,410)
109,803
2,952,105
3,548
434,605
277,328
26,730
144,447
107,848
2,911,290
4,411
2,749,891
2,948,557
2,906,879
1,248,497
587,131
1,322,221
1,297,753
—
—
302,684
37,675
217,598
533,578
7,235
2,545
21,417
2,958,360
(208,469)
—
(208,469)
3,098
286,676
47,397
192,096
516,185
101,698
2,078
21,344
2,489,695
458,862
6,760
465,622
38,523
234,203
54,922
176,703
520,372
8,276
2,696
21,126
2,316,051
590,828
33,657
624,485
45,977
$ (211,567)
$ 427,099
$ 578,508
(36,799)
(15,320)
22,381
$ (174,768)
$ 442,419
$ 556,127
$
$
(0.62)
(0.62)
$
$
1.59
1.58
$
$
2.07
2.07
See Accompanying Notes to Consolidated Financial Statements.
Annual Report 2011
83
AllianceBernstein L.P. and Subsidiaries
Consolidated Statements of Changes in Partners’ Capital and Comprehensive Income
General Partner’s Capital
Balance, beginning of year
Net (loss) income
Cash distributions to General Partner
Issuances of Holding Units to fund deferred compensation plan awards, net of forfeitures
Retirement of AllianceBernstein Units
Compensation plan accrual
Additional investment by Holding with proceeds from exercise of compensatory options to buy Holding Units
Re-valuation of Holding Units held in rabbi trust
Purchase of Australian joint venture non-controlled interest
Other
Balance, end of year
Limited Partners’ Capital
Balance, beginning of year
Net (loss) income
Cash distributions to unitholders
Issuance of Holding Units to fund deferred compensation plan awards, net of forfeitures
Retirement of AllianceBernstein Units
Re-valuation of Holding Units held in rabbi trust
Compensatory Holding Unit options expense
Compensation plan accrual
Additional investment by Holding with proceeds from exercise of compensatory options to buy Holding Units
Purchase of Australian joint venture non-controlled interest
Other
Balance, end of year
Capital Contributions Receivable
Balance, beginning of year
Capital contributions from General Partner
Compensation plan accrual
Balance, end of year
Holding Units held for Deferred Compensation Plans
Balance, beginning of year
Purchases of Holding Units to fund deferred compensation plans, net
Issuance of Holding Units to fund deferred compensation plan awards, net of forfeitures
Amortization of deferred compensation awards
Re-valuation of Holding Units held in rabbi trust
Balance, end of year
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year
Unrealized gain (loss) on investments, net of tax
Foreign currency translation adjustment, net of tax
Changes in employee benefit related items, net of tax
Balance, end of year
Total Partners’ Capital attributable to AllianceBernstein Unitholders
Non-controlling Interests in Consolidated Entities
Balance, beginning of year
Net (loss) income
Unrealized gain (loss) on investments
Foreign currency translation adjustment
Acquisitions
Distributions to non-controlling interests of our consolidated venture capital fund activities
Balance, end of year
Total Capital
See Accompanying Notes to Consolidated Financial Statements.
Year Ended December 31,
2010
2011
2009
(in thousands)
$
48,964
(1,748)
(4,775)
—
—
10
15
49
37
—
42,552
4,902,854
(173,020)
(471,691)
—
(6,522)
4,853
36,360
945
1,463
3,666
—
4,298,908
(15,973)
4,793
(955)
(12,135)
(535,410)
(220,813)
—
437,743
(4,902)
(323,382)
(31,801)
528
7,964
(15,104)
(38,413)
3,967,530
124,517
(36,799)
33
(550)
(32,101)
(1,073)
54,027
$4,021,557
$
48,671
4,424
(4,978)
785
(85)
12
83
52
—
—
48,964
4,862,158
437,995
(490,118)
77,721
(8,436)
5,090
9,064
1,176
8,204
—
—
4,902,854
(19,664)
4,879
(1,188)
(15,973)
(338,941)
(226,370)
(78,506)
113,548
(5,141)
(535,410)
(21,862)
348
(199)
(10,088)
(31,801)
4,368,634
171,593
(15,320)
108
3,159
—
(35,023)
124,517
$4,493,151
$
45,010
5,561
(4,647)
2,728
—
14
—
—
—
5
48,671
4,493,496
550,566
(460,086)
270,087
—
(5,750)
11,889
1,387
—
—
569
4,862,158
(23,168)
4,905
(1,401)
(19,664)
(125,532)
(7,555)
(272,815)
61,211
5,750
(338,941)
(72,147)
4,232
39,098
6,955
(21,862)
4,530,362
169,167
22,381
159
4,074
—
(24,188)
171,593
$4,701,955
84
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization of deferred sales commissions
Amortization of non-cash deferred compensation
Depreciation and other amortization
Unrealized losses (gains) on deferred compensation-related investments
Unrealized loss (gain) on consolidated venture capital fund
Real estate asset write-off charges
Other, net
Changes in assets and liabilities:
(Increase) decrease in segregated cash and securities
Decrease (increase) in receivables
(Increase) decrease in investments
(Increase) in deferred sales commissions
(Increase) decrease in other assets
Increase (decrease) in payables
(Decrease) increase in accounts payable and accrued expenses
Increase (decrease) in accrued compensation and benefits
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments
Proceeds from sales of investments
Additions to furniture, equipment and leasehold improvements, net
Purchase of businesses, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities:
Issuance (repayment) of commercial paper, net
(Decrease) increase in overdrafts payable
Distributions to General Partner and unitholders
Distributions to non-controlling interests in consolidated entities
Capital contributions from General Partner
Additional investment by Holding with proceeds from exercise of compensatory options to buy Holding Units
Purchases of Holding Units to fund deferred compensation plan awards, net
Purchase of AllianceBernstein Units
Debt issuance costs
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents as of beginning of the period
Cash and cash equivalents as of end of the period
Cash paid:
Interest
Income taxes
Non-cash investing activities:
Fair value of assets acquired
Fair value of liabilities assumed
See Accompanying Notes to Consolidated Financial Statements.
Years Ended December 31,
2010
2009
2011
(in thousands)
$(211,567)
$ 427,099
$ 578,508
37,675
474,103
83,489
12,037
38,974
4,639
28,604
(169,964)
1,164
(110,600)
(21,518)
(24,523)
284,680
(22,141)
178,870
583,922
(56)
3,507
(38,339)
(41,835)
(76,723)
219,363
(38,640)
(476,466)
(1,073)
4,793
1,478
(220,813)
(6,522)
(69)
(26)
(517,975)
(734)
(11,510)
650,191
$ 638,681
$
3,001
29,477
30,368
(4,999)
47,397
122,612
81,697
(39,094)
39,534
25,521
(6,692)
(124,560)
(399,549)
24,062
(33,366)
27,151
543,638
87,844
9,045
832,339
(73)
4,349
(23,501)
(14,298)
(33,523)
(24,247)
15,278
(495,096)
(35,023)
4,879
8,287
(226,370)
(8,521)
(1,932)
(51)
(762,796)
(45)
35,975
614,216
$ 650,191
$
3,721
43,072
49,041
(34,743)
54,922
73,101
83,851
(184,384)
(5,762)
3,219
(17,324)
1,587,238
66,314
19,787
(31,568)
(18,626)
(1,520,959)
(21,493)
(41,361)
625,463
(10,378)
6,924
(53,763)
—
(57,217)
(36,751)
(16,860)
(464,733)
(24,188)
4,905
—
(6,981)
—
—
132
(544,476)
37,869
61,639
552,577
$ 614,216
$
5,433
64,085
—
—
Annual Report 2011
85
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements
The words “we” and “our” refer collectively to AllianceBernstein L.P. and its subsidiaries (“AllianceBernstein”), or to their officers and employ-
ees. Similarly, the word “company” refers to AllianceBernstein. Cross-references are in italics.
1. Business Description and Organization
We provide research, diversified investment management and related services globally to a broad range of clients. Our principal
services include:
•
Institutional Services—servicing our institutional clients, including unaffiliated corporate and public employee pension funds,
endowment funds, domestic and foreign institutions and governments, and affiliates such as AXA and certain of its insurance
company subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective
investment trusts, mutual funds, hedge funds and other investment vehicles.
• Retail Services—servicing our retail clients, primarily by means of retail mutual funds sponsored by AllianceBernstein or an affili-
ated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs
sponsored by financial intermediaries worldwide and other investment vehicles.
• Private Client Services—servicing our private clients, including high-net-worth individuals, trusts and estates, charitable founda-
tions, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds,
mutual funds and other investment vehicles.
• Bernstein Research Services—servicing institutional investors seeking high-quality research, portfolio analysis and brokerage-
related services, and issuers of publicly-traded securities seeking equity capital markets services.
We also provide distribution, shareholder servicing and administrative services to the mutual funds we sponsor.
Our high-quality, in-depth research is the foundation of our business. Our research disciplines include fundamental research, quanti-
tative research, economic research and currency forecasting. In addition, we have created several specialized research initiatives,
including research examining global strategic changes that can affect multiple industries and geographies.
We provide a broad range of services with expertise in:
• Value equities, generally targeting stocks that are out of favor and considered undervalued;
• Growth equities, generally targeting stocks with under-appreciated growth potential;
• Fixed income securities, including taxable and tax-exempt securities;
• Blend strategies, combining style-pure investment components with systematic rebalancing;
• Passive management, including index and enhanced index strategies;
• Alternative investments, including hedge funds, currency management strategies and private capital (e.g., direct real estate
investing); and
• Asset allocation services, including dynamic asset allocation, customized target date funds, target risk funds and other strategies
tailored to help clients meet their investment goals.
We provide 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.
As of December 31, 2011, AXA, a sociu˘tu˘ anonyme organized under the laws of France and the holding company for an international
group of insurance and related financial services companies, through certain of its subsidiaries (“AXA and its subsidiaries”) owned
approximately 1.4% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership
interests in AllianceBernstein Holding L.P. (“Holding Units”).
86
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
As of December 31, 2011, the ownership structure of AllianceBernstein, expressed as a percentage of general and limited partner-
ship interests, was as follows:
AXA and its subsidiaries
Holding
Unaffiliated holders
60.9%
37.5
1.6
100.0%
AllianceBernstein Corporation (an indirect wholly-owned subsidiary of AXA, “General Partner”) is the general partner of both
AllianceBernstein Holding L.P. (“Holding”) and AllianceBernstein. AllianceBernstein Corporation owns 100,000 general
partnership units in Holding and a 1% general partnership interest in AllianceBernstein. Including both the general partnership and
limited partnership interests in Holding and AllianceBernstein, AXA and its subsidiaries had an approximate 64.4% economic
interest in AllianceBernstein as of December 31, 2011.
2. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of the consolidated financial statements requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include AllianceBernstein and its majority-owned and/or controlled subsidiaries. All sig-
nificant inter-company transactions and balances among the consolidated entities have been eliminated.
Reclassifications
We reclassified prior period unit and option amortization expense relating to equity awards to members of the Board of Directors
(“Board”) of the General Partner, from employee compensation and benefits expense in the consolidated statements of income to
general and administrative expense to conform to the current year’s presentation.
Variable Interest Entities
In accordance with Accounting Standards Update (“ASU”) 2009-17, Consolidations (Topic 810)—Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities, the determination of whether a company is required to consolidate an entity is
based on, among other things, an entity’s purpose and design, a company’s ability to direct the activities of the entity that most sig-
nificantly impact the entity’s economic performance, and whether a company is obligated to absorb losses or receive benefits that
could potentially be significant to the entity. The standard also requires ongoing assessments of whether a company is the primary
beneficiary of a variable interest entity (“VIE”). The provisions of this standard became effective January 1, 2010. In January 2010,
the Financial Accounting Standards Board (“FASB”) deferred portions of ASU 2009-17 that relate to asset managers. We
determined that all entities for which we are a sponsor and/or investment manager, other than collateralized debt obligations and
collateralized loan obligations (collectively “CDOs”), qualify for the scope deferral and will continue to be assessed for con-
solidation under prior accounting guidance for consolidation of variable interest entities.
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Notes to Consolidated Financial Statements (continued)
As of December 31, 2011, we are the investment manager for five CDOs that meet the definition of a VIE due primarily to the
lack of unilateral decision-making authority of the equity holders. The CDOs are alternative investment vehicles created for the sole
purpose of issuing collateralized debt instruments that offer investors the opportunity for returns that vary with the risk level of their
investment. Our management fee structure for these CDOs will typically include a senior management fee, and may also include
subordinated and incentive management fees. We hold no equity interest in any of these CDOs. For each of the CDOs, we eval-
uated the management fee structure, the current and expected economic performance of the entities and other provisions included
in the governing documents of the CDOs that might restrict or guarantee an expected loss or residual return. In accordance with
ASC 810, we concluded that our investment management contract does not represent a variable interest in four of the five CDOs.
As such, we are not required to consolidate these entities.
For the remaining CDO, we concluded our collateral management agreement represented a variable interest primarily due to the
level of subordinated fees. We evaluated whether we possessed both of the following characteristics of a controlling financial inter-
est: (1) the power to direct the activities of the VIE that most significantly impacts the entity’s economic performance, and (2) the
obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the
VIE. We determined that we possessed the decision-making power noted in criteria (1) above.
In evaluating criteria (2) above, we considered all facts regarding the design, terms and characteristics of the CDO and concluded
that we do not meet the criteria. Our conclusion was based on the following quantitative and qualitative factors: (a) we have no
involvement with the CDO beyond providing investment management services, (b) we hold no equity or debt interests in the
CDO, (c) we are not a transferor of any of the assets of the CDO, (d) our expected aggregate fees in future periods are insignificant
relative to the expected cash flows of the CDO, (e) the variability of our expected fees in relation to the expected cash flows of the
CDO is insignificant, (f) our maximum exposure to loss for the CDO is our investment management fee, which is based upon the
fair value of the CDO’s assets, (g) the CDO has no recourse against us for any losses sustained in the CDO structure, (h) we have
not provided, nor expect to provide, any financial or other support to the CDO, and (i) there are no liquidity arrangements,
guarantees and/or other commitments by third parties that would impact our variable interest in the CDO. As such, we do not
have a controlling financial interest in the CDO and we should not consolidate the CDO into our consolidated financial statements.
The cash, collateral investments (at fair value) and notes payable (at amortized cost) as of December 31, 2011 of this CDO is $7.6
million, $305.4 million and $317.1 million, respectively.
For the entities that meet the scope deferral, management reviews its agreements quarterly and its investments in, and other financial
arrangements with, certain entities that hold client assets under management (“AUM”) to determine the variable interest entities
that the company is required to consolidate. These entities include certain mutual fund products, hedge funds, structured products,
group trusts, collective investment trusts and limited partnerships. We earn investment management fees on client assets under
management of these entities, but we derive no other benefit from these assets and cannot use them in our operations.
As of December 31, 2011, we have significant variable interests in certain structured products and hedge funds with approximately
$22.5 million in AUM. However, these variable interest entities do not require consolidation because management has determined
that we are not the primary beneficiary of the expected losses or expected residual returns of these entities. Our maximum exposure
to loss is limited to our investment of $0.1 million in these entities.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, money market accounts, overnight commercial paper and highly
liquid investments with original maturities of three months or less. Due to the short-term nature of these instruments, the recorded
value has been determined to approximate fair value.
Fees Receivable, Net
Fees receivable are shown net of allowances. An allowance for doubtful accounts related to investment advisory and services fees is
determined through an analysis of the aging of receivables, assessments of collectibility based on historical trends and other
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AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
qualitative and quantitative factors, including the following: our relationship with the client, the financial health (or ability to pay) of
the client, current economic conditions and whether the account is closed or active. The allowance for doubtful accounts is not
material to fees receivable.
Collateralized Securities Transactions
Customers’ securities transactions are recorded on a settlement date basis, with related commission income and expenses reported on
a trade date basis. Receivables from and payables to clients include amounts due on cash and margin transactions. Securities owned
by customers are held as collateral for receivables; such collateral is not reflected in the consolidated financial statements. Principal
securities transactions and related expenses are recorded on a trade date basis.
Securities borrowed and securities loaned by Sanford C. Bernstein & Co., LLC (“SCB LLC”) and Sanford C. Bernstein Limited
(“SCBL”), both indirect wholly-owned subsidiaries, are recorded at the amount of cash collateral advanced or received in con-
nection with the transaction and are included in receivables from and payables to brokers and dealers in the consolidated statements
of financial condition. Securities borrowed transactions require SCB LLC and SCBL to deposit cash collateral with the lender. As of
December 31, 2011 and 2010, cash collateral on deposit with lenders was $34.9 million and $72.5 million, respectively. With
respect to securities loaned, SCB LLC and SCBL receive cash collateral from the borrower. As of December 31, 2011 and 2010,
cash collateral received from borrowers was $151.6 million and $42.2 million, respectively. The initial collateral advanced or
received approximates or is greater than the fair value of securities borrowed or loaned. SCB LLC and SCBL monitor the fair value
of the securities borrowed and loaned on a daily basis and request additional collateral or return excess collateral, as appropriate. As
of December 31, 2011 and 2010, there is no allowance provision required for the collateral advanced. Income or expense is recog-
nized over the life of the transactions.
As of December 31, 2011 and 2010, we had $16.8 million and $16.5 million, respectively, of cash on deposit with clearing orga-
nizations for trade facilitation purposes. In addition, as of December 31, 2011 and 2010, SCB LLC held U.S. Treasury Bills with
values totaling $38.0 million and $35.0 million, respectively, in its investment account which are pledged as collateral with clearing
organizations.
Investments
Investments include United States Treasury Bills, unconsolidated mutual funds and limited partnership hedge funds we sponsor and
manage, various separately-managed portfolios comprised of equity and fixed income securities, exchange-traded options and
investments owned by a consolidated venture capital fund in which we own a controlling interest as the general partner and in
which we hold a 10% limited partnership interest.
Investments in United States Treasury Bills, mutual funds, and equity and fixed income securities are classified as either trading or
available-for-sale securities. Trading investments are stated at fair value with unrealized gains and losses reported in investment gains
and losses on the consolidated statements of income. Available-for-sale investments are stated at fair value with unrealized gains and
losses reported as a separate component of accumulated other comprehensive income in partners’ capital. Realized gains and losses
on the sale of investments are reported in investment gains and losses on the consolidated statements of income. Average cost is used
to determine realized gain or loss on investments sold.
We use the equity method of accounting for investments in limited partnership hedge funds. The equity in earnings of our limited
partnership hedge fund investments is reported in investment gains and losses on the consolidated statements of income.
The investments owned by our consolidated venture capital fund are generally illiquid and are initially valued at cost. These invest-
ments are adjusted to fair value to reflect the occurrence of “significant developments” (i.e., capital transactions or business,
economic or market events). Adjustments to fair value are reported in investment gains and losses on the consolidated statements of
income. There are three private equity investments that we own directly outside of our consolidated venture capital fund. Two of
the investments are accounted for using the cost method; the third is accounted for at fair value.
See Note 8 for a description of how we measure the fair value of our investments.
Annual Report 2011
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AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Furniture, Equipment and Leasehold Improvements, Net
Furniture, equipment and leasehold improvements are stated at cost, less accumulated depreciation and amortization. Depreciation is
recognized on a straight-line basis over the estimated useful lives of eight years for furniture and three to six years for equipment and
software. Leasehold improvements are amortized on a straight-line basis over the lesser of their estimated useful lives or the terms of
the related leases.
Goodwill
In 2000, AllianceBernstein acquired the business and assets of SCB Inc., an investment research and management company formerly
known as Sanford C. Bernstein Inc. (“Bernstein”), and assumed the liabilities of Bernstein (“Bernstein Transaction”). The pur-
chase price consisted of a cash payment of approximately $1.5 billion and 40.8 million newly-issued AllianceBernstein Units. The
Bernstein Transaction was accounted for under the purchase method and the cost of the acquisition was allocated on the basis of the
estimated fair value of the assets acquired and the liabilities assumed. The excess of the purchase price over the fair value of identifi-
able assets acquired, net of liabilities assumed, resulted in the recognition of goodwill of approximately $3.0 billion.
We have determined that AllianceBernstein has only one operating segment and reporting unit. As of December 31, 2011, goodwill
of $3.0 billion on the consolidated statement of financial condition is composed of $2.8 billion as a result of the Bernstein Trans-
action and $154 million in regard to various smaller acquisitions.
We test goodwill annually, as of September 30, for impairment. As of September 30, 2011, the impairment test indicated that
goodwill was not impaired. The carrying value of goodwill is also reviewed if facts and circumstances, such as significant declines in
assets under management, revenues, earnings or our Holding Unit price, occur, suggesting possible impairment. During the fourth
quarter of 2011, the Holding Unit price was below our December 31, 2011 book value per unit for most of the quarter. As such,
we re-performed step one of the goodwill impairment test as of December 31, 2011.
The impairment analysis is a two-step process. The first step of the goodwill impairment test is used to identify potential impairment
by comparing the fair value of AllianceBernstein, the reporting unit, with its carrying value, including goodwill. If the fair value of
the reporting unit exceeds its carrying value, goodwill is considered not impaired and the second step of the impairment test is not
performed. However, if the carrying value of the reporting unit exceeds its fair value, the second step of the goodwill impairment
test is performed to measure the amount of impairment loss, if any. The second step compares the implied fair value of the report-
ing unit to the aggregated fair values of its individual assets and liabilities to determine the amount of impairment, if any.
AllianceBernstein estimates its fair value under both the market approach and income approach. Under the market approach, the
fair value of the reporting unit is based on its unadjusted market valuation (AllianceBernstein Units outstanding multiplied by the
price of a Holding Unit) and adjusted market valuations assuming a control premium and earnings multiples. Per the
AllianceBernstein Partnership Agreement, the price of a limited partnership interest is equal to the price of a Holding Unit. On an
unadjusted basis, AllianceBernstein’s fair value per unit as of December 31, 2011 was $13.08 (the price of a Holding Unit as of that
date) as compared to its carrying value, or book value, of $14.33 per unit. Also under the market approach, we assumed a control
premium for the reporting unit, which was determined based on an analysis of control premiums for relevant recent acquisitions, as
well as applied comparable industry earnings multiples to our current earnings forecast. Under the income approach, the fair value
of the reporting unit is based on the present value of estimated future cash flows. Determining estimated fair value using a dis-
counted cash flow valuation technique consists of applying business growth rate assumptions over the estimated life of the goodwill
asset and then discounting the resulting expected cash flows using an estimated weighted average cost of capital of market partic-
ipants to arrive at a present value amount that approximates fair value. In our tests, our discounted expected cash flow model uses
management’s current four-year business plan, which factors in current market conditions and all material events that have
impacted, or that we believed at the time could potentially impact, future expected cash flows and a declining annual growth rate
thereafter.
Management has considered the results of the market approach and income approach analysis performed along with a number of
other factors (including current market conditions) and has determined that AllianceBernstein’s fair value exceeded its carrying value
as of December 31, 2011. As such, no goodwill impairment existed and the second step of the goodwill impairment test was not
required.
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AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
As a result of increased economic uncertainty and current market dynamics, determining whether an impairment of the goodwill
asset exists is increasingly difficult and requires management to exercise significant judgment. In addition, to the extent that secu-
rities valuations are depressed for prolonged periods of time and market conditions stagnate or worsen as a result of global debt fears
and the threat of another financial crisis, or if we continue to experience significant net redemptions, our assets under management,
revenues, profitability and unit price may continue to be adversely affected. Although the price of a Holding Unit is just one factor
in the calculation of fair value, if current Holding Unit price levels continue or decline further, reaching the conclusion that fair
value exceeds carrying value will, over time, become more difficult. As a result, subsequent impairment tests may be more frequent
and be based upon more negative assumptions and future cash flow projections, which may result in an impairment of this asset.
Any impairment could reduce materially the recorded amount of goodwill with a corresponding charge to our earnings.
Intangible Assets, Net
Intangible assets consist primarily of costs assigned to acquired investment management contracts of SCB Inc. based on their esti-
mated fair value at the time of acquisition, less accumulated amortization. As of December 31, 2011, intangible assets, net of
accumulated amortization, of $189.7 million on the consolidated statement of financial condition composed of $187.2 million of
definite-lived intangible assets subject to amortization, of which $181.1 million relates to the Bernstein Transaction, and $2.5 mil-
lion of indefinite-lived intangible assets not subject to amortization in regard to a smaller acquisition. Intangible assets are recognized
at fair value and are generally amortized on a straight-line basis over their estimated useful life of approximately 20 years. The gross
carrying amount of intangible assets totaled $424.4 million as of December 31, 2011 and $419.2 million as of December 31, 2010,
and accumulated amortization was $234.7 million as of December 31, 2011 and $213.3 million as of December 31, 2010, resulting
in the net carrying amount of intangible assets subject to amortization of $189.7 million as of December 31, 2011 and $205.9 mil-
lion as of December 31, 2010. Amortization expense was $21.4 million for 2011, $21.3 million for 2010 and $21.1 million for
2009. Estimated annual amortization expense for each of the next five years is approximately $22 million.
We periodically review intangible assets for impairment as events or changes in circumstances indicate that the carrying value may
not be recoverable. If the carrying value exceeds fair value, additional impairment tests are performed to measure the amount of the
impairment loss, if any.
Deferred Sales Commissions, Net
We pay commissions to financial intermediaries in connection with the sale of shares of open-end company-sponsored mutual funds
sold without a front-end sales charge (“back-end load shares”). These commissions are capitalized as deferred sales commissions
and amortized over periods not exceeding five and one-half years for U.S. fund shares and four years for non-U.S. fund shares, the
periods of time during which deferred sales commissions are generally recovered. We recover these commissions from distribution
services fees received from those funds and from contingent deferred sales commissions (“CDSC”) received from shareholders of
those funds upon the redemption of their shares. CDSC cash recoveries are recorded as reductions of unamortized deferred sales
commissions when received. Since January 31, 2009, our U.S. mutual funds have not offered back-end load shares to new investors.
However, our non-U.S. funds continue to offer back-end load shares.
We periodically review the deferred sales commission asset for impairment as events or changes in circumstances indicate that the
carrying value may not be recoverable. If the carrying value exceeds fair value, additional impairment tests are performed to meas-
ure the amount of the impairment loss, if any.
Loss Contingencies
With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of
a negative outcome is probable, and the amount of the loss can be reasonably estimated, we record an estimated loss for the
expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we are able to determine an
estimate of the possible loss or range of loss, we disclose that fact together with the estimate of the possible loss or range of loss.
Annual Report 2011
91
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
However, it is difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent
uncertainties, particularly when plaintiffs allege substantial or indeterminate damages, or when the litigation is highly complex or
broad in scope. In such cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.
Revenue Recognition
Investment advisory and services fees, generally calculated as a percentage of AUM, are recorded as revenue as the related services
are performed. Certain investment advisory contracts, including those associated with hedge funds or other alternative investments,
provide for a performance-based fee, in addition to or in lieu of a base fee, which 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.
Performance-based fees are recorded as a component of revenue at the end of each contract’s measurement period.
We calculate AUM using established fair valuation methodologies, including market-based valuation methods and fair valuation
methods. Market-based valuation methods include: last sale/settle prices from an exchange for actively-traded listed equities, options
and futures; evaluated bid prices from recognized pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid
prices from recognized pricing vendors and brokers for credit default swaps; and quoted bids or spreads from pricing vendors and
brokers for other derivative products. Fair valuation methods include discounted cash flow models, evaluation of assets versus
liabilities or any other methodology that is validated and approved by our Valuation Committee. Fair valuation methods are used
only where AUM cannot be valued using market-based valuation methods, such as in the case of private equity or illiquid securities.
Investments utilizing fair valuation methods typically make up an insignificant amount of our total AUM. Recent market volatility
has not had a significant effect on our ability to acquire market data and, accordingly, our ability to use market-based valuation
methods.
The Valuation Committee, which is composed of senior officers and employees, is responsible for overseeing the pricing and valu-
ation of all investments held in client and AllianceBernstein portfolios. The Valuation Committee has adopted a Statement of Pric-
ing Policies describing principles and policies that apply to pricing and valuing investments held in these portfolios. We have also
established a Pricing Group, which reports to the Valuation Committee. The Valuation Committee has delegated to the Pricing
Group responsibility for overseeing the pricing process for all investments.
Bernstein Research Services revenue consists primarily of brokerage commissions received by SCB LLC and SCBL for research and
brokerage-related services provided to institutional investors. Brokerage commissions earned and related expenses are recorded on a
trade-date basis. Bernstein Research Services revenue also consists of underwriting fees, management fees, payments for research
services and/or selling concessions from equity capital markets activities, which are recognized as the related services are performed.
Distribution revenues, shareholder servicing fees, and dividend and interest income are accrued as earned.
Mutual Fund Underwriting Activities
Purchases and sales of shares of company-sponsored mutual funds in connection with the underwriting activities of our subsidiaries,
including related commission income, are recorded on trade date. Receivables from brokers and dealers for sale of shares of
company-sponsored mutual funds are generally realized within three business days from trade date, in conjunction with the settle-
ment of the related payables to company-sponsored mutual funds for share purchases. Distribution plan and other promotion and
servicing payments are recognized as expense when incurred.
Deferred Compensation Plans
We maintain several unfunded, non-qualified deferred compensation plans under which annual awards to employees are generally
made in the fourth quarter.
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AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
For awards made before 2009, participants were permitted to allocate their awards: (i) among notional investments in Holding
Units, certain of the investment services we provide to our clients and a money market fund or (ii) under limited circumstances, in
options to buy Holding Units.
• We made investments in our services that were notionally elected by the participants and maintained them in a consolidated
rabbi trust or separate custodial account.
• Awards generally vested over four years but could vest more quickly depending on the terms of the individual award, the age of
the participant, or the terms of the participant’s employment, separation or retirement agreement. Upon vesting, awards are
distributed to participants unless they have made a voluntary long-term election to defer receipt.
• Quarterly cash distributions on unvested Holding Units for which a long-term deferral election had not been made are paid
currently to participants. Quarterly cash distributions on notional investments in Holding Units and income credited on
notional investments in our investment services or the money market fund for which a long-term deferral election has been
made are reinvested and distributed as elected by participants.
• Prior to a fourth quarter 2011 amendment made to all outstanding deferred incentive compensation awards of active employees
(discussed below), compensation expense for awards under the plans, including changes in participant account balances resulting
from gains and losses on related investments (other than in Holding Units and options to buy Holding Units), was recognized
on a straight-line basis over the applicable vesting periods. Mark-to-market gains or losses on investments made to fund deferred
compensation obligations (other than in Holding Units and options to buy Holding Units) are recognized currently as invest-
ment gains (losses) in the consolidated statements of income. In addition, our equity in the earnings of investments in limited
partnership hedge funds made to fund deferred compensation obligations is recognized currently as investment gains (losses) in
the consolidated statements of income.
Awards in 2010 and 2009 consisted solely of restricted Holding Units and deferred cash. (In 2010, deferred cash was an option avail-
able only to certain non-U.S. employees.)
• We engaged in open-market purchases of, or issued, Holding Units that were awarded to the participants and held them in a
consolidated rabbi trust.
• Upon vesting, awards are distributed to participants unless they have made a voluntary long-term election to defer receipt.
• Quarterly cash distributions on unvested restricted Holding Units for which a long-term deferral election had not been made
are paid currently to participants. Quarterly cash distributions on vested and unvested restricted Holding Units for which a
long-term deferral election has been made are paid currently to participants.
• Prior to a fourth quarter 2011 amendment made to all outstanding deferred incentive compensation awards of active employees
(discussed below), compensation expense for awards under the plans was recognized on a straight-line basis over the applicable
vesting periods.
Awards in 2011 allowed employees to allocate their award between restricted Holding Units and deferred cash. Employees (except
certain members of senior management) generally could allocate up to 50% of their awards to deferred cash, not to exceed a total of
$250,000 per award, and had until January 13, 2012 to make their elections. The number of restricted Holding Units
issued equalled the remaining dollar value of the award divided by the average of the closing prices of a Holding Unit for the five
business day period that commenced on January 13, 2012 and concluded on January 20, 2012.
• Upon approval and communication of the dollar value of the 2011 awards in December 2011, we recorded a $159.9 million
liability for the full dollar value of the awards. In January 2012, 8.7 million restricted Holding Units were issued from the con-
solidated rabbi trust and we reclassified $130.3 million of the liability to partners’ capital, and will account for restricted Holding
Units as equity-based awards.
• We engage in open-market purchases of, or issue, Holding Units that are awarded to the participants and hold them in a con-
solidated rabbi trust.
Annual Report 2011
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AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
• Quarterly distributions on Holding Units are paid currently to participants.
•
Interest on deferred cash will be accrued monthly based on our monthly weighted average cost of funds.
On November 17, 2011, we announced that we implemented changes to our employee long-term incentive compensation award
program designed to better align the costs of employee compensation and benefits with the company’s current year financial per-
formance, and provide employees with a higher degree of certainty that they will receive the incentive compensation they are
awarded.
We amended all outstanding deferred incentive compensation awards of active employees, so that employees who terminate their
employment or are terminated without cause may retain their award, subject to compliance with certain agreements and restrictive
covenants set forth in the applicable award agreement, including restrictions on competition and employee and client solicitation,
and a claw-back for failing to follow existing risk management policies. Most equity replacement, sign-on or similar deferred com-
pensation awards included in separate employment agreements or arrangements have not been amended.
We recognize compensation expense related to equity compensation grants in the financial statements using the fair value method.
Fair value of restricted Holding Unit awards is the closing price of a Holding Unit on the grant date; fair value of options is
determined using the Black-Scholes option valuation model. Under the fair value method, compensatory expense is measured at the
grant date based on the estimated fair value of the award and is recognized over the required service period. Prior to the amend-
ment made to the employee long-term incentive compensation award program in the fourth quarter of 2011, an employee’s service
requirement was typically the same as the delivery dates. This amendment eliminated employee service requirements but did not
modify delivery dates contained in the original award agreements.
As a result of this change, we recorded a one-time, non-cash charge of $587.1 million in the fourth quarter for all unrecognized
deferred incentive compensation on the amended outstanding awards from prior years. In addition, we recorded 100% of the
expense associated with our 2011 deferred incentive compensation awards of $159.9 million.
Awards granted in 2011 contained the provisions described above and we expect to add these provisions to deferred incentive
compensation awards in the future. Accordingly, our annual incentive compensation expense will reflect 100% of the expense asso-
ciated with the deferred incentive compensation awarded in each year. This approach to expense recognition will more closely
match the economic cost of awarding deferred incentive compensation to the period in which the related service is performed.
Grants of restricted Holding Units and options to buy Holding Units are typically awarded to eligible members of the Board
(“Eligible Directors”) during the second quarter. Restricted Holding Units vest on the third anniversary of the grant date and the
options become exercisable ratably over three years. These restricted Holding Units and options are not forfeitable. Due to there
being no service requirement, we fully expense these awards on each grant date.
We fund our restricted Holding Unit awards either by purchasing newly-issued Holding Units from Holding or purchasing Hold-
ing Units on the open market, all of which are held in a consolidated rabbi trust until they are distributed to employees upon vest-
ing. In accordance with the AllianceBernstein Partnership Agreement, when Holding issues Holding Units to AllianceBernstein,
Holding is required to use the proceeds it receives from AllianceBernstein to purchase the equivalent number of newly-issued
AllianceBernstein Units, thus increasing its percentage ownership interest in AllianceBernstein. Holding Units held in the con-
solidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AllianceBernstein.
During 2011 and 2010, we purchased 13.5 million and 8.8 million Holding Units for $220.8 million and $226.4 million,
respectively. These amounts reflect open-market purchases of 11.1 million and 7.4 million Holding Units for $192.1 million and
$195.3 million, respectively, with the remainder primarily relating to purchases of Holding Units from employees to allow them to
fulfill statutory tax requirements at the time of distribution of long-term incentive compensation awards, offset by Holding Units
purchased by employees as part of a distribution reinvestment election.
During the third and fourth quarters of 2011, we adopted a plan to repurchase Holding Units pursuant to Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended (“Exchange Act”). A Rule 10b5-1 plan allows a company to repurchase its shares at
times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods and because it possesses
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Notes to Consolidated Financial Statements (continued)
material non-public information. The broker we selected has the authority under the terms and limitations specified in the plan to
repurchase Holding Units on our behalf in accordance with the terms of the plan. Repurchases are subject to SEC regulations as
well as certain price, market volume and timing constraints specified in the plan. The amount of Holding Units we buy also is sub-
ject to the trading volume of Holding Units on the New York Stock Exchange. The plan adopted during the fourth quarter of
2011 does not specify an aggregate limitation and expires at the close of business on February 10, 2012. We intend to adopt addi-
tional Rule 10b5-1 plans so that we can continue to engage in open market purchases of Holding Units to help fund anticipated
obligations under its incentive compensation award program and for other corporate purposes.
We granted 1.7 million restricted Holding Units (not including 8.7 million restricted Holding Units granted in January 2012 for
2011) and 13.1 million restricted Holding Unit awards to employees during 2011 and 2010, respectively. To fund these awards, we
allocated previously repurchased Holding Units that had been held in the consolidated rabbi trust. The 2011 incentive compensa-
tion awards allowed most employees to allocate their award between restricted Holding Units and deferred cash. As a result,
8.7 million restricted Holding Unit awards for the December 2011 awards were issued from the consolidated rabbi trust in January
2012. There were approximately 13.6 million and 6.2 million unallocated Holding Units remaining in the consolidated rabbi trust
as of December 31, 2011 and January 31, 2012, respectively. The balance as of January 31, 2012 also reflects repurchases and other
activity during January 2012.
New Holding Units are also issued by Holding upon exercise of options. Proceeds received by Holding upon exercise of options
are used to acquire newly-issued AllianceBernstein Units, increasing Holding’s percentage ownership interest in AllianceBernstein.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into United States dollars (“US$”) at exchange rates in effect at the balance
sheet dates, and related revenues and expenses are translated into US$ at average exchange rates in effect during each period. Net
foreign currency gains and losses resulting from the translation of assets and liabilities of foreign operations into US$ are reported as
a separate component of accumulated other comprehensive income in the consolidated statements of changes in partners’ capital and
comprehensive income. Net foreign currency transaction gains (losses) were $(2.4) million, $1.3 million and $(0.4) million for 2011,
2010 and 2009, respectively.
Cash Distributions
AllianceBernstein is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of
Limited Partnership of AllianceBernstein (“AllianceBernstein Partnership Agreement”), to its unitholders and to the General
Partner. Available Cash Flow can be summarized as the cash flow received by AllianceBernstein from operations minus such
amounts as the General Partner determines, in its sole discretion, should be retained by AllianceBernstein for use in its business, or
plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow.
The General Partner computes cash flow received from operations by determining the sum of:
• net cash provided by operating activities of AllianceBernstein,
• proceeds from borrowings and from sales or other dispositions of assets in the ordinary course of business, and
•
income from investments in marketable securities, liquid investments and other financial instruments that are acquired for
investment purposes and that have a value that may be readily established,
and then subtracting from this amount the sum of:
• payments in respect of the principal of borrowings, and
• amounts expended for the purchase of assets in the ordinary course of business.
On February 10, 2012, the General Partner declared a distribution of $47.7 million, or $0.17 per AllianceBernstein Unit, represent-
ing a distribution of Available Cash Flow for the three months ended December 31, 2011. The General Partner, as a result of its 1%
Annual Report 2011
95
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
general partnership interest, is entitled to receive 1% of each distribution. The distribution is payable on March 8, 2012 to holders of
record on February 21, 2012. This distribution excludes the one-time, non-cash deferred compensation charge of $587.1 million
taken in the fourth quarter of 2011. See further discussion above in Deferred Compensation Plans.
Total cash distributions per Unit paid to the General Partner and unitholders during 2011, 2010 and 2009 were $1.70, $1.79 and
$1.73, respectively.
Real Estate Charges
During 2010, we performed a comprehensive review of our real estate requirements in New York in connection with our work-
force reductions commencing in 2008. As a result, during 2010 we decided to sub-lease over 380,000 square feet in New York
(approximately half of which has occurred) and largely consolidate our New York-based employees into two office locations from
three. We recorded pre-tax real estate charges of $101.7 million in 2010 that reflected the net present value of the difference
between the amount of our on-going contractual operating lease obligations for this space and our estimate of current market rental
rates ($76.2 million), as well as the write-off of leasehold improvements, furniture and equipment related to this space ($25.5
million). We periodically review the assumptions and estimates we used in recording these charges. During 2011, we reduced our
real estate liability by $3.5 million as a result of changes in our estimates. The following table summarizes the activity in the liability
account relating to this charge for the following periods:
Balance as of January 1,
Expense (credit) incurred
Deferred rent
Payments made
Interest accretion
Balance as of end of period
December 31,
2011
2010
(in thousands)
$ 89,793
$ —
(3,506)
2,288
(18,696)
1,285
76,177
22,954
(9,814)
476
$71,164
$89,793
During 2011, we recorded pre-tax real estate charges totaling $7.2 million for our office space in London, New York and other
U.S. locations. The London charge was $8.8 million consisting of a $5.8 million payment to the party to which the lease was
assigned, as well as the write-off of $3.0 million of leasehold improvements, furniture and equipment related to the space. We also
wrote off an additional $1.5 million of leasehold improvements, furniture and equipment related to the New York space and had
miscellaneous charges of $0.4 million. These charges were offset by the $3.5 million credit discussed above.
Comprehensive Income
We report all changes in comprehensive income in the consolidated statements of changes in partners’ capital and comprehensive
income. Comprehensive income includes net income, as well as unrealized gains and losses on investments classified as
available-for-sale, foreign currency translation adjustments, and unrecognized actuarial net losses and transition assets, all net of tax.
3. Cash and Securities Segregated Under Federal Regulations and Other Requirements
As of December 31, 2011 and 2010, $1.2 billion and $1.1 billion, respectively, of United States Treasury Bills were segregated in a
special reserve bank custody account for the exclusive benefit of brokerage customers of SCB LLC under Rule 15c3-3 of the
Exchange Act.
AllianceBernstein Investments, Inc. (“AllianceBernstein Investments”), an indirect wholly-owned subsidiary of AllianceBernstein and
the distributor of company-sponsored mutual funds, maintains several special bank accounts for the exclusive benefit of customers. As
of December 31, 2011 and 2010, $39.9 million and $25.3 million, respectively, of cash were segregated in these bank accounts.
96
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Net Income Per Unit
Basic net (loss) income per unit is derived by reducing net (loss) income for the 1% general partnership interest and dividing the
remaining 99% by the basic weighted average number of units outstanding for each year. Diluted net (loss) income per unit is
derived by reducing net (loss) income for the 1% general partnership interest and dividing the remaining 99% by the total of the
basic weighted average number of units outstanding and the dilutive unit equivalents resulting from outstanding compensatory
options to buy Holding Units as follows:
Net (loss) income attributable to AllianceBernstein Unitholders
Weighted average units outstanding—basic
Dilutive effect of compensatory options to buy Holding Units
Weighted average units outstanding—diluted
Basic net (loss) income per AllianceBernstein Unit
Diluted net (loss) income per AllianceBernstein Unit
Years Ended December 31,
2010
2011
2009
(in thousands, except per unit amounts)
$(174,768)
$442,419
278,018
—
278,018
$
$
(0.62)
(0.62)
275,415
1,639
277,054
$
$
1.59
1.58
$556,127
266,300
244
266,544
$
$
2.07
2.07
For the years ended December 31, 2011, 2010 and 2009, we excluded 3,813,567, 4,783,472 and 5,752,877 options, respectively,
from the diluted net (loss) income per unit computation due to their anti-dilutive effect.
The 2011 net (loss) income per unit includes the one-time, non-cash deferred compensation charge of $587.1 million taken in the
fourth quarter. See further discussion above in Note 2, Deferred Compensation Plans.
5. Fees Receivables, Net
Fees receivable, net consists of:
AllianceBernstein mutual funds
Unaffiliated clients (net of allowance of $752 in 2011 and $876 in 2010)
Affiliated clients
Total fees receivables, net
December 31,
2011
2010
(in thousands)
$ 120,828
135,416
9,004
$265,248
$ 128,480
196,339
18,654
$343,473
Annual Report 2011
97
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Investments
Investments consist of:
Available-for-sale
Trading:
Deferred compensation-related
United States Treasury Bills
Seed money
Other
Investments in limited partnership hedge funds:
Deferred compensation-related
Seed money/other
Consolidated private equity fund
Private equity
Other
Total investments
December 31,
2011
2010
(in thousands)
$ 13,883
$ 16,588
135,832
37,998
278,932
58,237
40,538
123,920
58,749
35,726
11,479
239,787
52,975
177,589
35,259
58,918
47,735
101,360
17,803
8,541
$795,294
$756,555
Total investments related to deferred compensation obligations of $176.4 million and $298.7 million as of December 31, 2011 and
2010, respectively, consist of company-sponsored mutual funds and limited partnership hedge funds. We typically made investments
in our services that were notionally elected by deferred compensation plan participants and maintain them in a consolidated rabbi
trust or separate custodial account. The rabbi trust and custodial account enable us to hold such investments separate from our other
assets for the purpose of settling our obligations to participants. The investments held in the rabbi trust and custodial account remain
available to the general creditors of AllianceBernstein.
The underlying investments of the limited partnership hedge funds in which we invest include long and short positions in equity
securities, fixed income securities (including various agency and non-agency asset-based securities), currencies, commodities and
derivatives (including various swaps and forward contracts). These investments are valued at quoted market prices or, where quoted
market prices are not available, are fair valued based on the pricing policies and procedures of the underlying funds.
United States Treasury Bills are held by SCB LLC in their investment account, the majority of which are pledged as collateral with
clearing organizations.
We provide seed money to our investment teams to develop new products and services for our clients.
Trading securities also include long positions in corporate equities and long exchange-traded options traded through our options
desk.
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AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following is a summary of the cost and fair value of available-for-sale and trading investments held as of December 31, 2011
and 2010:
December 31, 2011:
Available-for-sale:
Equity investments
Fixed income investments
Trading:
Equity investments
Fixed income investments
December 31, 2010:
Available-for-sale:
Equity investments
Fixed income investments
Trading:
Equity investments
Fixed income investments
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(in thousands)
$
6,753
6,857
$ 13,610
$375,287
172,142
$547,429
$
9,695
6,267
$ 15,962
$269,529
207,436
$476,965
$
$
489
133
622
$ 5,959
3,475
$ 9,434
$ 1,380
282
$ 1,662
$34,211
2,894
$37,105
$
$
(342)
(7)
(349)
$(41,938)
(3,926)
$(45,864)
$ (1,023)
(13)
$ (1,036)
$ (6,259)
(2,201)
$ (8,460)
$
6,900
6,983
$ 13,883
$339,308
171,691
$510,999
$ 10,052
6,536
$ 16,588
$297,481
208,129
$505,610
Proceeds from sales of available-for-sale investments were approximately $3.5 million, $4.3 million and $6.9 million in 2011, 2010
and 2009, respectively. Realized gains from our sales of available-for-sale investments were $0.1 million in 2011, $0.5 million in
2010 and zero in 2009. Realized losses from our sales of available-for-sale investments were $0.1 million in 2011, $0.4 million in
2010 and $2.5 million in 2009. We assess valuation declines to determine the extent to which such declines are fundamental to the
underlying investment or attributable to temporary market-related factors. Based on our assessment, we do not believe the declines
are other than temporary as of December 31, 2011.
7. Derivative Instruments
We enter into various futures, forwards and swaps to economically hedge certain of our seed money investments. In addition, we
have currency forwards that economically hedge certain cash accounts. As of December 31, 2010, we also had seeded a product
consisting of currency forwards, which was liquidated during the first quarter of 2011. Lastly, during 2010 we used currency for-
wards to economically hedge certain foreign investment advisory fees. We do not hold any derivatives designated in a formal hedge
relationship under ASC 815-10, Derivatives and Hedging.
Annual Report 2011
99
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following table presents the notional value, fair value and gains and losses recognized in investment gains (losses) in the con-
solidated statement of income as of December 31, 2011 for derivative instruments not designated as hedging instruments:
December 31, 2011:
Exchange-traded futures
Currency forwards
Interest rate swaps
Credit default swaps
Total return swaps
Total derivatives
Notional
Value
Derivative
Assets
Derivative
Liabilities
Gains
(Losses)
(in thousands)
$ 111,447
$ 127
38,330
47,640
84,215
38,148
$319,780
358
136
2,962
38
$3,621
$ 2,054
227
3,301
639
1,038
$7,259
$ 8,979
453
(5,585 )
676
(184 )
$4,339
The following table presents the notional value, fair value and gains and losses recognized in investment gains (losses) in the con-
solidated statement of income as of December 31, 2010 for derivative instruments not designated as hedging instruments:
December 31, 2010:
Exchange-traded futures
Currency forwards
Interest rate swaps
Credit default swaps
Total return swaps
Total derivatives
Notional
Value
Derivative
Assets
Derivative
Liabilities
Gains
(Losses)
(in thousands)
$ 16,973
133,471
43,210
74,915
28,975
$
16
249
1,197
182
—
$ 318
$ (5,532)
1,000
239
1,036
960
929
(1,601 )
(1,155 )
(8,264 )
$297,544
$1,644
$3,553
$(15,623)
As of December 31, 2011 and 2010, the derivative assets and liabilities are included in both receivables and payables to brokers and
dealers on our consolidated statements of financial condition.
We may be exposed to credit-related losses in the event of nonperformance by counterparties to derivative financial instruments.
We take steps to minimize our counterparty exposure through a credit review and approval process. In addition, we executed vari-
ous collateral arrangements with counterparties to the over-the-counter derivative transactions that require both pledging and
accepting collateral in the form of cash. As of December 31, 2011 and 2010, we held $4.4 million and $6.9 million, respectively, of
cash collateral payable to trade counterparties. This obligation to return cash is reported in payables to brokers and dealers in our
consolidated statements of financial condition.
Although notional amount is the most commonly used measure of volume in the derivative market, it is not used as a measure of
credit risk. Generally, the current credit exposure of our derivative contracts is limited to the net positive estimated fair value of
derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral
received. A derivative with positive value (a derivative asset) indicates existence of credit risk because the counterparty would owe
us if the contract were closed. Alternatively, a derivative contract with negative value (a derivative liability) indicates we would owe
money to the counterparty if the contract were closed. Generally, if there is more than one derivative transaction with a single
counterparty, a master netting arrangement exists with respect to derivative transactions with that counterparty to provide for
aggregate net settlement.
Certain of our standardized contracts for over-the-counter derivative transactions (“ISDA Master Agreements”) contain credit risk
related contingent provisions related to the counterparty’s credit rating. In some ISDA Master Agreements, if the counterparty’s
credit rating (or in some agreements, our assets under management) falls below a specified threshold, either a default or a termi-
nation event permitting the counterparty to terminate the ISDA Master Agreement would be triggered. In all agreements that
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AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
provide for collateralization, various levels of collateralization of net liability positions are applicable, depending upon the credit rating
of the counterparty. As of December 31, 2011 and 2010, we delivered $14.7 million and $9.3 million, respectively, of cash collateral
into brokerage accounts, which is reported in cash and cash equivalents in our consolidated statements of financial condition.
8. Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an
orderly transaction between market participants at the measurement date. The three broad levels of fair value hierarchy are as
follows:
• Level 1—Quoted prices in active markets are available for identical assets or liabilities as of the reported date.
• Level 2—Quoted prices in markets that are not active or other pricing inputs that are either directly or indirectly observable as
of the reported date.
• Level 3—Prices or valuation techniques that are both significant to the fair value measurement and unobservable as of the
reported date. These financial instruments do not have two-way markets and are measured using management’s best estimate of
fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
Assets Measured at Fair Value on a Recurring Basis
The following table summarizes the valuation of our financial instruments by pricing observability levels as of December 31, 2011
and 2010:
Money markets
U.S. Treasury bills
U.K. Treasury bills
Equity securities
Growth
Value
Blend
Other(1)
Fixed Income securities
Taxable(2)
Tax-exempt(3)
Other
Derivatives
Long exchange-traded options
Private equity
Total assets measured at fair value
Securities sold not yet purchased
Short equities-corporate
Short exchange-traded options
Other
Derivatives
Total liabilities measured at fair value
Level 1
Level 2
Level 3
Total
December 31, 2011
(in thousands)
$ 340,548
—
—
107,802
60,096
118,208
45,583
110,062
15,366
17
127
14,322
11,592
$823,723
$ 34,469
3,567
1,271
2,054
$ 41,361
$
—
1,277,944
119
$ —
—
—
$
340,548
1,277,944
119
189
9
—
—
14,488
743
—
3,494
—
—
$1,296,986
$
$
—
—
—
5,205
5,205
—
—
—
—
—
—
—
—
—
64,466
$64,466
$ —
—
—
—
$ —
107,991
60,105
118,208
45,583
124,550
16,109
17
3,621
14,322
76,058
$2,185,175
$
$
34,469
3,567
1,271
7,259
46,566
Annual Report 2011
101
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Money markets
U.S. Treasury bills
U.K. Treasury bills
Equity securities
Growth
Value
Blend
Other(1)
Fixed Income securities
Taxable(2)
Tax-exempt(3)
Other
Derivatives
Long exchange-traded options
Private equity
Total assets measured at fair value
Securities sold not yet purchased
Short equities-corporate
Short exchange-traded options
Other
Derivatives
Total liabilities measured at fair value
Level 1
Level 2
Level 3
Total
December 31, 2010
(in thousands)
$ 323,104
$
—
$ —
$
323,104
—
—
1,137,578
7,911
97,161
73,579
93,590
28,868
130,122
9,310
17
16
9,027
24,432
188
—
—
5,051
21,491
750
—
1,628
—
23,811
$789,226
$1,198,408
—
—
69
—
—
—
—
—
—
—
—
1,137,578
7,911
97,418
73,579
93,590
33,919
151,613
10,060
17
1,644
9,027
59,345
$59,414
107,588
$2,047,048
$ 42,914
7,622
3
318
$ 50,857
$
$
—
—
—
3,235
3,235
$ —
$
42,914
—
—
—
7,622
3
3,553
$ —
$
54,092
(1) Primarily long positions in corporate equities traded through our options desk.
(2) Primarily corporate and government securities.
(3) Primarily municipal bonds.
Following is a description of the fair value methodologies used for instruments measured at fair value, as well as the general classi-
fication of such instruments pursuant to the valuation hierarchy:
• Money markets: We invest excess cash in various money market funds that are valued based on quoted prices in active markets;
these are included in Level 1 of the valuation hierarchy.
• Treasury bills: We hold United States Treasury Bills, which are segregated in a special reserve bank custody account as required
by Rule 15c3-3 of the Exchange Act. We also hold United Kingdom Treasury Bills. These securities are valued based on
quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.
• Equity and fixed income securities: Our equity and fixed income securities consist principally of company-sponsored mutual
funds with net asset values and various separately-managed portfolios consisting primarily of equity and fixed income securities
with quoted prices in active markets, which are included in Level 1 of the valuation hierarchy. In addition, some securities are
valued based on observable inputs from recognized pricing vendors, which are included in Level 2 of the valuation hierarchy.
Also, as of December 31, 2010, an insignificant amount of securities are included in Level 3 of the valuation hierarchy.
• Derivatives: We hold exchange-traded futures with counterparties that are included in Level 1 of the valuation hierarchy. In
addition, we also hold currency forward contracts, interest rate swaps, credit default swaps and total return swaps with counter-
parties that are included in Level 2 of the valuation hierarchy.
102
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
• Options: We hold long exchange-traded options that are included in Level 1 of the valuation hierarchy.
• Private equity: The valuation of non-public private equity investments owned by our consolidated venture capital fund requires
significant management judgment due to the absence of quoted market prices, inherent lack of liquidity and the long-term
nature of such investments. Private equity investments are valued initially at cost. The carrying values of private equity invest-
ments are adjusted either up or down from cost to reflect expected exit values as evidenced by financing and sale transactions
with third parties, or when determination of a valuation adjustment is confirmed through ongoing review in accordance with
our valuation policies and procedures. A variety of factors are reviewed and monitored to assess positive and negative changes in
valuation including, but not limited to, current operating performance and future expectations of investee companies, industry
valuations of comparable public companies, changes in market outlooks and the third party financing environment over time.
In determining valuation adjustments resulting from the investment review process, particular emphasis is placed on current
company performance and market conditions. Non-public equity investments are included in Level 3 of the valuation hierarchy
because they trade infrequently and, therefore, their fair value is unobservable. Publicly-traded equity investments owned by
our consolidated venture capital fund are included in Level 1 of the valuation hierarchy. If they contain trading restrictions,
publicly-traded equity investments are included in Level 2 of the valuation hierarchy. One of our private securities went public
in the first quarter of 2011 and, due to a trading restriction period, $3.6 million was transferred from a Level 3 classification to a
Level 2 classification. During the second quarter of 2011, the trading restriction period for one of our public securities lapsed,
and, as a result, $20.6 million was transferred from a Level 2 classification to a Level 1 classification. During the third quarter of
2011, the trading restriction period for one of our public securities lapsed, and, as a result, $3.7 million was transferred from a
Level 2 classification to a Level 1 classification.
• Securities sold not yet purchased: Securities sold not yet purchased, primarily reflecting short positions in equities and exchange-
traded options, are included in Level 1 of the valuation hierarchy.
Effective January 1, 2011, we adopted the second part of ASU 2010-06, Improving Disclosures about Fair Value Measurements, which
requires that purchases, sales, issuances and settlements be presented separately within the Level 3 reconciliation. The following table
summarizes the change in carrying value associated with Level 3 financial instruments carried at fair value:
Balance as of beginning of period
Transfers in (out), net
Purchases
Sales
Realized gains (losses), net
Unrealized gains (losses), net
Balance as of end of period
December 31,
2011
2010
(in thousands)
$ 59,414
$ 98,559
(3,588)
10,002
(214)
(3,106)
1,958
(23,974)
9,423
(37,101)
16,802
(4,295)
$64,466
$59,414
Transfers into and out of all levels of the fair value hierarchy are reflected at end-of-period fair values. Realized and unrealized gains
and losses on Level 3 financial instruments are recorded in investment gains and losses in the consolidated statements of income. A
majority of the Level 3 investments are private equity investments owned by our consolidated venture capital fund, of which we
own 10% and non-controlling interests own 90%.
Assets Measured at Fair Value on a Nonrecurring Basis
There were no impairments recognized for goodwill, intangible assets or other long-lived assets as of December 31, 2011.
Annual Report 2011
103
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Furniture, Equipment and Leasehold Improvements, Net
Furniture, equipment and leasehold improvements, net consist of:
Furniture and equipment
Leasehold improvements
Less: Accumulated depreciation and amortization
Furniture, equipment and leasehold improvements, net
December 31,
2011
2010
(in thousands)
$ 564,958
$ 547,961
348,987
913,945
(640,841)
$273,104
330,448
878,409
(577,967)
$300,442
Depreciation and amortization expense on furniture, equipment and leasehold improvements were $60.9 million, $59.6 million and
$61.4 million for the years ended December 31, 2011, 2010 and 2009, respectively.
During 2011, we recorded $7.2 million in pre-tax real estate charges. Included in the charges was $4.6 million worth of leasehold
improvements, furniture and equipment we wrote off related to the respective spaces. During 2010, we recorded $101.7 million in
pre-tax real estate charges in connection with our workforce reductions commencing in 2008. Included in the charges was $25.5
million worth of leasehold improvements, furniture and equipment we wrote off related to the space. See Note 2 for further dis-
cussion of the real estate charges.
10. Deferred Sales Commissions, Net
The components of deferred sales commissions, net for the years ended December 31, 2011 and 2010 were as follows:
Carrying amount of deferred sales commissions
Less: Accumulated amortization
Cumulative CDSC received
Deferred sales commissions, net
(1) Excludes amounts related to fully amortized deferred sales commissions.
December 31,(1)
2011
2010
(in thousands)
$ 660,735
$ 624,995
(434,770)
(165,966)
(397,095)
(151,744)
$ 59,999
$ 76,156
Amortization expense was $37.7 million, $47.4 million and $54.9 million for the years ended December 31, 2011, 2010 and 2009,
respectively. Estimated future amortization expense related to the December 31, 2011 net asset balance, assuming no additional
CDSC is received in future periods, is as follows (in thousands):
2012
2013
2014
2015
2016
2017
104
$26,361
17,646
11,007
4,245
651
89
$59,999
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Debt
At December 31, 2011 and 2010, AllianceBernstein had $444.9 million and $225.0 million, respectively, in commercial paper out-
standing with weighted average interest rates of approximately 0.2% and 0.3%, respectively. The commercial paper and amounts
outstanding under the 2010 Credit Facility described below are short term in nature, and as such, recorded value is estimated to
approximate fair value. Average daily borrowings of commercial paper during 2011 and 2010 were $273.6 million and $104.2 mil-
lion, respectively, with weighted average interest rates of approximately 0.2% for both periods.
On December 9, 2010, AllianceBernstein entered into a committed, unsecured three-year senior revolving credit facility (the
“2010 Credit Facility”) with a group of commercial banks and other lenders in an original principal amount of $1.0 billion with
SCB LLC as an additional borrower.
The 2010 Credit Facility replaced AllianceBernstein’s existing $1.95 billion of committed credit lines (comprised of two separate
lines — a $1.0 billion committed, unsecured revolving credit facility in the name of AllianceBernstein, which had a scheduled
expiration date of February 17, 2011, and SCB LLC’s $950 million committed, unsecured revolving credit facility, which had a
scheduled expiration date of January 25, 2011), both of which were terminated upon the effectiveness of the 2010 Credit Facility.
AllianceBernstein has agreed to guarantee the obligations of SCB LLC under the 2010 Credit Facility.
The 2010 Credit Facility is available for AllianceBernstein’s and SCB LLC’s business purposes, including the support of
AllianceBernstein’s $1.0 billion commercial paper program. Both AllianceBernstein and SCB LLC can draw directly under the 2010
Credit Facility and management expects to draw on the 2010 Credit Facility from time to time.
The 2010 Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, includ-
ing, among other things, restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a max-
imum leverage ratio. We are in compliance with these covenants. The 2010 Credit Facility also includes customary events of default
(with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all
outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the
occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the 2010 Credit Facility would
automatically become immediately due and payable, and the lender’s commitments would automatically terminate.
The 2010 Credit Facility provides for possible increases in principal amount by up to an aggregate incremental amount of $250 mil-
lion (“accordion feature”), any such increase being subject to the consent of the affected lenders. Amounts under the 2010 Credit
Facility may be borrowed, repaid and re-borrowed by us from time to time until the maturity of the facility. Voluntary prepayments
and commitment reductions requested by us are permitted at any time without fee (other than customary breakage costs relating to
the prepayment of any drawn loans) upon proper notice and subject to a minimum dollar requirement. Borrowings under the 2010
Credit Facility bear interest at a rate per annum, which will be, at our option, a rate equal to an applicable margin, which is subject
to adjustment based on the credit ratings of AllianceBernstein, plus one of the following indexes: London Interbank Offered Rate; a
floating base rate; or the Federal Funds rate.
On January 17, 2012, the 2010 Credit Facility was amended and restated. The principal amount was amended to $900 million from
the original principal amount of $1.0 billion. Also, the amendment increased the accordion feature from $250 million to $350 mil-
lion. In addition, the maturity date of the 2010 Credit Facility was extended from December 9, 2013 to January 17, 2017. There
were no other significant changes in terms and conditions included in this amendment.
As of December 31, 2011 and 2010, we had no amounts outstanding under the 2010 Credit Facility. Average daily borrowings
outstanding under the 2010 Credit Facility outstanding during 2011 and 2010 were $0.1 million and $65.6 million, respectively,
with weighted average interest rates of approximately 1.3% and 0.3%, respectively.
In addition, SCB LLC has five uncommitted lines of credit with four financial institutions. Two of these lines of credit permit us to
borrow up to an aggregate of approximately $200.0 million while three lines have no stated limit.
As of December 31, 2011 and 2010, we had no uncommitted bank loans outstanding. Average daily borrowings of uncommitted
bank loans during 2011 and 2010 were $6.4 million and $2.4 million, respectively, with weighted average interest rates of approx-
imately 1.3% and 1.5%, respectively.
Annual Report 2011
105
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Commitments and Contingencies
Operating Leases
We lease office space, furniture and office equipment under various operating leases. The future minimum payments under
non-cancelable leases, sublease commitments and related payments we are obligated to make, net of sublease commitments of third
party lessees to make payments to us, as of December 31, 2011 are as follows:
2012
2013
2014
2015
2016
2017 and thereafter
Total future minimum payments
Payments
$
148.2
148.9
149.7
151.6
151.5
1,336.1
$2,086.0
Sublease
Receipts
(in millions)
$ 13.0
14.2
13.7
13.4
14.1
42.5
$110.9
Net
Payments
$
135.2
134.7
136.0
138.2
137.4
1,293.6
$1,975.1
Office leases contain escalation clauses that provide for the pass through of increases in operating expenses and real estate taxes. Rent
expense, which is amortized on a straight-line basis over the life of the lease, was $121.2 million, $121.5 million and $133.6 million,
respectively, for the years ended December 31, 2011, 2010 and 2009, net of sublease income of $3.2 million, $3.2 million and $3.4
million, respectively, for the years ended December 31, 2011, 2010 and 2009. In addition, we accelerated rent of $2.6 million and
$76.2 million in 2011 and 2010, respectively. See Note 2 for further discussion of the real estate charges.
Legal Proceedings
With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of
a negative outcome is probable, and the amount of the loss can be reasonably estimated, we record an estimated loss for the
expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we are able to determine an
estimate of the possible loss or range of loss, we disclose that fact together with the estimate of the possible loss or range of loss.
However, it is difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent
uncertainties, particularly when plaintiffs allege substantial or indeterminate damages, or when the litigation is highly complex or
broad in scope. In such cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.
We are involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege
significant damages. It is reasonably possible that we could incur some losses pertaining to these matters; however, we believe that
any such losses would be immaterial. Furthermore, although any inquiry, proceeding or litigation has the element of uncertainty,
management believes that the outcome of any one of these matters that is pending or threatened, or all of them combined, will not
have a material adverse effect on our results of operations or financial condition.
Other
During 2009, we entered into a subscription agreement under which we committed to invest up to $40 million in a venture capital
fund over a six-year period. In December 2011, we sold 12.5% of our funded interest and commitment to an unaffiliated third party
for $2.0 million. As of December 31, 2011, we had funded $14.0 million, net of the sales proceeds, of our revised commitment of
$35 million.
Also during 2009, we were selected by the U.S. Treasury Department as one of nine pre-qualified investment managers under the
Public-Private Investment Program. As part of the program, each investment manager is required to invest a minimum of $20 mil-
lion in the Public-Private Investment Fund they manage. As of December 31, 2011, we funded $18.0 million of this commitment.
106
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
During 2010, as general partner of the AllianceBernstein U.S. Real Estate L.P. (the “Real Estate Fund”), we committed to invest
up to 2.5% of the capital of the Real Estate Fund up to a maximum of $50 million. As of December 31, 2011, we had funded $3.8
million of this commitment.
13. Net Capital
SCB LLC, a broker-dealer and a member organization of the New York Stock Exchange (“NYSE”), is subject to the Uniform Net
Capital Rule 15c3-1 of the Exchange Act. SCB LLC computes its net capital under the alternative method permitted by the rule,
which requires that minimum net capital, as defined, equal the greater of $1 million, or two percent of aggregate debit items arising
from customer transactions, as defined. As of December 31, 2011, SCB LLC had net capital of $111.3 million, which was $96.0
million in excess of the minimum net capital requirement of $15.3 million. Advances, dividend payments and other equity with-
drawals by SCB LLC are restricted by the regulations of the U.S. Securities and Exchange Commission (“SEC”), the Financial
Industry Regulatory Authority, Inc., and other securities agencies.
SCBL is a member of the London Stock Exchange. As of December 31, 2011, SCBL was subject to financial resources require-
ments of $16.5 million imposed by the Financial Services Authority of the United Kingdom and had aggregate regulatory financial
resources of $47.0 million, an excess of $30.5 million.
AllianceBernstein Investments serves as distributor and/or underwriter for certain company-sponsored mutual funds.
AllianceBernstein Investments is registered as a broker-dealer under the Exchange Act and is subject to the minimum net capital
requirements imposed by the SEC. AllianceBernstein Investments’ net capital as of December 31, 2011 was $46.2 million, which
was $46.1 million in excess of its required net capital of $0.1 million.
Many of our subsidiaries around the world are subject to minimum net capital requirements by the local laws and regulations to
which they are subject. As of December 31, 2011, each of our subsidiaries subject to a minimum net capital requirement satisfied
the applicable requirement.
14. Counterparty Risk
Customer Activities
In the normal course of business, brokerage activities involve the execution, settlement and financing of various customer securities
trades, which may expose SCB LLC and SCBL to off-balance sheet risk by requiring SCB LLC and SCBL to purchase or sell secu-
rities at prevailing market prices in the event the customer is unable to fulfill its contracted obligations.
SCB LLC’s customer securities activities are transacted on either a cash or margin basis. In margin transactions, SCB LLC extends
credit to the customer, subject to various regulatory and internal margin requirements. These transactions are collateralized by cash
or securities in the customer’s account. In connection with these activities, SCB LLC may execute and clear customer transactions
involving the sale of securities not yet purchased. SCB LLC seeks to control the risks associated with margin transactions by requir-
ing customers to maintain collateral in compliance with the aforementioned regulatory and internal guidelines. SCB LLC monitors
required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral, or reduce positions,
when necessary. A majority of SCB LLC’s customer margin accounts are managed on a discretionary basis whereby
AllianceBernstein maintains control over the investment activity in the accounts. For these discretionary accounts, SCB LLC’s mar-
gin deficiency exposure is minimized through maintaining a diversified portfolio of securities in the accounts and by virtue of
AllianceBernstein’s discretionary authority and SCB LLC’s role as custodian.
SCB LLC may enter into forward foreign currency contracts on behalf of accounts for which SCB LLC acts as custodian. SCB LLC
minimizes credit risk associated with these contracts by monitoring these positions on a daily basis, as well as by virtue of
AllianceBernstein’s discretionary authority and SCB LLC’s role as custodian.
Annual Report 2011
107
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
In accordance with industry practice, SCB LLC and SCBL record customer transactions on a settlement date basis, which is gen-
erally three business days after trade date. SCB LLC and SCBL are exposed to risk of loss on these transactions in the event of the
customer’s or broker’s inability to meet the terms of their contracts, in which case SCB LLC and SCBL may have to purchase or
sell financial instruments at prevailing market prices. The risks assumed by SCB LLC and SCBL in connection with these trans-
actions are not expected to have a material effect upon AllianceBernstein’s, SCB LLC’s, or SCBL’s financial condition or results of
operations.
Other Counterparties
SCB LLC and SCBL are engaged in various brokerage activities on behalf of clients, including Sanford C. Bernstein (Hong Kong)
Limited (an indirect wholly-owned subsidiary of AllianceBernstein), in which counterparties primarily include broker-dealers, banks
and other financial institutions. In the event counterparties do not fulfill their obligations, SCB LLC and SCBL may be exposed to
risk. The risk of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is SCB LLC’s and
SCBL’s policy to review, as necessary, each counterparty’s creditworthiness.
In connection with security borrowing and lending arrangements, SCB LLC and SCBL enter into collateralized agreements, which
may result in credit exposure in the event the counterparty to a transaction is unable to fulfill its contractual obligations. Security
borrowing arrangements require SCB LLC and SCBL to deposit cash collateral with the lender. With respect to security lending
arrangements, SCB LLC (SCBL does not participate in security lending arrangements) receives collateral in the form of cash in
amounts generally in excess of the market value of the securities loaned. SCB LLC minimizes credit risk associated with these activ-
ities by establishing credit limits for each broker and monitoring these limits on a daily basis. Additionally, security borrowing and
lending collateral is marked to market on a daily basis, and additional collateral is deposited by or returned to SCB LLC and SCBL
as necessary.
15. Qualified Employee Benefit Plans
We maintain a qualified profit sharing plan covering U.S. employees and certain foreign employees. Employer contributions are
discretionary and generally limited to the maximum amount deductible for federal income tax purposes. Aggregate contributions for
2011, 2010 and 2009 were $13.7 million, $14.6 million and $15.2 million, respectively.
We maintain several defined contribution plans for foreign employees in our subsidiaries in the United Kingdom, Australia, Japan
and other foreign locations outside the United States. Employer contributions are generally consistent with regulatory requirements
and tax limits. Defined contribution expense for foreign entities was $7.7 million, $7.1 million and $7.7 million in 2011, 2010 and
2009, respectively.
We maintain a qualified, noncontributory, defined benefit retirement plan (“Retirement Plan”) covering current and former
employees who were employed by AllianceBernstein in the United States prior to October 2, 2000. Benefits are based on years of
credited service, average final base salary (as defined in the Retirement Plan), and primary Social Security benefits. Service and
compensation after December 31, 2008 are not taken into account in determining participants’ retirement benefits.
Our policy is to satisfy our funding obligation for each year in an amount not less than the minimum required by ERISA and not
greater than the maximum amount we can deduct for federal income tax purposes. We contributed $6.9 million to the Retirement
Plan during 2011. We currently estimate that we will contribute $5.9 million to the Retirement Plan during 2012. Contribution
estimates, which are subject to change, are based on regulatory requirements, future market conditions and assumptions used for
actuarial computations of the Retirement Plan’s obligations and assets. Management, at the present time, has not determined the
amount, if any, of additional future contributions that may be required.
108
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The Retirement Plan’s projected benefit obligation, fair value of plan assets, and funded status (amounts recognized in the con-
solidated statements of financial condition) were as follows:
Changeinprojectedbenefitobligation:
Projected benefit obligation at beginning of year
Interest cost
Actuarial loss
Benefits paid
Projected benefit obligation at end of year
Changeinplanassets:
Plan assets at fair value at beginning of year
Actual return on plan assets
Employer contribution
Benefits paid
Plan assets at fair value at end of year
Funded status
The amounts recognized in other comprehensive income (loss) for 2011 and 2010 were as follows:
Unrecognized net loss from experience different from that assumed and effects of changes and assumptions
Unrecognized net plan assets as of January 1, 1987 being recognized over 26.3 years
Income tax benefit
Other comprehensive loss
Years Ended December 31,
2011
2010
(in thousands)
$ 87,733
$ 77,164
4,627
4,585
(2,290 )
94,655
64,627
(5,912 )
6,900
(2,290 )
63,325
4,600
9,634
(3,665 )
87,733
56,592
5,600
6,100
(3,665 )
64,627
$(31,330)
$(23,106)
2011
2010
(in thousands)
$ (15,231)
$ (8,225)
(143)
(15,374)
332
(143)
(8,368)
71
$(15,042)
$(8,297)
The amounts included in accumulated other comprehensive income (loss) as of December 31, 2011 and 2010 were as follows:
2011
2010
(in thousands)
Unrecognized net loss from experience different from that assumed and effects of changes and assumptions
$ (39,070)
$ (23,839)
Unrecognized net plan assets as of January 1, 1987 being recognized over 26.3 years
Income tax benefit
Accumulated other comprehensive loss
190
(38,880)
849
333
(23,506)
517
$(38,031)
$(22,989)
The estimated initial plan assets and amortization of loss for the Retirement Plan that will be amortized from accumulated other
comprehensive income over the next year is $143,017 and $865,624, respectively. The accumulated benefit obligation for the plan
was $94.7 million and $87.7 million, respectively, as of December 31, 2011 and 2010.
The discount rates used to determine benefit obligations as of December 31, 2011 and 2010 (measurement dates) were 5.1% and
5.5%, respectively.
Annual Report 2011
109
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following benefit payments, which reflect expected future service, are expected to be paid as follows (in thousands):
2012
2013
2014
2015
2016
2017-2021
Net expense under the Retirement Plan consisted of:
Interest cost on projected benefit obligations
Expected return on plan assets
Amortization of transition asset
Recognized actuarial loss
Net pension (benefit) charge
$ 4,364
3,969
3,314
5,072
5,850
25,163
Years Ended December 31,
2010
2011
2009
(in thousands)
$ 4,627
(5,133)
(143)
399
$ 4,600
(4,453)
(143)
262
$ 4,419
(3,110)
(143)
431
$ (250)
$ 266
$1,597
Actuarial computations used to determine net periodic costs were made utilizing the following weighted-average assumptions:
Years Ended December 31,
2010
2011
2009
Discount rate on benefit obligations
Expected long-term rate of return on plan assets
5.50%
8.00
6.05%
8.00
6.20%
8.00
The Retirement Plan’s asset allocation percentages consisted of:
Equity securities
Debt securities
Real estate
December 31,
2011
2010
62%
28
10
100%
60%
32
8
100%
In developing the expected long-term rate of return on plan assets of 8.0%, management considered the historical returns and future
expectations for returns for each asset category, as well as the target asset allocation of the portfolio. The expected long-term rate of
return on assets is based on weighted average expected returns for each asset class.
The guidelines regarding allocation of assets formalized in the Investment Policy Statement were adopted by the Investment
Committee for the Retirement Plan to reflect the Plan’s liquidity requirements, funded status, growth expectations and risk toler-
ance. The guidelines specify an allocation weighting of 50% to 70% for global equity securities (target of 60%), 20% to 40% for
fixed income securities (target of 30%) and 0% to 10% for real estate investment trusts (target of 10%). Alternative investments are
permitted under the guidelines, with such investments to be allocated to one or more of the above security classes and subject to the
indicated tactical ranges.
Exposure of the total portfolio to cash equivalents on average should not exceed 5% of the portfolio’s value on a market value basis.
The plan seeks to provide a rate of return that exceeds applicable benchmarks over rolling five-year periods. The benchmark for the
plan’s large cap domestic equity investment strategy is the S&P 500 Index; the small cap domestic equity investment strategy is
110
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
measured against the Russell 2000 Index; the international equity investment strategy is measured against the MSCI EAFE Index;
and the fixed income investment strategy is measured against the Barclays Aggregate Bond Index.
The following table summarizes the valuation of our Retirement Plan assets by pricing observability levels as of December 31, 2011:
Cash
Government securities
U.S. Treasury bills
Agency Discount notes
Real estate mutual fund
Fixed income mutual funds
Equity mutual funds
Equity private investment trusts
Total assets measured at fair value
Level 1
Level 2
Level 3
Total
(in thousands)
$
9
$ —
$—
$
9
—
—
6,358
16,591
10,938
—
$33,896
662
208
—
—
—
28,559
$29,429
—
—
—
—
—
—
662
208
6,358
16,591
10,938
28,559
$—
$63,325
The following table summarizes the valuation of our Retirement Plan assets by pricing observability levels as of December 31, 2010:
Cash
Government securities
U.S. Treasury bills
Agency Discount notes
Real estate mutual fund
Offshore hedge funds
Fixed/equity securities
Private investment trusts
Fixed securities
Equity securities
Level 1
Level 2
Level 3
Total
(in thousands)
$
63
$ —
$—
$
63
—
—
5,345
—
—
—
1,898
580
—
5,515
14,015
37,211
—
—
—
—
—
—
1,898
580
5,345
5,515
14,015
37,211
$64,627
Total assets measured at fair value
$5,408
$59,219
$—
See Note 8 for a description of how we measure the fair value of our plan assets.
The Retirement Plan invests in a real estate mutual fund which is an open-end fund that seeks total return from long-term growth
of capital and income. Typically the mutual fund invests at least 80% of its net assets in real estate investment trusts and other real
estate industry companies. The mutual fund is subject to certain risks associated with the direct ownership of real estate and with the
real estate industry in general. To the extent that assets underlying the mutual fund’s investments are concentrated geographically,
by property type or in certain other respects, the mutual fund may be subject to additional risks.
The Retirement Plan also invests in two fixed income mutual funds. One of the mutual funds seeks to provide safety of principal
and a moderate rate of income that is subject to taxes. Typically the mutual funds invest at least 80% of their net assets in securities
rated A- or better and comparably rated commercial paper and notes. The other fixed income mutual fund seeks to generate current
income consistent with preservation of capital. The mutual fund invests in debt securities with a range of maturities from short- to
long-term.
The Retirement Plan invests in two equity mutual funds. One equity mutual fund seeks long-term growth of capital through the
pursuit of opportunistic growth by investing in a global universe of companies in multiple industries that may benefit from
Annual Report 2011
111
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
innovation. The second mutual fund’s objective is to maximize real return, which equals total return less the estimated effect of
inflation. The mutual fund invests principally in instruments that are affected directly or indirectly by the level and change in rate of
inflation.
Finally the Retirement Plan invests in two equity private investment trusts. One of these trusts invests primarily in equity securities
of companies located around the world, while the other invests primarily in equity securities of non-U.S. companies located in
emerging market countries.
The government securities held by the Retirement Plan consist of United States Treasury bills and Agency Discount notes.
We provide postretirement medical benefits which allow retirees between the ages of 55 and 65 meeting certain service require-
ments, at their election, to continue to participate in our group medical program by paying 100% of the applicable group premium.
Retirees older than 65 may also continue to participate in our group medical program, but are required to pay the full expected cost
of benefits. To the extent that retirees’ medical costs exceed premiums paid, we incur the cost of providing a postretirement medical
benefit. During 2011, our net periodic benefit cost was $0.8 million, and our aggregate benefit obligation as of December 31, 2011
is $6.7 million.
16. Long-term Incentive Compensation Plans
We maintain an unfunded, non-qualified incentive compensation program known as the 2011 AllianceBernstein Incentive Compen-
sation Award Program (the “Incentive Compensation Program”) under which annual awards may be granted to eligible employ-
ees. See Note 2. Summary of Significant Accounting Policies—Deferred Compensation Plans for a discussion of the award provisions.
Under the Incentive Compensation Program, we made awards in 2011, 2010 and 2009 aggregating $159.9 million, $275.6 million
and $223.1 million, respectively. The amounts charged to employee compensation and benefits for the years ended December 31,
2011, 2010 and 2009 were $654.3 million (which includes $509.1 million of the one-time, non-cash deferred compensation
charge), $207.9 million and $202.3 million, respectively.
During 2005, we established the AllianceBernstein Financial Advisor Wealth Accumulation Plan (“Wealth Accumulation Plan”),
a voluntary unfunded, non-qualified incentive plan. The Wealth Accumulation Plan was established to attract, motivate and retain
eligible employees expected to make significant contributions to the future growth and success of Bernstein Global Wealth
Management, the unit of AllianceBernstein that services private clients. Participants designate the percentage of their awards to be
notionally invested in Holding Units or certain of our investment services. No more than 50% of the award may be notionally
invested in Holding Units. Prior to the amendments made in the fourth quarter of 2011, all awards vested annually on a pro rata
basis over the term of the award. There were no awards granted under this plan in 2011 and 2010. We made awards totaling $16.5
million in 2009. The amounts charged to employee compensation and benefits expense for the years ended December 31, 2011,
2010 and 2009 were $25.5 million (which includes $24.8 million of the one-time, non-cash deferred compensation charge), $8.5
million and $9.5 million, respectively.
During 2003, we established the AllianceBernstein Commission Substitution Plan (“Commission Substitution Plan”), an
unfunded, non-qualified incentive plan. Employees whose principal duties are to sell or market the products or services of
AllianceBernstein and whose compensation is entirely or mostly commission-based were eligible for an award under this plan.
Participants designated the percentage of their awards to be allocated to notional investments in Holding Units or in certain of our
investment services. Awards vested ratably over a three-year period and were amortized as employee compensation expense. The
Commission Substitution Plan was terminated in 2007 and no awards have been made since 2006. The amounts charged to
employee compensation and benefits expense for the years ended December 31, 2011, 2010 and 2009 were $0.1 million, $0.1 mil-
lion and $10.5 million, respectively.
We maintain an unfunded, non-qualified deferred compensation plan known as the Capital Accumulation Plan and also have
assumed obligations under contractual unfunded deferred compensation arrangements covering certain executives (“Contractual
Arrangements”). The Capital Accumulation Plan was frozen on December 31, 1987 and no additional awards have been made.
The Board may terminate the Capital Accumulation Plan at any time without cause, in which case our liability would be limited to
112
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
benefits that have vested. Payment of vested benefits under both the Capital Accumulation Plan and the Contractual Arrangements
will generally be made over a ten-year period commencing at retirement age. The General Partner is obligated to make capital
contributions to AllianceBernstein in amounts equal to benefits paid under the Capital Accumulation Plan and the Contractual
Arrangements. Amounts included in employee compensation and benefits expense for the Capital Accumulation Plan and the Con-
tractual Arrangements for the years ended December 31, 2011, 2010 and 2009 were $0.9 million, $1.2 million and $1.4 million,
respectively.
17. Compensatory Unit Awards and Option Plans
Effective as of July 1, 2010, we established the AllianceBernstein 2010 Long Term Incentive Plan (“2010 Plan”), as amended,
which was adopted by Holding Unitholders at a special meeting of Holding Unitholders held on June 30, 2010. Since the 2010
Plan was adopted, the following forms of awards have been available for grant to employees and Eligible Directors: (i) restricted
Holding Units or phantom restricted Holding Units (a “phantom” award is a contractual right to receive Holding Units at a later
date or upon a specified event); (ii) options to buy Holding Units; and (iii) other Holding Unit-based awards (including, without
limitation, Holding Unit appreciation rights and performance awards). The purpose of the 2010 Plan is to promote the interest of
AllianceBernstein by: (i) attracting and retaining talented officers, employees and directors, (ii) motivating such officers, employees
and directors by means of performance-related incentives to achieve longer-range business and operational goals, (iii) enabling such
officers, employees and directors to participate in the long-term growth and financial success of AllianceBernstein, and (iv) aligning
the interests of such officers, employees and directors with those of Holding Unitholders. The 2010 Plan will expire on June 30,
2020, and no awards under the 2010 Plan will be made after that date. Under the 2010 Plan, the number of newly-issued Holding
Units with respect to which awards may be granted is 30.0 million. The 2010 Plan also permits us to award an additional
30.0 million Holding Units if we acquire the Holding Units on the open market or through private purchases. As of December 31,
2011, we had granted 13.2 million Holding Unit awards, net of forfeitures, under the 2010 Plan. As of December 31, 2011,
27.0 million newly-issued Holding Units and 19.8 million repurchased Holding Units were available for grant.
The 2010 Plan was amended by the Board in May 2011, expanding the universe of persons eligible to receive awards under the
2010 Plan to include any member of the Board who is a former executive or former employee of an affiliate of Holding. For
purposes of this amendment, “affiliate” includes any company or other entity that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with, AllianceBernstein.
The 2010 Plan was further amended by the Compensation Committee of the Board (“Compensation Committee”) in December
2011, clarifying that, where duly authorized by the Compensation Committee or the Board, continued vesting of Awards after a
Termination (as those terms are defined in the 2010 Plan or the applicable award agreement) in circumstances where such
continued vesting is conditioned on compliance with (A) one or more restrictive covenants, and/or (B) a standard of conduct
regarding appropriate consideration of risk set forth in the applicable award agreement, shall count towards satisfying the minimum
vesting requirement set forth in Section 6(b)(i) of the 2010 Plan.
In 1997, we established the 1997 Long Term Incentive Plan (“1997 Plan”), under which options to buy Holding Units, restricted
Holding Units and phantom restricted Holding Units, performance awards, and other Holding Unit-based awards were available for
grant to key employees and independent directors of the General Partner for terms established at the time of grant (generally 10
years). Options granted to employees are generally exercisable at a rate of 20% of the Holding Units subject to such options on each
of the first five anniversary dates of the date of grant (except for certain options awarded under the Special Option Program, which
are described below); options granted to independent directors are generally exercisable at a rate of 33.3% of the Holding Units subject
to such options on each of the first three anniversary dates of the date of grant. Restricted Holding Units awarded to independent
directors of the General Partner vest on the third anniversary of the grant date or immediately upon a director’s resignation.
Restricted Holding Units awarded to our CEO (as described below under “Restricted Holding Unit Awards”) vest 20% on each of the
first five anniversary dates of the grant date. Restricted Holding Units awarded under the Incentive Compensation Program vest
25% on December 1st of the subsequent four years. The 1997 Plan expired on July 26, 2010.
In 1993, we established the 1993 Unit Option Plan (“1993 Plan”), under which options to buy Holding Units were granted to key
employees and independent directors of the General Partner for terms of up to 10 years. Each option has an exercise price of not
Annual Report 2011
113
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
less than the fair market value of Holding Units on the date of grant. Options are exercisable at a rate of 20% of the Holding Units
subject to such options on each of the first five anniversary dates of the date of grant. No options or other awards have been granted
under the 1993 Plan since it expired in 2003.
Option Awards
In 2007, the Compensation Committee approved the Special Option Program, under which selected senior officers voluntarily
allocate a specified portion of their annual long-term incentive compensation award to options to buy Holding Units. On Jan-
uary 23, 2009, the Compensation Committee granted an award of options to buy 6,534,182 Holding Units to 67 selected senior
officers. The exercise price is $17.05, the closing price of Holding Units on the grant date, and the fair value is $3.51 per option.
The equity needed to fund awards under the Special Option Program was taken from the 1997 Plan (and reduced amounts available
for grant under that plan accordingly). Future awards under the Special Option Program, if any, will take equity from the 2010 Plan
or any successor equity compensation plan (and will reduce amounts available for grant under such plans accordingly).
Options to buy Holding Units (including grants to Eligible Directors) were granted as follows: 70,238 options were granted during
2011, 387,661 options were granted during 2010, and 6,565,302 options were granted during 2009. The weighted average fair
value of options to buy Holding Units granted during 2011, 2010 and 2009 was $5.98, $6.18 and $3.52, respectively, on the date of
grant, determined using the Black-Scholes option valuation model with the following assumptions:
Risk-free interest rate
Expected cash distribution yield
Historical volatility factor
Expected term
2011
2010
2009
1.9%
5.4%
2.2 – 2.3%
7.2 – 8.2%
1.6 – 2.1%
5.2 – 6.1%
47.3%
46.2 – 46.6%
40.0 – 44.6%
6.0 years
6.0 years
6.0 – 6.5 years
Due to a lack of sufficient historical data, we have chosen to use the simplified method to calculate the expected term of options.
The following table summarizes the activity in our option plan during 2011:
Options to Buy
Holding
Units
Weighted
Average
Exercise Price
Per Option
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
Outstanding as of December 31, 2010
10,217,871
$41.24
6.9
Granted
Exercised
Forfeited
Expired
Outstanding as of December 31, 2011
Exercisable as of December 31, 2011
Vested or expected to vest as of December 31, 2011
70,238
(86,543)
(778,557)
(428,780)
8,994,229
3,316,961
8,994,229
21.75
17.05
55.66
50.59
39.63
36.65
39.63
6.4
5.6
6.4
$—
—
—
The aggregate intrinsic value as of December 31, 2011 on options outstanding, exercisable and expected to vest is negative, and is
therefore presented as zero in the table above. The total intrinsic value of options exercised during 2011, 2010 and 2009 was $0.4
million, $5.6 million and zero, respectively.
Under the fair value method, compensation expense is measured at the grant date based on the estimated fair value of the options
awarded (determined using the Black-Scholes option valuation model) and is recognized over the required service period. We
recorded compensation expense relating to option grants of $36.4 million (which includes $35.2 million of the one-time, non-cash
deferred compensation charge), $9.1 million and $11.9 million, respectively, for the years ended December 31, 2011, 2010 and
114
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2009. As of December 31, 2011, there was $0.9 million of compensation cost related to unvested option grants not yet recognized
in the consolidated statement of income. The cost is expected to be recognized over a weighted average period of 1.3 years.
Restricted Holding Unit Awards
In 2011, 2010 and 2009, restricted Holding Units were awarded to Eligible Directors. These Holding Units give the Eligible Direc-
tors, in most instances, all the rights of other Holding Unitholders subject to such restrictions on transfer as the Board may impose.
We awarded 19,313, 5,275 and 8,210 restricted Holding Units, respectively, in 2011, 2010 and 2009 with grant date fair values of
$21.75, $28.46 and $18.27, respectively, per restricted Holding Unit. All of the restricted Holding Units vest on the third anniver-
sary of grant date or immediately upon a director’s resignation. We fully expensed these awards on each grant date. We recorded
compensation expense relating to these awards of $0.4 million, $0.2 million and $0.1 million, respectively, for the years ended
December 31, 2011, 2010 and 2009.
In accordance with the terms of the employment agreement among Mr. Kraus, Chairman and CEO, the General Partner, Holding
and AllianceBernstein dated December 19, 2008, Mr. Kraus was granted 2,722,052 restricted Holding Units with a grant date fair
value of $19.20. Subject to accelerated vesting provisions in Mr. Kraus’s employment agreement, his restricted Holding Units vest
ratably on each of the first five anniversaries of December 19, 2008, commencing December 19, 2009, provided, with respect to
each installment, Mr. Kraus continues to be employed by AllianceBernstein on the vesting date. The agreement provides for
immediate vesting upon AXA ceasing to control the management of AllianceBernstein’s business or Holding ceasing to be publicly-
traded and certain qualifying terminations of employment, including termination of Mr. Kraus’s employment (i) by
AllianceBernstein without cause, (ii) by Mr. Kraus for good reason (“good reason” generally means actions taken by
AllianceBernstein resulting in a material negative change in Mr. Kraus’s employment relationship, including assignment to
Mr. Kraus of duties materially inconsistent with his position or a requirement that Mr. Kraus report to an officer or employee of
AllianceBernstein instead of reporting directly to the Board), and (iii) due to death or disability. Mr. Kraus’s service requirement
included in his employment agreement was not impacted by the amendment to the employee long-term incentive compensation
award program in the fourth quarter of 2011. We recorded compensation expense relating to the CEO restricted Holding Unit
grant of $10.5 million for each of the years ended December 31, 2011, 2010 and 2009.
In 1993, we established the Century Club Plan, under which employees of AllianceBernstein whose primary responsibilities are to
assist in the distribution of company-sponsored mutual funds and who meet certain sales targets, are eligible to receive an award of
restricted Holding Units. Awards granted prior to December 2010 vested ratably over three years and subsequent awards vest ratably
over four years. The service requirement for Century Club participants was impacted by the amendment to the employee long-
term incentive compensation award program in the fourth quarter of 2011. We awarded 57,828, 95,531 and 46,163 restricted
Holding Units in 2011, 2010 and 2009, respectively. The grant date fair values of these awards were $13.38 in 2011, $27.45 and
$23.72 in 2010 and $12.17 in 2009 per Holding Unit. We recorded compensation expense relating to the Century Club Plan grants
of $3.0 million (which includes $2.2 million of the one-time, non-cash deferred compensation charge), $1.2 million and $2.1 mil-
lion, respectively, for the years ended December 31, 2011, 2010 and 2009.
Beginning in 2009, we awarded restricted Holding Units under the Incentive Compensation Program (see Note 16). We awarded
11,594,207 and 8,345,805 restricted Holding Units in 2010 and 2009, respectively, with grant date fair values ranging between
$23.72 and $32.06 for 2010 and $26.73 in 2009 per restricted Holding Unit.
We also award restricted Holding Units in connection with certain employment and separation agreements with vesting schedules
ranging between two to five years. The fair value of the restricted Holding Units is amortized over the required service period as
employee compensation expense. We awarded 1,649,973, 1,369,751 and 1,443,227 Holding Units in 2011, 2010 and 2009,
respectively, with grant date fair values ranging between $16.29 and $22.71 in 2011, $23.72 and $28.37 in 2010 and $16.79 and
$28.38 in 2009 per restricted Holding Unit. We recorded compensation expense relating to restricted Holding Unit grants in con-
nection with certain employment and separation agreements of $32.9 million (which includes $15.8 million of the one-time,
non-cash deferred compensation charge), $23.2 million and $8.1 million, respectively, for the years ended December 31, 2011,
2010 and 2009.
Annual Report 2011
115
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The following table summarizes the activity of unvested restricted Holding Units during 2011:
Unvested as of December 31, 2010
Granted
Vested
Forfeited
Unvested as of December 31, 2011
Holding
Units
21,326,859
1,741,930
(5,732,057)
(1,762,541)
15,574,191
Weighted Average
Grant Date Fair
Value per Holding
Unit
$24.37
20.52
24.45
24.68
23.88
The total grant date fair value of restricted Holding Units that vested during 2011, 2010 and 2009 was $140.2 million, $73.4 million
and $14.7 million, respectively. As of December 31, 2011, there was $60.9 million of compensation cost related to unvested
restricted Holding Unit awards granted and not yet recognized in the consolidated statement of income. The cost is expected to be
recognized over a weighted average period of 2.7 years.
18. Units Outstanding
Changes in units outstanding for the years ended December 31, 2011 and 2010 were as follows:
Outstanding as of January 1,
Options exercised
Units issued
Units retired
Units forfeited
Outstanding as of December 31,
2011
2010
278,115,232
274,745,592
86,543
—
(354,187)
—
486,017
3,249,861
(365,410)
(828)
277,847,588
278,115,232
In accordance with the Holding Partnership Agreement, when Holding issues Holding Units to AllianceBernstein, Holding is
required to use the proceeds it receives from AllianceBernstein to purchase the equivalent number of newly-issued
AllianceBernstein Units. Holding Units issued pertain to Holding Units newly-issued under the 2010 Plan and could include:
(i) restricted Holding Unit awards to Eligible Directors, (ii) restricted Holding Unit awards to eligible employees, (iii) restricted
Holding Unit awards for recruitment, and (iv) restricted Holding Unit issuances in connection with certain employee separation
agreements.
During 2011 and 2010, we purchased 354,187 and 365,410 AllianceBernstein Units, respectively, in private transactions and retired
them.
19. Income Taxes
AllianceBernstein is a private partnership for federal income tax purposes and, accordingly, is not subject to federal or state corporate
income taxes. However, AllianceBernstein is subject to a 4.0% New York City unincorporated business tax (“UBT”). Domestic
corporate subsidiaries of AllianceBernstein, which are subject to federal, state and local income taxes, are generally included in the
filing of a consolidated federal income tax return with separate state and local income tax returns being filed. Foreign corporate sub-
sidiaries are generally subject to taxes in the foreign jurisdictions where they are located.
In order to preserve AllianceBernstein’s status as a private partnership for federal income tax purposes, AllianceBernstein Units must
not be considered publicly traded. The AllianceBernstein Partnership Agreement provides that all transfers of AllianceBernstein
116
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Units must be approved by AXA Equitable and the General Partner; AXA Equitable and the General Partner approve only those
transfers permitted pursuant to one or more of the safe harbors contained in relevant treasury regulations. If AllianceBernstein Units
were considered readily tradable, AllianceBernstein’s net income would be subject to federal and state corporate income tax
reducing its quarterly distribution to Holding. Furthermore, should AllianceBernstein enter into a substantial new line of business,
Holding, by virtue of its ownership of AllianceBernstein, would lose its status as a “grandfathered” publicly-traded partnership and
would become subject to corporate income tax, which would reduce materially Holding’s net income and its quarterly distributions
to Holding unitholders.
(Loss) earnings before income taxes and income tax expense consist of:
(Loss) earnings before income taxes:
United States
Foreign
Total
Income tax expense:
Partnership UBT
Corporate subsidiaries:
Federal
State and local
Foreign
Current tax expense
Deferred tax (benefit) expense
Income tax expense
Years Ended December 31,
2010
2011
2009
(in thousands)
$ (120,159)
$ 382,463
$ 539,002
(88,310)
83,159
85,483
$(208,469)
$465,622
$624,485
$
8,737
$ 10,363
$
2,420
10,600
1,772
11,411
32,520
(29,422)
2,570
1,401
25,144
39,478
(955)
5,550
632
32,001
40,603
5,374
$
3,098
$ 38,523
$ 45,977
The principal reasons for the difference between the effective tax rates and the UBT statutory tax rate of 4.0% are as follows:
2011
Years Ended December 31,
2010
(in thousands)
2009
UBT statutory rate
Corporate subsidiaries’ federal, state, local and foreign income taxes
Effect of ASC 740 adjustments, miscellaneous taxes, and other
Income not taxable resulting from use of UBT business apportionment factors and effect
of deferred compensation charge
Income tax expense and effective tax rate
$(8,339)
4.0%
$ 18,625
4.0%
$ 24,979
2,998
2,560
5,879
$3,098
(1.4)
(1.3)
(2.8)
(1.5)
25,544
1,445
(7,091)
$38,523
5.5
0.3
(1.5)
8.3
32,585
(1,988)
(9,599)
$45,977
4.0%
5.2
(0.3)
(1.5)
7.4
Income tax expenses decreased $35.4 million, or 92.0%, in 2011 compared to 2010. Prior to the fourth quarter 2011 deferred
compensation charge of $587.1 million, our estimate of our full year 2011 effective tax rate was 7.1%. As a result of the deferred
compensation charge, as well as the immediate recognition of the 2011 deferred compensation incentive awards, we had a fourth
quarter 2011 effective tax rate of 3.8% (pre-tax loss of $540.2 million and income tax benefit of $20.3 million that resulted in a full-
year 2011 pre-tax loss of $208.5 million and income tax expense of $3.1 million). The deferred compensation charge resulted in a
one-time change to the historical mix of business between AllianceBernstein, which incurs a 4.0% UBT, and its corporate sub-
sidiaries that incur corporate level income taxes. In addition, the recorded tax benefit associated with the future deliveries of vested
Holding Units was based on the current market value in most jurisdictions, which was lower than the grant price of the awards
included in the deferred compensation charge. Both contributed to us incurring tax expense of $3.1 million rather than a benefit at
the full year estimated effective tax rate of 7.1%. Income tax expenses decreased $7.5 million, or 16.2%, in 2010 compared to 2009.
Annual Report 2011
117
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The decrease was primarily the result of lower pre-tax earnings, partially offset by a higher effective tax rate due to a higher pro-
portion of pre-tax earnings from our foreign subsidiaries where tax rates are generally higher.
We recognize the effects of a tax position in the financial statements only if, as of the reporting date, it is “more likely than not” to
be sustained based solely on its technical merits. In making this assessment, we assume that the taxing authority will examine the tax
position and have full knowledge of all relevant information.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Years Ended December 31,
2010
2011
2009
Balance as of beginning of period
Additions for prior year tax positions
Reductions for prior year tax positions
Additions for current year tax positions
Reductions for current year tax positions
Reductions related to closed years/settlements with tax authorities
Balance as of end of period
(in thousands)
$5,326
190
—
761
—
$7,365
—
—
823
—
(2,249)
$4,028
(2,862)
$5,326
$8,805
174
—
1,182
(52)
(2,744)
$7,365
The amount of unrecognized tax benefits as of December 31, 2011, 2010 and 2009 when recognized, is recorded as a reduction to
income tax expense and reduces the company’s effective tax rate.
Interest and penalties, if any, relating to tax positions are recorded in income tax expense on the consolidated statements of income.
The total amount of interest expense (credit) recorded in income tax expense during 2011, 2010 and 2009 was $(0.2) million, $(0.1)
million and $(0.1) million, respectively. The total amount of accrued interest recorded on the consolidated statements of financial
condition as of December 31, 2011, 2010 and 2009 are $0.5 million, $0.7 million and $0.8 million, respectively. There were no
accrued penalties as of December 31, 2011, 2010 or 2009.
The company is generally no longer subject to U.S. federal, or state and local income tax examinations by tax authorities for any
year prior to 2008, except as set forth below.
The Internal Revenue Service initiated an examination of our domestic corporate subsidiaries’ federal tax returns for 2009 in the
fourth quarter of 2011. This examination is in the preliminary stages and we do not believe an increase in the reserve is necessary.
In addition, examinations of three of AllianceBernstein’s domestic corporate subsidiaries were initiated in 2010 and 2011 by state
and local taxing authorities. These examinations remain in progress and we do not believe an increase in the reserve is necessary. In
addition, an assessment has been received resulting from a state and local examination of AllianceBernstein’s corporate subsidiary tax
returns for years 2001 through 2004. This matter remains in the appeal stage, however, we do not believe an increase in the existing
reserve is necessary.
During 2010, the National Tax Agency notified us of an examination of AllianceBernstein’s Japanese subsidiary tax returns for the
years 2007 to 2009. The examination was completed in the first quarter of 2011, resulting in a tax payment of less than $0.1 million.
The taxing authorities in France also completed their examination of AllianceBernstein’s French subsidiary tax returns, resulting in
no additional tax payments.
The Canadian Revenue Agency continues their examination of AllianceBernstein’s Canadian subsidiary tax returns for the years
2005-2007. We have been advised verbally that there will be no change to the tax filing for the year 2005 but that no determi-
nation has yet been made with respect to years 2006 and 2007. We do not believe an increase to the reserve is necessary. Currently,
there are no other income tax examinations at our significant non-U.S. subsidiaries except as noted above. Years that remain open
and may be subject to examination vary under local law, and range from one to seven years.
118
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
The State of New York began an examination of AllianceBernstein’s tax returns for the years 2005 and 2006 during 2009. The
examinations were not completed and the statue of limitations has expired with respect to these years. During the third quarter of
2011, the City of New York notified us of an examination of AllianceBernstein’s UBT returns for the years 2007 and 2008. The
examination has yet to begin and we do not believe an increase in the reserve is necessary.
Subject to the results of the examinations for the tax year 2008, under our existing policy for determining whether a tax position is
effectively settled for purposes of recognizing previously unrecognized tax benefits, there is the possibility that recognition of
unrecognized tax benefits of approximately $1.3 million including accrued interest could occur over the next twelve months.
Adjustment to the reserve could occur in light of changing facts and circumstances with respect to the aforementioned on-going
examinations.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. The tax effect of significant items comprising the net
deferred tax asset (liability) is as follows:
Deferred tax asset:
Differences between book and tax basis:
Benefits from net operating loss carryforwards
Deferred compensation plans
Other, primarily accrued expenses deductible when paid
Less: valuation allowance
Deferred tax asset
Deferred tax liability:
Differences between book and tax basis:
Intangible assets
Translation adjustment
Other, primarily undistributed earnings of certain foreign subsidiaries
Deferred tax liability
Net deferred tax asset (liability)
December 31,
2011
2010
(in thousands)
$ 5,138
$ —
35,716
14,398
55,252
(5,138)
50,114
14,325
9,413
330
24,068
$26,046
15,431
7,183
22,614
—
22,614
14,575
8,303
2,979
25,857
$(3,243)
A valuation allowance of $5.1 million has been established due to the uncertainty of realizing certain net operating loss (“NOL”)
carryforwards given the future losses expected to be incurred by the applicable subsidiaries. We had NOL carryforwards at
December 31, 2011 of approximately $31.1 million in certain foreign locations with an indefinite expiration period.
The deferred tax asset is included in other assets. Management has determined that realization of the deferred tax asset is more likely
than not based on anticipated future taxable income.
The company provides income taxes on the undistributed earnings of non-U.S. corporate subsidiaries except to the extent that such
earnings are permanently invested outside the United States. As of December 31, 2011, $573.8 million of accumulated undis-
tributed earnings of non-U.S. corporate subsidiaries were permanently invested. At existing applicable income tax rates, additional
taxes of approximately $20.1 million, net of foreign tax credits, would need to be provided if such earnings were remitted.
Annual Report 2011
119
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
20. Business Segment Information
Management has assessed the requirements of ASC 280, Segment Reporting, and determined that, because we utilize a consolidated
approach to assess performance and allocate resources, we have only one operating segment. Enterprise-wide disclosures as of and
for the years ended December 31, 2011, 2010 and 2009 were as follows:
Services
Net revenues derived from our investment management, research and related services were as follows:
Years Ended December 31,
2010
2011
2009
Institutions
Retail
Private client
Bernstein research services
Other
Total revenues
Less: Interest expense
Net revenues
(in millions)
$ 765
1,069
651
431
37
2,953
4
$ 617
1,093
652
437
(47)
2,752
2
$ 811
888
590
435
187
2,911
4
$2,750
$2,949
$2,907
Our AllianceBernstein Global High Yield Portfolio, an open-end fund incorporated in Luxembourg (ACATEUH: LX), generated
approximately 10% and 7% of our investment advisory and service fees and 11% and 8% of our net revenues during 2011 and 2010,
respectively.
Geographic Information
Net revenues and long-lived assets, related to our U.S. and international operations, as of and for the years ended December 31,
were:
Net revenues:
United States
International
Total
Long-lived assets:
United States
International
Total
Major Customers
2011
2010
2009
(in millions)
$ 1,725
1,025
$2,750
$ 1,933
1,016
$2,949
$ 2,038
869
$2,907
$ 3,403
$ 3,448
$ 3,488
74
74
79
$3,477
$3,522
$3,567
Company-sponsored mutual funds are distributed to individual investors through broker-dealers, insurance sales representatives,
banks, registered investment advisers, financial planners and other financial intermediaries. Certain subsidiaries of AXA, including
AXA Advisors, LLC, have entered into selected dealer agreements with AllianceBernstein Investments and have been responsible
for 1%, 2% and 2% of our open-end mutual fund sales in 2011, 2010 and 2009, respectively. During 2011, Hong Kong and Shang-
hai Banking Corporation (HSBC), UBS AG and Bank of America Merrill Lynch (or their respective subsidiaries) were responsible
120
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
for approximately 14%, 7% and 5%, respectively, of our open-end mutual fund sales. Neither AXA nor these unaffiliated companies
are 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.
AXA and the general and separate accounts of AXA Equitable (including investments by the separate accounts of AXA Equitable in
the funding vehicle EQ Advisors Trust) accounted for approximately 4%, 5% and 5% of total revenues for the years ended
December 31, 2011, 2010 and 2009, respectively. No single institutional client other than AXA and its subsidiaries accounted for
more than 1% of total revenues for the years ended December 31, 2011, 2010 and 2009.
21. Related Party Transactions
Mutual Funds
Investment management, distribution, shareholder and administrative, and brokerage services are provided to individual investors by
means of retail mutual funds sponsored by our company, our subsidiaries and our affiliated joint venture companies. Substantially all
of these services are provided under contracts that set forth the services to be provided and the fees to be charged. The contracts are
subject to annual review and approval by each of the mutual funds’ boards of directors or trustees and, in certain circumstances, by
the mutual funds’ shareholders. Revenues for services provided or related to the mutual funds are as follows:
Years Ended December 31,
2010
2011
2009
Investment advisory and services fees
Distribution revenues
Shareholder servicing fees
Other revenues
Bernstein research services
AXA and its Subsidiaries
(in thousands)
$864,578
351,621
91,931
5,643
81
$809,494
$644,039
338,597
93,148
5,726
121
277,328
90,141
6,962
1,138
We provide investment management and certain administration services to AXA and its subsidiaries. In addition, AXA and its sub-
sidiaries distribute company-sponsored mutual funds, for which they receive commissions and distribution payments. Sales of
company-sponsored mutual funds through AXA and its subsidiaries, excluding cash management products, aggregated approx-
imately $0.4 billion, $0.5 billion and $0.3 billion for the years ended December 31, 2011, 2010 and 2009, respectively. Also, we are
covered by various insurance policies maintained by AXA subsidiaries and we pay fees for technology and other services provided
Annual Report 2011
121
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
by AXA and its subsidiaries that are included in General and Administrative expenses. Aggregate amounts included in the con-
solidated financial statements for transactions with AXA and its subsidiaries are as follows:
Revenues:
Investment advisory and services fees
Bernstein research services
Other revenues
Expenses:
Commissions and distribution payments to financial intermediaries
General and administrative
Other
Balance Sheet:
Institutional investment advisory and services fees receivable
Prepaid insurance
Other due (to) from AXA and its subsidiaries
Years Ended December 31,
2010
2011
2009
(in thousands)
$ 114,266
$ 135,004
$ 131,181
802
599
492
583
71
568
$115,667
$136,079
$131,820
$
7,411
$
8,896
$
8,637
22,191
1,467
21,256
264
17,285
368
$ 31,069
$ 30,416
$ 26,290
$
9,004
1,411
(4,319)
$ 18,654
$ 11,287
1,199
(4,732)
1,199
(3,888)
$ 6,096
$ 15,121
$ 8,598
During the first quarter of 2011, AXA sold its 50% interest in our consolidated Australian joint venture to an unaffiliated third party
as part of a larger transaction. On March 31, 2011, we purchased that 50% interest from the unaffiliated third party making our
Australian entity an indirect wholly-owned subsidiary. Investment advisory and services fees earned by this company were approx-
imately $8.5 million for the first three months of 2011, and $37.1 million and $40.9 million for the years ended December 31, 2010
and 2009, respectively, of which approximately $3.0 million, $12.8 million and $14.0 million, respectively, were from AXA affili-
ates and are included in the table above. Minority interest recorded for this company was $0.4 million for the first three months of
2011, and $3.6 million and $3.7 million for the years ended December 31, 2010 and 2009, respectively.
AllianceBernstein Venture Fund I, L.P. was launched during 2006. It seeks to achieve its investment objective, which is long-term
capital appreciation through equity and equity-related investments, by acquiring early-stage growth companies in private trans-
actions. One of our subsidiaries is the general partner of the fund and, as a result, the fund is included in our consolidated financial
statements, with approximately $59 million, $101 million and $163 million of investments on the consolidated statements of finan-
cial condition as of December 31, 2011, 2010 and 2009, respectively. AXA Equitable holds a 10% limited partnership interest in this
fund.
The General Partner is obligated to make capital contributions to AllianceBernstein in amounts equal to benefits paid under the
Capital Accumulation Plan and the Contractual Arrangements (see Note 16). Amounts paid by the General Partner to
AllianceBernstein for the Capital Accumulation Plan and the Contractual Arrangements for the years ended December 31, 2011,
2010 and 2009 was $4.8 million, $4.9 million and $4.9 million, respectively.
122
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Other Related Parties
The consolidated statements of financial condition include a net receivable or payable from Holding as a result of cash transactions
for fees and expense reimbursements. The net balance included in the consolidated statements of financial condition as of
December 31, 2011, 2010 and 2009 are as follows:
Due to Holding, net
Due from Holding, net
22. Comprehensive (Loss) Income
Comprehensive (loss) income consisted of:
Net (loss) income
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments
Foreign currency translation adjustment
Changes in retirement plan related items
Comprehensive (loss) income
Comprehensive (loss) income in consolidated entities attributable to non-controlling interests
December 31,
2010
(in thousands)
$1,277
$ —
2011
$5,479
$ —
2009
$ —
$1,484
Years Ended December 31,
2010
2011
2009
(in thousands)
$ (211,567)
$ 427,099
$ 578,508
561
397
(15,104)
(225,713)
(37,316)
456
2,960
(10,088)
420,427
(12,053)
4,391
43,172
6,955
633,026
26,614
Comprehensive (loss) income attributable to AllianceBernstein Unitholders
$(188,397)
$432,480
$606,412
23. Acquisitions
On October 1, 2010, we acquired SunAmerica’s alternative investment group, an experienced team that manages a portfolio of
hedge fund and private equity fund investments. The purchase price of this acquisition, accounted for under ASC 805, Business
Combinations, was $49.0 million, consisting of $14.3 million of cash payments, $2.5 million of assumed deferred compensation
liabilities and $32.2 million of net contingent consideration payable. The net contingent consideration payable consists of the net
present value of three annual payments of $1.5 million to SunAmerica based on its assets under management transferred to us in the
acquisition and the net present value of projected revenue sharing payments of $35.5 million based on projected newly-raised assets
under management by the acquired group. This contingent consideration payable was offset by $4.1 million of performance-based
fees earned in 2010 determined to be pre-acquisition consideration. The excess of the purchase price over the fair value of identifi-
able assets acquired resulted in the recognition of $46.1 million of goodwill. During 2011, no adjustments were made to the con-
tingent consideration payable.
During the first quarter of 2011, AXA sold its 50% interest in our consolidated Australian joint venture to an unaffiliated third party
as part of a larger transaction. On March 31, 2011, we purchased that 50% interest from the unaffiliated third party for $21.4 mil-
lion, making our Australian entity an indirect wholly-owned subsidiary. As a result, we eliminated $32.1 million of non-controlling
interests in consolidated entities and increased partner’s capital attributable to AllianceBernstein unitholders by $10.7 million.
On May 31, 2011, we acquired Pyrander Capital Management, LLC, an investment management company jointly owned by Cax-
ton Associates L.P. (“Caxton”) and Kurt Feuerman, a Caxton portfolio manager. We hired Mr. Feuerman and members of his team
Annual Report 2011
123
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
from Caxton, and acquired investment management contracts of the investment vehicles the team manages. The purchase price of
this acquisition, accounted for under ASC 805, Business Combinations, was $10.2 million, consisting of $5.5 million of cash pay-
ments, $4.4 million payable over the next two years (if Mr. Feuerman remains with the company) and a miscellaneous liability of
$0.3 million. The excess of the purchase price over the fair value of identifiable assets acquired resulted in the recognition of $5.7
million of goodwill. We also recorded $2.5 million of indefinite-lived intangible assets relating to the acquired fund’s investment
management contracts and $2.0 million of definite-lived intangible assets relating to separately managed accounts’ relationships.
Mr. Feuerman also received two restricted Holding unit awards; one with a three-year service condition (the award was amended
in December 2011 to eliminate the service condition) and one with a five-year service condition and performance condition (assets
under management targets). As a result of the service conditions at the time of the acquisition, for accounting purposes these awards
are considered compensation expense, not part of the purchase price. Also, we are contingently liable to pay Caxton an additional
$4.4 million if Mr. Feuerman’s five-year service condition and performance condition are met.
On November 30, 2011, we acquired Taiwan International Investment Management Co. (“TIIM”) to expand our business in the
Taiwan market. The purchase price of this acquisition, accounted for under ASC 805, Business Combinations, was a cash payment of
$15.0 million, net of cash acquired. The valuation of the fair value of assets and liabilities acquired has been determined provision-
ally. The excess of the purchase price over the current fair value of identifiable net assets acquired resulted in the recognition of $9.8
million of goodwill as of December 31, 2011. Adjustments, if any, will be recorded to goodwill upon the completion of the
valuation.
The 2010 and 2011 acquisitions have not had a significant impact on 2010 and 2011 revenues and earnings. As a result, we have not
provided supplemental pro forma information.
24. Accounting Pronouncements
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement. The changes to the existing guidance include how and
when the valuation premise of highest and best use applies, the application of premiums and discounts, as well as new required dis-
closures. This standard is effective for interim and annual periods beginning after December 15, 2011 and is not expected to have a
material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option
to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present
items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements.
This standard will not change the items that constitute net income and other comprehensive income, when an item of other com-
prehensive income must be reclassified to net income or the earnings per unit computation (which will continue to be based on net
income). ASU No. 2011-05 is effective for interim and annual periods beginning after December 15, 2011 and is not expected to
have a material impact on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment. The revised standard is intended to reduce
the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a “qualitative” assess-
ment to determine whether further impairment testing is necessary. The revised standard is effective for annual and interim good-
will impairment tests performed for fiscal years beginning after December 15, 2011 and is not expected to have a material impact on
our consolidated financial statements.
In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The amended standard requires
an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand
the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods
beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures
required by those amendments retrospectively for all comparative periods presented. This amendment is not expected to have a
material impact on our consolidated financial statements.
124
AllianceBernstein
AllianceBernstein L.P. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
25. Quarterly Financial Data (Unaudited)
Net revenues
Net (loss) income attributable to AllianceBernstein Unitholders
Basic net (loss) income per AllianceBernstein Unit(1)
Diluted net (loss) income per AllianceBernstein Unit(1)
Cash distributions per AllianceBernstein Unit(2)(3)
Net revenues
Net income attributable to AllianceBernstein Unitholders
Basic net income per AllianceBernstein Unit(1)
Diluted net income per AllianceBernstein Unit(1)
Cash distributions per AllianceBernstein Unit(2)
Quarters Ended 2011
December 31
September 30
June 30
March 31
(in thousands, except per unit amounts)
$ 624,978
$(516,360)
$
$
$
(1.84)
(1.84)
0.17
$641,529
$ 90,981
$
$
$
0.32
0.32
0.32
$727,994
$114,139
$
$
$
0.41
0.41
0.41
$755,390
$136,472
$
$
$
0.49
0.48
0.48
Quarters Ended 2010
December 31
September 30
June 30
March 31
(in thousands, except per unit amounts)
$ 777,561
$ 136,519
$
$
$
0.49
0.49
0.49
$757,567
$ 51,515
$
$
$
0.19
0.18
0.18
$688,343
$106,119
$
$
$
0.38
0.38
0.38
$725,086
$148,266
$
$
$
0.53
0.53
0.53
(1) Basic and diluted net (loss) income per unit are computed independently for each of the periods presented. Accordingly, the sum of the quarterly net (loss)
income per unit amounts may not agree to the total for the year.
(2) Declared and paid during the following quarter.
(3) The 2011 distribution excludes the $587.1 million one-time, non-cash deferred compensation charge.
Annual Report 2011
125
Report of Independent Registered Public Accounting Firm
To the General Partner and Unitholders
AllianceBernstein L.P.:
In our opinion, the accompanying consolidated statements of financial condition and the related consolidated statements of income,
changes in partners’ capital and comprehensive income and cash flows present fairly, in all material respects, the financial position of
AllianceBernstein L.P. and its subsidiaries (“AllianceBernstein”) at December 31, 2011 and 2010, and the results of their operations
and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, AllianceBernstein maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). AllianceBernstein’s man-
agement is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over
Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on
AllianceBernstein’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial state-
ments included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement pre-
sentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over finan-
cial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projec-
tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
February 10, 2012
126
AllianceBernstein
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Neither AllianceBernstein nor Holding had any changes in or disagreements with accountants in respect of accounting or financial
disclosure.
Annual Report 2011
127
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Each of Holding and AllianceBernstein maintains a system of disclosure controls and procedures that is designed to ensure that
information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported in a
timely manner, and (ii) accumulated and communicated to management, including the Chief Executive Officer and the Interim
Chief Financial Officer, to permit timely decisions regarding our disclosure.
As of the end of the period covered by this report, management carried out an evaluation, under the supervision and with the partic-
ipation of the Chief Executive Officer and the Interim Chief Financial Officer, of the effectiveness of the design and operation of
disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and the Interim Chief Financial Officer
concluded that the disclosure controls and procedures are effective.
Management’s Report on Internal Control Over Financial Reporting
Management acknowledges its responsibility for establishing and maintaining adequate internal control over financial reporting for
each of Holding and AllianceBernstein.
Internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive offi-
cer and principal financial officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”) and
includes those policies and procedures that:
• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accord-
ance with GAAP and receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems
determined to be effective can provide only reasonable assurance with respect to the reliability of financial statement preparation and
presentation. Because of these inherent limitations, internal control over financial reporting may not prevent or detect misstate-
ments. Projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Management assessed the effectiveness of Holding’s and AllianceBernstein’s internal control over financial reporting as of
December 31, 2011. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Orga-
nizations of the Treadway Commission in Internal Control-Integrated Framework (“COSO criteria”).
Based on its assessment, management concluded that, as of December 31, 2011, each of Holding and AllianceBernstein maintained
effective internal control over financial reporting based on the COSO criteria.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the 2011 financial statements included
in this Form 10-K, has issued an attestation report on the effectiveness of each of Holding’s and AllianceBernstein’s internal control
over financial reporting as of December 31, 2011. These reports can be found in Item 8.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting occurred during the fourth quarter of 2011 that materially affected, or is
reasonably likely to materially affect, our internal control over financial reporting.
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AllianceBernstein
Item 9B. Other Information
Both AllianceBernstein and Holding reported all information required to be disclosed on Form 8-K during the fourth quarter of
2011.
Annual Report 2011
129
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
General Partner
The Partnerships’ activities are managed and controlled by the General Partner. The Board of the General Partner (“Board”) acts as
the Board of each of the Partnerships. The General Partner has agreed that it will conduct no active business other than managing
the Partnerships, although it may make certain investments for its own account. Neither AllianceBernstein Unitholders nor Holding
Unitholders have any rights to manage or control the Partnerships or to elect directors of the General Partner. The General Partner
is an indirect, wholly-owned subsidiary of AXA.
The General Partner does not receive any compensation from the Partnerships for services rendered to them as their general part-
ner. The General Partner holds a 1% general partnership interest in AllianceBernstein and 100,000 units of general partnership
interest in Holding. Each general partnership unit in Holding is entitled to receive distributions equal to those received by each
Holding Unit.
The General Partner is entitled to reimbursement by AllianceBernstein for any expenses it incurs in carrying out its activities as
general partner of the Partnerships, including compensation paid by the General Partner to its directors and officers (to the extent
such persons are not compensated directly by AllianceBernstein).
Board of Directors
Our Board currently consists of 14 members, including our Chief Executive Officer, six senior executives of AXA and certain of its
other subsidiaries, one former senior executive of AXA Financial, and six independent members. While we do not have a formal,
written diversity policy in place, we believe that an effective board consists of a diverse group of individuals who collectively possess
a variety of complementary skills and perspectives and who will work together to provide a board with the needed leadership and
experience to successfully guide our Company. As set forth in its charter, the Corporate Governance Committee of the Board
(“Governance Committee”) assists the Board in identifying and evaluating such candidates, determining Board composition,
developing and monitoring a process to assess Board effectiveness, developing and implementing corporate governance guidelines,
and reviewing programs relating to matters of corporate responsibility.
As we indicate below, our directors have a combined wealth of leadership experience derived from extensive service leading large,
complex organizations in their roles as either senior executives or board members and in government and academia. Each has the
integrity, business judgment, collegiality and commitment that are among the essential characteristics for a member of our Board.
Collectively, they have substantive knowledge and skills applicable to our business, including expertise in regulatory; public
accounting and financial reporting; finance; risk management; business development; operations; strategic planning; management
development, succession planning and compensation; corporate governance; investor relations; public policy; international; and
financial services areas.
As of February 10, 2012, the members of the Board were as follows:
Peter S. Kraus
Mr. Kraus, age 59, was elected Chairman of the Board of the General Partner and Chief Executive Officer of the General Partner,
AllianceBernstein and Holding in December 2008. Mr. Kraus has in-depth experience in financial services, including investment
banking, asset management and private wealth management. He served as an executive vice president, the head of global strategy
and a member of the Management Committee of Merrill Lynch & Company Inc. (“Merrill Lynch”) from September 2008
through December 2008. Mr. Kraus spent 22 years with Goldman Sachs Group Inc. (“Goldman”), where he most recently served
as co-head of the Investment Management Division and a member of the Management Committee, as well as head of firm-wide
strategy and chairman of the Strategy Committee. Mr. Kraus also served as co-head of the Financial Institutions Group. He was
named a partner at Goldman in 1994 and managing director in 1996. In April 2010, Mr. Kraus was appointed a member of the
Management Committee of AXA, which was formed by Mr. de Castries in April 2010 to assist him with the operational manage-
ment of AXA. He was named a Director of AXA Financial, AXA Equitable, MONY Life Insurance Company (a wholly-owned
subsidiary of AXA Financial, “MONY”) and MONY Life Insurance Company of America (a wholly-owned subsidiary of MONY,
“MLOA”) in February 2009. He is not compensated for serving in these roles for AXA and its subsidiaries. Mr. Kraus is also
130
AllianceBernstein
Chairman of the Investment Committee of Trinity College, Chairman of the Board of Overseers of CalArts, Co-Chair of the
Friends of Carnegie International, a member of the board of directors of Lincoln Center for the Performing Arts and the chairman
of Lincoln Center’s Art Committee, a member of the board of Keewaydin Camp, and a member of the board of Young Audiences,
Inc., a non-profit organization that works with educational systems, the arts community and private and public sectors to provide
arts education to children.
Mr. Kraus brings to the Board extensive knowledge of our industry and in-depth experience in financial services, including experi-
ence as co-head of the Investment Management Division and head of firm-wide strategy at Goldman.
Dominique Carrel-Billiard
Mr. Carrel-Billiard, age 45, was elected a Director of the General Partner in July 2004. He has been Chief Executive Officer of
AXA Investment Managers S.A. (“AXA IM”), a subsidiary of AXA, since June 2006 and was named to the AXA Group Executive
Committee in January 2009. He joined AXA in June 2004 as the Senior Vice President-Business Support and Development in
charge of AXA Financial, asset management and reinsurance. Prior to joining AXA, Mr. Carrel-Billiard was a Partner of
McKinsey & Company (“McKinsey”), a strategic consulting firm, where he specialized in the financial services industry. During
the 12 years he spent at McKinsey, Mr. Carrel-Billiard worked on a broad array of topics (including insurance, asset gathering and
management, and corporate and investment banking) for the top management of international banks, insurance companies, includ-
ing AXA, and other financial services groups. Mr. Carrel-Billiard is a member of the boards of directors of various other privately-
held subsidiaries and affiliates of the AXA Group.
Mr. Carrel-Billiard brings to the Board extensive financial services and strategic planning experience, as well as a strong global per-
spective in our industry as the Chief Executive Officer of AXA IM, a subsidiary of the AXA Group, managing client assets of more
than $650 billion as of December 31, 2011.
Christopher M. Condron
Mr. Condron, age 64, was elected a Director of the General Partner in May 2001. Formerly Director, President and Chief Execu-
tive Officer of AXA Financial since May 2001, he retired from his AXA positions effective January 1, 2011. Prior to retiring, he
was also Chairman of the Board, Chief Executive Officer and President of AXA Equitable and a member of the Management
Committee of AXA. In addition, Mr. Condron was Chairman of the Board, President and Chief Executive Officer of MONY and
MLOA, which AXA Financial acquired in July 2004. During 2010, he assumed the additional responsibility of overseeing AXA’s
Global Life & Savings and Health businesses. Prior to joining AXA Financial, Mr. Condron served as both President and Chief
Operating Officer of Mellon Financial Corporation (“Mellon”), from 1999, and as Chairman and Chief Executive Officer of The
Dreyfus Corporation, a subsidiary of Mellon, from 1995. Mr. Condron has been a member of the Board of Directors of Keefe
Bruyette & Woods, Inc. (NYSE: KBW), a full-service investment bank and broker-dealer, since January 2007. He also serves as
Chairman of Keefe Bruyette & Woods’s compensation committee and as a member of its audit committee and its corporate gover-
nance and nominating committee.
Mr. Condron brings to the Board extensive financial services, insurance, sales and sell-side experience achieved from his service to
AXA and Mellon, as well as his directorship at Keefe Bruyette & Woods.
Henri de Castries
Mr. de Castries, age 57, was elected a Director of the General Partner in October 1993. In April 2010, in connection with a change
in AXA’s governance structure from dual boards (the Supervisory Board and the Management Board) to a single Board of
Directors, Mr. de Castries was appointed Chairman and Chief Executive Officer of AXA. From May 2000 through the change in
AXA’s governance, Mr. de Castries was Chairman of the AXA Management Board. Prior thereto, he served AXA in various
capacities, including Vice Chairman of the AXA Management Board; Senior Executive Vice President-Financial Services and Life
Insurance Activities in the United States, Germany, the United Kingdom and Benelux from 1996 to 2000; Senior Executive Vice
President-Financial Services and Life Insurance Activities from 1993 to 1996; Corporate Secretary from 1991 to 1993; and Central
Director of Finances from 1989 to 1991. Before joining AXA, Mr. de Castries was part of the French Finance Ministry Inspection
Office. He is a director or officer of AXA Financial, AXA Equitable and various other privately-held subsidiaries and affiliates of the
AXA Group. Mr. de Castries was elected Vice Chairman of AXA Financial in February 1996 and was elected Chairman of AXA
Financial in April 1998.
Annual Report 2011
131
Mr. de Castries brings to the Board his extensive experience as an AXA executive and, prior thereto, his financial and public sector
experience gained from working in French government. The Board also benefits from his invaluable perspective as the Chairman
and Chief Executive Officer of AXA.
Denis Duverne
Mr. Duverne, age 58, was elected a Director of the General Partner in February 1996. In April 2010, he was appointed the Deputy
Chief Executive Officer of AXA and a member of the Board of Directors of AXA. In January 2010, he was selected to oversee
AXA Group strategy, finance and operations with AXA’s Chief Operating Officer, Chief Financial Officer and Chief Risk Officer
reporting to him. Mr. Duverne was a member of the AXA Management Board from February 2003 through the change in AXA’s
governance in April 2010. He was Chief Financial Officer of AXA from May 2003 through December 2009. From January 2000 to
May 2003, Mr. Duverne served as Group Executive Vice President-Finance, Control and Strategy. Mr. Duverne joined AXA as
Senior Vice President in 1995. He is a Director of AXA Financial, AXA Equitable and various other privately-held subsidiaries and
affiliates of the AXA Group.
Mr. Duverne brings to the Board the highly diverse experience he has garnered throughout the years from the many key roles he
has served for AXA.
Richard S. Dziadzio
Mr. Dziadzio, age 48, was re-elected a Director of the General Partner in May 2007. (He had previously served on the Board from
February 2001 to May 2004.) The Chief Financial Officer of AXA Financial and AXA Equitable since January 2007, Mr. Dziadzio
was elected Senior Executive Vice President of AXA Equitable in January 2010. He joined AXA Financial and AXA Equitable in
July 2004 and was elected Executive Vice President in September 2004. He became Deputy Chief Financial Officer of AXA
Financial and AXA Equitable in September 2005. Prior to joining AXA Financial, Mr. Dziadzio held various positions with
subsidiaries and affiliates of the AXA Group, which he originally joined in 1994 as a senior analyst in the corporate finance
department, working primarily on mergers and acquisitions (“M&A”). In 1997, he was promoted to corporate finance officer,
handling corporate finance activities for the group in insurance and asset management in the U.S. and U.K. In 1998, Mr. Dziadzio
became head of finance and administration for AXA Real Estate Investment Managers, a subsidiary of AXA. From February 2001
to June 2004, he was responsible for business support and development for AXA Financial, AllianceBernstein and AXA IM.
Mr. Dziadzio brings to the Board financial, M&A and investment expertise from the various diverse positions he has held within
AXA’s family of companies. As a former Business Support and Development representative, he also brings to the Board expertise on
how our Company can operate more efficiently and consistently with AXA’s overall objectives and strategy.
Steven G. Elliott
Mr. Elliott, age 65, was elected a Director of the General Partner in January 2011. Until his retirement in December 2010,
Mr. Elliott had served as Senior Vice Chairman of The Bank of New York Mellon (“BNY Mellon”) since 1998. In this role, he
helped oversee numerous company-wide growth initiatives and co-headed the integration of The Bank of New York and Mellon
from 2007 to 2009. Mr. Elliott was Chief Financial Officer of Mellon from 1990 to 2002 and Head of Finance from 1987 to 1990,
while also leading some of Mellon’s diverse lines of business, including asset servicing, securities lending, global cash management
and institutional banking. Before joining BNY Mellon, he held senior positions at First Commerce Corporation (1986-87), Crocker
National Bank (1984-86), Continental Illinois National Bank (1977-84) and United California Bank (1974-77). Since January 2011,
he has been a member of the boards of directors of Huntington Bancshares Inc. (NASDAQ: HBAN) and PPL Corporation (NYSE:
PPL). Since April 2011, he has served as Chairman of PPL Corporation’s risk oversight committee and, since January 2012, he also
has served as Chairman of PPL Corporation’s audit committee. Mr. Elliott served as a director of Mellon (NYSE: MEL) from 2001
to the July 2007 merger with The Bank of New York and then as a director of BNY Mellon (NYSE: BK) through July 2008. He
has been a certified public accountant since 1973.
Mr. Elliott, an audit committee financial expert, brings to the Board the four decades of auditing and banking expertise he gained in
the financial services industry.
Deborah S. Hechinger
Ms. Hechinger, age 61, was elected a Director of the General Partner in May 2007. Currently an independent consultant on
non-profit governance, she was President and Chief Executive Officer of BoardSource, a leading governance resource for
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AllianceBernstein
non-profit organizations, from 2003 to 2007. From 2004 to 2007, Ms. Hechinger also served as co-convener of the Governance
and Fiduciary Responsibilities work group, one of the five groups established by the Panel on the Nonprofit Sector to make
recommendations to Congress on ways to improve the governance and accountability of non-profit organizations. She also served
on the Advisory Board for the Center for Effective Philanthropy and was a Member of the Ethics and Accountability Committee at
Independent Sector. Prior to joining BoardSource, Ms. Hechinger was the Executive Vice President of the World Wildlife Fund, a
large, global conservation organization, where she oversaw all fundraising, communication and operations activities. She has also
served as a Deputy Comptroller and as Director of the Securities and Corporate Practices Division at the Office of the Comptroller
of the Currency and has held senior executive positions in the Division of Enforcement at the SEC. A graduate of Georgetown Law
School, Ms. Hechinger has been a member in good standing of the District of Columbia Bar Association since 1975.
Ms. Hechinger brings to the Board the significant knowledge of corporate governance matters and public policy she has achieved
through her extensive experience in both the private and public sectors.
Weston M. Hicks
Mr. Hicks, age 55, was elected a Director of the General Partner in July 2005. He has been a Director and the President and chief
executive officer of Alleghany Corporation (NYSE: Y, “Alleghany”), an insurance and diversified financial services holding com-
pany, since December 2004 and was Executive Vice President of Alleghany from October 2002 until December 2004. From March
2001 through October 2002, Mr. Hicks was Executive Vice President and Chief Financial Officer of The Chubb Corporation.
Mr. Hicks brings to the Board extensive financial expertise, including his unique perspective as the chief executive officer of an
unaffiliated publicly-traded company, his background as a professional investor and CFA charter holder, and his ten years of experi-
ence as an equity research analyst.
Kevin Molloy
Mr. Molloy, age 41, was elected a Director of the General Partner in January 2011. He has been the Business Support and Develop-
ment representative for AXA Equitable, AXA IM and AllianceBernstein since January 2011. From April 2010 to December 2010,
Mr. Molloy was the Chief Financial Officer of AXA Global Life, a company formed by AXA to accelerate global synergies
throughout its Life & Savings business. Prior to serving in this role, he was Senior Vice President of Distribution & Service Finance
at AXA Equitable. From November 2003 to April 2007, Mr. Molloy served as Vice President and Head of AXA’s North American
Investor Relations office. Mr. Molloy joined AXA Equitable in 1999 as Director of Corporate Finance after beginning his career in
1993 as an economist and corporate profits analyst with The United States Department of Commerce’s Bureau of Economic
Analysis.
Mr. Molloy brings to the Board the finance, capital markets and investor relations experience he has developed through the key
roles he has served for AXA and the in-depth knowledge of global economies he gained while working for the U.S. government.
Mark Pearson
Mr. Pearson, age 53, was elected a Director of the General Partner in February 2011. Also during February 2011, he succeeded
Mr. Condron as Director, President and Chief Executive Officer of AXA Financial, and as Chairman and Chief Executive Officer
of AXA Equitable. Having joined AXA in 1995 when AXA acquired National Mutual Funds Management Limited (presently AXA
Asia Pacific Holdings Limited), Mr. Pearson became a member of the Executive Committee of AXA in 2008 and the Management
Committee of AXA in 2011. He was appointed Regional Chief Executive of AXA Asia Life in 2001 and, in 2008, was named
President and Chief Executive Officer of AXA Japan Holding Co., Ltd. and AXA Life Insurance Co., Ltd. Prior to joining AXA,
Mr. Pearson spent approximately 20 years in the insurance sector, holding several senior management positions at National Mutual
and Friends Provident.
Mr. Pearson brings to the Board the in-depth knowledge of Asian markets and diverse experience he has developed through the
key roles he has served for AXA.
Lorie A. Slutsky
Ms. Slutsky, age 59, was elected a Director of the General Partner in July 2002. Since January 1990, she has been President and
Chief Executive Officer of The New York Community Trust, a community foundation that manages a $2 billion endowment and
annually grants more than $150 million to non-profit organizations. Ms. Slutsky is Secretary and a board member of the
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Independent Sector and co-chaired its National Panel on the Non-Profit Sector, which focused on reducing abuse and improving
governance practices at non-profit organizations. She served on the Board of Directors of BoardSource from 1999 to 2008 and
served as its Chair from 2005 to 2007. Ms. Slutsky also served as Trustee and Chair of the Budget Committee of Colgate University
from 1989 to 1997 and as Chair of the Council on Foundations from 1989 to 1995. She has been a Director of AXA Financial,
AXA Equitable, MONY and MLOA since September 2006. In addition, Ms. Slutsky was a member of AXA Financial’s Audit
Committee from 2006 through 2010. She has been a member of AXA Financial’s Organization and Compensation Committee
since 2006 and was elected Chair of the Organization and Compensation Committee in February 2012.
Ms. Slutsky brings to the Board extensive corporate governance experience achieved through her executive and managerial roles at
The New York Community Trust, BoardSource and various other non-profit organizations. She also brings valuable insight gained
from serving on boards and board committees at certain of our parent companies.
A.W. (Pete) Smith, Jr.
Mr. Smith, age 68, was elected a Director of the General Partner in July 2005. The former CEO of Watson Wyatt Worldwide
(now Towers Watson), he was also President of the Private Sector Council, a non-profit public service organization dedicated to
improving the efficiency of the federal government, from September 2000 until May 2005. Mr. Smith has been President of Smith
Compensation Consulting, a privately-held company specializing in executive compensation consulting, since June 2005.
Mr. Smith brings to the Board extensive financial services expertise, compensation expertise and leadership skills obtained through
his wealth of experience as Towers Watson’s chief executive and the head of his own firm.
Peter J. Tobin
Mr. Tobin, age 67, was elected a Director of the General Partner in May 2000. From September 2003 to June 2005, he was Special
Assistant to the President of St. John’s University. Prior thereto, Mr. Tobin served as Dean of the Tobin College of Business of St.
John’s University from August 1998 to September 2003. As Dean, Mr. Tobin was the chief executive and academic leader of the
College of Business. Mr. Tobin was Chief Financial Officer at The Chase Manhattan Corporation from 1996 to 1997. Prior there-
to, he was Chief Financial Officer of Chemical Bank (which merged with Chase in 1996) from 1991 to 1996 and Chief Financial
Officer of Manufacturers Hanover Trust (which merged with Chemical in 1991) from 1985 to 1991. Mr. Tobin has served on the
board of directors of CIT Group Inc. (NYSE: CIT) since 1985 (except for one year during which CIT Group was owned by
Tyco). He has been a Director of AXA Financial and AXA Equitable since March 1999 and also serves on AXA Financial’s Audit
Committee, Investment Committee, Investment and Finance Committee, Organization and Compensation Committee, and
Executive Committee.
Mr. Tobin brings to the Board invaluable expertise as an audit committee financial expert and key leadership and analytical skills
from his positions in academia.
Executive Officers (other than Mr. Kraus)
Laurence E. Cranch, General Counsel
Mr. Cranch, age 65, has been our General Counsel since he joined our firm in 2004. Prior to joining AllianceBernstein,
Mr. Cranch was a partner of Clifford Chance, an international law firm. Mr. Cranch joined Clifford Chance in 2000 when
Rogers & Wells, a New York law firm of which he was Managing Partner, merged with Clifford Chance.
Edward J. Farrell, Controller and Interim Chief Financial Officer
Mr. Farrell, age 51, joined our firm in 2003 as Senior Vice President and Controller. He was appointed our firm’s Interim Chief
Financial Officer in January 2011. Mr. Farrell also serves as the Chief Financial Officer of SCB LLC. From 1994 to 2003, he
worked at Nomura Securities International, Inc. (“Nomura”), where he was a Managing Director and held various senior finance
positions, including Chief Financial Officer. Prior to joining Nomura, Mr. Farrell spent 10 years in various finance positions at
Salomon Brothers Inc. A certified public accountant, he also worked at PricewaterhouseCoopers LLP.
James A. Gingrich, Chief Operating Officer
Mr. Gingrich, age 53, joined our firm in 1999 as a senior research analyst on the sell side and has been our firm’s Chief Operating
Officer since December 2011. Prior to becoming COO, Mr. Gingrich held senior managerial positions with SCB LLC, including
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Chairman and Chief Executive Officer of SCB LLC from February 2007 to November 2011 and Global Director of Research from
December 2002 to January 2007.
Lori A. Massad, Head—Human Capital and Chief Talent Officer
Ms. Massad, age 47, joined our firm in 2006 as Chief Talent Officer. In February 2009, her role was expanded to include oversight
of Human Capital in addition to Talent Development. Prior to joining our firm, Ms. Massad served as Chief Talent Officer and
Chief Operating Officer at Marakon Associates, a strategy consulting firm from 2004 to 2006. Before joining Marakon, Ms. Massad
was a founding member of two start-ups: Spencer Stuart Talent Network (in 2001) and EmployeeMatters, a human resources out-
sourcing firm (in 2000). Prior to helping found EmployeeMatters, she spent eight years at The Boston Consulting Group, where
she became a senior manager on the consulting staff and leader of the firm’s recruiting, training and development programs. While
with The Boston Consulting Group, Ms. Massad was also an adjunct professor at New York University’s Leonard Stern School of
Business.
Robert P. van Brugge, Chairman and Chief Executive Officer of SCB LLC
Mr. van Brugge, age 43, has been Chairman of the Board and Chief Executive Officer of SCB LLC since December 2011. Prior to
becoming Chairman and CEO, Mr. van Brugge served as Global Director of Research from January 2008 to December 2011. He
joined our firm in 2002 as a senior research analyst on the sell side.
Board Meetings
In 2011, the Board held regular meetings in February, April, May, July, September and November; the Board held one special
meeting in August 2011.
Generally, the Board holds six meetings annually: in February, April, May, July or August, September, and November. In addition,
the Board holds special meetings or takes action by unanimous written consent as circumstances warrant. The Board has standing
Executive, Audit, Corporate Governance, Compensation and Special Committees, each of which is described in further detail below.
Of the members of the Board, Messrs. Carrel-Billiard and de Castries attended fewer than 75% of the aggregate of all Board and
committee meetings which each was entitled to attend in 2011.
Committees of the Board
In January 2011, the Executive Committee of the Board (“Executive Committee”) was composed of Ms. Slutsky and Messrs.
Condron, Duverne, Kraus (Chair) and Tobin. In February 2011, the Board elected Mr. de Castries as an additional member. The
Executive Committee exercises all of the powers and authority of the Board (with limited exceptions) when the Board is not in ses-
sion, or when it is impractical to assemble the full Board. The Executive Committee held three meetings in 2011.
In January 2011, the Governance Committee was composed of Mr. Condron, Ms. Hechinger (Chair), Mr. Kraus and Ms. Slutsky.
In February 2011, the Board elected Mr. Duverne as an additional member. The Governance Committee (i) assists the Board and
the sole stockholder of the General Partner in (1) identifying and evaluating qualified individuals to become Board members and
(2) determining the composition of the Board and its committees, and (ii) assists the Board in (1) developing and monitoring a
process to assess Board effectiveness, (2) developing and implementing our corporate governance guidelines and (3) reviewing our
policies and programs that relate to matters of corporate responsibility of the General Partner and the Partnerships. The Governance
Committee held two meetings in 2011.
In January 2011, the Audit Committee of the Board (“Audit Committee”) was composed of Messrs. Hicks, Smith and Tobin
(Chair). In February 2011, the Board elected Mr. Elliott as an additional member. The primary purposes of the Audit Committee
are to: (i) assist the Board in its oversight of (1) the integrity of the financial statements of the Partnerships, (2) the Partnerships’ sta-
tus and system of compliance with legal and regulatory requirements and business conduct, (3) the independent registered public
accounting firm’s qualification and independence, and (4) the performance of the Partnerships’ internal audit function; and
(ii) oversee the appointment, retention, compensation, evaluation and termination of the Partnerships’ independent registered public
accounting firm. Consistent with this function, the Audit Committee encourages continuous improvement of, and fosters adherence
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to, the Partnerships’ policies, procedures and practices at all levels. With respect to these matters, the Audit Committee provides an
open avenue of communication among the independent registered public accounting firm, senior management, the Internal Audit
Department and the Board. The Audit Committee held seven meetings in 2011.
In January 2011, the Compensation Committee of the Board (“Compensation Committee”) was composed of Mr. Condron
(Chair), Mr. Kraus, Ms. Slutsky and Mr. Smith. In February 2011, the Board elected Messrs. de Castries, Duverne and Elliott as
additional members. In February 2012, Mr. de Castries resigned as a member of the Compensation Committee. For additional
information about the Compensation Committee, see “Compensation Discussion and Analysis—Compensation Committee” in Item 11.
The functions of each of the committees discussed above are more fully described in each committee’s charter. The charters are
available on our Internet site (http://www.alliancebernstein.com).
The Special Committee of the Board (“Special Committee”) is composed of all of the independent members of the Board and in
2011 included Mr. Elliott, Ms. Hechinger, Mr. Hicks, Ms. Slutsky, Mr. Smith and Mr. Tobin (Chair). The Special Committee has
the authority to direct and oversee any matters referred to it by the Board and/or management including, but not limited to, mat-
ters relating to conflicts of interest and the relationship among AllianceBernstein, Holding and AXA. The members of the Special
Committee do not receive any additional compensation for their service on the Special Committee, apart from the ordinary meet-
ing fees described in “Director Compensation” in Item 11. The Special Committee did not meet in 2011.
Audit Committee Financial Experts
In January 2011 and 2012, the Governance Committee, after reviewing materials prepared by management, recommended that the
Board determine that each of Steven G. Elliott and Peter J. Tobin is an “audit committee financial expert” within the meaning of
Item 407(d) of Regulation S-K. The Board so determined at its regular meetings in February 2011 and 2012. The Board also
determined at these meetings that each of Messrs. Elliott, Hicks, Smith and Tobin is financially literate and possesses accounting or
related financial management expertise, as contemplated by Section 303A.07(a) of the NYSE Listed Company Manual.
Independence of Certain Directors
In January 2011 and 2012, the Governance Committee, after reviewing materials prepared by management, recommended that the
Board determine that each of Mr. Elliott, Ms. Hechinger, Mr. Hicks, Ms. Slutsky, Mr. Smith and Mr. Tobin is “independent”
within the meaning of Section 303A.02 of the NYSE Listed Company Manual. The Board considered immaterial relationships of
Mr. Elliott (relating to the fact that AllianceBernstein and its family of mutual funds are clients of BNY Mellon and Mr. Elliott’s
equity stake in BNY Mellon), Mr. Hicks (relating to the fact that Alleghany Corporation is a client of SCB LLC and Mr. Hicks was
employed by Bernstein from 1991 to 1999), Ms. Slutsky (relating to contributions formerly made by AllianceBernstein to The New
York Community Trust, of which she is President and Chief Executive Officer, and the fact that she is a member of the boards of
directors of AXA Financial and AXA Equitable) and Mr. Tobin (relating to the fact that, like Ms. Slutsky, he is a member of the
boards of directors of AXA Financial and AXA Equitable) and then determined, at its February 2011 and 2012 regular meetings,
that each of Mr. Elliott, Ms. Hechinger, Mr. Hicks, Ms. Slutsky, Mr. Smith and Mr. Tobin is independent within the meaning of
the relevant rules.
Board Leadership Structure and Role in Risk Oversight
Leadership
The Board, together with the Governance Committee, is responsible for reviewing the Board’s leadership structure. In determining
the appropriate individual to serve as our Chairman and Chief Executive Officer, the Board and the Governance Committee
consider, among other things, the composition of the Board, the role of the Board’s lead director (discussed more fully below), our
Company’s strong corporate governance practices, and the challenges and opportunities specific to our Company.
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We believe that the positions of Chairman and Chief Executive Officer are best shared by one individual, but only if a company has
sufficient counter-balancing governance in place. We see significant value in having the leader in the Board room also manage the
affairs of our Company, and we believe any potential doubts as to our Board’s objectivity in evaluating management are offset by
the lead independent director we have in place and the fact that the affirmative consent of our largest Unitholder (AXA) is required
in order for any action taken by the Executive Committee or the Compensation Committee to be effective.
Lead Independent Director
Our lead independent director, Peter J. Tobin, was appointed unanimously by our Board in November 2005. He presides at all
executive sessions of non-management and independent directors and makes himself available, if requested by Unitholders, for
consultation and communication. Interested parties wishing to communicate directly with Mr. Tobin may send an e-mail, with
“confidential” in the subject line, to corporate_secretary@alliancebernstein.com. Upon receipt, our Corporate Secretary will promptly
forward all such e-mails to Mr. Tobin. Interested parties may also address mail to Mr. Tobin in care of Corporate Secretary,
AllianceBernstein Corporation, 1345 Avenue of the Americas, New York, NY 10105, and the Corporate Secretary will promptly
forward such mail to Mr. Tobin. We have posted this information in the “Management & Governance” section of our Internet site
(http://www.alliancebernstein.com).
Risk Oversight
The Board, together with the Audit Committee, has oversight for our Company’s risk management framework, both investment
risk and operational risk, and is responsible for helping to ensure that our Company’s risks are managed in a sound manner. The
Board has delegated to the Audit Committee, which is composed entirely of independent directors, the responsibility to consider
our Company’s policies and practices with respect to operational risk assessment and operational risk management, including discus-
sing with management the major financial risk exposures and the steps taken to monitor and control such exposures. Members of
the Company’s Risk Management team responsible for identifying, managing and controlling the array of operational and invest-
ment risks inherent in our Company’s business and operations, make quarterly reports to the Audit Committee, including an annual
risk review which addresses operational risk identification, assessment and monitoring. The Head of Investment Risk, whose
expertise encompasses both quantitative research and associated investment risks, reports directly to our Chairman and Chief Execu-
tive Officer and makes annual presentations to the Board.
The Board has determined that its leadership and risk oversight are appropriate for our Company. Mr. Kraus’s in-depth knowledge
of financial services and extensive executive experience in the investment management industry make him uniquely suited to serve
as our Chairman and Chief Executive Officer, while Mr. Tobin’s leadership and expertise have proven invaluable at enhancing the
overall functioning of the Board. The Board believes that the combination of a single Chairman and Chief Executive Officer, a lead
independent director, the Audit Committee, a specialized risk management team, and significant involvement from our largest
Unitholder (AXA) provide the appropriate leadership to help ensure effective risk oversight by the Board.
Code of Ethics and Related Policies
All of our directors, officers and employees are subject to our Code of Business Conduct and Ethics. The code is intended to com-
ply with Section 303A.10 of the NYSE Listed Company Manual, Rule 204A-1 under the Investment Advisers Act and Rule 17j-1
under the Investment Company Act, as well as with recommendations issued by the Investment Company Institute regarding,
among other things, practices and standards with respect to securities transactions of investment professionals. The Code of Business
Conduct and Ethics establishes certain guiding principles for all of our employees, including sensitivity to our fiduciary obligations
and ensuring that we meet those obligations. Our Code of Business Conduct and Ethics may be found in the “Management &
Governance” section of our Internet site (http://www.alliancebernstein.com).
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We have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is intended to comply with
Section 406 of the Sarbanes-Oxley Act of 2002 (“Item 406 Code”). The Item 406 Code was adopted on October 28, 2004 by the
Executive Committee. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding certain amend-
ments to, or waivers from, provisions of the Item 406 Code that apply to the Chief Executive Officer, Chief Financial Officer and
Controller by posting such information on our Internet site (http://www.alliancebernstein.com). To date, there have been no such
amendments or waivers.
NYSE Governance Matters
Section 303A.00 of the NYSE Listed Company Manual exempts limited partnerships from compliance with the following sections
of the Manual: Section 303A.01 (board must have a majority of independent directors), 303A.04 (corporate governance committee
must have only independent directors as its members), and 303A.05 (compensation committee must have only independent direc-
tors as its members). Holding is a limited partnership (as is AllianceBernstein). In addition, because the General Partner is a wholly-
owned subsidiary of AXA, and the General Partner controls Holding (and AllianceBernstein), we believe we would also qualify for
the “controlled company” exemption. Notwithstanding the foregoing, the Board has adopted a Corporate Governance Committee
Charter that complies with Section 303A.04 and a Compensation Committee Charter that complies with Section 303A.05. How-
ever, not all members of these committees are independent.
Our Corporate Governance Guidelines (“Guidelines”) promote the effective functioning of the Board and its committees, promote
the interests of the Partnerships’ respective Unitholders, with appropriate regard to the Board’s duties to the sole stockholder of the
General Partner, and set forth a common set of expectations as to how the Board, its various committees, individual directors and
management should perform their functions. The Guidelines may be found in the “Management & Governance” section of our
Internet site (http://www.alliancebernstein.com).
The Governance Committee is responsible for considering any request for a waiver under the Code of Business Conduct and Eth-
ics, the Item 406 Code, the AXA Group Compliance and Ethics Guide, and the AXA Financial Policy Statement on Ethics from
any director or executive officer of the General Partner. Any such waiver that has been granted would be set forth in the
“Management & Governance” section of our Internet site (http://www.alliancebernstein.com).
Our Internet site (http://www.alliancebernstein.com), under the heading “Meet our Directors”, provides an e-mail address for any inter-
ested party, including Unitholders, to communicate with the Board of Directors. Our Corporate Secretary reviews e-mails sent to
that address and has some discretion in determining how or whether to respond, and in determining to whom such e-mails should
be forwarded. In our experience, substantially all of the e-mails received are ordinary client requests for administrative assistance that
are best addressed by management or solicitations of various kinds.
The 2011 Certification by our Chief Executive Officer under NYSE Listed Company Manual Section 303A.12(a) was submitted to
the NYSE on March 3, 2011.
Certifications by our Chief Executive Officer and Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 have been furnished as exhibits to this Form 10-K.
Holding Unitholders and AllianceBernstein Unitholders may request a copy of any committee charter, the Guidelines, the Code of
Business Conduct and Ethics, and the Item 406 Code by contacting our Company’s Corporate Secretary
(corporate_secretary@alliancebernstein.com). The charters and memberships of the Executive, Audit, Governance and Compensation
Committees may be found in the “Management & Governance” section of our Internet site (http://www.alliancebernstein.com).
Fiduciary Culture
We maintain a robust fiduciary culture and, as a fiduciary, we place the interests of our clients first and foremost. We are committed
to the fair and equitable treatment of all our clients, and to compliance with all applicable rules and regulations and internal policies
to which our business is subject. We pursue these goals through education of our employees to promote awareness of our fiduciary
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obligations, incentives that align employees’ interests with those of our clients, and a range of measures, including active monitor-
ing, to ensure regulatory compliance. Specific steps we have taken to help us achieve these goals include:
• establishing two committees, the Code of Ethics Oversight Committee (“Ethics Committee”) and the Internal Compliance
Controls Committee (“Compliance Committee”), composed of our executive officers and other senior executives to oversee
and resolve code of ethics and compliance-related issues;
• creating an ombudsman office, where employees and others can voice concerns on a confidential basis;
•
initiating firm-wide compliance and ethics training programs; and
• appointing a Conflicts Officer and establishing a Conflicts Committee to identify and mitigate conflicts of interest.
The Ethics Committee oversees all matters relating to issues arising under our Code of Business Conduct and Ethics. The Ethics
Committee meets on a quarterly basis and at such other times as circumstances warrant. The Ethics Committee and its sub-
committee, the Personal Trading Subcommittee, have oversight of personal trading by our employees.
The Compliance Committee reviews compliance issues throughout our Company, endeavors to develop solutions to those issues as
they may arise from time to time, and oversees implementation of those solutions. The Compliance Committee meets on a quar-
terly basis and at such other times as circumstances warrant.
Compliance with Item 405 of Regulation S-K (Section 16(a) Beneficial Ownership Reporting
Compliance)
Section 16(a) of the Exchange Act requires directors of the General Partner and executive officers of the Partnerships, and persons
who own more than 10% of the Holding Units or AllianceBernstein Units, to file with the SEC initial reports of ownership and
reports of changes in ownership of Holding Units or AllianceBernstein Units. To the best of management’s knowledge, during
2011: (i) all Section 16(a) filing requirements relating to Holding were complied with, except one Form 4 for each of Christopher
M. Condron, Steven G. Elliott, Deborah S. Hechinger, Weston M. Hicks, Lorie A. Slutsky, A.W. (Pete) Smith, Jr. and Peter J.
Tobin was filed late (each Form 4 related solely to 2011 equity compensation awards granted to these Directors); and (ii) all
Section 16(a) filing requirements relating to AllianceBernstein were complied with. Our Section 16 filings can be found under
“Investor & Media Relations” / “Reports & SEC Filings” on our Internet site (http://www.alliancebernstein.com).
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139
Item 11.
Executive Compensation
Compensation Discussion and Analysis (“CD&A”)
Overview of Compensation Philosophy and Program
The intellectual capital of our employees is collectively the most important asset of our firm. We invest in people—we hire qualified
people, train them, encourage them to give their best thinking to the firm and our clients, and compensate them in a manner
designed to motivate and retain them. As a result, the costs of employee compensation and benefits are significant, comprising
approximately 62% of our operating expenses (53% excluding the deferred compensation charge) and representing approximately
67% of our revenues (50.3% of our adjusted revenues, as defined below) for 2011. Although these percentages are not unusual for
companies in the financial services industry, the magnitude of these costs requires that they be monitored by management, and
overseen by the Board, with the particular attention of the Compensation Committee.
We believe that the quality, skill and dedication of our executives are critical to enhancing the long-term value of our Company.
Our key compensation goals are to attract, motivate and retain highly-qualified executive talent, provide rewards for the past year’s
performance and provide incentives for future performance, and align our executives’ long-term interests with those of our clients
and Unitholders. We believe that success in achieving good results for the firm, and for our Unitholders, flows from achieving
investment success for our clients.
We utilize a variety of compensation elements to achieve the goals described above, including base salary, annual short-term
incentive compensation awards (cash bonuses), a long-term incentive compensation award program and a defined contribution plan,
all of which are discussed in detail below.
Although estimates are developed for budgeting and strategic planning purposes, executive compensation is not correlated with
meeting any specific targets. (Some of our salespeople have compensation incentives based on sales levels.)
In addition to the compensation goals discussed above, we are focused also on ensuring that our compensation practices are com-
petitive with industry peers and provide sufficient potential for wealth creation for our executives and employees in order to attract,
motivate and retain top talent. As a result, since 2009 long-term incentive compensation awards generally have been in the form of
restricted Holding Units and, accordingly, unlike in previous years, executives and eligible employees have not been able to
notionally allocate their awards to our investment services.
In 2011, to further ensure that our compensation practices are competitive and to better align the costs of employee compensation
and benefits with the firm’s current year financial performance and provide employees with a higher degree of certainty that they
will receive the incentive compensation they are awarded, we implemented the following changes to our long-term incentive
compensation program:
• We provided our employees, except certain members of senior management, with the opportunity to diversify their deferred
incentive compensation awards by allocating up to 50% of their awards to cash, up to a maximum cash amount of $250,000
(“Deferred Cash”). The portion of an award allocated to Deferred Cash is subject to the same multi-year vesting periods
(generally, four years) as the portion of an award allocated to Holding Units; and
• We amended all outstanding deferred incentive compensation awards of active employees (i.e., those employees who were
employed by the Company as of December 31, 2011) permitting those employees, who terminate their employment or are
terminated without cause, to continue to vest in their deferred awards if they comply with certain agreements and restrictive
covenants set forth in the applicable award agreement. These agreements and covenants include restrictions on competition and
employee and client solicitation, and a claw-back for failing to follow existing risk management policies. As used in this
Item 11, “vested” means the time at which the awards are no longer subject to forfeiture for breach of these restrictions or risk
management policies. These changes also applied to 2011 deferred incentive compensation awards and we expect the changes
to apply to deferred incentive compensation awards in future years as well. Most equity replacement, sign-on or similar deferred
compensation awards included in separate employment agreements or arrangements were not amended. For information about
the accounting impact of these changes, see Note 2 to AllianceBernstein’s consolidated financial statements in Item 8.
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Consideration of Risk Matters in Determining Compensation
We have considered whether our compensation practices encourage unnecessary or excessive risk-taking and whether any risks aris-
ing from our compensation practices are reasonably likely to have a material adverse effect on our Company. For the reasons set
forth below, we have determined that our current compensation practices do not incentivize, and actually discourage, our employ-
ees from engaging in unnecessary or excessively risky activities. Accordingly, we have concluded that our compensation practices do
not create risks that are reasonably likely to have a material adverse effect on our Company.
In our effort to foster the spirit of partnership among our employees and better align their interests with those of Holding Unithold-
ers and our clients, eligible employees receive at least half of their deferred incentive compensation awards in the form of restricted
Holding Units, with multiple-year vesting periods (generally, four years). Our Chairman and Chief Executive Officer firmly
believes that compensating key employees with equity ownership fosters a true partnership community, one that will help us grow
and achieve our firm’s goals. And, as our employees become more focused on partnering with each other to achieve our firm’s
overall goals, they will serve as checks and balances on each other in assessing risk and performance.
Our approach to long-term incentive compensation is designed to reflect the firm’s current year and long-term financial perform-
ance and the specific performance of each individual employee. The initial amount of an employee’s award is based on the
performance of the firm and the employee for the current year. But because a substantial portion of the award is denominated in
Holding Units that are not distributed until subsequent years, the ultimate value that the employee derives from the award depends
on the long-term performance of the firm. Denominating a substantial portion of the award in Holding Units and deferring their
delivery also sensitizes employees to risk outcomes and discourages them from taking excessive risks that could lead to a decrease in
the value of the Holding Units. Furthermore, and as noted above, we have added a clause to all outstanding deferred incentive com-
pensation awards of our active employees (and we expect to add this clause to deferred incentive compensation awards in future
years) permitting us to “claw-back” the unvested portion of an employee’s deferred incentive compensation award (whether
denominated in restricted Holding Units or Deferred Cash) if the Compensation Committee determines that (i) the employee failed
to follow existing risk management policies and (ii) as a result of the employee’s failure, there has been or reasonably could be
expected to be a material adverse impact on our firm or the employee’s business unit.
Overview of 2011 Incentive Compensation Program
Our 2011 incentive compensation, generally consisting of annual cash bonuses and deferred incentive compensation awards
(restricted Holding Unit awards and Deferred Cash awards), is intended to reward our executives (and any other employee with
2011 total compensation in excess of $200,000) for their performance and encourage them to remain with the firm. Annual cash
bonuses, which generally reflect individual performance and the firm’s current year financial performance, provide a shorter-term
incentive to remain through year-end because such bonuses are typically paid during the last week of the year. Deferred incentive
compensation awards (whether denominated in restricted Holding Units or Deferred Cash) provide future earnings potential. They
are subject to multi-year vesting periods (generally, four years) and are subject to forfeiture in the event an award recipient violates
certain agreements and restrictive covenants set forth in the applicable award agreement (see “Compensation Elements for Executive
Officers—Long-term Incentive Compensation” in this Item 11).
The aggregate amount of incentive compensation (i.e., the amount available to pay annual cash bonuses and make deferred
incentive compensation awards to executives and other eligible employees) generally is determined on a discretionary basis and is
primarily a function of our firm’s current year financial performance. Amounts are awarded to help us achieve our goal of attracting,
motivating and retaining top talent while also helping ensure that our Unitholders receive an appropriate return on their invest-
ment. Senior management, with the approval of the Compensation Committee, confirmed that the appropriate metric to consider
in determining the amount of incentive compensation for 2011 is the ratio of adjusted employee compensation and benefits expense
to adjusted net revenues:
• Adjusted net revenues (see our discussion of “Management Operating Metrics” in Item 7) exclude investment gains and losses and
dividends and interest on deferred compensation-related investments, and 90% of the investment gains and losses of our con-
solidated venture capital fund attributable to non-controlling interests. In addition, adjusted net revenues offset distribution-
related payments to third parties as well as amortization of deferred sales commissions against distribution revenues. We also
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141
exclude from adjusted net revenues additional pass-through expenses we incur (primarily through our transfer agent) that are
reimbursed and recorded as fees in revenues. During the fourth quarter of 2011, we made a minor modification to the adjusted
compensation ratio calculation: for adjusted compensation ratio purposes, we have excluded revenues associated with acquis-
itions over the last two years to implement strategic product initiatives;
• Adjusted employee compensation and benefits expense is total employee compensation and benefits expense minus other
employment costs such as recruitment, training, temporary help and meals, and excludes the impact of mark-to-market vesting
expense, as well as dividends and interest expense, associated with employee deferred compensation-related investments and our
firm’s fourth quarter 2011 deferred compensation charge (see “Deferred Compensation Charge” in Item 7). As a result of a mod-
ification made in the fourth quarter of 2011, adjusted employee compensation and benefits expense also excludes total compen-
sation and certain amortization of equity-based awards of personnel related to acquisitions over the last two years to implement
strategic product initiatives.
Senior management, with the approval of the Compensation Committee, also confirmed that the firm’s adjusted employee compen-
sation and benefits expense should not exceed 50% of our adjusted revenues, except in unexpected or unusual circumstances.
As shown in the table below, in 2011, adjusted employee compensation and benefits expense amounted to 50.3% of adjusted rev-
enues (in thousands):
Net Revenues
Adjustments (see above)
Adjusted Revenues
Employee Compensation & Benefits Expense
Adjustments (see above)
Adjusted Employee Compensation & Benefits Expense
Adjusted Compensation Ratio
$ 2,749,891
(335,316)
$2,414,575
$ 1,835,628
(620,381)
$1,215,247
50.3%
Our 2011 adjusted compensation ratio of approximately 50% reflects the need to keep compensation levels competitive with
industry peers. In determining the appropriate level of compensation for the firm’s executives, senior management retained
McLagan Partners (“McLagan”), which provided compensation benchmarking data that included comparisons of estimated 2011
executive compensation to executive compensation in 2010.
Employees with total compensation in excess of $200,000 received a portion of their 2011 incentive compensation in the form of a
cash bonus and a portion in the form of deferred incentive compensation (at least 50% of which must be allocated to restricted
Holding Units). The split between cash bonus and deferred incentive compensation varied depending on the eligible employee’s
total compensation, with lower-paid employees receiving a greater percentage of their incentive compensation as cash bonuses than
more highly-paid employees. Quarterly cash distributions on vested and unvested restricted Holding Units are paid currently to
award recipients. If Deferred Cash is elected, interest will accrue monthly based on our monthly weighted average cost of funds and
will be credited to the award recipient annually. Our cost of funds during December 2011 was 0.19%, representing a nominal
return.
Overview of our Chief Executive Officer’s Compensation
On December 19, 2008, Peter S. Kraus, the General Partner, AllianceBernstein and Holding entered into an agreement (“Kraus
Employment Agreement”) pursuant to which Mr. Kraus serves as Chairman of the Board of the General Partner and Chief
Executive Officer (“CEO”) of the General Partner, AllianceBernstein and Holding until January 2, 2014 (“Employment Term”)
unless the Kraus Employment Agreement is terminated in accordance with its terms.
The terms of the Kraus Employment Agreement were the result of arm’s-length negotiations between Mr. Kraus and a member of
the Compensation Committee. The terms of the Kraus Employment Agreement (which are described in detail immediately below),
including the compensation elements, were discussed and approved by the Compensation Committee and the full Board on
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December 19, 2008 and reflect their decision to structure the allocation of Mr. Kraus’s compensation more heavily toward a grant
of restricted Holding Units.
In connection with the commencement of Mr. Kraus’s employment, on December 19, 2008, he was granted 2,722,052 restricted
Holding Units (“Restricted Holding Unit Grant”). Subject to accelerated vesting clauses in the Kraus Employment Agreement,
Mr. Kraus’s restricted Holding Units vest ratably on each of the first five anniversaries of December 19, 2008, commencing
December 19, 2009, provided, with respect to each installment, Mr. Kraus continues to be employed by AllianceBernstein on the
vesting date. The agreement provides for immediate vesting upon AXA ceasing to control the management of AllianceBernstein’s
business or Holding ceasing to be publicly traded and certain qualifying terminations of employment, including termination of
Mr. Kraus’s employment (i) by AllianceBernstein without cause (“cause” means, among other things, (1) the continued, willful fail-
ure by Mr. Kraus to perform substantially his duties with AllianceBernstein after a written demand for substantial performance is
delivered to him by the Board; (2) Mr. Kraus’s conviction of, or plea of guilty or nolo contendere to, a crime that constitutes a felony;
(3) the willful engaging by Mr. Kraus in misconduct that is materially and demonstrably injurious to AllianceBernstein or any of its
affiliates; and (4) Mr. Kraus’s failure to comply with a material written Company workplace policy applicable to him), (ii) by
Mr. Kraus for good reason (“good reason” generally means actions taken by AllianceBernstein resulting in a material negative
change in Mr. Kraus’s employment relationship, including assignment to Mr. Kraus of duties materially inconsistent with his posi-
tion or a requirement that Mr. Kraus report to an officer or employee of AllianceBernstein instead of reporting directly to the
Board), and (iii) due to death or disability. During the Employment Term, Mr. Kraus will be paid the cash distributions payable
with respect to his unvested restricted Holding Units and a dollar amount equal to the cash distributions payable with respect to the
number of any Holding Units that are withheld by AllianceBernstein to cover Mr. Kraus’s withholding tax obligations as the Hold-
ing Units vest. These cash distributions will be paid at the time distributions are made to Holding Unitholders generally, provided
that no such payments to Mr. Kraus will be required with respect to any cash distribution with a record date following the earlier of
(i) the termination of Mr. Kraus’s employment for any reason, and (ii) December 19, 2013.
Given the five-year vesting schedule, Mr. Kraus has a strong incentive to remain with our firm for the full five-year term of the
Kraus Employment Agreement and to cause our firm to have strong financial performance during each of those five years. The size
of the Restricted Holding Unit Grant, which had a value of approximately $52 million based on the market price of a Holding Unit
on December 19, 2008, reflected the determination by Mr. Kraus and the Board that this was a reasonable and appropriate amount
of long-term incentive compensation in view of Mr. Kraus’s expertise and experience, his past compensation, the compensation of
his predecessor and the compensation of other chief executive officers of comparable asset management companies.
The $6 million cash bonus paid to Mr. Kraus in 2009 represented the amount that Mr. Kraus and the Board agreed represented a
reasonable and appropriate short-term financial inducement for Mr. Kraus to join AllianceBernstein based on the same factors (listed
immediately above) and reflected the significant uncertainty surrounding the level of 2009 quarterly cash distributions on Holding
Units when he was hired; it most directly reflects the Company’s goal of attracting highly-qualified executive talent.
Mr. Kraus is paid an annual base salary of $275,000. The $275,000 base salary is in line with our firm’s policy generally to keep base
salaries low in relation to total compensation.
During the Employment Term, AllianceBernstein has no commitment to pay additional cash bonuses to Mr. Kraus beyond the $6
million he was paid in 2009 (with any additional bonuses being entirely in the discretion of the Compensation Committee) or to
make any additional equity-based awards to him. Consequently, for 2010 and subsequent years during the Employment Term, the
totality of Mr. Kraus’s compensation (other than his salary and absent any additional awards the Board may choose to grant) is
dependent on the level of cash distributions on the restricted Holding Units granted to him and the evolution of the trading price of
Holding Units, both of which are partially dependent on the financial and operating results of our firm. Accordingly, his long-term
interests are directly aligned with the interests of our Unitholders and also indirectly aligned with the interests of our clients, as
strong performance for our clients generally contributes directly to increases in assets under management and thus improved finan-
cial performance for the firm.
Mr. Kraus received neither a cash bonus nor a long-term incentive compensation award for 2011 or 2010.
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Mr. Kraus is also entitled to receive perquisites and benefits, including full tax gross-ups by AllianceBernstein with respect to
personal air travel on Company aircraft, personal use of a Company car and driver, any continued medical coverage due to termi-
nation by death or disability, and any payments for COBRA coverage due to termination of employment by AllianceBernstein
without cause or by Mr. Kraus for good reason. These terms reflect the results of the arm’s-length negotiation process described
immediately above.
Factors Considered when Determining Executive Compensation
Decisions about executive compensation are based primarily on our assessment of each executive’s leadership, operational perform-
ance and potential to enhance investment returns and service for our clients, all of which contribute to long-term Unitholder value.
We do not utilize quantitative formulas when determining the compensation of our CEO, our Interim Chief Financial Officer and
our other three most highly-compensated executive officers (“named executive officers”), but rather rely on our judgment about
each executive’s performance and whether each particular payment or award provides an appropriate reward for the executive
officer’s and the firm’s current year performance. We begin this process by determining the total incentive compensation amounts
available for a particular year (as more fully explained above in “Overview of 2011 Incentive Compensation Program”). We then consider a
number of key factors for each of the named executive officers (other than Mr. Kraus, our CEO, whose compensation is described
above in “Overview of our Chief Executive Officer’s Compensation”). These factors include: total compensation paid to the named execu-
tive officer in the previous year; the increase or decrease in the current year’s total incentive compensation amounts available; the
named executive officer’s performance compared to individual business and operational goals established at the beginning of the
year; the nature, scope and level of responsibilities of the named executive officer; the contribution to our overall financial results;
and the contribution of the executive’s business unit to our Company’s fiduciary culture in which clients’ interests are paramount.
In 2011, we also considered data provided by McLagan to benchmark the total compensation paid to each of our named executive
officers.
This process, which is conducted by the CEO working with other members of senior management, results in specific incentive
compensation recommendations to the Compensation Committee supported by the factors considered. The Compensation Com-
mittee then makes the final incentive compensation decisions. The Compensation Committee did not analyze quantifiable goals
relating to the firm’s business units in determining the cash bonus of each of the named executive officers.
In addition to our CEO, our Interim CFO and our other three most highly-compensated executive officers, for 2011, pursuant to
applicable SEC rules and regulations, we also included our former Chief Financial Officer as a “named executive officer”.
The priorities of our named executive officers (other than Mr. Kraus) generally include a robust set of factors relating to our firm’s
financial performance, its strategic and operational considerations, the specific business or function headed by each named executive
officer, and each named executive officer’s management effectiveness, talent development and adherence to our firm’s culture,
including risk/control management and regulatory compliance. Because specific factors will vary among business units, among
individuals and during different business cycles, we do not adopt any specific weighting or formula under which these metrics are
applied.
We have described below the business and operational goals established in 2011 for our named executive officers (other than
Mr. Kraus) and the contribution to our Company each made in achieving these goals:
• For Mr. Gingrich, our Company’s Chief Operating Officer, the main elements of his business and operational goals for 2011
related to his prior role as Chairman and CEO of SCB LLC and included: optimizing the revenue and profit contribution of
our Bernstein Research Services unit; further enhancing this unit’s research capabilities, trading services and product array;
extending this unit’s geographic platform; and attracting, motivating and retaining top talent.
• Mr. Gingrich was successful in meeting these goals in 2011. The most significant contributions made by Mr. Gingrich
toward achieving these goals included leading our sell-side business to: strong market share and profitability; excellent
results in third party surveys; further expansion of the European trading platform; significant progress in establishing the
Asia business; and further expansion of the equity derivatives and equity capital markets initiatives. Mr. Gingrich’s
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compensation reflected Mr. Kraus’s and the Compensation Committee’s judgment in assessing the importance of these
contributions to our Company.
• For Mr. van Brugge, the Chairman and CEO of SCB LLC, the main elements of his business and operational goals for 2011
related to his prior role as SCB LLC’s Global Director of Research and included: further enhancing the research capabilities of
our Bernstein Research Services unit; extending this unit’s research capabilities in Asia; and attracting, motivating and retaining
top talent.
• Mr. van Brugge was successful in meeting these goals in 2011. The most significant contributions made by Mr. van Brugge
towards achieving these goals included excellent results in third-party research surveys; significant progress in establishing
SCB LLC’s research capabilities in Asia; and recruiting a number of talented individuals to join our firm as new analysts.
Mr. van Brugge’s compensation reflected Mr. Kraus’s and the Compensation Committee’s judgment in assessing the
importance of these contributions to our Company.
• For Mr. Cranch, our Company’s General Counsel, the main elements of his business and operational goals included: maintain-
ing the Company’s good compliance record; sustaining and improving the Legal and Compliance Department’s level of client
service; recruiting, developing and retaining high-quality talent within the department; and minimizing the risk of litigation and
regulatory actions against the Company.
• Mr. Cranch was successful in meeting these goals in 2011. The most significant contributions made by Mr. Cranch toward
achieving these goals included: his strong leadership and advocacy at all levels of our Company, and particularly within the
Legal and Compliance Department, in requiring strict adherence to our compliance policies and procedures and ensuring
that our Company fulfills its fiduciary duties to its clients; leading the design and implementation of a new client service
model within the Legal and Compliance Department with a view toward achieving a consistent level of service excellence;
and his leadership in identifying practices and circumstances that risk exposing our Company to litigation and regulatory
enforcement proceedings, and taking steps to proactively mitigate that risk. Mr. Cranch’s compensation reflected
Mr. Kraus’s and the Compensation Committee’s judgment in assessing the importance of these contributions to our
Company.
• For Mr. Farrell, our Chief Accounting Officer, Corporate Controller and Interim Chief Financial Officer, the main elements of
his business and operational goals included: assuming the additional responsibilities of Interim Chief Financial Officer (in January
2011) in a seamless manner; ensuring the firm’s internal control structure and financial reporting standards were adhered to;
revising the firm’s long-term incentive compensation program; reviewing the firm’s global liquidity profile and extending the
term of our senior revolving credit facility; establishing bilateral credit lines for our sell-side business; reviewing the firm’s cost
structure, including its global real estate footprint; rationalizing the firm’s Finance and Administrative functions to leverage and
improve the service levels to the Company and its business leaders; and continuing to identify and develop our firm’s next
generation of business leaders.
• Mr. Farrell was successful in meeting these goals in 2011. The most significant contributions made by Mr. Farrell toward
achieving these goals included: revising the firm’s long-term incentive compensation program designed to better align the
costs of employee compensation and benefits with the firm’s current year financial performance, and provide our
employees with a higher degree of certainty that they will receive the incentive compensation that they were awarded;
completing a review of the firm’s liquidity profile and, working with our firm’s bank syndicate, extending the maturity of
our senior revolving credit facility to five years (which was finalized on January 17, 2012); successfully working with
certain banks in our syndicate to establish bilateral credit lines for our sell-side business to enhance its liquidity; continuing
to evaluate the firm’s cost structure which, including the review of the firm’s occupancy requirements, resulted in the
consolidation of the space in London; and reorganizing the Finance and Administrative function and leveraging existing
resources to support the Company and its business leaders more efficiently. Mr. Farrell’s compensation reflected
Mr. Kraus’s and the Compensation Committee’s judgment in assessing the importance of these contributions to our
Company.
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145
• For John B. Howard, our Company’s former Chief Financial Officer, the main elements of his business and operational goals
were to assist with the recruitment of a successor and facilitate the transition of his responsibilities as Chief Financial Officer to
that successor.
• On February 15, 2011, Mr. Howard left AllianceBernstein to return to his former employer, AQR Capital Management,
to resume his former role as Chief Operating Officer. As a result of his resignation, Mr. Howard forfeited any equity and
deferred compensation awards we granted to him (including the Holding Units we awarded to him as replacement equity).
Accordingly, Mr. Howard’s compensation in 2011 consisted entirely of the pro rata portion of his salary paid to him for the
time he was employed by our firm.
Consistent with the management approach taken by AllianceBernstein for its executives generally, the 2011 goals of our named
executive officers (other than Mr. Kraus, whose compensation is described above in “Overview of our Chief Executive Officer’s
Compensation”) did not include specific revenue or profit targets. By their nature, the business and operational goals for each of these
other named executive officers are difficult to measure quantitatively and thus management uses discretion to determine whether
those goals and objectives have been met.
In addition to considering the extent to which our named executive officers met their business and operational goals, we consider
each executive’s current salary, and prior-year short-term and long-term incentive compensation awards, and the compensation paid
to the executive’s peers within our Company. In general, we believe that key employees should be well-compensated for strong
performance, but that significant portions of compensation should be deferred, which provides an incentive for key employees to
remain with the firm or, in the event they resign, not to join a competitor.
Furthermore, during the fourth quarter of 2011, McLagan provided us with comparative compensation benchmarking data, which
summarized compensation levels for the prior year at selected asset management companies and banks comparable to ours. This data
provides ranges of compensation levels for executive positions at these companies similar to those held by our named executive
officers, including salary, total cash compensation and total compensation. The comparable companies are selected by management
with input from the compensation consultants in order to provide appropriate comparables for the size and business mix of
AllianceBernstein and the roles played by the named executive officers.
In 2011, the McLagan data we used to benchmark the compensation of our named executive officers was based on compensation
comparisons from the following asset management companies and banks: Bank of America Merrill Lynch, Barclays Capital Group,
BlackRock Financial Management, Citigroup, Credit Suisse, Deutsche Bank, Franklin Templeton, Goldman Sachs & Co., Gold-
man Sachs Asset Management, Invesco Plc, Jefferies, JPMorgan Asset Management, JPMorgan Chase, Morgan Stanley, Morgan
Stanley Investment Management, Nomura Securities, PIMCO Advisors, T. Rowe Price Associates, UBS and The Vanguard
Group.
Total compensation paid to our named executive officers fell within or below the ranges of total compensation paid to executives in
similar positions by the companies included in the McLagan data. Additionally, the Board, when it reviewed and approved the
Kraus Employment Agreement on December 19, 2008, considered McLagan data indicating that Mr. Kraus’s compensation
arrangement was fully competitive, reasonable and appropriate given our size, scope and complexity, and Mr. Kraus’s experience,
credentials and proven track record.
Our Chief Executive Officer, and the Compensation Committee, retain discretion as to how to utilize the McLagan benchmarking
data. The data is not used in a formulaic or mechanical way to determine named executive officer compensation levels. The Com-
pensation Committee considered McLagan data in concluding that the compensation levels paid in 2011 to our named executive
officers were appropriate and reasonable.
Compensation Elements for Executive Officers
Below we describe the major elements of our executive compensation.
1. Base Salary. Base salaries comprise a relatively small portion of executives’ total compensation and are maintained at levels gen-
erally lower than the salaries of executives at peer firms. Within the narrow range of base salaries paid to executives, we consider
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individual experience, responsibilities and tenure with the firm. The salaries we paid during 2011 to our named executive officers
are shown in column (c) of the Summary Compensation Table.
2. Short-term Incentive Compensation (Cash Bonus). In 2011, we paid annual cash bonuses in late December to reward individual
performance for the year. These bonuses are based on management’s evaluation (subject to the Compensation Committee’s review
and approval) of each executive’s performance during the year, and the performance of the executive’s business unit or function,
compared to business and operational goals established at the beginning of the year, and in the context of the firm’s current year
financial performance. The cash bonuses we awarded in 2011 to our named executive officers are shown in column (d) of the
Summary Compensation Table.
3. Long-term Incentive Compensation. In 2011, we granted annual long-term incentive compensation awards in December to supple-
ment cash bonuses and to encourage retention of our executives. These awards are made under an unfunded, non-qualified
incentive compensation plan under which awards may be granted to eligible employees.
As discussed above in “Overview of 2011 Incentive Compensation Program”, long-term incentive compensation awards generally are
denominated in restricted Holding Units. We employ this structure to directly align our executives’ long-term interests with the
interests of our Unitholders while also indirectly aligning our executives’ long-term interests with the interests of our clients, as
strong performance for our clients generally contributes directly to increases in assets under management and thus improved finan-
cial performance for the firm. Certain executives, like other eligible employees, may allocate a portion of their long-term incentive
compensation awards to Deferred Cash (up to 50% of their awards, up to a maximum cash amount of $250,000). The 2011 long-
term incentive compensation awards granted to our named executive officers are shown in column (e) of the Summary Compensa-
tion Table and column (i) of the Grants of Plan-based Awards Table if they are denominated in restricted Holding Units; these
awards are shown in column (d) of the Summary Compensation Table and are not shown in the Grants of Plan-based Awards Table
if they are denominated in Deferred Cash.
Long-term incentive compensation, whether denominated in restricted Holding Units or Deferred Cash, was awarded in 2011 as
part of total incentive compensation based on a customized set of goals for each executive. The relative level of cash bonus com-
pared to deferred incentive compensation is generally fixed using a sliding scale based on the total compensation level of the execu-
tive, with lower-paid executives receiving a greater percentage of their incentive compensation as cash bonuses than more highly-
paid executives.
In 2011, the number of restricted Holding Units comprising deferred incentive compensation awards was based on the average of
the closing prices of a Holding Unit as reported for NYSE composite transactions for the five business day period that commenced
on January 13, 2012 and concluded on January 20, 2012; the Compensation Committee approved the awards on December 9,
2011.
Long-term incentive compensation awards, whether denominated in restricted Holding Units or Deferred Cash, generally vest rat-
ably over four years. However, award recipients, who terminate their employment or are terminated without cause, continue to
vest in their deferred awards if the award recipients comply with certain agreements and restrictive covenants set forth in the appli-
cable award agreement, including restrictions on competition, employee and client solicitation, and a claw-back for failing to follow
existing risk management policies.
Withdrawals prior to vesting are not permitted. Upon vesting, awards are distributed to participants unless the award recipient has,
in advance, voluntarily elected to defer receipt to future periods. Quarterly cash distributions on vested and unvested restricted
Holding Units are paid currently to award recipients and are included in column (i) of the Summary Compensation Table.
4. Defined Contribution Plan. Employees of AllianceBernstein are eligible to participate in the Profit Sharing Plan for Employees of
AllianceBernstein L.P. (as amended and restated as of January 1, 2010, “Profit Sharing Plan”), a tax-qualified retirement plan. The
Compensation Committee determines the amount of Company contributions (both the level of annual matching by the firm of an
employee’s pre-tax salary deferral contributions and the annual Company profit sharing contribution). For 2011, the Compensation
Committee determined that employee deferral contributions would be matched on a one-to-one basis up to five percent of eligible
compensation and there would be no profit sharing contribution. Company contributions to the Profit Sharing Plan on behalf of
the named executive officers are shown in column (i) of the Summary Compensation Table.
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147
5. CEO Arrangements. See “Overview of our Chief Executive Officer’s Compensation” above.
6. Former Chief Financial Officer Arrangements.
John B. Howard
On February 15, 2011, Mr. Howard left AllianceBernstein to return to his former employer, AQR Capital Management, to resume
his former role as Chief Operating Officer. As a result of his resignation, Mr. Howard forfeited any equity and deferred compensa-
tion awards we granted to him (including the Holding Units we awarded to him as replacement equity). Accordingly,
Mr. Howard’s compensation in 2011 consisted entirely of the pro rata portion of his salary paid to him for the time he was
employed by our firm.
Compensation Committee
In January 2011, the Compensation Committee consisted of Mr. Condron (Chairman), Mr. Kraus, Ms. Slutsky and Mr. Smith. In
February 2011, the Board elected Messrs. de Castries, Duverne and Elliott as additional members. In February 2012, Mr. de Castries
resigned as a member of the Compensation Committee. As discussed above (see “Corporate Governance—NYSE Governance Matters”
in Item 10), because it is a limited partnership, Holding is exempt from NYSE rules that require public companies to have a
compensation committee composed solely of independent directors. AXA owns, indirectly, an approximate 64.4% economic inter-
est in AllianceBernstein (as of December 31, 2011), and compensation expense is a significant component of our financial results.
For these reasons, Mr. Duverne, Deputy Chief Executive Officer of AXA, is a member of the Compensation Committee, and any
action taken by the Compensation Committee requires the affirmative vote or consent of an executive officer of one or more of
our parent companies. (Presently, Mr. Duverne is the only member of the Compensation Committee who is also an executive offi-
cer of one or more of our parent companies.)
The Compensation Committee has general oversight of compensation and compensation-related matters, including:
(i) determining cash bonuses;
(ii) determining contributions and awards under incentive plans or other compensation arrangements (whether qualified or
non-qualified) for employees of AllianceBernstein and its subsidiaries, and amending or terminating such plans or arrangements
or any welfare benefit plan or arrangement or making recommendations to the Board with respect to adopting any new
incentive compensation plan, including equity-based plans;
(iii) reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer,
evaluating his performance in light of those goals and objectives, and determining and approving his compensation level based
on this evaluation (our Chief Executive Officer will recuse himself from voting on his own compensation); and
(iv) reviewing and discussing the CD&A, and recommending to the Board its inclusion in the Partnerships’ Forms 10-K and,
when applicable, proxy statements.
In December 2007, the Compensation Committee delegated responsibility for managing AllianceBernstein’s non-qualified plans to
the Omnibus Committee for Non-Qualified Plans (“Omnibus Committee”), consisting of six members who are senior officers of
AllianceBernstein. The Compensation Committee held four meetings in 2011. The Omnibus Committee held five meetings in
2011.
The Compensation Committee’s year-end process has generally focused on the cash bonuses and long-term incentive compensation
awards granted to senior management. Mr. Kraus plays an active role in the work of the Compensation Committee, but he does
not participate in any Committee discussions or votes regarding his own compensation. Mr. Kraus, working with other members of
senior management, provides recommendations for individual employee awards to the Compensation Committee for its consid-
eration. As part of this process, management provides the Committee with compensation benchmarking data from compensation
consultants. For 2011, we paid $16,050 to McLagan for executive compensation benchmarking data and an additional $245,973 for
survey and consulting services relating to the amount and form of compensation paid to employees other than executives.
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The Compensation Committee held its regularly-scheduled meeting regarding year-end compensation on December 9, 2011, at
which it discussed and approved senior management’s compensation recommendations. The Compensation Committee has not
retained its own consultants.
The Compensation Committee’s functions are more fully described in the committee’s charter, which is available online in the
“Management & Governance” section of our Internet site (http://www.alliancebernstein.com).
Other Compensation-Related Matters
AllianceBernstein and Holding are, respectively, private and public limited partnerships, and are subject to taxes other than federal
and state corporate income tax (see “Business—Taxes” in Item 1 and “Structure-related Risks” in Item 1A). Accordingly, Section 162(m)
of the Code, which limits tax deductions relating to executive compensation otherwise available to entities taxed as corporations, is
not applicable to either AllianceBernstein or Holding.
We have amended our qualified and non-qualified plans to the extent necessary to comply with applicable law.
For long-term incentive compensation awards made during or before 2008, we typically purchased the investments that were notion-
ally elected by plan participants and held these investments in a consolidated rabbi trust. Effective January 1, 2009, investments we
previously made in our investment services offered to clients are held in a custodial account, while we continue to hold investments
in Holding Units in the consolidated rabbi trust. These investments are subject to the general creditors of AllianceBernstein.
All compensation awards approved during 2011 that involve the issuance of Holding Units were made under the 2010 Plan.
Compensation Committee Interlocks and Insider Participation
Mr. de Castries, who was a member of the Compensation Committee from February 2011 through February 2012, is the Chief
Executive Officer of AXA, the ultimate parent of the General Partner.
Mr. Duverne is the Deputy Chief Executive Officer of AXA.
Mr. Condron served as the Chairman of the Board, President and Chief Executive Officer of AXA Equitable, the sole stockholder
of the General Partner, until his retirement on January 1, 2011.
As of December 31, 2011, AXA Equitable and its affiliates owned an aggregate 64.4% economic interest in AllianceBernstein.
Mr. Kraus is Chairman of the Board and Chief Executive Officer of the General Partner and, accordingly, also serves in that
capacity for AllianceBernstein and Holding. Mr. Kraus is also a director of AXA Financial, AXA Equitable, MONY and MLOA.
Other than Mr. Kraus, no executive officer of AllianceBernstein served as (i) a member of a compensation committee or (ii) a direc-
tor of another entity, an executive officer of which served as a member of AllianceBernstein’s Compensation Committee or Board.
Compensation Committee Report
The members of the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analy-
sis set forth above and, based on such review and discussion, recommended its inclusion in this Form 10-K.
Christopher M. Condron (Chair)
Denis Duverne
Peter S. Kraus
A.W. (Pete) Smith, Jr.
Henri de Castries
Steven G. Elliott
Lorie A. Slutsky
Annual Report 2011
149
Summary Compensation Table
The following table summarizes the total compensation of our named executive officers for 2011, 2010 and 2009, as applicable
(including Mr. Howard, who is no longer an executive officer as a result of his resignation in January 2011):
Bonus
($)
(d)
Stock
Awards(1)(2)
($)
(e)
Option
Awards(1)
($)
(f)
Non-Equity
Incentive Plan
Compensation
($)
(g)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(h)
Name and Principal Position
(a)
Year
(b)
Peter S. Kraus(3)
Chairman and Chief Executive
Officer
James A. Gingrich(4)
Chief Operating Officer
2011
2010
2009
2011
2010
2009
Salary
($)
(c)
275,000
275,000
275,000
400,000
400,000
200,000
—
—
6,000,000
1,685,000
1,311,092
1,270,000
—
—
—
—
—
—
1,915,000
2,638,921
2,529,995
—
—
925,000
Robert P. van Brugge(5)(6)
2011
375,000
1,470,000
930,002
—
Chairman and CEO of SCB LLC
Laurence E. Cranch(4)
General Counsel
2011
2010
2009
400,000
400,000
200,000
785,000
601,250
770,000
565,005
1,123,759
1,030,014
—
—
275,000
Edward J. Farrell(5)(7)
2011
300,000
515,000
285,005
Interim Chief Financial Officer
John B. Howard(7)
Former Chief Financial Officer
2011
2010
47,500
153,077
—
927,877
—
3,872,124
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
All Other
Compensation
($)
(i)
Total
($)
(j)
3,982,527
4,328,020
4,175,132
314,352
155,586
10,414
356,910
177,570
71,624
11,188
4,257,527
4,603,020
10,450,132
4,314,352
4,505,599
4,935,409
3,131,912
1,927,575
2,196,633
2,286,202
47,633
1,147,638
21
138
47,521
4,953,216
(1) The figures in columns (e) and (f) of the above table provide the aggregate grant date fair value of the awards calculated in accordance with FASB ASC Topic
718. For the assumptions made in determining these values, see Note 17 to AllianceBernstein’s consolidated financial statements in Item 8.
(2) As discussed above in “Overview of 2011 Incentive Compensation Program” and “Compensation Elements for Executive Officers—Long-term Incentive Compen-
sation” in this Item 11, long-term incentive compensation awards generally are denominated in restricted Holding Units. We employ this structure to directly
align our executives’ long-term interests with the interests of our Unitholders while also indirectly aligning our executives’ long-term interests with the interests
of our clients, as strong performance for our clients generally contributes directly to increases in assets under management and thus improved financial perform-
ance for the firm. Certain executives, like other eligible employees, may allocate a portion of their long-term incentive compensation awards to Deferred Cash
(up to 50% of their awards, up to a maximum cash amount of $250,000). The 2011 long-term incentive compensation awards granted to our named executive
officers are shown in column (e) of this table and column (i) of the Grant of Plan-Based Awards Table if they are denominated in restricted Holding Units; these
awards are shown in column (d) of this table and are not shown in the Grant of Plan-Based Awards Table if they are denominated in Deferred Cash.
In 2011, the number of restricted Holding Units comprising deferred incentive compensation awards was based on the average of the closing prices of a Holding
Unit as reported for NYSE composite transactions for the five business day period that commenced on January 13, 2012 and concluded on January 20, 2012
(this calculation resulted in an average price of $14.896); the Compensation Committee approved the awards on December 9, 2011.
(3) Mr. Kraus’s compensation structure is set forth in the Kraus Employment Agreement, the terms of which are described above in “Compensation Discussion and
Analysis—Overview of our Chief Executive Officer’s Compensation” and below in “Potential Payments upon Termination or Change in Control”.
(4) As discussed above in “Overview of Compensation Philosophy and Program” in this Item 11, we amended all outstanding deferred incentive compensation
awards (including options to buy Holding Units) of active employees permitting those employees, who terminate their employment or are terminated without
cause, to continue to vest in their deferred awards if they comply with certain agreements and restrictive covenants set forth in the applicable award agreement.
The amendment to outstanding options held by Messrs. Gingrich and Cranch did not result in any incremental fair value.
(5) We have not provided 2010 and 2009 compensation because neither Mr. van Brugge nor Mr. Farrell was a named executive officer in 2010 or 2009.
(6) The bonus disclosed in column (d) for Mr. van Brugge includes a $1,220,000 cash bonus paid to Mr. van Brugge in December 2011 and the $250,000 portion of
Mr. van Brugge’s 2011 long-term incentive compensation award under the Incentive Compensation Program he elected to allocate to Deferred Cash. This
amount will accrue interest monthly based on our monthly weighted average cost of funds (0.19% in December 2011) and will be credited to Mr. van Brugge
annually until the cash is distributed to him in installments over the four-year vesting period.
150
AllianceBernstein
(7) On March 22, 2010, Mr. Howard joined our firm as Chief Financial Officer. We did not pay Mr. Howard any compensation during 2009. On February 15, 2011,
Mr. Howard left AllianceBernstein to rejoin his former employer, AQR Capital, and Mr. Farrell assumed the role of Interim Chief Financial Officer.
For information about how salary and bonus relate to total compensation, see “Compensation Elements for Executive Officers” above.
Mr. Gingrich’s compensation reflects his former role as Chief Executive Officer of SCB LLC and his leadership role in optimizing
the revenue and profit contribution of our sell-side business, further enhancing that business’s research capabilities, trading services
and product array, and extending the business’s geographic platform.
Mr. van Brugge’s compensation reflects his former role as Global Research Director of SCB LLC and the contribution he makes in
achieving excellent results in third-party research surveys, helping to establish SCB’s research capabilities in Asia and attracting a
number of talented individuals to join SCB LLC as new analysts.
Mr. Cranch’s compensation reflects his role as General Counsel of AllianceBernstein and the contribution he makes in maintaining
a good compliance record, sustaining and improving the Legal and Compliance Department’s level of client service and minimizing
litigation against the firm.
Mr. Farrell’s compensation reflects his role as Controller and Interim Chief Financial Officer of AllianceBernstein and the con-
tribution he makes in helping ensure our firm’s incentive compensation program remains competitive, ensuring our firm has suffi-
cient liquidity on reasonable terms, rationalizing our firm’s global real estate footprint and leveraging existing resources to support
our firm and its business leaders more efficiently.
During 2011, we owned a fractional interest in an aircraft with an aggregate operating cost of $1,577,107 (including $315,847 in
maintenance fees, $1,023,395 in usage fees and $237,865 of amortization based on the original cost of our fractional interest, less
estimated residual value). The unamortized value of the fractional interest as of December 31, 2011 was $2,273,993. We also leased
an aircraft during 2011 with an aggregate operating cost of $4,282,967 (including $858,000 in leasing costs, $916,608 in main-
tenance fees and $2,508,359 in usage fees).
Our interests in aircraft facilitate business travel of senior management. In 2011, we permitted our Chief Executive Officer to use
the aircraft for personal travel. His personal travel constituted approximately 19.4% of our actual use of the aircraft in 2011.
Our methodology for determining the reported value of personal use of aircraft includes fees paid to the managers of the aircraft
(fees take into account the aircraft type and weight, number of miles flown, flight time, number of passengers, and a variable fee),
but excludes our fixed costs (amortization of original cost less estimated residual value and monthly maintenance fees). We included
such amounts in column (i).
We use the Standard Industry Fare Level (“SIFL”) methodology to calculate the amount to include in the taxable income of execu-
tives for the personal use of Company-owned aircraft. Using the SIFL methodology, which was approved by our Compensation
Committee, limits our ability to deduct the full cost of personal use of Company-owned aircraft by our executive officers. Taxable
income for the 12 months ended October 31, 2011 for personal use imputed to Mr. Kraus is $115,410.
Column (i) also includes the aggregate incremental cost to our Company of certain other expenses and perquisites, including leased
cars, drivers, contributions to the Profit Sharing Plan, life insurance premiums, medical and dental coverage, office space, admin-
istrative assistance, business club dues and parking, as applicable.
In accordance with the Kraus Employment Agreement and the Restricted Holding Unit Grant, Mr. Kraus is paid the cash dis-
tributions payable with respect to his unvested restricted Holding Units and a dollar amount equal to the cash distributions payable
with respect to the number of any Holding Units that are withheld by AllianceBernstein to cover Mr. Kraus’s withholding tax obli-
gations as the Holding Units vest.
For 2011, column (i) includes:
for Mr. Kraus, $3,155,012 for quarterly distributions related to his Restricted Holding Unit Grant ($2,351,853 of which was paid
on Holding Units Mr. Kraus owned and $803,159 of which was paid on Holding Units that had been withheld to cover taxes),
$497,855 for personal use of aircraft, $181,920 for personal use of a car and driver (including lease costs ($30,326), driver
Annual Report 2011
151
compensation ($132,189) and other car-related costs ($19,405), such as parking, gas, tolls, and repairs and maintenance), $135,490
for gross-ups related to imputed income for personal use of aircraft and car, and a $12,250 contribution to the Profit Sharing
Plan.
for Mr. Gingrich, $264,500 for quarterly distributions on Holding Units awarded as long-term incentive compensation, $20,000
for financial planning services, $17,188 for gross-ups related to imputed income for these financial planning services, a $12,250
contribution to the Profit Sharing Plan and $414 of life insurance premiums.
for Mr. van Brugge, $164,430 for U.K. taxes paid on his behalf, $150,063 for quarterly distributions on Holding Units awarded
as long-term incentive compensation, $26,467 for gross-ups related to imputed income for tax payments made on his behalf, a
$12,250 contribution to the Profit Sharing Plan, $3,520 for tax preparation services and $180 of life insurance premiums.
for Mr. Cranch, $123,709 for quarterly distributions on Holding Units awarded as long-term incentive compensation, $20,000
for financial planning services, $20,392 for gross-ups related to imputed income for these financial planning services, a $12,250
contribution to the Profit Sharing Plan and $1,219 of life insurance premiums.
for Mr. Farrell, $34,969 for quarterly distributions on Holding Units awarded as long-term incentive compensation, a $12,250
contribution to the Profit Sharing Plan and $414 of life insurance premiums.
for Mr. Howard, $21 of life insurance premiums.
Grants of Plan-based Awards in 2011
The following table describes each grant of an award made to a named executive officer during 2011 under the 2010 Plan, an
equity compensation plan:
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
Estimated Future Payouts Under
Equity Incentive Plan Awards
Grant
Date
(b)
Threshold
($)
(c)
Target
($)
(d)
Maximum
($)
(e)
Threshold
(#)
(f)
Target
(#)
(g)
Maximum
(#)
(h)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
Exercise
or Base
Price of
Option
Awards
($/Sh)
(k)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
128,558
62,433
37,930
19,133
—
—
—
—
—
—
—
—
—
—
—
—
—
Name
(a)
Peter S. Kraus
James A.
—
Gingrich(1)(2)(3)
12/09/2011
Robert P. van
Brugge(1)(3)
Laurence E.
12/09/2011
Cranch(1)(2)(3)
12/09/2011
Edward J. Farrell(1)(3)
12/09/2011
John B. Howard
—
Grant
Date Fair
Value of
Stock and
Option
Awards
($)
(l)
—
1,915,000
930,002
565,005
285,005
—
(1) Amounts shown in column (l) reflect 2011 restricted Holding Unit awards under the Incentive Compensation Program and the 2010 Plan, an equity compensa-
tion plan, and can also be found in column (e) of the Summary Compensation Table.
(2) As discussed above in “Overview of Compensation Philosophy and Program” in this Item 11, we amended all outstanding deferred incentive compensation
awards (including options to buy Holding Units) of active employees permitting those employees, who terminate their employment or are terminated without
cause, to continue to vest in their deferred awards if they comply with certain agreements and restrictive covenants set forth in the applicable award agreement.
The amendment to outstanding options held by Messrs. Gingrich and Cranch did not result in any incremental fair value.
152
AllianceBernstein
(3) As discussed above in “Overview of 2011 Incentive Compensation Program” and “Compensation Elements for Executive Officers—Long-term Incentive Compen-
sation” in this Item 11, long-term incentive compensation awards generally are denominated in restricted Holding Units. We employ this structure to directly
align our executives’ long-term interests with the interests of our Unitholders while also indirectly aligning our executives’ long-term interests with the interests
of our clients, as strong performance for our clients generally contributes directly to increases in assets under management and thus improved financial perform-
ance for the firm. Certain executives, like other eligible employees, may allocate a portion of their long-term incentive compensation awards to Deferred Cash
(up to 50% of their awards, up to a maximum cash amount of $250,000). The 2011 long-term incentive compensation awards granted to our named executive
officers are shown in column (i) of this table and column (e) of the Summary Compensation Table if they are denominated in restricted Holding Units; these
awards are not shown in this table and are shown in column (d) of the Summary Compensation Table if they are denominated in Deferred Cash.
In 2011, the number of restricted Holding Units comprising deferred incentive compensation awards was based on the average of the closing prices of a Holding
Unit as reported for NYSE composite transactions for the five business day period that commenced on January 13, 2012 and concluded on January 20, 2012
(this calculation resulted in an average price of $14.896); the Compensation Committee approved the awards on December 9, 2011.
Outstanding Equity Awards at 2011 Fiscal Year-End
The following table describes any outstanding equity awards held by our named executive officers as of December 31, 2011:
Option Awards
Holding Unit Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
(b)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
(c)
Name
(a)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
Option
Exercise
Price
($)
(e)
Option
Expiration
Date
(f)
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
(g)
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(h)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
(#)
(i)
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
(j)
Peter S. Kraus(1)
James A. Gingrich(2)(3)
Robert P. van Brugge(4)
Laurence E. Cranch(5)(6)
Edward J. Farrell(7)
John B. Howard(8)
—
105,413
—
31,339
—
—
—
158,120
—
47,009
—
—
—
—
—
—
—
—
—
17.05
—
17.05
—
—
—
1,088,821
14,241,779
1/23/19
—
1/23/19
—
—
259,323
133,459
92,729
34,669
—
3,391,945
1,745,644
1,212,895
453,471
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) Mr. Kraus’s Restricted Holding Unit Grant vested in 20% increments on each of December 19, 2009, 2010 and 2011 and is scheduled to vest in additional 20%
increments on each of December 19, 2012 and 2013.
(2) Mr. Gingrich was awarded (i) 128,558 restricted Holding Units in December 2011 that vest in 25% increments on each of December 1, 2012, 2013, 2014 and
2015, (ii) 111,253 restricted Holding Units in December 2010, 25% of which vested on December 1, 2011, and the remainder of which are scheduled to vest in
additional 25% increments on each of December 1, 2012, 2013 and 2014, and (iii) 94,650 restricted Holding Units in December 2009, 25% of which vested on
each of December 1, 2010 and 2011 and the remainder of which are scheduled to vest in additional 25% increments on each of December 1, 2012 and 2013.
(3) Mr. Gingrich was granted 263,533 options to buy Holding Units in January 2009, 20% of which vested and became exercisable on each of January 23, 2010,
2011 and 2012 and the remainder of which are scheduled to vest and become exercisable in additional 20% increments on each of January 23, 2013 and 2014.
(4) Mr. van Brugge was awarded 62,433 restricted Holding Units in December 2011 that vest in 25% increments on each of December 1, 2012, 2013, 2014 and
2015. Mr. van Brugge elected to receive the remaining $250,000 value of his December 2011 long-term incentive compensation award in Deferred Cash, which
will vest according to the same schedule as his restricted Holding Unit award.
(5) Mr. Cranch was awarded (i) 37,930 restricted Holding Units in December 2011 that vest in 25% increments on each of December 1, 2012, 2013, 2014 and
2015, (ii) 47,376 restricted Holding Units in December 2010, 25% of which vested on December 1, 2011 and the remainder of which are scheduled to vest in
additional 25% increments on each of December 1, 2012, 2013 and 2014, and (iii) 38,534 restricted Holding Units in December 2009, 25% of which vested on
each of December 1, 2010 and 2011 and the remainder of which are scheduled to vest in additional 25% increments on each of December 1, 2012 and 2013.
Annual Report 2011
153
(6) Mr. Cranch was granted 78,348 options to buy Holding Units in January 2009, 20% of which vested and became exercisable on each of January 23, 2010, 2011
and 2012 and the remainder of which are scheduled to become exercisable in additional 20% increments on each of January 23, 2013 and 2014.
(7) Mr. Farrell was awarded 19,133 restricted Holding Units in December 2011 that vest in 25% increments on each of December 1, 2012, 2013, 2014 and 2015.
(8) As a result of his resignation on February 15, 2011, Mr. Howard forfeited his outstanding equity awards.
Option Exercises and Holding Units Vested in 2011
The following table describes any Holding Units held by our named executive officers that vested during 2011:
Name
(a)
Peter S. Kraus
James A. Gingrich
Robert P. van Brugge
Laurence E. Cranch
Edward J. Farrell
John B. Howard
Pension Benefits for 2011
Option Awards
Holding Unit Awards
Number of Units
Acquired on Exercise
(#)
(b)
Value Realized
on Exercise
($)
(c)
Number of Holding
Units Acquired on
Vesting
(#)
(d)
Value Realized
on Vesting
($)
(e)
—
—
—
—
—
—
—
—
—
—
—
—
544,411
51,476
28,017
21,478
6,071
—
7,082,787
682,572
371,505
284,798
80,501
—
None of our named executive officers are entitled to benefits under the Amended and Restated Retirement Plan for Employees of
AllianceBernstein L.P. (“Retirement Plan”), our Company pension plan. For additional information regarding the Retirement
Plan, including interest rates and actuarial assumptions, see Note 15 to AllianceBernstein’s consolidated financial statements in Item 8.
Non-Qualified Deferred Compensation for 2011
The following table describes our named executive officers’ vested and unvested non-qualified deferred compensation con-
tributions, earnings and distributions during 2011 and their non-qualified deferred compensation plan balances as of December 31,
2011:
Name
(a)
Peter S. Kraus
James A. Gingrich(1)
Robert P. van Brugge(1)(2)
Laurence E. Cranch(1)
Edward J. Farrell(1)
John B. Howard
Executive
Contributions
in Last FY
($)
(b)
Registrant
Contributions
in Last FY
($)
(c)
Aggregate
Earnings
in Last FY
($)
(d)
Aggregate
Withdrawals/
Distributions
($)
(e)
Aggregate
Balance at
Last FYE
($)
(f)
—
—
—
—
—
—
—
—
250,000
—
—
—
—
(212,162)
(92,969)
(251,113)
(7,063)
—
—
(365,959)
(632,736)
—
(211,285)
—
—
2,746,427
838,588
2,431,088
631,969
—
(1) For Messrs. Gingrich, van Brugge, Cranch and Farrell, amounts shown reflect their respective interests from pre-2009 awards under the Incentive Compensation
Program. For additional information about the Incentive Compensation Program, see Note 16 to AllianceBernstein’s consolidated financial statements in Item 8.
For individuals (including Messrs. Gingrich, van Brugge, Cranch and Farrell) with notional investments in Holding Units, amounts of quarterly distributions on
such Holding Units are reflected as earnings in column (d) and, to the extent distributed to the named executive officer, as distributions in column (e). Column
154
AllianceBernstein
(f) includes the value of all notional investments as of the close of business on December 31, 2011. As of that date, Messrs. Gingrich, van Brugge, Cranch and
Farrell notionally held 17,975 Holding Units, 7,287 Holding Units, 8,831 Holding Units and 9,944 Holding Units, respectively, as a result of pre-2009 awards
under the Incentive Compensation Program.
(2) The amount shown in column (c) for Mr. van Brugge reflects the portion of his 2011 long-term incentive compensation award that he elected to receive in
Deferred Cash. This amount will accrue interest monthly based on our monthly weighted average cost of funds (0.19% in December 2011) and will be credited
to Mr. van Brugge annually until the cash is distributed to him in installments over the four-year vesting period. In future years, this interest will be reflected in
column (d) and these distributions will be reflected in column (e).
Potential Payments upon Termination or Change in Control
In connection with the commencement of Mr. Kraus’s employment, on December 19, 2008, he received the Restricted Holding
Unit Grant. During Mr. Kraus’s Employment Term, AllianceBernstein has no commitment to pay any cash bonuses to Mr. Kraus
beyond the $6 million in 2009 (with any additional bonuses being entirely at the discretion of the Compensation Committee) or to
make any additional equity-based awards to him. Consequently, for 2010 and subsequent years during the Employment Term, the
totality of Mr. Kraus’s compensation (other than his salary and absent any additional awards the Compensation Committee may
choose to grant) is dependent on the level of cash distributions on the restricted Holding Units granted to him and the evolution of
the trading price of Holding Units, both of which are partially dependent on the financial and operating results of our firm. Accord-
ingly, his long-term interests are directly aligned with the interests of other holders of Holding Units. For additional information
about Mr. Kraus’s compensation, see “Overview of our Chief Executive Officer’s Compensation” above.
The Kraus Employment Agreement contains a number of accelerated vesting clauses, including immediate vesting upon a “change
in control” of our firm (i.e., AXA, our parent company, ceasing to control the management of AllianceBernstein’s business or
Holding ceasing to be publicly traded); and immediate vesting upon certain qualifying terminations of employment, including
termination of Mr. Kraus’s employment (i) by AllianceBernstein “without cause”, (ii) by Mr. Kraus for “good reason” and (iii) due
to death or disability.
The change-in-control provisions in the Kraus Employment Agreement were required by Mr. Kraus as part of his negotiation in
order to assure him that AllianceBernstein would continue to be operated as a separately-managed entity, and with a certain degree
of independence, and that Holding would continue as a publicly-traded entity. Both AXA and Mr. Kraus believe that this arrange-
ment adds significant value to AllianceBernstein. The Board understood that AXA had no intention of changing this arrangement
during the term of Mr. Kraus’s Employment Term and thus concluded that the change-in-control provisions were acceptable and
necessary in order to recruit Mr. Kraus.
The provisions requiring accelerated vesting upon termination without cause or for good reason were required by Mr. Kraus in
order to preserve the value of his long-term incentive compensation arrangement. The Board agreed to these provisions because
they were typical of executive compensation agreements for executives at Mr. Kraus’s level and because the Board concluded that
they were necessary to recruit Mr. Kraus.
The Board concluded that the change-in-control and termination provisions in the Kraus Employment Agreement fit into
AllianceBernstein’s overall compensation objectives because they permitted AllianceBernstein to attract and retain a highly-qualified
chief executive officer, were consistent with AXA’s and the Board’s expectations with respect to the manner in which
AllianceBernstein and Holding would be operated from 2009 to 2013, were consistent with the Board’s expectations that Mr. Kraus
would not be terminated without cause and that no steps would be taken that would provide him with the ability to terminate the
agreement with good reason (and thus that there was no inconsistency between these provisions and AllianceBernstein’s goal of
providing Mr. Kraus with effective incentives for future performance), and to align his long-term interests with those of
AllianceBernstein’s Unitholders and clients.
In 2011, we amended all outstanding deferred incentive compensation awards (including option awards) of active employees (i.e.,
those employees who were employed by the Company as of December 31, 2011) permitting those employees, who terminate their
employment or are terminated without cause, to continue to vest in their deferred awards if they comply with certain agreements
and restrictive covenants set forth in the applicable award agreement. These agreements and covenants include restrictions on
competition and employee and client solicitation, and a claw-back for failing to follow existing risk management policies. These
Annual Report 2011
155
changes applied to 2011 deferred incentive compensation awards and we expect the changes to apply to deferred incentive compen-
sation awards in future years as well. The amounts shown for the named executive officers (other than Mr. Kraus) for resignation or
termination by AllianceBernstein without cause in column (c) of the table below reflect the value of these changes to their out-
standing awards, assuming such resignation or termination on December 31, 2011 and the executives’ continued compliance with
these agreements and restrictive covenants through the vesting dates of the awards. For additional information, see “Overview of
Compensation Philosophy and Program” in this Item 11 and Note 2 to AllianceBernstein’s consolidated financial statements in Item 8. In addi-
tion, there are amounts payable to the named executive officers upon death and disability.
The following table sets forth estimated payments and benefits to which our named executive officers would have been entitled
upon a change in control of AllianceBernstein or the specified terminations of employment as of December 31, 2011 (Mr. Howard
has been excluded from the table because he resigned from AllianceBernstein in February 2011 and, accordingly, was not entitled to
any payments or benefits upon a change in control or other specified termination of employment as of December 31, 2011; the
only 2011 compensation Mr. Howard received was the pro rata portion of the base salary he earned while working for our firm):
Name
(a)
Peter S. Kraus
Change in control
Termination by AllianceBernstein without cause
Termination by Mr. Kraus for good reason
Death or disability(4)(5)
James A. Gingrich
Resignation or termination by AllianceBernstein without cause
(complies with applicable agreements and restrictive covenants)(2)
Death or disability(6)
Robert P. van Brugge
Resignation or termination by AllianceBernstein without cause
(complies with applicable agreements and restrictive covenants)(2)
Death or disability(6)
Laurence E. Cranch
Resignation or termination by AllianceBernstein without cause
(complies with applicable agreements and restrictive covenants)(2)
Death or disability(6)
Edward J. Farrell
Resignation or termination by AllianceBernstein without cause
(complies with applicable agreements and restrictive covenants)(2)
Death or disability(6)
Acceleration
or Grant of
Restricted
Holding
Unit
Awards(2)
($)
(c)
Acceleration
of Option
Awards(3)
($)
(d)
Cash
Payments(1)
($)
(b)
—
—
—
—
14,241,779
14,241,779
14,241,779
14,241,779
304,168
304,168
3,391,945
3,391,945
368,329
368,329
1,745,644
1,745,644
96,716
96,716
1,212,895
1,212,895
78,286
78,286
453,471
453,471
—
—
—
—
—
—
—
—
—
—
—
—
Other
Benefits
($)
(e)
20,753
20,753
20,753
20,753
—
—
—
—
—
—
—
—
(1) For Messrs. Gingrich, van Brugge, Cranch and Farrell, amounts shown represent pre-2009 awards under the Incentive Compensation Program. In addition, it is
our expectation that each would receive a cash severance payment on the termination of his employment. As the amounts of any such cash severance payments
would be determined at the time of such termination, we are unable to estimate such amounts.
(2)
In 2011, we amended all outstanding deferred incentive compensation awards (including option awards) of active employees (i.e., those employees who were
employed by the Company as of December 31, 2011) permitting those employees, who terminate their employment or are terminated without cause, to con-
tinue to vest in their deferred awards if they comply with certain agreements and restrictive covenants set forth in the applicable award agreement. These
agreements and covenants include restrictions on competition and employee and client solicitation, and a claw-back for failing to follow existing risk manage-
ment policies. These changes applied to 2011 deferred incentive compensation awards and we expect these changes also to apply to future deferred incentive
compensation awards.
If a named executive officer fails to comply with the applicable agreements and restrictive covenants set forth in his award agreements, the named executive
officer would not be entitled to any acceleration of restricted Holding Unit or option awards.
156
AllianceBernstein
(3) Out-of-the-money options are not disclosed in column (d) because their intrinsic value is $0.
(4) The Kraus Employment Agreement defines “Disability” as a good faith determination by AllianceBernstein that Mr. Kraus is physically or mentally incapacitated
and has been unable for a period of 120 days in the aggregate during any twelve-month period to perform substantially all of the duties for which he is respon-
sible immediately before the commencement of the incapacity.
(5) Upon termination of Mr. Kraus’s employment due to death or disability, AllianceBernstein will provide at its expense continued health and welfare benefits for
Mr. Kraus, his spouse and his dependants through the end of the calendar year in which termination occurs. Thereafter, until the date Mr. Kraus (or, in the case
of his spouse, his spouse) reaches age 65, AllianceBernstein will provide Mr. Kraus and his spouse with access to participation in AllianceBernstein’s medical plans
at Mr. Kraus’s (or his spouse’s) sole expense based on a reasonably determined fair market value premium rate.
(6) “Disability” is defined in the Incentive Compensation Program award agreements of Messrs. Gingrich, van Brugge, Cranch and Farrell, and in the Special Option
Program award agreements of Messrs. Gingrich and Cranch, as the inability to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to last for a continuous period of not less than 12 months, as determined by the carrier of the long-term
disability insurance program maintained by AllianceBernstein or its affiliate that covers the executive officer.
Director Compensation in 2011
The following table describes how we compensated our non-employee directors during 2011 (Mr. Kraus does not receive any
compensation in his capacity as a director):
Fees
Earned or
Paid in
Cash
($)
(b)
68,000
74,000
69,500
68,000
72,500
77,000
93,500
Stock
Awards(1)(3)
($)
(c)
Option
Awards(2)(3)
($)
(d)
Non-Equity
Incentive
Plan
Compensation
($)
(e)
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
60,000
—
—
—
—
—
—
—
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(f)
All Other
Compensation
($)
(g)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
($)
(h)
188,000
194,000
189,500
188,000
192,500
197,000
213,500
Name
(a)
Christopher M. Condron
Steven G. Elliott
Deborah S. Hechinger
Weston M. Hicks
Lorie A. Slutsky
A.W. (Pete) Smith, Jr.
Peter J. Tobin
(1) As of December 31, 2011, these directors had outstanding restricted Holding Unit awards in the following amounts: Mr. Condron held 2,759 Holding Units,
Mr. Elliott held 2,759 Holding Units, Ms. Hechinger held 6,264 Holding Units, Mr. Hicks held 6,726 Holding Units, Ms. Slutsky held 7,387 Holding Units,
Mr. Smith held 6,726 Holding Units and Mr. Tobin held 7,387 Holding Units.
(2) As of December 31, 2011, these directors had outstanding option awards in the following amounts: Mr. Condron held 10,034 options to buy Holding Units,
Mr. Elliott held options to buy 10,034 Holding Units, Ms. Hechinger held options to buy 26,161 Holding Units, Mr. Hicks held options to buy 28,589 Holding
Units, Ms. Slutsky held options to buy 57,740 Holding Units, Mr. Smith held options to buy 28,589 Holding Units and Mr. Tobin held options to buy 62,990
Holding Units.
(3) Reflects the aggregate grant date fair value of the awards calculated in accordance with FASB ASC Topic 718. For the assumptions made in determining these
values, see Note 17 to AllianceBernstein’s consolidated financial statements in Item 8.
The General Partner only pays fees, and makes equity awards, to directors who are not employed by our Company or by any of our
affiliates. Through December 31, 2011, these fees and awards consisted of:
• an annual retainer of $50,000 (paid quarterly after any quarter during which a director serves on the Board);
• a fee of $1,500 for participating in a meeting of the Board, or any duly constituted committee of the Board, whether in person
or by telephone;
Annual Report 2011
157
• an annual retainer of $15,000 for acting as Chair of the Audit Committee;
• an annual retainer of $7,500 for acting as Chair of the Governance Committee; and
• an annual equity-based grant under an equity compensation plan consisting of:
•
restricted Holding Units having a value of $60,000 based on the closing price of a Holding Unit on the grant date as
reported for NYSE composite transactions; and
• options to buy Holding Units with a grant date value of $60,000 calculated using the Black-Scholes method.
During 2011, at a regularly-scheduled meeting of the Board, 2,759 restricted Holding Units and options to buy 10,034 Holding
Units at $21.75 per Unit were granted to each of Mr. Condron, Mr. Elliott, Ms. Hechinger, Mr. Hicks, Ms. Slutsky, Mr. Smith
and Mr. Tobin. Such grants have generally been made at the May meeting of the Board. The date of the meeting was set at a Board
meeting in 2010. The exercise price of the options was the closing price on the NYSE on May 11, 2011, the date the Board
approved the awards. For information about how the Black-Scholes value was calculated, see Note 17 to AllianceBernstein’s con-
solidated financial statements in Item 8. Options granted to these directors become exercisable ratably over three years. Restricted
Holding Units granted to these directors “cliff” vest after three years (i.e., 100% of the award is distributed on the third anniversary
of the grant date). In order to avoid any perception that our directors’ exercise of their fiduciary duties might be impaired, these
options and restricted Holding Units are not forfeitable. Accordingly, vesting and exercisability of options continues following a
director’s resignation from the Board. Restricted Holding Units vest and are distributed as soon as administratively feasible following
a director’s resignation from the Board.
The General Partner may reimburse any director for reasonable expenses incurred in participating in Board meetings. Holding and
AllianceBernstein, in turn, reimburse the General Partner for expenses incurred by the General Partner on their behalf, including
amounts in respect of directors’ fees and expenses. These reimbursements are subject to any relevant provisions of the Holding
Partnership Agreement and AllianceBernstein Partnership Agreement.
158
AllianceBernstein
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Securities Authorized for Issuance under Equity Compensation Plans
The following table summarizes the Holding Units to be issued pursuant to our equity compensation plans as of December 31,
2011:
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
8,994,229
—
8,994,229
Weighted average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of
securities
remaining
available for future
issuance(1)
(c)
$ 39.63
—
$39.63
46,860,548
—
46,860,548
(1) All Holding Units remaining available for future issuance will be issued pursuant to the 2010 Plan.
There are no AllianceBernstein Units to be issued pursuant to an equity compensation plan.
For information about our equity compensation plans (2010 Plan, 1997 Plan, 1993 Unit Option Plan, Century Club Plan), see Note
17 to AllianceBernstein’s consolidated financial statements in Item 8.
Principal Security Holders
As of December 31, 2011, we had no information that any person beneficially owned more than 5% of the outstanding Holding
Units.
As of December 31, 2011, we had no information that any person beneficially owned more than 5% of the outstanding
AllianceBernstein Units except AXA and certain of its wholly-owned subsidiaries as reported on Schedules 13D/A and Forms 4
filed with the SEC on December 16, 2011 pursuant to the Exchange Act.
The table below and the notes following it have been prepared in reliance upon such filings for the nature of ownership and an
explanation of overlapping ownership.
Name and Address of Beneficial Owner
Amount and Nature of Beneficial
Ownership Reported on Schedule
Percent of Class
AXA(1)(2)(3)(4)
25 avenue Matignon 75008
Paris, France
170,121,745(4)(5)
61.2%(4)(5)
(1) Based on information provided by AXA Financial, on December 31, 2011, AXA and certain of its subsidiaries beneficially owned all of AXA Financial’s out-
standing common stock. For insurance regulatory purposes, the shares of common stock of AXA Financial beneficially owned by AXA and its subsidiaries have
been deposited into a voting trust (“Voting Trust”), the term of which has been extended until April 29, 2021. The trustees of the Voting Trust (“Voting
Trustees”) are Henri de Castries, Denis Duverne and Mark Pearson. Messrs. de Castries and Duverne serve on the Board of Directors of AXA, while Mr. Pearson
serves on the Management Committee of AXA. The Voting Trustees have agreed to exercise their voting rights to protect the legitimate economic interests of
AXA, but with a view to ensuring that certain minority shareholders of AXA do not exercise control over AXA Financial or certain of its insurance subsidiaries.
(2) Based on information provided by AXA, as of December 31, 2011, 14.54% of the issued ordinary shares (representing 22.78% of the voting power) of AXA
were owned directly and indirectly by two French mutual insurance companies engaged in the Property & Casualty insurance business and the Life & Savings
insurance business in France (“Mutuelles AXA”).
Annual Report 2011
159
(3) The Voting Trustees and the Mutuelles AXA, as a group, may be deemed to be beneficial owners of all AllianceBernstein Units beneficially owned by AXA and its
subsidiaries. By virtue of the provisions of the Voting Trust Agreement, AXA may be deemed to have shared voting power with respect to the AllianceBernstein
Units. AXA and its subsidiaries have the power to dispose or direct the disposition of all shares of the capital stock of AXA Financial deposited in the Voting
Trust. The Mutuelles AXA, as a group, may be deemed to share the power to vote or to direct the vote and to dispose or to direct the disposition of all the
AllianceBernstein Units beneficially owned by AXA and its subsidiaries. The address of each of AXA and the Voting Trustees is 25 avenue Matignon, 75008 Paris,
France. The address of the Mutuelles AXA is 313 Terrasses de l’Arche, 92727 Nanterre Cedex, France.
(4) By reason of their relationships, AXA, the Voting Trustees, the Mutuelles AXA, AXA America Holdings, Inc. (a wholly-owned subsidiary of AXA), AXA IM Rose
Inc. (a 95.535%-owned subsidiary of AXA), AXA Financial, AXA Equitable, AXA Financial (Bermuda) Ltd. (a wholly-owned subsidiary of AXA Financial), Coliseum
Reinsurance Company (a wholly-owned subsidiary of AXA Financial), ACMC, LLC (a wholly-owned subsidiary of AXA Financial), MONY and MLOA may be
deemed to share the power to vote or to direct the vote and to dispose or direct the disposition of all or a portion of the 170,121,745 AllianceBernstein Units.
(5) As indicated above in note 4, AXA owns approximately 95.535% of AXA IM Rose Inc., which means that approximately 4.465% of the AllianceBernstein Units
beneficially owned by AXA IM Rose Inc. as of December 31, 2011 were not beneficially owned by AXA. As a result, as of December 31, 2011, AXA beneficially
owned 168,249,366 AllianceBernstein Units, or 60.6% of the issued and outstanding AllianceBernstein Units.
As of December 31, 2011, Holding was the record owner of 105,173,342, or 37.9%, of the issued and outstanding AllianceBernstein
Units.
Management
The following table sets forth, as of December 31, 2011, the beneficial ownership of Holding Units by each director and named
executive officer of the General Partner and by all directors and executive officers as a group:
Peter S. Kraus(1)(2)
Dominique Carrel-Billiard(1)
Christopher M. Condron
Henri de Castries(1)
Denis Duverne(1)
Richard S. Dziadzio(1)
Steven G. Elliott
Deborah S. Hechinger(3)
Weston M. Hicks(4)
Kevin Molloy(1)(5)
Mark Pearson(1)
Lorie A. Slutsky(1)(6)
A.W. (Pete) Smith, Jr.(7)
Peter J. Tobin(1)(8)
James A. Gingrich(1)(9)
Laurence E. Cranch(1)(10)
Edward J. Farrell(1)(11)
Robert P. van Brugge(1)(12)
Name of Beneficial Owner
Number of Holding
Units and Nature of
Beneficial Ownership
Percent of Class
1,889,538
1.8%
—
47,759
2,000
2,000
—
2,759
16,680
24,750
395
—
50,350
21,269
54,812
538,350
179,678
56,087
140,746
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
John B. Howard
All directors and executive officers of the General Partner as a group (20 persons)(13)(14)
—
3,139,816
*
3.0%
* Number of Holding Units listed represents less than 1% of the Units outstanding.
(1) Excludes Holding Units beneficially owned by AXA and its subsidiaries. Ms. Slutsky and Messrs. Kraus, Carrel-Billiard, de Castries, Duverne, Dziadzio, Molloy,
Pearson and Tobin are directors and/or officers of AXA, AXA IM, AXA Financial, and/or AXA Equitable. Messrs. Kraus, Gingrich, Cranch, Farrell and van Brugge
are directors and/or officers of the General Partner.
160
AllianceBernstein
(2)
In connection with the commencement of Mr. Kraus’s employment, on December 19, 2008, he was granted 2,722,052 restricted Holding Units. Subject to
accelerated vesting clauses in the Kraus Employment Agreement (e.g., immediate vesting upon AXA ceasing to control the management of AllianceBernstein’s
business or Holding ceasing to be publicly traded and certain qualifying terminations of employment), Mr. Kraus’s restricted Holding Units vest ratably on each of
the first five anniversaries of December 19, 2008, which commenced December 19, 2009, provided, with respect to each installment, Mr. Kraus continues to be
employed by AllianceBernstein on the vesting date. AllianceBernstein withheld 280,263 Holding Units, 277,487 Holding Units and 274,764 Holding Units,
respectively, from Mr. Kraus’s distributions when the 2009, 2010 and 2011 tranches of his Restricted Holding Unit Grant vested to cover withholding tax obliga-
tions. Mr. Kraus’s total reflected in the table includes 1,088,821 Holding Units awarded under the Kraus Employment Agreement that have not yet vested or
been distributed to him.
(3)
Includes 10,596 Holding Units Ms. Hechinger can acquire within 60 days under an AllianceBernstein option plan.
(4)
Includes 13,024 Holding Units Mr. Hicks can acquire within 60 days under an AllianceBernstein option plan.
(5)
Includes 25 Holding Units acquired during 2011 by Mr. Molloy through distribution reinvestment.
(6)
Includes 42,175 Holding Units Ms. Slutsky can acquire within 60 days under an AllianceBernstein option plan.
(7)
Includes 13,024 Holding Units Mr. Smith can acquire within 60 days under an AllianceBernstein option plan.
(8)
Includes 47,425 Holding Units Mr. Tobin can acquire within 60 days under an AllianceBernstein option plan.
(9)
Includes 158,119 Holding Units Mr. Gingrich can acquire within 60 days under an AllianceBernstein option plan and 324,622 restricted Holding Units awarded to
Mr. Gingrich as long-term incentive compensation that have not yet vested or been distributed to him. Mr. Gingrich’s 324,622 restricted Holding Units include
128,558 restricted Holding Units granted to him as 2011 deferred incentive compensation. This award was approved by the Compensation Committee at a
meeting duly called and held on December 9, 2011, at which meeting the Compensation Committee determined that the number of Holding Units would be
derived using the average of the closing prices of a Holding Unit as reported for NYSE composite transactions for the five business day period that commenced
on January 13, 2012 and concluded on January 20, 2012.
(10) Represents 47,008 Holding Units Mr. Cranch can acquire within 60 days under an AllianceBernstein option plan and 132,670 restricted Holding Units awarded
to Mr. Cranch as long-term incentive compensation that have not yet vested or been distributed to him. Mr. Cranch’s 132,670 restricted Holding Units include
37,930 restricted Holding Units granted to him as 2011 deferred incentive compensation. This award was approved by the Compensation Committee at a meet-
ing duly called and held on December 9, 2011, at which meeting the Compensation Committee determined that the number of Holding Units would be derived
using the average of the closing prices of a Holding Unit as reported for NYSE composite transactions for the five business day period that commenced on
January 13, 2012 and concluded on January 20, 2012.
(11) Includes 49,967 restricted Holding Units awarded to Mr. Farrell as long-term incentive compensation that have not yet vested or been distributed to him.
Mr. Farrell’s 49,967 restricted Holding Units include 19,133 restricted Holding Units granted to him as 2011 deferred incentive compensation. This award was
approved by the Compensation Committee at a meeting duly called and held on December 9, 2011, at which meeting the Compensation Committee
determined that the number of Holding Units would be derived using the average of the closing prices of a Holding Unit as reported for NYSE composite trans-
actions for the five business day period that commenced on January 13, 2012 and concluded on January 20, 2012.
(12) Represents 140,746 restricted Holding Units awarded to Mr. van Brugge as long-term incentive compensation that have not yet vested or been distributed to
him. Mr. van Brugge’s 140,746 restricted Holding Units include 62,433 restricted Holding Units granted to him as 2011 deferred incentive compensation. This
award was approved by the Compensation Committee at a meeting duly called and held on December 9, 2011, at which meeting the Compensation Committee
determined that the number of Holding Units would be derived using the average of the closing prices of a Holding Unit as reported for NYSE composite trans-
actions for the five business day period that commenced on January 13, 2012 and concluded on January 20, 2012.
(13) Includes 331,371 Holding Units the directors and executive officers as a group can acquire within 60 days under AllianceBernstein option plans.
(14) Includes 1,828,504 restricted Holding Units awarded to the executive officers as a group as long-term incentive compensation that have not yet vested or been
distributed to them.
As of December 31, 2011, our directors and executive officers did not beneficially own any AllianceBernstein Units.
Annual Report 2011
161
The following table sets forth, as of December 31, 2011, the beneficial ownership of the common stock of AXA by each director
and named executive officer of the General Partner and by all directors and executive officers as a group:
AXA Common Stock(1)
Name of Beneficial Owner
Number of Shares
and Nature of
Beneficial Ownership
Percent of Class
Peter S. Kraus
Dominique Carrel-Billiard(2)
Christopher M. Condron(3)
Henri de Castries(4)
Denis Duverne(5)
Richard S. Dziadzio(6)
Steven G. Elliott
Deborah S. Hechinger
Weston M. Hicks
Kevin Molloy(7)
Mark Pearson(8)
Lorie A. Slutsky(9)
A.W. (Pete) Smith, Jr.
Peter J. Tobin(10)
James A. Gingrich
Laurence E. Cranch
Edward J. Farrell
Robert P. van Brugge
John B. Howard
—
188,482
3,167,568
4,420,475
2,593,822
216,186
—
—
—
34,084
94,015
21,786
—
38,906
—
—
—
—
—
All directors and executive officers of the General Partner as a group (20 persons)(11)
10,775,324
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* Number of shares listed represents less than 1% of the outstanding AXA common stock.
(1) Holdings of AXA American Depositary Shares (“ADS”) are expressed as their equivalent in AXA common stock. Each AXA ADS represents the right to receive
one AXA ordinary share.
(2)
(3)
(4)
(5)
(6)
(7)
Includes 129,734 shares Mr. Carrel-Billiard can acquire within 60 days under option plans. Also includes 261 unvested AXA IM performance shares, which are
paid out when vested based on the price of AXA at that time.
Includes 2,001,365 shares Mr. Condron can acquire within 60 days under option plans. Also includes 111,600 unvested performance units, which are paid out
when vested based on the price of ADSs at that time and are subject to achievement of internal performance conditions. Also includes 359,610 deferred
restricted ADS units under AXA’s Variable Deferred Compensation Plan for Executives.
Includes 2,592,178 shares Mr. de Castries can acquire within 60 days under option plans. Also includes 207,000 unvested AXA performance shares, which are
paid out when vested based on the price of AXA at that time and are subject to achievement of internal performance conditions.
Includes 1,850,482 shares Mr. Duverne can acquire within 60 days under option plans.
Includes 200,339 shares Mr. Dziadzio can acquire within 60 days under option plans. Also includes 6,863 restricted AXA shares, representing the 30% payout of
AXA performance units awarded to Mr. Dziadzio in 2008 and 2009.
Includes 11,745 shares Mr. Molloy can acquire within 60 days under options plans and 7,036 ADSs Mr. Molloy can acquire within 60 days under option plans. Also
includes 9,749 unvested performance units, which are paid out when vested based on the price of AXA at that time and are subject to achievement of internal
performance conditions, and 1,552 restricted AXA shares, representing the 30% payout of AXA performance units awarded to Mr. Molloy in 2008 and 2009.
(8)
Includes 52,925 shares Mr. Pearson can acquire within 60 days under options plans. Also includes 7,529 restricted AXA shares, representing the 30% payout of
AXA performance units awarded to Mr. Pearson in 2008 and 2009.
(9)
Includes 2,702 shares Ms. Slutsky can acquire within 60 days under option plans.
(10) Includes 7,313 shares Mr. Tobin can acquire within 60 days under option plans.
(11) Includes 6,848,783 shares the directors and executive officers as a group can acquire within 60 days under option plans.
162
AllianceBernstein
Partnership Matters
The General Partner makes all decisions relating to the management of AllianceBernstein and Holding. The General Partner has
agreed that it will conduct no business other than managing AllianceBernstein and Holding, although it may make certain invest-
ments for its own account. Conflicts of interest, however, could arise between AllianceBernstein and Holding, the General Partner
and the Unitholders of both Partnerships.
Section 17-403(b) of the Delaware Revised Uniform Limited Partnership Act (“Delaware Act”) states in substance that, except as
provided in the Delaware Act or the applicable partnership agreement, a general partner of a limited partnership has the liabilities of
a general partner in a general partnership governed by the Delaware Uniform Partnership Law (as in effect on July 11, 1999) to the
partnership and to the other partners. Accordingly, while under Delaware law a general partner of a limited partnership is liable as a
fiduciary to the other partners, those fiduciary obligations may be altered by the terms of the applicable partnership agreement. The
AllianceBernstein Partnership Agreement and Holding Partnership Agreement both set forth limitations on the duties and liabilities
of the General Partner. Each partnership agreement provides that the General Partner is not liable for monetary damages for errors
in judgment or for breach of fiduciary duty (including breach of any duty of care or loyalty) unless it is established (the person
asserting such liability having the burden of proof) that the General Partner’s action or failure to act involved an act or omission
undertaken with deliberate intent to cause injury, with reckless disregard for the best interests of the Partnerships or with actual bad
faith on the part of the General Partner, or constituted actual fraud. Whenever the AllianceBernstein Partnership Agreement and
the Holding Partnership Agreement provide that the General Partner is permitted or required to make a decision (i) in its
“discretion” or under a grant of similar authority or latitude, the General Partner is entitled to consider only such interests and fac-
tors as it desires and has no duty or obligation to consider any interest of or other factors affecting the Partnerships or any
Unitholder of AllianceBernstein or Holding or (ii) in its “good faith” or under another express standard, the General Partner will
act under that express standard and will not be subject to any other or different standard imposed by the AllianceBernstein Partner-
ship Agreement and the Holding Partnership Agreement or applicable law or in equity or otherwise. The partnership agreements
further provide that to the extent that, at law or in equity, the General Partner has duties (including fiduciary duties) and liabilities
relating thereto to either Partnership or any partner, the General Partner acting under the AllianceBernstein Partnership Agreement
or the Holding Partnership Agreement, as applicable, will not be liable to the Partnerships or any partner for its good faith reliance
on the provisions of the partnership agreement.
In addition, the AllianceBernstein Partnership Agreement and the Holding Partnership Agreement grant broad rights of
indemnification to the General Partner and its directors and affiliates and authorize AllianceBernstein and Holding to enter into
indemnification agreements with the directors, officers, partners, employees and agents of AllianceBernstein and its affiliates and
Holding and its affiliates. The Partnerships have granted broad rights of indemnification to officers and employees of
AllianceBernstein and Holding. The foregoing indemnification provisions are not exclusive, and the Partnerships are authorized to
enter into additional indemnification arrangements. AllianceBernstein and Holding have obtained directors and officers/errors and
omissions liability insurance.
The AllianceBernstein Partnership Agreement and the Holding Partnership Agreement also allow transactions between
AllianceBernstein and Holding and the General Partner or its affiliates if the transactions are on terms determined by the General
Partner to be comparable to (or more favorable to AllianceBernstein or Holding than) those that would prevail with an unaffiliated
party. The partnership agreements provide that those transactions are deemed to meet that standard if such transactions are approved
by a majority of those directors of the General Partner who are not directors, officers or employees of any affiliate of the General
Partner (other than AllianceBernstein and its subsidiaries or Holding) or, if in the reasonable and good faith judgment of the General
Partner, the transactions are on terms substantially comparable to (or more favorable to AllianceBernstein or Holding than) those
that would prevail in a transaction with an unaffiliated party.
The AllianceBernstein Partnership Agreement and the Holding Partnership Agreement expressly permit all affiliates of the General
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engage in any business or other activity and to exploit any opportunity, including those that may be available to AllianceBernstein and
Holding. AXA, AXA Financial, AXA Equitable and certain of their subsidiaries currently compete with AllianceBernstein. (See
“Business—Competition” in Item 1.) The partnership agreements further provide that, except to the extent that a decision or action by
Annual Report 2011
163
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(
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)
Parties(1)
General Description of Relationship(2)
Amounts Received
or Accrued for in 2011
AXA Belgium(3)
AXA Germany(3)
AXA (Canada)(3)
AXA U.K. Group Pension Scheme
AXA Corporate Solutions(3)
AXA Investment Managers Ltd. Paris(3)
AXA Mediterranean(3)
AXA General Insurance Hong Kong Ltd.(3)
AXA Reinsurance Company(3)
AXA Foundation, Inc., a subsidiary of AXA Financial(3)
$1,978,000
$1,889,000
$1,742,000
$1,341,000
$1,201,000
$ 720,000
$ 261,000
$ 183,000
$ 180,000
$ 132,000
(1) AllianceBernstein or one of its subsidiaries is a party to each transaction.
(2) We provide investment management services unless otherwise indicated.
(3) This entity is a subsidiary of AXA. AXA is an indirect parent of AllianceBernstein.
(4) Subsidiaries include MONY Life Insurance Company of America and U.S. Financial Life Insurance Company.
Parties(1)(2)
General Description of Relationship
Amounts Paid
or Accrued for in 2011
AXA Business Services Pvt. Ltd.
AXA Advisors
AXA Equitable
AXA Technology Services India Pvt. Ltd.
AXA Group Solutions Pvt. Ltd.
AXA Advisors
GIE Informatique AXA (“GIE”)
AXA Business Services provides data processing services and support for certain
investment operations functions.
AXA Advisors distributes certain of our Retail Products and provides Private Client
referrals.
We are covered by various insurance policies maintained by AXA Equitable.
AXA Technology Services India Pvt. Ltd. provides certain data processing services
and functions.
AXA Group Solution Pvt. Ltd. provides maintenance and development support for
applications.
AXA Advisors sells shares of our mutual funds under Distribution Services and
Educational Support agreements.
GIE provides cooperative technology development and procurement services to us
and to various other subsidiaries of AXA.
AXA Equitable
AXA Equitable allows us use of their healthcare facility.
$9,643,000
$6,419,000
$5,001,000
$4,152,000
$2,515,000
$2,339,000
$ 880,000
$ 120,000
(1) AllianceBernstein is a party to each transaction.
(2) Each entity is a subsidiary of AXA. AXA is an indirect parent of AllianceBernstein.
Additional Transactions with Related Persons
Certain subsidiaries of AXA, including AXA Advisors, have entered into selected dealer agreements with AllianceBernstein Invest-
ments, for which we paid these subsidiaries of AXA sales concessions on sales of approximately $362 million. Various subsidiaries of
AXA distribute certain of our Non-U.S. Funds, for which such entities received aggregate distribution payments of approximately
$136,000 in 2011.
AXA Equitable and its affiliates are not obligated to provide funds to us, except for ACMC, LLC’s and the General Partner’s obliga-
tion to fund certain of our incentive compensation and employee benefit plan obligations. ACMC, LLC and the General Partner
are obligated, subject to certain limitations, to make capital contributions to AllianceBernstein in an amount equal to the payments
AllianceBernstein is required to make as incentive compensation under the employment agreements entered into in connection
166
AllianceBernstein
with AXA Equitable’s 1985 acquisition of Donaldson, Lufkin and Jenrette Securities Corporation (since November 2000, a part of
Credit Suisse Group) as well as obligations of AllianceBernstein to various employees and their beneficiaries under AllianceBernstein’s
Capital Accumulation Plan. In 2011, ACMC, LLC made capital contributions to AllianceBernstein in the amount of approximately
$4.8 million in respect of these obligations. ACMC, LLC’s obligations to make these contributions are guaranteed by Equitable Hold-
ings, LLC (a wholly-owned subsidiary of AXA Equitable), subject to certain limitations. All tax deductions with respect to these
obligations, to the extent funded by ACMC, LLC, the General Partner or Equitable Holdings, LLC, will be allocated to ACMC, LLC
or the General Partner.
Arrangements with Immediate Family Members of Related Persons
During 2011, we did not have arrangements with immediate family members of our directors and executive officers.
Director Independence
See “Corporate Governance—Independence of Certain Directors” in Item 10.
Annual Report 2011
167
Item 14.
Principal Accounting Fees and Services
The following table presents fees for professional audit services rendered by PricewaterhouseCoopers LLP (“PwC”) for the audit of
AllianceBernstein’s and Holding’s annual financial statements for 2011 and 2010, respectively, and fees for other services rendered
by PwC ($ in thousands):
Audit fees(1)
Audit related fees(2)
Tax fees(3)
All other fees(4)
Total
2011
2010
$ 4,869
$ 4,703
2,825
2,494
5
2,952
2,487
5
$10,193
$10,147
(1)
Includes $64,914 and $68,330 paid for audit services to Holding in 2011 and 2010, respectively.
(2) Audit related fees consist principally of fees for audits of financial statements of certain employee benefit plans, internal control reviews and accounting
consultation.
(3) Tax fees consist of fees for tax consultation and tax compliance services.
(4) All other fees in 2011 and 2010 consisted of miscellaneous non-audit services.
On November 9, 2005, the Audit Committee adopted a policy to pre-approve audit and non-audit service engagements with the
independent registered public accounting firm. This policy was revised on August 3, 2006. The independent registered public
accounting firm is to provide annually a comprehensive and detailed schedule of each proposed audit and non-audit service to be
performed. The Audit Committee then affirmatively indicates its approval of the listed engagements. Engagements that are not list-
ed, but that are of similar scope and size to those listed and approved, may be deemed to be approved, if the fee for such service is
less than $100,000. In addition, the Audit Committee has delegated to its chairman the ability to approve any permissible non-audit
engagement where the fees are expected to be less than $100,000.
168
AllianceBernstein
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a)
There is no document filed as part of this Form 10-K.
Financial Statement Schedule.
Attached to this Form 10-K is a schedule describing Valuation and Qualifying Account-Allowance for Doubtful Accounts
for the three years ended December 31, 2011, 2010 and 2009. PwC’s report regarding the schedule is also attached.
(b)
Exhibits.
The following exhibits required to be filed by Item 601 of Regulation S-K are filed herewith or incorporated by reference
herein, as indicated:
Exhibit
Description
3.01
3.02
3.03
3.04
3.05
3.06
3.07
3.08
10.01
10.02
10.03
10.04
10.05
10.06
10.07
10.08
10.09
10.10
10.11
Amended and Restated Certificate of Limited Partnership dated February 24, 2006 of Holding (incorporated by reference to Exhibit 99.06 to Form 8-K, as filed
February 24, 2006).
Amendment No. 1 dated February 24, 2006 to Amended and Restated Agreement of Limited Partnership of Holding (incorporated by reference to Exhibit 3.1 to
Form 10-Q for the quarterly period ended September 30, 2006, as filed November 8, 2006).
Amended and Restated Agreement of Limited Partnership dated October 29, 1999 of Alliance Capital Management Holding L.P. (incorporated by reference to
Exhibit 3.2 to Form 10-K for the fiscal year ended December 31, 2003, as filed March 10, 2004).
Amended and Restated Certificate of Limited Partnership dated February 24, 2006 of AllianceBernstein (incorporated by reference to Exhibit 99.07 to Form 8-K,
as filed February 24, 2006).
Amendment No. 1 dated February 24, 2006 to Amended and Restated Agreement of Limited Partnership of AllianceBernstein (incorporated by reference to
Exhibit 3.2 to Form 10-Q for the quarterly period ended September 30, 2006, as filed November 8, 2006).
Amended and Restated Agreement of Limited Partnership dated October 29, 1999 of Alliance Capital Management L.P. (incorporated by reference to Exhibit 3.3
to Form 10-K for the fiscal year ended December 31, 2003, as filed March 10, 2004).
Certificate of Amendment to the Certificate of Incorporation of AllianceBernstein Corporation (incorporated by reference to Exhibit 99.08 to Form 8-K, as filed
February 24, 2006).
AllianceBernstein Corporation By-Laws with amendments through February 24, 2006 (incorporated by reference to Exhibit 99.09 to Form 8-K, as filed
February 24, 2006).
Amendment No. 1 to the AllianceBernstein L.P. 2010 Long Term Incentive Plan.*
Amendment No. 2 to the AllianceBernstein L.P. 2010 Long Term Incentive Plan.*
2011 AllianceBernstein Incentive Compensation Award Program.*
2011 AllianceBernstein Deferred Cash Compensation Program.*
Form of 2011 Award Agreement under Incentive Compensation Award Program, Deferred Cash Compensation Program and 2010 Long Term Incentive Plan.*
Form of 2011 Award Agreement under 2010 Long Term Incentive Plan (relates to May 2011 awards to Eligible Directors).*
Summary of AllianceBernstein L.P.’s Lease at 1345 Avenue of the Americas, New York, New York 10105.
Guidelines for Transfer of AllianceBernstein L.P. Units.
Revolving Credit Agreement, dated as of December 9, 2010 and Amended and Restated as of January 17, 2012, among AllianceBernstein L.P. and Sanford C.
Bernstein & Co., LLC, as Borrowers; Bank of America, N.A., as Administrative Agent; Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global
Markets Inc. and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Book Managers, and the other lenders party thereto (incorporated by reference to
Exhibit 10.01 to Form 8-K , as filed January 20, 2012).
AllianceBernstein L.P. 2010 Long Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.01 to Form 10-K for the fiscal year ended
December 31, 2010, as filed February 10, 2011).*
Form of Award Agreement under the Special Option Program (incorporated by reference to Exhibit 10.05 to Form 10-K for the fiscal year ended December 31,
2008, as filed February 23, 2009).*
Annual Report 2011
169
Exhibit
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
12.01
21.01
23.01
31.01
31.02
32.01
32.02
Description
Amended and Restated Commercial Paper Dealer Agreement, dated as of February 10, 2009, among Banc of America Securities LLC, Merrill Lynch Money
Markets Inc., Deutsche Bank Securities Inc. and AllianceBernstein L.P. (incorporated by reference to Exhibit 10.11 to Form 10-K for the fiscal year ended
December 31, 2008, as filed February 23, 2009).
Employment Agreement among Peter S. Kraus, AllianceBernstein Corporation, AllianceBernstein Holding L.P. and AllianceBernstein L.P., dated as of
December 19, 2008 (incorporated by reference to Exhibit 99.02 to Form 8-K, as filed December 24, 2008).*
Amended and Restated 1997 Long Term Incentive Plan, as amended through November 28, 2007 (incorporated by reference to Exhibit 10.02 to Form 10-K for
the fiscal year ended December 31, 2007, as filed February 25, 2008).*
Amended and Restated Issuing and Paying Agency Agreement, dated as of May 3, 2006 (incorporated by reference to Exhibit 10.2 to Form 10-Q for the
quarterly period ended March 31, 2006, as filed May 8, 2006).
Investment Advisory and Management Agreement for MONY Life Insurance Company (incorporated by reference to Exhibit 10.4 to Form 10-K for the fiscal year
ended December 31, 2004, as filed March 15, 2005).
Investment Advisory and Management Agreement for the General Account of AXA Equitable Life Insurance Company (incorporated by reference to Exhibit 10.5
to Form 10-K for the fiscal year ended December 31, 2004, as filed March 15, 2005).
Alliance Capital Management L.P. Partners Plan of Repurchase adopted as of February 20, 2003 (incorporated by reference to Exhibit 10.2 to Form 10-K for the
fiscal year ended December 31, 2002, as filed March 27, 2003).
Services Agreement dated as of April 22, 2001 between Alliance Capital Management L.P. and AXA Equitable Life Insurance Company (incorporated by
reference to Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 2001, as filed March 28, 2002).
Extendible Commercial Notes Dealer Agreement, dated as of December 14, 1999 (incorporated by reference to Exhibit 10.10 to the Form 10-K for the fiscal
year ended December 31, 1999, as filed March 28, 2000).
Amended and Restated Investment Advisory and Management Agreement dated January 1, 1999 among Alliance Capital Management Holding L.P., Alliance
Corporate Finance Group Incorporated, and AXA Equitable Life Insurance Company (incorporated by reference to Exhibit (a)(6) to Form 10-Q/A for the quarterly
period ended September 30, 1999, as filed on September 28, 2000).
Amended and Restated Accounting, Valuation, Reporting and Treasury Services Agreement dated January 1, 1999 between Alliance Capital Management
Holding L.P., Alliance Corporate Finance Group Incorporated, and AXA Equitable Life Insurance Company (incorporated by reference to Exhibit (a)(7) to the
Form 10-Q/A for the quarterly period ended September 30, 1999, as filed September 28, 2000).
Alliance Capital Accumulation Plan (incorporated by reference to Exhibit 10.11 to Form 10-K for the fiscal year ended December 31, 1988, as filed March 31,
1989).*
AllianceBernstein Consolidated Ratio of Earnings to Fixed Charges in respect of the years ended December 31, 2011, 2010 and 2009.
Subsidiaries of AllianceBernstein.
Consents of PricewaterhouseCoopers LLP.
Certification of Mr. Kraus furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Mr. Farrell furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Mr. Kraus furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Mr. Farrell furnished for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase.
101.LAB
XBRL Taxonomy Extension Label Linkbase.
101.PRE
101.DEF
XBRL Taxonomy Extension Presentation Linkbase.
XBRL Taxonomy Extension Definition Linkbase.
*
Denotes a compensatory plan or arrangement
170
AllianceBernstein
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: February 10, 2012
By: /s/ Peter S. Kraus
AllianceBernstein Holding L.P.
Peter S. Kraus
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Exchange Act, this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Date: February 10, 2012
/s/ Edward J. Farrell
Edward J. Farrell
Chief Accounting Officer, Controller and Interim
Chief Financial Officer
Annual Report 2011
171
Directors
/s/ Peter S. Kraus
Peter S. Kraus
Chairman of the Board
/s/ Dominique Carrel-Billiard
Dominique Carrel-Billiard
Director
/s/ Christopher M. Condron
Christopher M. Condron
Director
/s/ Henri de Castries
Henri de Castries
Director
/s/ Denis Duverne
Denis Duverne
Director
/s/ Richard S. Dziadzio
Richard S. Dziadzio
Director
/s/ Steven G. Elliott
Steven G. Elliott
Director
/s/ Deborah S. Hechinger
Deborah S. Hechinger
Director
/s/ Weston M. Hicks
Weston M. Hicks
Director
/s/ Kevin Molloy
Kevin Molloy
Director
/s/ Mark Pearson
Mark Pearson
Director
/s/ Lorie A. Slutsky
Lorie A. Slutsky
Director
/s/ A.W. (Pete) Smith, Jr.
A.W. (Pete) Smith, Jr.
Director
/s/ Peter J. Tobin
Peter J. Tobin
Director
172
AllianceBernstein
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2011 Company Information
AllianceBernstein Holding L.P.
New York Stock Exchange
Symbol: AB
Headquarters
1345 Avenue of the Americas
New York, NY 10105
212.969.1000
www.alliancebernstein.com
Unitholder Investor Relations
Phone 800.962.2134
212.969.2136
Fax
E-mail
ir@alliancebernstein.com
www.alliancebernstein.com/investorrelations
All forms that we fi le with the US Securities and
Exchange Commission, as well as this annual
report, can be found in the Investor & Media
Relations section of our website.
Unitholder Account Assistance
Unitholders who own units in certifi cate form
should contact the transfer agent and registrar
listed below with any questions:
Media Relations
Jonathan Freedman
212.823.2687
(regular mail)
Shareholder Relations Department
P.O. Box 358015
Pittsburgh, PA 15252-8015
(overnight mail)
BNY Mellon Shareowner Services
480 Washington Boulevard, 27th Floor
Jersey City, NJ 07310-1900
US 866.737.9896
Outside the US 201.680.6578
E-mail shrrelations@bnymellon.com
www.bnymellon.com/shareowner/equityaccess
Unitholder Tax Assistance
Unitholders with Schedule K-1 or any tax-related
questions can contact:
Phone 800.526.3132
Fax
212.969.6870
E-mail K1help@alliancebernstein.com
www.taxpackagesupport.com/ab
Independent Public Accountants
PricewaterhouseCoopers LLP
New York
Mutual Fund Shareholder Information
For US Investors:
AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Monday to Friday, 8:30 am–7:00 pm ET
800.221.5672
US Direct Number 210.384.6000
24-Hour Automated Assistance
(aka “Alliance Answer”)
800.251.0539
www.alliancebernstein.com
For Non-US Investors:
AllianceBernstein Investor Services,
a unit of AllianceBernstein (Luxembourg) S.A.
Société Anonyme
R.C.S. Luxembourg B 34 405
18, rue Eugène Ruppert
L-2453 Luxembourg
International Access Code + 800.22.63.8637
Be advised that only the international access
code is required to dial this number and not the
country code.
Alternative Phone + 352.46.39.36.151
AllianceBernstein Institutional Investments
Kelly Murphy
212.969.6601
www.alliancebernstein.com/institutional
Bernstein Global Wealth Management
212.486.5800
www.bernstein.com
Bernstein Research Services
Lori Lewin
212.756.4226
www.bernsteinresearch.com
Cautions Regarding Forward-Looking Statements
Certain statements provided by management in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such
forward-looking statements. The most signifi cant of these factors include, but are not limited to, the following: the performance of fi nancial markets, the investment performance
of sponsored investment products and separately managed accounts, general economic conditions, industry trends, future acquisitions, competitive conditions, and government
regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly traded partnerships are taxed. We caution readers to carefully consider
such factors. Further, such forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking
statements to refl ect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause
actual results to differ, see “Risk Factors” in Item 1A and “Cautions Regarding Forward-Looking Statements” in Item 7 of the enclosed Form 10-K. Any or all of the forward-looking
statements that we make in this report, the enclosed Form 10-K, other documents we fi le with or furnish to the SEC, and any other public statements we issue, may turn out to be
wrong. It is important to remember that other factors besides those listed in “Risk Factors” and “Cautions Regarding Forward-Looking Statements” could also adversely affect our
revenues, fi nancial condition, results of operations and business prospects.
AllianceBernstein® and the AB AllianceBernstein logo are trademarks and service marks owned by AllianceBernstein L.P.
© 2012 AllianceBernstein Holding L.P. and AllianceBernstein L.P.
Printed in the USA
AB–4737–0212
AllianceBernstein Holding L.P.
1345 Avenue of the Americas
New York, NY 10105
www.alliancebernstein.com