ALLIANCEBERNSTEIN HOLDING L.P. - FORM 10-Q - EX-99.1 - EXHIBIT 99.1

Attached files

file	filename
EX-31.1 - EXHIBIT 31.1 - ALLIANCEBERNSTEIN HOLDING L.P.	ex31_1.htm
EX-32.2 - EXHIBIT 32.2 - ALLIANCEBERNSTEIN HOLDING L.P.	ex32_2.htm
EX-15.1 - EXHIBIT 15.1 - ALLIANCEBERNSTEIN HOLDING L.P.	ex15_1.htm
EX-32.1 - EXHIBIT 32.1 - ALLIANCEBERNSTEIN HOLDING L.P.	ex32_1.htm
10-Q - ALLIANCEBERNSTEIN HOLDING L.P. 10-Q 9-30-2009 - ALLIANCEBERNSTEIN HOLDING L.P.	form10q.htm
EX-31.2 - EXHIBIT 31.2 - ALLIANCEBERNSTEIN HOLDING L.P.	ex31_2.htm

Exhibit 99.1

Part I

FINANCIAL INFORMATION

Item 1.

Financial Statements

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(in thousands)

	September 30, 2009			December 31, 2008
	(unaudited)

ASSETS
Cash and cash equivalents	$	570,987		$	552,577
Cash and securities segregated, at market (cost: $1,273,963 and $2,568,339)		1,274,266			2,572,569
Receivables, net:
Brokers and dealers		282,461			251,644
Brokerage clients		585,619			398,979
Fees		334,244			377,167
Investments:
Deferred compensation related		497,253			305,809
Other		307,783			272,034
Furniture, equipment and leasehold improvements, net		367,415			365,804
Goodwill, net		2,893,029			2,893,029
Intangible assets, net		229,676			243,493
Deferred sales commissions, net		97,027			113,541
Other assets		173,259			156,813
Total assets	$	7,613,019		$	8,503,459

LIABILITIES AND CAPITAL
Liabilities:
Payables:
Brokers and dealers	$	299,982		$	110,655
Brokerage clients		1,617,861			2,755,104
AllianceBernstein mutual funds		88,805			195,617
Accounts payable and accrued expenses		279,959			310,392
Accrued compensation and benefits		580,562			360,086
Debt		52,000			284,779
Total liabilities		2,919,169			4,016,633


Commitments and contingencies (See Note 7)

Capital:
General Partner		46,443			45,010
Limited partners: 266,146,832 and 263,717,610 units issued and outstanding		4,626,568			4,485,564
Capital contributions receivable from General Partner		(21,468	)		(23,168	)
Deferred compensation expense		(108,593	)		(117,600	)
Accumulated other comprehensive loss		(26,164	)		(72,147	)
Partners’ capital attributable to AllianceBernstein Unitholders		4,516,786			4,317,659
Non-controlling interests in consolidated entities		177,064			169,167
Total capital		4,693,850			4,486,826
Total liabilities and capital	$	7,613,019		$	8,503,459

See Accompanying Notes to Condensed Consolidated Financial Statements.

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(in thousands, except per unit amounts)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008

Revenues:
Investment advisory and services fees	$	484,098		$	713,229		$	1,377,170		$	2,325,098
Distribution revenues		73,779			96,711			196,437			313,948
Institutional research services		109,321			124,854			325,830			353,594
Dividend and interest income		4,966			18,937			19,344			71,251
Investment gains (losses)		106,680			(131,920	)		130,727			(187,094	)
Other revenues		27,946			28,230			79,418			89,697
Total revenues		806,790			850,041			2,128,926			2,966,494
Less: Interest expense		776			9,050			3,908			32,857
Net revenues		806,014			840,991			2,125,018			2,933,637

Expenses:
Employee compensation and benefits		335,898			328,614			974,662			1,190,484
Promotion and servicing:
Distribution plan payments		55,155			69,994			146,382			227,885
Amortization of deferred sales commissions		13,362			19,324			42,103			61,861
Other		42,059			50,013			125,417			164,653
General and administrative		130,142			114,333			427,582			407,326
Interest on borrowings		491			2,117			2,130			11,933
Amortization of intangible assets		5,437			5,179			16,170			15,537
Total expenses		582,544			589,574			1,734,446			2,079,679

Operating income		223,470			251,417			390,572			853,958

Non-operating income		16,869			4,921			29,105			13,264

Income before income taxes		240,339			256,338			419,677			867,222

Income taxes		13,844			27,258			32,076			88,294

Net income		226,495			229,080			387,601			778,928

Net income in consolidated entities attributable to non-controlling interests		(27,154	)		(9,551	)		(23,114	)		(31,667	)

Net income attributable to AllianceBernstein Unitholders	$	199,341		$	219,529		$	364,487		$	747,261

Net income per AllianceBernstein Unit:
Basic	$	0.74		$	0.83		$	1.36		$	2.84
Diluted	$	0.74		$	0.83		$	1.36		$	2.83

See Accompanying Notes to Condensed Consolidated Financial Statements.

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2009			2008

Cash flows from operating activities:
Net income	$	387,601		$	778,928
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions		42,103			61,861
Amortization of non-cash deferred compensation		51,838			47,265
Depreciation and other amortization		63,047			75,511
Unrealized (gains) losses on deferred compensation related investments		(162,781	)		194,296
Other, net		(22,573	)		(5,783	)
Changes in assets and liabilities:
Decrease in segregated cash and securities		1,298,303			79,923
(Increase) decrease in receivables		(42,660	)		34,328
(Increase) in investments		(28,672	)		(235,193	)
(Increase) in deferred sales commissions		(25,589	)		(20,193	)
(Increase) in other assets		(15,053	)		(44,628	)
(Decrease) in payables		(1,174,793	)		(299,001	)
(Decrease) in accounts payable and accrued expenses		(11,133	)		(29,798	)
Increase in accrued compensation and benefits		215,385			236,677
Net cash provided by operating activities		575,023			874,193

Cash flows from investing activities:
Purchases of investments		(10,439	)		(22,213	)
Proceeds from sales of investments		4,380			32,778
Additions to furniture, equipment and leasehold improvements		(43,542	)		(61,241	)
Net cash used in investing activities		(49,601	)		(50,676	)

Cash flows from financing activities:
Repayment of commercial paper, net		(258,718	)		(475,443	)
Proceeds from bank loans, net		25,000			693,000
(Decrease) increase in overdrafts payable		(26,424	)		45,123
Distributions to General Partner and unitholders		(265,699	)		(835,137	)
Distributions to Joint Venture Partners		—			(10,387	)
(Distributions to) contributions from non-controlling interests to fund consolidated venture capital fund activities		(19,369	)		25,311
Capital contributions from General Partner		2,751			2,583
Additional investment by Holding with proceeds from exercise of compensatory options to buy Holding Units		—			13,353
Purchases of Holding Units to fund deferred compensation plans, net of issuances		(232	)		(3,202	)
Other		154			—
Net cash used in financing activities		(542,537	)		(544,799	)
Effect of exchange rate changes on cash and cash equivalents		35,525			(30,147	)

Net increase in cash and cash equivalents		18,410			248,571
Cash and cash equivalents as of beginning of period		552,577			576,416
Cash and cash equivalents as of end of period	$	570,987		$	824,987

See Accompanying Notes to Condensed Consolidated Financial Statements.

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2009

(unaudited)

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.

These statements should be read in conjunction with AllianceBernstein’s audited consolidated financial statements included in AllianceBernstein’s Form 10-K for the year ended December 31, 2008.

1.	Business Description and Organization

AllianceBernstein provides research, diversified investment management and related services globally to a broad range of clients. Our principal services include:

•

Institutional Investment 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 individual clients, primarily by means of retail mutual funds sponsored by AllianceBernstein or an affiliated 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 foundations, partnerships, private and family corporations, and other entities, by means of separately managed accounts, hedge funds, mutual funds and other investment vehicles.

•

Institutional Research Services – servicing our institutional clients seeking independent research, portfolio strategy and brokerage-related services.

We also provide distribution, shareholder servicing and administrative services to the mutual funds we sponsor.

We provide a broad range of services with expertise in:

•

Value equities, generally targeting stocks that are out of favor and that may trade at bargain prices;

•

Growth equities, generally targeting stocks with under-appreciated growth potential;

•

Fixed income securities, including both 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, such as hedge funds, currency management strategies and venture capital; and

•

Asset allocation, by which we offer specifically-tailored investment solutions for our clients (e.g., customized target-date fund retirement services for institutional defined contribution plan clients).

We manage these services using various investment disciplines, including market capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-, intermediate- and short-duration debt securities), and geographic location (e.g., U.S., international, global and emerging markets), as well as local and regional disciplines in major markets around the world.

Recently, we were selected by the U.S. Treasury Department as one of only three firms to manage its portfolio of assets issued by banks and other institutions taking part in the Capital Purchase Program of the Troubled Assets Relief Program. In addition, we were selected by the U.S. Treasury Department as one of nine pre-qualified fund managers under the Public-Private Investment Program.

Our independent research is the foundation of our business. Our research disciplines include fundamental research, quantitative research, economic research and currency forecasting capabilities. In addition, we have created several specialized research units, including one unit that examines global strategic changes that can affect multiple industries and geographies, and another dedicated to identifying potentially successful innovations within private early-stage growth companies.

As of September 30, 2009, AXA, a société 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 1.6% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in Holding (“Holding Units”).

As of September 30, 2009, the ownership structure of AllianceBernstein, expressed as a percentage of general and limited partnership interests, was as follows:

AXA and its subsidiaries	63.5	%
Holding	34.5
Unaffiliated holders	2.0
	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 64.1% economic interest in AllianceBernstein as of September 30, 2009.

2.	Summary of Significant Accounting Policies

Basis of Presentation

The interim condensed consolidated financial statements of AllianceBernstein included herein have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The December 31, 2008 condensed consolidated statement of financial condition was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

Principles of Consolidation

The condensed consolidated financial statements include AllianceBernstein and its majority-owned and/or controlled subsidiaries. All significant inter-company transactions and balances among the consolidated entities have been eliminated.

Subsequent Events

We evaluated subsequent events through October 29, 2009, the date the financial statements were issued.

FASB Codification

For annual and interim periods ending after September 15, 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification”) became the single authoritative source of generally accepted accounting principles (“GAAP”) in the United States.

Reclassifications and Revisions

Effective January 1, 2009, we adopted amended accounting principles related to non-controlling interests in consolidated financial statements. The objective of this amendment is to improve the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the non-controlling interest in a subsidiary. The disclosure provisions of the amendment require retrospective application for all periods presented. As a result, certain prior period amounts have been reclassified to conform to the current year presentation. These include: (i) net (income) loss in consolidated entities attributable to non-controlling interests, previously included within general and administrative expenses, currently shown separately in the condensed consolidated statements of income, (ii) non-controlling interests in consolidated entities previously included in liabilities, currently shown as a component of total capital in the condensed consolidated statements of financial condition, and (iii) change in non-controlling interests in consolidated entities previously included within cash provided by operating activities, currently included in net cash used in financing activities in the condensed consolidated statements of cash flows.

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.

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 October 29, 2009, the General Partner declared a distribution of $198.9 million, or $0.74 per AllianceBernstein Unit, representing a distribution of Available Cash Flow for the three months ended September 30, 2009. The General Partner, as a result of its 1% general partnership interest, is entitled to receive 1% of each distribution. The distribution is payable on November 19, 2009 to holders of record on November 9, 2009.

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 actual 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 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.

Investments

Investments include United States Treasury Bills, unconsolidated mutual funds and limited partnership hedge funds we sponsor and manage, various separately managed portfolios, exchange-traded options and investments held by a consolidated venture capital fund of which we are the general partner and in which we hold a 10% limited partnership interest.

Investments in United States Treasury Bills, mutual funds, and other 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 net 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 included in net income in the current period. Average cost is used to determine the 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 included in investment gains and losses on the condensed consolidated statements of income.

The investments held by our consolidated venture capital fund are generally illiquid and are initially valued at cost. These investments 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 recorded as unrealized gains and losses in investment gains and losses on the condensed consolidated statements of income. There is one private equity investment which represents an approximate 12% ownership in a company that we own directly, outside of our consolidated venture capital fund. This investment is accounted for using the cost method.

See Note 6 for a description of how we measure the fair value of our investments.

Goodwill, Net

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 purchase 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 identifiable assets acquired resulted in the recognition of goodwill of approximately $3.0 billion.

We test goodwill annually, as of September 30, for impairment. 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. As of September 30, 2009, the impairment test indicated that goodwill was not impaired.

To the extent that securities valuations are depressed for prolonged periods of time, our assets under management, revenues, profitability and unit price would likely be adversely affected. As a result, subsequent impairment tests may be based upon different 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 estimated fair value at the time of acquisition, less accumulated amortization. Intangible assets are recognized at fair value and are amortized on a straight-line basis over their estimated useful life of approximately 20 years. The gross carrying amount and accumulated amortization of intangible assets subject to amortization totaled $416.7 million and $187.0 million, respectively, as of September 30, 2009 and $414.3 million and $170.8 million, respectively, as of December 31, 2008. Amortization expense was $5.4 million and $5.2 million for the three months ended September 30, 2009 and 2008, respectively, and $16.2 million and $15.5 million for the nine months ended September 30, 2009 and 2008, respectively. 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. Effective January 31, 2009, back-end load shares are no longer offered to new investors by our U.S. funds. Management tests the deferred sales commission asset for recoverability quarterly and determined that the balance as of September 30, 2009 was not impaired.

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. However, it may be 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 assets under management (“AUM”), are recorded as revenue as the related services are performed. Certain investment advisory contracts, including those associated with hedge funds, 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 standard pricing vendors for fixed income, asset-backed or mortgage-backed issues; mid prices from standard 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. Fair valued investments typically make up less than 1% 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 and is chaired by our Chief Risk Officer, is responsible for overseeing the pricing and valuation of all investments held in client portfolios. The Valuation Committee has adopted a Statement of Pricing Policies describing principles and policies that apply to pricing and valuing investments held in client 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 monitoring the pricing process for all investments held in client portfolios.

Institutional research services revenue consists primarily of brokerage transaction charges received by Sanford C. Bernstein & Co., LLC (“SCB LLC”) and Sanford C. Bernstein Limited (“SCBL”), each a wholly-owned subsidiary of AllianceBernstein, for independent research and brokerage-related services provided to institutional investors. Brokerage transaction charges earned and related expenses are recorded on a trade-date basis.

Distribution revenues, shareholder servicing fees, and dividend and interest income are accrued as earned.

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. Participants 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) in options to acquire Holding Units. We typically purchase the investments that are notionally elected by the participants and maintain them in a consolidated rabbi trust or separate custodial account. Awards generally vest over four years but can vest as soon as immediately upon grant depending on the terms of the individual award, the age of the participant, or the terms of employment, separation or retirement agreements. 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 has 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.

Compensation expense for awards under the plans, including changes in participant account balances resulting from gains and losses on notional investments (other than in Holding Units and options to acquire Holding Units), is recognized on a straight-line basis over the applicable vesting periods. Mark-to-market gains or losses on investments (other than in Holding Units and options to acquire Holding Units) are recognized currently as investment gains (losses) in the consolidated statements of income. In addition, our equity in the earnings of investments in limited partnership hedge funds is recognized currently as investment gains (losses) in the condensed consolidated statements of income.

We expect that for 2009 and future years, all deferred awards will be in the form of restricted Holding Units. As a result, the amount of deferred compensation-related investments on which we recognize mark-to-market gains and losses will decline as awards previously made vest and are paid.

Compensatory Unit Awards and Option Plans

We recognize compensation expense related to grants of unit awards and options in the financial statements. 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 vesting period. Fair value of unit awards is the grant date unit price; fair value of options is determined using the Black-Scholes option valuation model. New Holding Units are issued upon exercise of options to buy Holding Units.

Variable Interest Entities

Management reviews quarterly its management agreements and its investments in, and other financial arrangements with, certain entities that hold client assets under management 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 September 30, 2009, we have significant variable interests in certain structured products and hedge funds with approximately $60.6 million in client assets under management. 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 investments of $0.1 million in these entities.

3.	Cash and Securities Segregated Under Federal Regulations and Other Requirements

As of September 30, 2009, $1.2 billion 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 Securities Exchange Act of 1934, as amended (“Exchange Act”).

AllianceBernstein Investments, Inc. (“AllianceBernstein Investments”), a 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 September 30, 2009, $26.5 million of cash was segregated in these bank accounts.

4.	Net Income Per Unit

Basic net income per unit is derived by reducing net income for the 1% general partnership interest and dividing the remaining 99% by the basic weighted average number of units outstanding for each period. Diluted net income per unit is derived by reducing net 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:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
	(in thousands, except per unit amounts)

Net income attributable to AllianceBernstein Unitholders	$	199,341	$	219,529	$	364,487	$	747,261

Weighted average units outstanding - basic		266,051		260,976		265,540		260,826
Dilutive effect of compensatory options to buy Holding Units		635		515		174		909
Weighted average units outstanding – diluted		266,686		261,491		265,714		261,735

Basic net income per AllianceBernstein Unit	$	0.74	$	0.83	$	1.36	$	2.84
Diluted net income per AllianceBernstein Unit	$	0.74	$	0.83	$	1.36	$	2.83

For the three months and nine months ended September 30, 2009, we excluded 6,120,480 out-of-the-money options (i.e., options with an exercise price greater than the weighted average closing price of a unit for the relevant period) from the diluted net income per unit computation due to their anti-dilutive effect. For the three months and nine months ended September 30, 2008, we excluded 5,073,605 and 3,664,405, respectively, out-of-the-money options from the diluted net income per unit computation due to their anti-dilutive effect.

5.	Investments

Investments consist of:

	September 30, 2009		December 31, 2008
	(in thousands)

Available-for-sale	$	20,734	$	7,566
Trading:
Deferred compensation related		421,473		238,136
United States Treasury Bills		25,993		52,694
Other		76,707		31,717
Investments in limited partnership hedge funds:
Deferred compensation related		75,780		67,673
Other		2,890		2,191
Private equity investments		179,976		176,823
Other investments		1,483		1,043
Total investments	$	805,036	$	577,843

Total investments related to deferred compensation obligations of $497.3 million and $305.8 million as of September 30, 2009 and December 31, 2008, respectively, consist of company-sponsored mutual funds and limited partnership hedge funds. We typically purchase the investments that are 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 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). Such 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 and are pledged as collateral with clearing organizations.

6.	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 September 30, 2009:

	Level 1		Level 2		Level 3		Total
	(in thousands)

Cash equivalents	$	164,377	$	111,948	$	—	$	276,325
Securities segregated		—		1,247,808				1,247,808
Receivables from brokers and dealers		—		854		—		854
Investments – available-for-sale		20,734		—		—		20,734
Investments – trading
Mutual fund investments		435,809		—		—		435,809
Equity and fixed income securities		52,844		8,582		945		62,371
U.S. Treasury Bills		—		25,993		—		25,993
Investments – private equity		12,852		54,956		102,168		169,976
Total assets measured at fair value	$	686,616	$	1,450,141	$	103,113	$	2,239,870

Payables to brokers and dealers	$	26,267	$	—	$	—	$	26,267
Total liabilities measured at fair value	$	26,267	$	—	$	—	$	26,267

The following table summarizes the valuation of our financial instruments pricing observability levels as of December 31, 2008:

	Level 1			Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	184,404		$	—	$	—	$	184,404
Securities segregated		—			2,524,698		—		2,524,698
Receivables from brokers and dealers		(46	)		680		—		634
Investments – available-for-sale		7,566			—		—		7,566
Investments – trading
Mutual fund investments		237,529			—		—		237,529
Equity and fixed income securities		25,027			6,874		423		32,324
U.S. Treasury Bills		—			52,694		—		52,694
Investments – private equity		4,694			—		162,129		166,823
Total assets measured at fair value	$	459,174		$	2,584,946	$	162,552	$	3,206,672

Payables to brokers and dealers	$	167		$	—	$	—	$	167
Total liabilities measured at fair value	$	167		$	—	$	—	$	167

Following is a description of the fair value methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy:

•

Cash equivalents: 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. We also hold United Kingdom Treasury Bills, which are valued based on quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.

•

Securities segregated: 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. These securities are valued based on quoted yields in secondary markets and are included in Level 2 of the valuation hierarchy.

•

Receivables from brokers and dealers: We hold several exchange-traded futures and currency forward contracts with counterparties that are included in Level 1 and Level 2, respectively, of the valuation hierarchy.

•

Investments – available-for-sale and trading: Our available-for-sale investments consist principally of company-sponsored mutual funds with exchange listed net asset values. Our trading investments mainly comprise company-sponsored mutual funds with exchange listed net asset values, United States Treasury Bills, exchange-traded options and various separately managed portfolios consisting primarily of equity securities with quoted prices in active markets. These investments are included in Level 1 or Level 2 of the valuation hierarchy. Trading investments also include a separately managed portfolio of fixed income securities that are included in Level 2 or Level 3 of the valuation hierarchy.

•

Investments – private equity: The valuation of non-public private equity investments held by a 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 investments 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 outlook 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, the fair value is unobservable. If they contain trading restrictions, publicly-traded equity investments are included in Level 2 of the valuation hierarchy.

•

Payables to brokers and dealers: Securities sold but not yet purchased and short positions in exchange-traded options are included in Level 1 of the valuation hierarchy.

The following table summarizes the changes in carrying value associated with Level 3 financial instruments carried at fair value:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2009			2008		2009			2008
	(in thousands)

Balance as of beginning of period	$	132,130		$	163,896	$	162,552		$	125,020

Transfer (out) in, net		(55,037	)		—		(85,417	)		—
Purchases (sales), net		1,384			15,984		7,788			30,253
Realized gains (losses), net		114			9		905			9
Unrealized gains (losses), net		24,522			7,942		17,285			32,549
Balance as of end of period	$	103,113		$	187,831	$	103,113		$	187,831

Realized and unrealized gains and losses on Level 3 financial instruments are recorded in investment gains and losses on the condensed consolidated statements of income. Substantially all of the Level 3 investments are private equity investments held by a consolidated venture capital fund, of which we own 10% and non-controlling interests own 90%.

Assets Measured at Fair Value on a Nonrecurring Basis

We adopted ASC 820-10-65-1 for nonfinancial assets and nonfinancial liabilities on January 1, 2009. There were no impairments recognized for goodwill, intangible assets or other long-lived assets for the nine months ended September 30, 2009.

7.	Commitments and Contingencies

Deferred Sales Commission Asset

Payments of sales commissions made by AllianceBernstein Investments to financial intermediaries in connection with the sale of back-end load shares under our mutual fund distribution system (the “System”) are capitalized as deferred sales commissions (“deferred sales commission asset”) and amortized over periods not exceeding five and one-half years for U.S. mutual fund shares and four years for non-U.S. mutual fund shares, the periods of time during which the deferred sales commission asset is expected to be recovered. CDSC cash recoveries are recorded as reductions of unamortized deferred sales commissions when received. The amount recorded for the net deferred sales commission asset was $97.0 million as of September 30, 2009. Payments of sales commissions made by AllianceBernstein Investments to financial intermediaries in connection with the sale of back-end load shares under the System, net of CDSC received of $11.2 million and $18.2 million, totaled approximately $25.6 million and $20.2 million during the nine months ended September 30, 2009 and 2008, respectively. Effective January 31, 2009, back-end load shares are no longer offered to new investors in our U.S. mutual funds.

Management tests the deferred sales commission asset for impairment quarterly by comparing undiscounted future cash flows to the recorded value, net of accumulated amortization. Significant assumptions utilized to estimate the company’s future average assets under management and undiscounted future cash flows from back-end load shares are updated quarterly and include expected future market levels and redemption rates. Market assumptions are selected using a long-term view of expected average market returns based on historical returns of broad market indices. As of September 30, 2009, management used average market return assumptions of 5% for fixed income securities and 8% for equities to estimate annual market returns. Higher actual average market returns would increase undiscounted future cash flows, while lower actual average market returns would decrease undiscounted future cash flows. Future redemption rate assumptions range from 18% to 24% for U.S. fund shares and 28% to 36% for non-U.S. fund shares. These assumptions are determined by reference to actual redemption experience over the five-year, three-year, one-year and current periods ended September 30, 2009, calculated as a percentage of our average assets under management represented by back-end load shares. An increase in the actual rate of redemptions would decrease undiscounted future cash flows, while a decrease in the actual rate of redemptions would increase undiscounted future cash flows. These assumptions are reviewed and updated quarterly. Estimates of undiscounted future cash flows and the remaining life of the deferred sales commission asset are made from these assumptions and the aggregate undiscounted future cash flows are compared to the recorded value of the deferred sales commission asset. As of September 30, 2009, management determined that the deferred sales commission asset was not impaired. However, if management determines in the future that the deferred sales commission asset is not recoverable, an impairment condition would exist and a loss would be measured as the amount by which the recorded amount of the asset exceeds its estimated fair value. Estimated fair value is determined using management’s best estimate of future cash flows discounted to a present value amount.

During the three-month and nine-month periods ended September 30, 2009, U.S. equity markets increased by approximately 15.6% and 19.3%, respectively, as measured by the change in the Standard & Poor’s 500 Stock Index and U.S. fixed income markets increased by approximately 3.7% and 5.7%, respectively, as measured by the change in the Barclays Aggregate Bond Index. The redemption rate for domestic back-end load shares was 18.9% and 20.6%, respectively, during the three-month and nine-month periods ended September 30, 2009. Increases in non-U.S. capital markets for the three-month and nine-month periods ended September 30, 2009 ranged from 17.5% to 20.9% and from 24.9% to 64.5%, respectively, as measured by the MSCI World, Emerging Market and EAFE Indices. The redemption rate for non-U.S. back-end load shares was 28.8% and 23.1%, respectively, during the three-month and nine-month periods ended September 30, 2009. Declines in financial markets or higher redemption levels, or both, as compared to the assumptions used to estimate undiscounted future cash flows, as described above, could result in the impairment of the deferred sales commission asset. Due to the volatility of the capital markets and changes in redemption rates, management is unable to predict whether or when a future impairment of the deferred sales commission asset might occur. Any impairment would reduce materially the recorded amount of the deferred sales commission asset with a corresponding charge to earnings.

Legal Proceedings

On October 2, 2003, a purported class action complaint entitled Hindo, et al. v. AllianceBernstein Growth & Income Fund, et al. (“Hindo Complaint”) was filed against, among others, AllianceBernstein, Holding and the General Partner. The Hindo Complaint alleges that certain defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in “late trading” and “market timing” of certain of our U.S. mutual fund securities, violating various securities laws.

Following October 2, 2003, additional lawsuits making factual allegations generally similar to those in the Hindo Complaint were filed in various federal and state courts against AllianceBernstein and certain other defendants. On September 29, 2004, plaintiffs filed consolidated amended complaints with respect to four claim types: mutual fund shareholder claims; mutual fund derivative claims; derivative claims brought on behalf of Holding; and claims brought under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) by participants in the Profit Sharing Plan for Employees of AllianceBernstein.

On April 21, 2006, AllianceBernstein and attorneys for the plaintiffs in the mutual fund shareholder claims, mutual fund derivative claims and ERISA claims entered into a confidential memorandum of understanding containing their agreement to settle these claims. The agreement will be documented by a stipulation of settlement and will be submitted for court approval at a later date. The settlement amount ($30 million), which we previously expensed and disclosed, has been disbursed. The derivative claims brought on behalf of Holding, in which plaintiffs seek an unspecified amount of damages, remain pending.

We intend to vigorously defend against the lawsuit involving derivative claims brought on behalf of Holding. At the present time, we are unable to predict the outcome or estimate a possible loss or range of loss in respect of this matter because of the inherent uncertainty regarding the outcome of complex litigation, and the fact that the plaintiffs did not specify an amount of damages sought in their complaint.

We are involved in various other matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege significant damages. While any inquiry, proceeding or litigation has the element of uncertainty, management believes that the outcome of any one of the other regulatory inquiries, administrative proceedings, lawsuits or claims 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 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.

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.

8.	Qualified Employee Benefit Plans

We maintain a qualified profit sharing plan (the “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.

We maintain several defined contribution plans for foreign employees in the United Kingdom, Australia, New Zealand, Japan and our other foreign entities. Employer contributions are generally consistent with regulatory requirements and tax limits. Defined contribution expense for foreign entities was $2.1 million and $2.9 million during the three months ended September 30, 2009 and 2008, respectively, and $5.8 million and $9.1 million during the nine months ended September 30, 2009 and 2008, 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), 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 $12.8 million to the Retirement Plan during 2009 and we do not plan to make additional contributions this year. 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, is unable to determine the amount, if any, of additional future contributions that may be required.

Net expense under the Retirement Plan consisted of:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in thousands)

Service cost	$	—		$	706		$	—		$	2,290
Interest cost on projected benefit obligations		1,112			1,257			3,308			3,739
Expected return on plan assets		(786	)		(1,147	)		(2,324	)		(3,443	)
Recognized actuarial loss		107			—			325			—
Amortization of prior service credit		—			(107	)		—			(325	)
Amortization of transition asset		(36	)		(36	)		(108	)		(108	)
Net pension charge	$	397		$	673		$	1,201		$	2,153

9.	Units Outstanding

The following table summarizes the activity in units during the first nine months of 2009:


Outstanding as of December 31, 2008	263,717,610
Options to buy Holding Units exercised	—
Holding Units issued	2,430,742
Holding Units forfeited	(1,520	)
Outstanding as of September 30, 2009	266,146,832

Holding Units issued pertain to Holding Units newly issued under our Amended and Restated 1997 Long Term Incentive Plan and include: (i) restricted Holding Unit awards to independent members of the Board of Directors of the General Partner, (ii) restricted Holding Unit awards to certain key employees, (iii) Holding Unit issuances to fund deferred compensation investment elections by plan participants, (iv) Century Club Plan Holding Unit awards to AllianceBernstein employees whose primary responsibilities are to assist in the distribution of company-sponsored mutual funds, and (v) Holding Unit issuances in connection with certain employee separation agreements.

10.	Income Taxes

AllianceBernstein is a private partnership for federal income tax purposes and, accordingly, is not subject to federal and 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 subsidiaries 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 Units must be approved by AXA Equitable Life Insurance Company (an indirect wholly-owned subsidiary of AXA, “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 considered readily tradable, AllianceBernstein’s net income would be subject to federal and state corporate income tax. 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.

Our income tax provision for the first quarter of 2009 included a $3.4 million expense relating to an under-accrual of estimated foreign taxes in the fourth quarter of 2008. This adjusting entry was not material to the income tax provision or income tax liability in our condensed consolidated financial statements or to the results of operations and financial condition in any prior reporting period.

11.

Debt

Total credit available, debt outstanding and weighted average interest rates as of September 30, 2009 and December 31, 2008 were as follows:

	September 30, 2009							December 31, 2008
	Credit Available		Debt Outstanding		Interest Rate			Credit Available		Debt Outstanding		Interest Rate
					(in millions)

Revolving credit facility(1)	$	973.0	$	—		—	%	$	$715.2	$	—		—	%
Commercial paper(1)		27.0		27.0		0.3			284.8		284.8		1.8
Total revolving credit facility – AllianceBernstein(1)		1,000.0		27.0		0.3			1,000.0		284.8		1.8
Revolving credit facility – SCB LLC(1)		950.0		25.0		0.3			950.0		—		—
Uncommitted lines of credit – SCB LLC		—		—		—			—		—		—
Uncommitted bank facilities – SCB LLC		—		—		—			—		—		—
Total	$	1,950.0	$	52.0		0.3		$	1,950.0	$	284.8		1.8

___________________

(1)

Commercial paper and amounts outstanding under the revolving credit facility are short-term in nature and, as such, recorded value is estimated to approximate fair value.

AllianceBernstein has a $1.0 billion five-year revolving credit facility with a group of commercial banks and other lenders which expires in 2011. The revolving credit facility is intended to provide back-up liquidity for our $1.0 billion commercial paper program, although we borrow directly under the facility from time to time. Amounts borrowed under the commercial paper program reduce amounts available for direct borrowing under the revolving credit facility on a dollar-for-dollar basis. Our interest rate, at our option, is a floating rate generally based upon a defined prime rate, a rate related to the London Interbank Offered Rate (“LIBOR”) or the Federal Funds rate. The revolving credit facility contains covenants which, among other things, require us to meet certain financial ratios. We are in compliance with these covenants.

SCB LLC has a $950 million three-year revolving credit facility with a group of commercial banks to fund its obligations resulting from engaging in certain securities trading and custody activities for private clients. Under the revolving credit facility, the interest rate, at the option of SCB LLC, is a floating rate generally based upon a defined prime rate, a rate related to LIBOR or the Federal Funds rate. This revolving credit facility contains covenants which, among other things, require AllianceBernstein, as guarantor, to meet the same financial ratios contained in its $1.0 billion revolving credit facility. We are in compliance with these covenants.

AllianceBernstein and AXA executed guarantees in regard to the $950 million SCB LLC facility. In the event SCB LLC is unable to meet its obligations, AllianceBernstein or AXA will pay the obligations when due or on demand. AllianceBernstein will reimburse AXA to the extent AXA must pay on its guarantee. This agreement is continuous and remains in effect until the later of payment in full of any such obligation under the credit facility has been made or the maturity date.

SCB LLC has four separate uncommitted credit facilities with various banks totaling $525 million, a decrease from five facilities totaling $775 million as of December 31, 2008. In addition, SCB LLC has two lines of credit with a commercial bank as of September 30, 2009 and December 31, 2008, one for $75 million secured by pledges of U.S. Treasury Bills and a second for $50 million secured by pledges of equity securities.

12.	Comprehensive Income

Comprehensive income consisted of:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
	(in thousands)

Net income	$	226,495		$	229,080		$	387,601		$	778,928
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments		3,305			(448	)		4,706			(4,225	)
Foreign currency translation adjustment		(3,181	)		(50,354	)		45,213			(39,985	)
Changes in retirement plan related items		70			(101	)		216			(434	)
Comprehensive income		226,689			178,177			437,736			734,284
Comprehensive (income) loss in consolidated entities attributable to non-controlling interests		(29,092	)		(7,165	)		(27,266	)		(29,571	)
Comprehensive income attributable to AllianceBernstein Unitholders	$	197,597		$	171,012		$	410,470		$	704,713

13. Changes in Capital

Changes in capital consisted of:

	Partners’ Capital Attributable to AllianceBernstein Unitholders			Non-Controlling Interests In Consolidated Entities			Total Capital
	(in thousands)

Balance as of December 31, 2008	$	4,317,659		$	169,167		$	4,486,826
Comprehensive income (loss):
Net income (loss)		364,487			23,114			387,601
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investments		4,430			276			4,706
Foreign currency translation adjustment		41,337			3,876			45,213
Changes in retirement plan related items		216			—			216
Comprehensive income (loss)		410,470			27,266			437,736

Cash distributions		(265,699	)		—			(265,699	)
Capital contributions from (distributions to)		2,751			(19,369	)		(16,618	)
Compensation-related transactions		51,605			—			51,605
Balance as of September 30, 2009	$	4,516,786		$	177,064		$	4,693,850

14.	Accounting Pronouncements

In December 2008, the FASB issued ASC 715-20-65, which requires companies to disclose information about fair value measurements of retirement plan assets. The provisions of FASB ASC 715-20-65 are effective for fiscal years ending after December 15, 2009 and are not expected to have a material impact on our consolidated financial statements.

In June 2009, the FASB issued Statement of Financial Accounting Standards No. 167 (“SFAS No. 167”), “Amendments to FASB Interpretation No. 46(R)”. This standard changes 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 and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This standard will require additional disclosures about involvement with variable interest entities and any significant changes in risk exposure due to that involvement, including how involvement with a variable interest entity affects the financial statements. The provisions of this standard are effective January 1, 2010. Management is currently evaluating the impact that the adoption of this standard will have on our consolidated financial statements. The adoption of this standard may require that a significant amount of assets, liabilities, revenues and expenses of certain variable interest entities in which we have a minimal financial ownership interest be included in our consolidated financial statements, with corresponding offsets to non-controlling interests.

Report of Independent Registered Public Accounting Firm

To the General Partner and Unitholders

AllianceBernstein L.P.

We have reviewed the accompanying condensed consolidated statement of financial condition of AllianceBernstein L.P. (“AllianceBernstein”) as of September 30, 2009, the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2009 and 2008, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2009 and 2008. These interim financial statements are the responsibility of the management of AllianceBernstein Corporation, the General Partner.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition as of December 31, 2008, and the related consolidated statements of income, of changes in partners’ capital and comprehensive income, and of cash flows for the year then ended (not presented herein), and in our report dated February 20, 2009, we expressed an unqualified opinion on those consolidated financial statements. As discussed in Note 2 to the accompanying condensed consolidated financial statements, AllianceBernstein changed its method of accounting for non-controlling interests in consolidated entities. The accompanying condensed consolidated statement of financial condition as of December 31, 2008 reflects this change.

/s/PricewaterhouseCoopers LLP
New York, New York
October 29, 2009

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Global capital markets continued to improve in the third quarter of 2009, with strong absolute returns in both equity and credit, and a majority of our investment services outperformed their benchmarks and/or peer averages. Our fixed income services were markedly strong, with many of our retail services now outperforming peer averages for 2009 as well as in one-, three-, five- and ten-year comparisons. In addition, many of our institutional services outperformed their benchmarks. Value equity services continued to outperform, and a strong 2009 has signigicantly improved one-year performance comparisons. Notably, our “Strategic Value” services, which emphasize our best research ideas, have materially outperformed their benchmarks. Although a number of our institutional growth equity services underperformed for the quarter, U.S. Large-Cap Growth continued to outperform and most retail growth services outperformed their peer averages.

Our client assets under management (“AUM”) declined $91.8 billion, or 15.6%, to $497.8 billion during the 12 months ended September 30, 2009 due to equity market depreciation and substantial net outflows. However, AUM increased $50.8 billion, or 11.4%, during the third quarter of 2009, as positive investment returns of $63.7 billion were only partially offset by lower net outflows. Total net outflows for the quarter were $12.9 billion, down from $24.0 billion in the second quarter of 2009, with more than one-half occurring during the month of July. Outflows slowed in all three distribution channels, most notably in the Institutional channel.

Institutional Investment Services AUM increased $29.7 billion, or 10.7%, to $307.5 billion during the quarter, due to strong investment returns and a 46.5% sequential decline in net asset outflows to $10.0 billion from $18.7 billion in the second quarter of 2009. Importantly, gross sales improved significantly to $5.3 billion in the quarter compared to $1.3 billion in the second quarter of 2009. Our strong relative performance year-to-date led to some significant new account wins in the third quarter of 2009, most notably in fixed income and regional value services. Additionally, we secured more than $500 million in Public-Private Investment Program commitments from a diverse group of current and prospective clients across the globe. Our pipeline of won but unfunded mandates increased 20.4% compared to the second quarter of 2009 to $3.4 billion.

Retail Services AUM increased $14.1 billion, or 13.8%, to $116.7 billion during the quarter. Gross sales increased $1.4 billion, or 32.0%, to $5.9 billion and redemptions, which remained at long-term averages, were also $5.9 billion. Net inflows from fixed income services were $2.2 billion, up from $0.8 billion in the second quarter of 2009. Our mutual fund performance remains strong as 69% of our mutual funds are in the top 50% of our peer groups.

Private Client Services AUM increased during the quarter by $7.0 billion, or 10.5%, to $73.6 billion. Net outflows of $1.0 billion represent a 44.3% decline compared to the second quarter of 2009, as gross sales improved and account closings and withdrawals continued to moderate. Interactions with current and prospective clients continue to indicate a shift from extreme risk aversion to future wealth creation through diversified stock and bond portfolios. Although our financial advisor headcount remained flat compared to the second quarter of 2009, we anticipate adding new financial advisors in the first quarter of 2010.

While Institutional Research Services revenues declined $15.6 million, or 12.4%, compared to the prior year’s record quarter, they were flat compared to the second quarter of 2009. Recent data from independent surveys indicate year-over-year market share gains in the first half of 2009 across geographies, especially in Europe. We have continued to invest in our trading platform, and recent investments in both European electronic and U.S. equity derivatives trading made meaningful contributions to third quarter revenues.

Net revenues decreased $35.0 million, or 4.2%, compared to the third quarter of 2008. Advisory fees revenues declined compared to the third quarter of 2008 by $229.1 million, or 32.1%, reflecting the impact of lower AUM. Conversely, investment gains (losses) had a favorable variance of $238.6 million, the result of current quarter gains of $106.7 million, primarily from gains on investments related to employee deferred compensation awards and our venture capital fund, as compared to $131.9 million of losses in the prior-year quarter.

Although over the past twelve months we have undertaken initiatives resulting in significant reductions in operating expenses and capital expenditures (as we describe in detail below in Expense Reduction), the impact of marking-to-market employee deferred compensation investments and a significant insurance reimbursement we received in the prior-year quarter have resulted in a decline in operating expenses of only $7.1 million, or 1.2%, compared to the third quarter of 2008. Employee compensation and benefits increased $7.3 million, or 2.2%, as lower salaries, commissions and other compensation expenses were more than offset by a $67.7 million increase in deferred compensation expense due to higher related investment values. Promotion and servicing expenses declined by $28.8 million, or 20.6%, compared to the third quarter of 2008, due primarily to lower distribution plan expenses. General and administrative expenses increased $15.8 million, or 13.8%, compared to the third quarter of 2008, as net foreign exchange gains and lower technology and occupancy costs were more than offset by the impact of a $35.3 million insurance reimbursement recieved in the prior-year quarter.

Operating income declined 11.1% from the third quarter of 2008 to $223.5 million, while net income attributable to AllianceBernstein Unitholders fell by only 9.2% due to the recognition of a $10.0 million contingent payment related to the 2005 sale of our cash management business and lower income taxes. Operating margin fell to 24.4% from 28.8% in the third quarter of 2008 but increased by 6.1% compared to the second quarter of 2009. Diluted net income per AllianceBernstein Unit declined 10.8% to $0.74 year-over-year, but distributions per AllianceBernstein Unit increased 5.7%, as the insurance reimbursement received in the third quarter of 2008 was not included in that quarter’s cash distribution.

We believe that the rise in the global capital markets reflects a rational adjustment to accumulating evidence that global economies have stabilized, and we anticipate that the global economy will grow modestly in 2010. Nonetheless, risks remain, such as tight credit and depressed consumer spending. Risk aversion is declining, but still high, among investors.

For AllianceBernstein, the third quarter of 2009 showed the beneficial impact of strong investment performance as net outflows fell by 46.3% compared to the second quarter of 2009. A continuation of strong investment performance is paramount in order for AllianceBernstein to resume organic growth in AUM.

Expense Reduction

The substantial decrease in AUM and the resulting decrease in fee revenues from levels during the first nine months of 2008 have led us to undertake initiatives resulting in significant reductions in operating expenses and capital expenditures.

We reduced our headcount by 453 during the first nine months of 2009 to 4,544, which, along with the reduction in force that occurred during the fourth quarter of 2008, represents a reduction of nearly 1,100 staff members, a 20% decline from our headcount peak during the third quarter of 2008. These actions reduced our fixed compensation costs (salaries and fringe benefits) by approximately $110 million on an annualized basis. In taking these measures, we have retained the intellectual capital required to service our clients and grow our business.

We have also reduced other controllable operating expenses, including print, mail, travel and entertainment, recruitment, seminars, market data services, communications, temporary help and technology consulting, at an annualized rate of approximately $85 million. In addition, we have eliminated or deferred nearly $150 million of planned capital expenditures since the beginning of 2008.

Recent financial results have begun to demonstrate the leverage inherent in our business model, which will increase should our AUM and revenues continue to grow and our lower expense base remains stable.

Assets Under Management

Assets under management by distribution channel were as follows:

	As of September 30,
	2009		2008		$ Change			% Change
	(in billions)

Institutional Investments	$	307.5	$	378.6	$	(71.1	)		(18.8	)%
Retail		116.7		125.8		(9.1	)		(7.2	)
Private Client		73.6		85.2		(11.6	)		(13.6	)
Total	$	497.8	$	589.6	$	(91.8	)		(15.6	)

Assets under management by investment service were as follows:

	As of September 30,
	2009		2008		$ Change			% Change
	(in billions)
Equity
Value:
U.S.	$	45.3	$	72.2	$	(26.9	)		(37.2	)%
Global & international		130.4		179.9		(49.5	)		(27.6	)
		175.7		252.1		(76.4	)		(30.3	)
Growth:
U.S.		36.3		49.7		(13.4	)		(26.9	)
Global & international		57.0		81.9		(24.9	)		(30.4	)
		93.3		131.6		(38.3	)		(29.1	)

Total Equity		269.0		383.7		(114.7	)		(29.9	)

Fixed Income:
U.S.		111.8		106.8		5.0			4.7
Global & international		84.1		80.3		3.8			4.7
		195.9		187.1		8.8			4.7
Other (1):
U.S.		22.7		11.9		10.8			90.7
Global & international		10.2		6.9		3.3			49.6
		32.9		18.8		14.1			75.6
Total:
U.S.		216.1		240.6		(24.5	)		(10.2	)
Global & international		281.7		349.0		(67.3	)		(19.3	)
Total	$	497.8	$	589.6	$	(91.8	)		(15.6	)

______________

(1) Includes index, structured and asset allocation services.

Changes in assets under management for the three-month period ended September 30, 2009 were as follows:

	Distribution Channel												Investment Service
	Institutional Investments			Retail			Private Client			Total			Value Equity			Growth Equity			Fixed Income			Other(1)			Total
	(in billions)

Balance as of June 30, 2009	$	277.8		$	102.6		$	66.6		$	447.0		$	155.8		$	84.2		$	178.0		$	29.0		$	447.0
Long-term flows:
Sales/new accounts		5.3			5.9			2.0			13.2			2.6			1.4			8.9			0.3			13.2
Redemptions/terminations		(12.5	)		(5.9	)		(1.5	)		(19.9	)		(10.4	)		(4.4	)		(4.6	)		(0.5	)		(19.9	)
Cash flow/unreinvested dividends		(2.8	)		(1.9	)		(1.5	)		(6.2	)		(3.6	)		(1.9	)		(0.2	)		(0.5	)		(6.2	)
Net long-term (outflows) inflows		(10.0	)		(1.9	)		(1.0	)		(12.9	)		(11.4	)		(4.9	)		4.1			(0.7	)		(12.9	)
Market appreciation		39.7			16.0			8.0			63.7			31.3			14.0			13.8			4.6			63.7
Net change		29.7			14.1			7.0			50.8			19.9			9.1			17.9			3.9			50.8
Balance as of September 30, 2009	$	307.5		$	116.7		$	73.6		$	497.8		$	175.7		$	93.3		$	195.9		$	32.9		$	497.8

________________

(1)	Includes index, structured and asset allocation services.

Changes in assets under management for the nine-month period ended September 30, 2009 were as follows:

Distribution Channel

Investment Service

Institutional

Investments

Retail

Private

Client

Total

Value

Equity

ALLIANCEBERNSTEIN HOLDING L.P. - FORM 10-Q - EX-99.1 - EXHIBIT 99.1 - October 29, 2009

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