AllianceBernstein Holding (AB) 10-Q 2007 Q3 Quarterly report

Exhibit 99.1

Part I

FINANCIAL INFORMATION

Item 1.Financial Statements

ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(in thousands, except unit amounts)

	September 30, 2007			December 31, 2006
	(unaudited)
ASSETS
Cash and cash equivalents	$	687,429		$	692,658
Cash and securities segregated, at market (cost: $1,227,324 and $1,863,133)		1,230,055			1,863,957
Receivables, net:
Brokers and dealers		2,750,383			2,445,552
Brokerage clients		382,285			485,446
Fees, net		706,409			557,280
Investments		707,182			543,653
Furniture, equipment and leasehold improvements, net		334,426			288,575
Goodwill, net		2,893,029			2,893,029
Intangible assets, net		269,388			284,925
Deferred sales commissions, net		187,629			194,950
Other investments		276,559			203,950
Other assets		170,370			147,130
Total assets	$	10,595,144		$	10,601,105
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Payables:
Brokers and dealers	$	536,950		$	661,790
Brokerage clients		3,716,906			3,988,032
AllianceBernstein mutual funds		195,419			266,849
Accounts payable and accrued expenses		346,235			333,007
Accrued compensation and benefits		908,182			392,014
Debt		163,000			334,901
Minority interests in consolidated subsidiaries		135,865			53,515
Total liabilities		6,002,557			6,030,108
Commitments and contingencies (See Note 5)
Partners’ capital:
General Partner		46,212			46,416
Limited partners: 260,118,297 and 259,062,014 units issued and outstanding		4,590,951			4,584,200
Capital contributions receivable from General Partner		(28,133	)		(29,590	)
Deferred compensation expense		(68,501	)		(63,196	)
Accumulated other comprehensive income		52,058			33,167
Total partners’ capital		4,592,587			4,570,997
Total liabilities and partners’ capital	$	10,595,144		$	10,601,105

See Accompanying Notes to Condensed Consolidated Financial Statements.

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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,
	2007		2006		2007		2006
Revenues:
Investment advisory and services fees	$	870,282	$	677,914	$	2,490,961	$	1,994,846
Distribution revenues		120,289		103,810		351,438		311,096
Institutional research services		103,552		87,908		305,355		286,306
Dividend and interest income		72,665		63,680		211,042		180,470
Investment gains (losses)		25,507		18,571		67,143		29,263
Other revenues		15,549		29,794		94,032		99,314
Total revenues		1,207,844		981,677		3,519,971		2,901,295
Less: Interest expense		55,022		46,966		164,040		137,586
Net revenues		1,152,822		934,711		3,355,931		2,763,709
Expenses:
Employee compensation and benefits		446,938		375,655		1,363,350		1,119,782
Promotion and servicing:
Distribution plan payments		86,230		71,414		248,754		215,254
Amortization of deferred sales commissions		23,739		21,679		73,253		71,649
Other		61,192		52,771		182,612		161,585
General and administrative		144,276		132,041		426,500		386,321
Interest on borrowings		5,965		5,936		20,484		20,219
Amortization of intangible assets		5,179		5,182		15,537		15,532
		773,519		664,678		2,330,490		1,990,342
Operating income		379,303		270,033		1,025,441		773,367
Non-operating income		3,353		3,112		11,566		16,293
Income before income taxes		382,656		273,145		1,037,007		789,660
Income taxes		34,574		20,171		86,295		48,011
Net income	$	348,082	$	252,974	$	950,712	$	741,649
Net income per unit:
Basic	$	1.33	$	0.97	$	3.62	$	2.85
Diluted	$	1.32	$	0.96	$	3.60	$	2.83

See Accompanying Notes to Condensed Consolidated Financial Statements.

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ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income	$	950,712		$	741,649
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions		73,253			71,649
Amortization of non-cash deferred compensation		37,483			35,301
Depreciation and other amortization		78,283			57,487
Other, net		(48,079	)		(15,697	)
Changes in assets and liabilities:
Decrease in segregated cash and securities		633,902			341,990
(Increase) in receivable from brokers and dealers		(290,503	)		(482,204	)
Decrease in receivable from brokerage clients		114,685			22,538
(Increase) in fees receivable, net		(134,991	)		(80,983	)
(Increase) in trading investments		(162,517	)		(179,400	)
(Increase) in deferred sales commissions		(65,931	)		(71,791	)
(Increase) decrease in other investments		(48,983	)		20,815
(Increase) decrease in other assets		(19,689	)		8,810
(Decrease) increase in payable to brokers and dealers		(136,988	)		25,522
(Decrease) increase in payable to brokerage clients		(284,728	)		194,497
(Decrease) in payable to AllianceBernstein mutual funds		(71,430	)		(20,330	)
Increase (decrease) in accounts payable and accrued expenses		80,004			(70,385	)
Increase in accrued compensation and benefits		512,760			419,586
Net cash provided by operating activities		1,217,243			1,019,054
Cash flows from investing activities:
Purchases of investments		(17,223	)		(54,803	)
Proceeds from sales of investments		46,251			2,580
Additions to furniture, equipment and leasehold improvements		(87,852	)		(74,954	)
Purchase of business, net of cash acquired		—			(16,086	)
Net cash used in investing activities		(58,824	)		(143,263	)
Cash flows from financing activities:
(Repayment) issuance of commercial paper, net		(191,566	)		169,602
Repayment of Senior Notes		—			(400,000	)
Cash distributions to General Partner and unitholders		(1,017,702	)		(774,885	)
Capital contributions from General Partner		2,700			2,281
Additional investment by Holding with proceeds from exercise of compensatory options to buy Holding Units		41,446			63,245
Purchases of Holding Units to fund deferred compensation plans, net		(12,530	)		(16,648	)
Net cash used in financing activities		(1,177,652	)		(956,405	)
Effect of exchange rate changes on cash and cash equivalents		14,004			3,377
Net (decrease) in cash and cash equivalents		(5,229	)		(77,237	)
Cash and cash equivalents as of beginning of period		692,658			654,168
Cash and cash equivalents as of end of period	$	687,429		$	576,931
Non-cash financing activities:
Additional investment by Holding through issuance of Holding Units in exchange for cash awards made under the Partners Compensation Plan	$	—		$	47,161

See Accompanying Notes to Condensed Consolidated Financial Statements.

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ALLIANCEBERNSTEIN L.P.

AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2007

(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, 2006.

1. Organization and Business Description

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

• Institutional Investment Services – servicing institutional investors, 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, group trusts, mutual funds (sponsored by AllianceBernstein or an affiliated company), and other investment vehicles.

• Retail Services – servicing individual investors, primarily by means of retail mutual funds sponsored by AllianceBernstein or an affiliated company, sub-advisory relationships in respect of mutual funds sponsored by third parties, separately managed account programs that are sponsored by various financial intermediaries worldwide, and other investment vehicles.

• Private Client Services – servicing 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 institutional investors desiring institutional research services including independent, in-depth fundamental 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 investment 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;

• Passive management, including both index and enhanced index strategies; and

• Blend strategies, combining style pure investment components with systematic rebalancing.

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.

Our independent, in-depth 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 specialist research units, including one unit that examines global strategic changes that can affect multiple industries and geographies, and another dedicated to identifying potentially successful innovation within early-stage companies.

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As of September 30, 2007, 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, AXA Financial, Inc. (an indirect wholly-owned subsidiary of AXA, “AXA Financial”), AXA Equitable Life Insurance Company (a wholly-owned subsidiary of AXA Financial, “AXA Equitable”), and certain subsidiaries of AXA Financial, collectively referred to as “AXA and its subsidiaries”, owned approximately 1.7% of the issued and outstanding Holding Units.

As of September 30, 2007, the ownership structure of AllianceBernstein, as a percentage of general and limited partnership interests, was as follows:

AXA and its subsidiaries	62.6	%
Holding	33.0
SCB Partners Inc. (a wholly-owned subsidiary of SCB Inc.; formerly known as Sanford C. Bernstein Inc.)	3.1
Other	1.3
	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 the general partnership interests in AllianceBernstein and Holding, and their equity interest in Holding, as of September 30, 2007, AXA and its subsidiaries had an approximate 63.2% economic interest in AllianceBernstein.

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, 2006 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.

The equity method of accounting is used for unconsolidated joint ventures and, in accordance with Emerging Issues Task Force D-46, “Accounting for Limited Partnership Investments”, for investments made in limited partnership hedge funds that we sponsor and manage. The investments are included in “other investments” on the condensed consolidated statements of financial position and the related investment income and gains and losses are included in “other revenues” on the condensed consolidated statements of income.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current year presentation. These include certain reclassifications within operating cash flow related to deferred compensation, other investments, and accrued expenses.

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 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.

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The General Partner computes cash 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 24, 2007, the General Partner declared a cash distribution of $346.8 million, or $1.32 per AllianceBernstein Unit, representing the distribution of Available Cash Flow for the three months ended September 30, 2007. The General Partner, as a result of its 1% general partnership interest, is entitled to receive 1% of each quarterly distribution. The distribution is payable on November 15, 2007 to holders of record as of November 5, 2007.

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.

Goodwill, Net

On October 2, 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.

In accordance with Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible Assets”, we test goodwill at least annually, as of September 30, for impairment. As of September 30, 2007, the impairment test indicated that goodwill was not impaired.

Intangible Assets, Net

Intangible assets consist primarily of costs assigned to investment management contracts of SCB Inc., less accumulated amortization. Intangible assets are being amortized over the estimated useful life of approximately 20 years. The gross carrying amount and accumulated amortization of intangible assets subject to amortization totaled $414.3 million and $144.9 million as of September 30, 2007, respectively. Amortization expense was $5.2 million for the three months ended September 30, 2007 and 2006, and estimated annual amortization expense for each of the next five years is approximately $20.7 million. Management tests intangible assets for impairment quarterly. Management believes that intangible assets were not impaired as of September 30, 2007.

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. Management tests the deferred sales commission asset for recoverability quarterly and determined that the balance as of September 30, 2007 was not impaired.

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Loss Contingencies – Legal Proceedings

With respect to all significant litigation matters, we conduct a probability assessment of 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 as required by Statement of Financial Accounting Standards No. 5 (“SFAS No. 5”), “Accounting for Contingencies”, and Financial Accounting Standards Board (“FASB”) Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5”. 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.

Revenue Recognition

Investment advisory and services base fees, generally calculated as a percentage of assets under management, are recorded as revenue as the related services are performed. Certain investment advisory contracts, including those 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 revenue at the end of each measurement period.

Institutional research services revenue consists of brokerage transaction charges received by Sanford C. Bernstein & Co., LLC (“SCB LLC”) and Sanford C. Bernstein Limited, both wholly-owned subsidiaries of AllianceBernstein, for in-depth 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 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 among notional investments in Holding Units, certain of the investment services we provide to our clients, or a money market fund, or investments in options to buy Holding Units. We typically purchase the investments that are notionally elected by the participants and hold such investments, which are classified as trading securities, in a consolidated rabbi trust. Vesting periods for annual awards range from four years to immediate, depending on the terms of the individual awards, the age of the participants, or, in the case of our Chairman and CEO, the terms of his employment agreement (filed as Exhibit 99.31 to Form 8-K, as filed October 31, 2006). 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 of Holding Units and income credited on notional investments in our investment services or in 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), 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) 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 in other revenues in the consolidated statements of income.

Compensatory Option Plans

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), (“SFAS No. 123-R”), “Share Based Payment”. SFAS No. 123-R requires that compensation cost related to share-based payments, based on the fair value of the equity instruments issued, be recognized in financial statements. We adopted SFAS No. 123-R effective January 1, 2006 utilizing the modified prospective method.

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Variable Interest Entities

In accordance with FASB Interpretation No. 46 (revised December 2003) (“FIN 46-R”), “Consolidation of 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 entities that the company is required to consolidate under FIN 46-R. These include certain mutual fund products, hedge funds, structured products, group trusts, and limited partnerships.

We derive no benefit from client assets under management of these entities other than investment management fees and cannot utilize those assets in our operations.

As of September 30, 2007, we have significant variable interests in certain structured products and hedge funds with approximately $183.4 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. Our maximum exposure to loss in these entities 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, 2007, $1.2 billion of United States Treasury Bills was 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”).

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 as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2007		2006		2007		2006
	(in thousands, except per unit amounts)
Net income	$	348,082	$	252,974	$	950,712	$	741,649
Weighted average units outstanding - basic		260,074		257,838		259,734		257,431
Dilutive effect of compensatory options		1,525		2,127		1,943		2,192
Weighted average units outstanding - diluted		261,599		259,965		261,677		259,623
Basic net income per unit	$	1.33	$	0.97	$	3.62	$	2.85
Diluted net income per unit	$	1.32	$	0.96	$	3.60	$	2.83

For the three months ended September 30, 2007, we excluded 1,678,985 out-of-the-money options (i.e., options to buy Holding Units 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 ended September 30, 2006, there were no out-of-the-money options. Out-of-the-money options to buy 1,678,985 and 9,712 Holding Units for the nine months ended September 30, 2007 and 2006, respectively, have been excluded from the diluted net income per unit computation.

5. Commitments and Contingencies

Deferred Sales Commission Asset

Payments of sales commissions made by AllianceBernstein Investments, Inc. (“AllianceBernstein Investments”), a wholly-owned subsidiary of AllianceBernstein, 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. fund shares and four years for non-U.S. 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 $187.6 million as of September 30, 2007. 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 $24.3 million and $17.5 million, totaled approximately $65.9 million and $71.8 million during the nine months ended September 30, 2007 and 2006, respectively.

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Management tests the deferred sales commission asset for recoverability quarterly. Significant assumptions utilized to estimate the company’s future average assets under management and undiscounted future cash flows from back-end load shares 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, 2007, management used average market return assumptions of 5% for fixed income and 8% for equity 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 19.0% to 25.0%  for U.S. fund shares and 21.0% to 32.0% for non-U.S. fund shares, determined by reference to actual redemption experience over the five-year, three-year, one-year and current periods ended September 30, 2007, calculated as a percentage of the company’s 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. Management determined that the deferred sales commission asset was not impaired as of September 30, 2007. 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, 2007, U.S. equity markets increased by approximately 2.0% and 9.1%, respectively, as measured by the total return of the Standard & Poor’s 500 Stock Index, and U.S. fixed income markets increased by approximately 2.8% and 3.9%, respectively, as measured by the change in the Lehman Brothers’ Aggregate Bond Index. The redemption rate for domestic back-end load shares was approximately 19.0% and 21.3%, respectively, during the three-month and nine-month periods ended September 30, 2007. Non-U.S. capital markets’ increases for the three-month and nine-month periods ended September 30, 2007 ranged from 2.2% to 14.4% and from 11.7% to 34.5%, respectively, as measured by the MSCI World, Emerging Market and EAFE Indices. The redemption rate for non-U.S. back-end load shares was 29.0% and 32.0%, respectively, during the three-month and nine-month periods ended September 30, 2007. 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 AllianceBernstein, Holding, the General Partner, AXA Financial, the AllianceBernstein-sponsored mutual funds (“U.S. Funds”) that are registered under the Investment Company Act of 1940, as amended (“Investment Company Act”), certain officers of AllianceBernstein (“AllianceBernstein defendants”), and certain unaffiliated defendants, as well as unnamed Doe defendants. The Hindo Complaint was filed in the United States District Court for the Southern District of New York by alleged shareholders of two of the U.S. Funds. The Hindo Complaint alleges that certain of the AllianceBernstein defendants failed to disclose that they improperly allowed certain hedge funds and other unidentified parties to engage in “late trading” and “market timing” of U.S. Fund securities, violating Sections 11 and 15 of the Securities Act of 1933, as amended (“Securities Act”), Sections 10(b) and 20(a) of the Exchange Act, and Sections 206 and 215 of the Investment Advisers Act of 1940, as amended (“Advisers Act”). Plaintiffs seek an unspecified amount of compensatory damages and rescission of the U.S. Funds’ contracts with AllianceBernstein, including recovery of all fees paid to AllianceBernstein pursuant to such contracts.

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. All state court actions against AllianceBernstein either were voluntarily dismissed or removed to federal court. On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred all federal actions to the United States District Court for the District of Maryland (“Mutual Fund MDL”). 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. All four complaints included substantially identical factual allegations, which appear to be based in large part on the Order of the SEC dated December 18, 2003 (as amended and restated January 15, 2004, “SEC Order”) and the New York State Attorney General Assurance of Discontinuance dated September 1, 2004 (“NYAG AoD”).

9

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 accrued 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.

The matters disclosed in previous reports involving the West Virginia Attorney General and the West Virginia Securities Commissioner have been resolved. The former was dismissed and the latter settled pursuant to an agreement in which AllianceBernstein does not admit liability.

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

6. Qualified Employee Benefit Plans

We maintain a qualified profit sharing plan covering U.S. employees and certain foreign employees. Employer contributions are generally limited to the maximum amount deductible for federal income tax purposes.

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 and primary Social Security 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 deduct for federal income tax purposes.

10

During the nine months ended September 30, 2007, we contributed $2.6 million to the Retirement Plan. In October 2007, we contributed an additional $2.2 million to the Retirement Plan. 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 was comprised of:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
	(in thousands)
Service cost	$	731		$	897		$	2,717		$	3,151
Interest cost on projected benefit obligations		1,130			1,122			3,592			3,456
Expected return on plan assets		(1,089	)		(952	)		(3,239	)		(2,848	)
Amortization of prior service credit		(15	)		(15	)		(45	)		(45	)
Amortization of transition asset		(36	)		(36	)		(108	)		(108	)
Recognized actuarial loss		—			42			—			240
Net pension charge	$	721		$	1,058		$	2,917		$	3,846

7. 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 treated as publicly traded. The AllianceBernstein Partnership Agreement provides that all transfers of AllianceBernstein 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 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.

Effective January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes”, an interpretation of FASB Statement No. 109.  FIN 48 requires that the effects of a tax position be 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. As a result of adopting FIN 48, we recognized a $442,000 decrease in the liability for unrecognized tax benefits, which was accounted for as a cumulative-effect adjustment to the January 1, 2007 balance of partners’ capital.  The adjustment reflects the difference between the net amount of liabilities recognized in our consolidated statement of financial position prior to the application of FIN 48 and the net amount of liabilities recognized as a result of applying the provisions of FIN 48.  As of January 1, 2007, the balance of unrecognized tax benefits was $17.9 million.  As discussed below, tax examinations were completed allowing us to conclude that the years under examination were effectively settled for purposes of recognizing previously unrecognized tax benefits.  Accordingly, the reserve for unrecognized tax benefits was reduced by $2.4 million during the three-month period ended September 30, 2007. The reserve for unrecognized tax benefits has increased during the nine-month period ended September 30, 2007 for the current period effects of previously identified uncertain tax positions.  No new issues have been identified during this time period. As of September 30, 2007, the balance of unrecognized tax benefits was $17.3 million. All unrecognized tax benefits, when recognized, are recorded in income tax expense and affect the company’s effective tax rate.

11

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 accrued interest recorded on the consolidated statement of financial condition as of January 1, 2007, the date of adoption of FIN 48, is $1.7 million. As of September 30, 2007, the amount is essentially unchanged. There were no accrued penalties as of January 1, 2007.

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 2004. However, by agreement, the year 2003 remains open in connection with the New York City tax examinations that are discussed below. The Internal Revenue Service (“IRS”) commenced an examination of our domestic corporate subsidiaries’ federal tax returns for 2003 and 2004 in the second quarter of 2006. This examination was settled during the third quarter of 2007 resulting in a tax payment to the U.S. Treasury in the amount of $0.4 million. In addition, examinations of AllianceBernstein’s New York City Partnership and corporate subsidiary tax returns for 2003 through 2005 commenced in the second quarter of 2007. These examinations remain in the preliminary stage and we do not currently believe that an increase in the reserve for unrecognized tax benefits is necessary. Adjustment to the reserve could occur in light of changing facts and circumstances. Subject to the results of the examinations for the tax years 2003-2005, 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 $13 million including accrued interest could occur over the next twelve months.

During the fourth quarter of 2007, the Japanese National Tax Agency commenced an examination of our corporate subsidiary located in Japan.  There are no reserves for unrecognized tax benefits recorded with respect to this subsidiary.  The examination is in the preliminary stage and we do not currently believe that a reserve for unrecognized tax benefits is necessary.  However, the establishment of a reserve could occur in light of changing facts and circumstances. Currently there are no other income tax examinations at our significant non-U.S. subsidiaries. Years that remain open and may be subject to examination vary under local law, and range from one to seven years.

8. Comprehensive Income

Comprehensive income was comprised of:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
	(in thousands)
Net income	$	348,082		$	252,974		$	950,712		$	741,649
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on investments		(4,574	)		2,629			(5,028	)		2,182
Foreign currency translation adjustment		13,370			(901	)		24,070			1,471
Other		(50	)		—			(151	)		—
		8,746			1,728			18,891			3,653
Comprehensive income	$	356,828		$	254,702		$	969,603		$	745,302

9. Accounting Pronouncements

In September 2006, FASB issued SFAS No. 157 (“SFAS No. 157”), “Fair Value Measurements”. Among other requirements, SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. In February 2007, FASB issued SFAS No. 159 (“SFAS No. 159”), “Fair Value Option for Financial Assets and Financial Liabilities”. SFAS No. 159 expands the use of fair value measurement by permitting entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Both SFAS No. 157 and SFAS No. 159 are effective beginning the first fiscal year that begins after November 15, 2007.  We are required to adopt both standards on January 1, 2008. We are currently evaluating the impact these pronouncements will have on our consolidated financial statements.

12

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. and its subsidiaries (“AllianceBernstein”) as of September 30, 2007, the related condensed consolidated statements of income for the three-month and nine-month periods ended September 30, 2007 and 2006, and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2007 and 2006. 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 have 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, 2006, and the related consolidated statements of income, changes in partners’ capital and comprehensive income, and cash flows for the year then ended (not presented herein), and in our report dated February 27, 2007 we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of December 31, 2006 is fairly stated in all material respects in relation to the consolidated statement of financial condition from which it has been derived.

/s/ PricewaterhouseCoopers LLP

New York, New York

November 2, 2007

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

During the third quarter of 2007, we generally provided satisfactory investment returns for our clients despite considerable market turbulence. Our growth services performed especially well, exceeding favorable benchmark performance for the quarter. However, our value equity services underperformed relative to benchmarks and our fixed income services posted slightly negative relative returns. The overall returns of our hedge fund services were disappointing for the quarter, especially in our diversified services where returns were negative, more than offsetting single digit organic growth. However, year-to-date performance is in the mid-single digit loss range, or better, for most of our hedge funds and, as a result, as of September 30, 2007, there are no material high watermark thresholds related to our ability to earn performance fees in 2008. Finally, relative performance of our blend strategies services was respectable, with strength in U.S. and international services, although relative returns in our emerging markets services were weak.

Total assets under management (“AUM”) grew 2.5% during the third quarter of 2007, driven almost entirely by market appreciation, as our organic growth rate slowed significantly during the third quarter. While our new account fundings were robust at $32.4 billion, net inflows totaled just $0.4 billion. This weakness was especially concentrated in our Institutional Investment Services, which had net outflows of $2.1 billion during the third quarter, primarily due to the loss of approximately $6 billion in index mandates. However, because fees earned on index accounts are very low, this loss did not affect revenues significantly. Our global footprint, both in terms of client domicile and geographic scope, continued to expand as AUM invested in global and international services and AUM managed for non-U.S. clients grew at faster rates than total AUM.

Our Institutional Investment Services AUM rose by 2.4%, or $12.2 billion, in the third quarter, as strong market appreciation was partly offset by net outflows (reflecting the above-referenced lost index mandates).  Despite these net outflows, over 100 institutional mandates were funded during the quarter, generating more than $18.1 billion of AUM, with value and blend services accounting for 80% of this total. Additionally, our global and international services accounted for approximately 86% of these new accounts, a continuing trend. While the pipeline of won but unfunded new mandates remains substantial, it declined somewhat during the quarter. However, due to growing momentum in the defined contribution market, we expect net inflows to improve in 2008.

Our Retail Services had a relatively quiet quarter. AUM increased by 2.1%, or $4.0 billion, as net inflows were slightly positive. Substantial growth in net sales of U.S. funds was offset by weakness in non-U.S. fixed income funds and by increased investment minimums on certain separately managed account services that reduced net inflows. Our “Investment Strategies for Life” suite, which captures the three most important services that we provide to our retail clients – Wealth Strategies, CollegeBoundfund, and Retirement Strategies (target-date solutions for individuals and smaller defined contribution plans) – continued to build momentum. As of September 30, 2007, our Wealth Strategies stood at $13.8 billion of AUM, while our CollegeBoundfund’s AUM stood at $8.5 billion and it was ranked #1 in the nation by SavingForCollege.com. Also, in a recent survey by PlanAdvisor magazine, our Retirement Strategies offerings, which stood at $1.1 billion of AUM as of September 30, 2007, received more citations as best in class than did the target-date funds of any other company in the industry.

Private Client Services AUM increased 3.5%, or $3.7 billion, driven by both strong net inflows and market appreciation.  For the trailing twelve month period, both gross and net inflows set records of $18.3 billion and $9.5 billion, respectively. This led to an outstanding 26.4% year-over-year growth rate. Our financial advisor headcount increased to 341, up 17.2% from September 30, 2006.

Institutional Research Services revenue increased by 17.8% versus the third quarter of 2006.  This represented the strongest quarter on record, primarily attributable to double-digit growth in Europe. We continue to expand our research platform, having launched coverage of the Southern European banking sector during the quarter, and maintain a robust global pipeline of future coverage launches. In Institutional Investor’s recently released U.S. poll, we achieved excellent results, ranking #7 overall, the highest in the history of the company. This marks the fourth consecutive year in which our firm has placed in the Top Ten of Institutional Investor’s league table. Nearly all of our publishing U.S. analysts were recognized in the poll, with six analysts voted #1 in their respective sectors.

The company’s financial performance for the quarter exceeded our expectations, with revenues rising by 23.3% and net income rising by 37.6%, as compared to the third quarter of 2006.  Our operating margin rose by four percentage points to 32.9%.

Our success as a company derives from our ability to generate superior investment returns for our clients and to provide them with world class service. Acting in the best interests of our clients is the key to the continuing success for our company which, in turn, translates into success for all of our stakeholders.

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Earnings Guidance

Our earnings are becoming more seasonal, primarily due to the increasing amount of AUM subject to performance fee arrangements, as well as other factors affecting expense ratios. To clarify this point, in our second quarter 2007 Earnings Release we provided full year 2007 earnings guidance estimates that earnings of AllianceBernstein would be at levels that result in Holding’s full year 2007 earnings being approximately $4.90 - $5.25 per Holding Unit, with the fourth quarter accounting for a disproportionate share of the total. In our third quarter 2007 Earnings Release, we estimated that AllianceBernstein’s earnings will be at levels that result in Holding’s full year 2007 earnings being approximately $4.50 - $4.80 per Holding Unit, with the entire reduction attributable to substantially lower estimated hedge fund performance fees to be earned by AllianceBernstein. This estimate, which is not being updated in this Report, was based on information available at the time of the Earnings Release and on the assumptions that equity and fixed income market returns would be at annual rates of 8% and 5%, respectively, for the fourth quarter of 2007 and that our net asset inflows for the fourth quarter of 2007 would continue at levels similar to rates experienced during the third quarter of 2007 (adjusted to exclude the above-referenced $6 billion of index mandate terminations). It is important to stress that our earnings are subject to considerable uncertainty including, but not limited to, capital market volatility, the effect of which can be amplified by the aforementioned increase in assets under management subject to performance fee arrangements.  Earnings guidance should be evaluated in this context.

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Assets Under Management

Effective January 1, 2006, we transferred certain client accounts among distribution channels to reflect changes in the way we service these accounts (shown as transfers in the tables below).

Assets under management by distribution channel were as follows:

	As of September 30,
	2007		2006		$ Change		% Change
	(in billions)
Institutional Investment	$	512.8	$	417.8	$	95.0		22.7	%
Retail		189.4		153.9		35.5		23.0
Private Client		110.6		87.6		23.0		26.4
Total	$	812.8	$	659.3	$	153.5		23.3

Assets under management by investment service were as follows:

	As of September 30,
	2007		2006		$ Change			% Change
	(in billions)
Equity:
Value
U.S.	$	117.4	$	112.5	$	4.9			4.3	%
Global & international		280.5		181.8		98.7			54.3
		397.9		294.3		103.6			35.2
Growth
U.S.		74.0		78.4		(4.4	)		(5.6	)
Global & international		121.5		84.1		37.4			44.5
		195.5		162.5		33.0			20.3
Total Equity		593.4		456.8		136.6			29.9
Fixed Income:
U.S.		113.3		109.2		4.1			3.8
Global & international		81.1		63.8		17.3			27.0
		194.4		173.0		21.4			12.3
Index/Structured:
U.S.		19.2		23.5		(4.3	)		(18.0	)
Global & international		5.8		6.0		(0.2	)		(4.2	)
		25.0		29.5		(4.5	)		(15.2	)
Total:
U.S.		323.9		323.6		0.3			0.1
Global & international		488.9		335.7		153.2			45.6
Total	$	812.8	$	659.3	$	153.5			23.3

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Changes in assets under management for the three months ended September 30, 2007 were as follows:

	Distribution Channel												Investment Service
	Institutional Investment			Retail			Private Client			Total			Value Equity			Growth Equity			Fixed Income			Index/ Structured			Total
	(in billions)
Balance as of July 1, 2007	$	500.6		$	185.4		$	106.9		$	792.9		$	388.2		$	185.9		$	187.9		$	30.9		$	792.9
Long-term flows:
Sales/new accounts		18.1			9.7			4.6			32.4			19.0			7.0			6.3			0.1			32.4
Redemptions/terminations		(14.8	)		(9.1	)		(1.1	)		(25.0	)		(7.3	)		(6.8	)		(4.8	)		(6.1	)		(25.0	)
Cash flow/unreinvested dividends		(5.4	)		(0.5	)		(1.1	)		(7.0	)		(4.3	)		(2.0	)		(0.3	)		(0.4	)		(7.0	)
Net long-term inflows (outflows)		(2.1	)		0.1			2.4			0.4			7.4			(1.8	)		1.2			(6.4	)		0.4
Transfers		0.8			(0.5	)		(0.3	)		—			—			—			—			—			—
Market appreciation		13.5			4.4			1.6			19.5			2.3			11.4			5.3			0.5			19.5
Net change		12.2			4.0			3.7			19.9			9.7			9.6			6.5			(5.9	)		19.9
Balance as of September 30, 2007	$	512.8		$	189.4		$	110.6		$	812.8		$	397.9		$	195.5		$	194.4		$	25.0		$	812.8

Changes in assets under management for the nine months ended September 30, 2007 were as follows:

	Distribution Channel												Investment Service
	Institutional Investment			Retail			Private Client			Total			Value Equity			Growth Equity			Fixed Income			Index/ Structured			Total
	(in billions)
Balance as of January 1, 2007	$	455.1		$	166.9		$	94.9		$	716.9		$	335.5		$	174.1		$	177.0		$	30.3		$	716.9
Long-term flows:
Sales/new accounts		52.1			36.2			14.8			103.1			53.9			22.5			26.4			0.3			103.1
Redemptions/terminations		(28.2	)		(27.7	)		(3.2	)		(59.1	)		(18.9	)		(20.6	)		(12.4	)		(7.2	)		(59.1	)
Cash flow/unreinvested dividends		(15.6	)		(1.2	)		(4.0	)		(20.8	)		(9.9	)		(6.1	)		(3.8	)		(1.0	)		(20.8	)
Net long-term inflows (outflows)		8.3			7.3			7.6			23.2			25.1			(4.2	)		10.2			(7.9	)		23.2
Transfers		0.1			(0.5	)		0.4			—			—			—			—			—			—
Market appreciation		49.3			15.7			7.7			72.7			37.3			25.6			7.2			2.6			72.7
Net change		57.7			22.5			15.7			95.9			62.4			21.4			17.4			(5.3	)		95.9
Balance as of September 30, 2007	$	512.8		$	189.4		$	110.6		$	812.8		$	397.9		$	195.5		$	194.4		$	25.0		$	812.8

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Changes in assets under management for the twelve months ended September 30, 2007 were as follows:

	Distribution Channel												Investment Service
	Institutional Investment			Retail			Private Client			Total			Value Equity			Growth Equity			Fixed Income			Index/ Structured			Total
	(in billions)
Balance as of October 1, 2006	$	417.8		$	153.9		$	87.6		$	659.3		$	294.3		$	162.5		$	173.0		$	29.5		$	659.3
Long-term flows:
Sales/new accounts		68.1			47.1			18.3			133.5			69.0			29.6			34.5			0.4			133.5
Redemptions/terminations		(36.4	)		(36.2	)		(4.1	)		(76.7	)		(23.9	)		(26.6	)		(18.9	)		(7.3	)		(76.7	)
Cash flow/unreinvested dividends		(17.0	)		(1.3	)		(4.7	)		(23.0	)		(9.8	)		(7.2	)		(3.7	)		(2.3	)		(23.0	)
Net long-term inflows (outflows)		14.7			9.6			9.5			33.8			35.3			(4.2	)		11.9			(9.2	)		33.8
Transfers		0.1			(0.5	)		0.4			—			0.8			(0.8	)		—			—			—
Market appreciation		80.2			26.4			13.1			119.7			67.5			38.0			9.5			4.7			119.7
Net change		95.0			35.5			23.0			153.5			103.6			33.0			21.4			(4.5	)		153.5
Balance as of September 30, 2007	$	512.8		$	189.4		$	110.6		$	812.8		$	397.9		$	195.5		$	194.4		$	25.0		$	812.8

Average assets under management by distribution channel and investment service were as follows:

	Three Months Ended										Nine Months Ended
	9/30/07		9/30/06		$ Change			% Change			9/30/07		9/30/06		$ Change			% Change
	(in billions)
Distribution Channel:
Institutional Investment	$	501.6	$	406.7	$	94.9			23.3	%	$	483.3	$	394.2	$	89.1			22.6	%
Retail		184.6		149.5		35.1			23.5			178.3		147.1		31.2			21.2
Private Client		107.5		85.2		22.3			26.2			103.0		82.2		20.8			25.2
Total	$	793.7	$	641.4	$	152.3			23.7		$	764.6	$	623.5	$	141.1			22.6
Investment Service:
Value Equity	$	386.7	$	283.5	$	103.2			36.4	%	$	367.2	$	269.0	$	98.2			36.5	%
Growth Equity		187.3		158.6		28.7			18.1			181.8		157.2		24.6			15.7
Fixed Income		190.8		169.2		21.6			12.7			185.6		166.8		18.8			11.3
Index/Structured		28.9		30.1		(1.2	)		(3.8	)		30.0		30.5		(0.5	)		(1.6	)
Total	$	793.7	$	641.4	$	152.3			23.7		$	764.6	$	623.5	$	141.1			22.6

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Consolidated Results of Operations

	Three Months Ended											Nine Months Ended
	9/30/07			9/30/06			$ Change		% Change			9/30/07			9/30/06			$ Change			% Change
	(in millions, except per unit amounts)
Net revenues	$	1,152.8		$	934.7		$	218.1		23.3	%	$	3,355.9		$	2,763.7		$	592.2			21.4	%
Expenses		773.5			664.7			108.8		16.4			2,330.5			1,990.3			340.2			17.1
Operating income		379.3			270.0			109.3		40.5			1,025.4			773.4			252.0			32.6
Non-operating income		3.4			3.1			0.3		7.7			11.6			16.3			(4.7	)		(29.0	)
Income before income taxes		382.7			273.1			109.6		40.1			1,037.0			789.7			247.3			31.3
Income taxes		34.6			20.1			14.5		71.4			86.3			48.0			38.3			79.7
Net income	$	348.1		$	253.0		$	95.1		37.6		$	950.7		$	741.7		$	209.0			28.2
Diluted net income per unit	$	1.32		$	0.96		$	0.36		37.5		$	3.60		$	2.83		$	0.77			27.2
Distributions per unit	$	1.32		$	0.96		$	0.36		37.5		$	3.60		$	2.82		$	0.78			27.7
Operating margin (1)		32.9	%		28.9	%							30.6	%		28.0	%

⁽¹⁾Operating income as a percentage of net revenues.

Net income for the three-month and nine-month periods ended September 30, 2007 increased 37.6% and 28.2%, respectively, from the corresponding periods in 2006. This increase was primarily due to higher investment advisory and services fee revenues resulting from higher assets under management, partially offset by higher employee compensation and benefits expenses.

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Net Revenues

The following table summarizes the components of total net revenues:

	Three Months Ended										Nine Months Ended
	9/30/07		9/30/06		$ Change			% Change			9/30/07		9/30/06			$ Change			% Change
	(in millions)
Investment advisory and services fees:
Institutional Investment:
Base fees	$	367.0	$	278.4	$	88.6			31.8	%	$	1,040.4	$	801.7		$	238.7			29.8	%
Performance fees		15.4		12.3		3.1			25.0			54.7		62.4			(7.7	)		(12.4	)
		382.4		290.7		91.7			31.5			1,095.1		864.1			231.0			26.7
Retail:
Base fees		242.4		195.9		46.5			23.8			699.6		575.5			124.1			21.6
Performance fees		—		—		—			—			—		(0.2	)		0.2			n/m
		242.4		195.9		46.5			23.8			699.6		575.3			124.3			21.6
Private Client:
Base fees		243.5		190.5		53.0			27.8			693.6		554.9			138.7			25.0
Performance fees		2.0		0.8		1.2			142.2			2.7		0.5			2.2			410.4
		245.5		191.3		54.2			28.3			696.3		555.4			140.9			25.4
Total:
Base fees		852.9		664.8		188.1			28.3			2,433.6		1,932.1			501.5			26.0
Performance fees		17.4		13.1		4.3			32.4			57.4		62.7			(5.3	)		(8.5	)
		870.3		677.9		192.4			28.4			2,491.0		1,994.8			496.2			24.9
Distribution revenues		120.3		103.8		16.5			15.9			351.4		311.1			40.3			13.0
Institutional research services		103.6		87.9		15.7			17.8			305.4		286.3			19.1			6.7
Dividend and interest income		72.6		63.7		8.9			14.1			211.0		180.5			30.5			16.9
Investment gains (losses)		25.5		18.6		6.9			37.3			67.1		29.3			37.8			129.4
Other revenues		15.5		29.8		(14.3	)		(47.8	)		94.0		99.3			(5.3	)		(5.3	)
Total revenues		1,207.8		981.7		226.1			23.0			3,519.9		2,901.3			618.6			21.3
Less: Interest expense		55.0		47.0		8.0			17.2			164.0		137.6			26.4			19.2
Net Revenues	$	1,152.8	$	934.7	$	218.1			23.3		$	3,355.9	$	2,763.7		$	592.2			21.4

Investment Advisory and Services Fees

Investment advisory and services fees, the largest component of our revenues, consist primarily of base fees. These fees are generally calculated as a percentage of the value of assets under management at a point in time, or as the value of average assets under management for the applicable billing period, and vary with the type of investment service, the size of account, and the total amount of assets we manage for a particular client. Accordingly, fee income generally increases or decreases as assets under management increase or decrease and is therefore affected by market appreciation or depreciation, the addition of new client accounts or client contributions of additional assets to existing accounts, withdrawals of assets from and termination of client accounts, purchases and redemptions of mutual fund shares, and shifts of assets between accounts or products with different fee structures.

Certain investment advisory contracts provide for a performance fee, in addition to or in lieu of a base fee. This fee 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 fees are recorded as revenue at the end of the measurement period and will be higher in favorable markets and lower in unfavorable markets, which may increase the volatility and seasonality of our revenues and earnings.

For the three-month and nine-month periods ended September 30, 2007, our investment advisory and services fees increased 28.4% and 24.9%, respectively, from the corresponding periods in 2006. These increases were primarily due to increases of 23.7% and 22.6%, respectively, in average assets under management resulting from net asset inflows and market appreciation. For the three-month and nine-month periods ended September 30, 2007, performance fees aggregated $17.4 million and $57.4 million, respectively, an increase of $4.3 million and a decrease $5.3 million, respectively, in comparison with the corresponding periods in 2006.

Institutional investment advisory and services fees for the three-month and nine-month periods ended September 30, 2007 increased $91.7 million, or 31.5%, and $231.0 million, or 26.7%, respectively, from the corresponding periods in 2006, primarily as a result of increases of 23.3% and 22.6%, respectively, in average assets under management.

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Retail investment advisory and services fees for the three-month and nine-month periods ended September 30, 2007 increased by $46.5 million, or 23.8%, and $124.3 million, or 21.6%, respectively, from the corresponding periods in 2006, reflecting increases of 23.5% and 21.2%, respectively, in average assets under management.

Private client investment advisory and services fees for the three-month and nine-month periods ended September 30, 2007 increased by $54.2 million, or 28.3%, and $140.9 million, or 25.4%, respectively, from the corresponding periods in 2006, primarily as a result of increases of 29.1% and 26.2%, respectively, in billable assets under management (i.e., assets billed at the beginning of each quarter).

Distribution Revenues

AllianceBernstein Investments and AllianceBernstein Luxembourg (both wholly-owned subsidiaries of AllianceBernstein) act as distributor and/or placement agent of company-sponsored mutual funds and receive distribution services fees from certain of those funds as partial reimbursement of the distribution expenses they incur. Distribution revenues for the three-month and nine-month periods ended September 30, 2007 increased $16.5 million, or 15.9%, and $40.3 million, or 13.0%, respectively, compared to the corresponding periods in 2006, principally due to higher average mutual fund assets under management.

Institutional Research Services

Institutional Research Services revenue consists principally of brokerage transaction charges received for providing independent, in-depth fundamental research and brokerage-related services to institutional investors.

Revenues from institutional research services for the three-month and nine-month periods ended September 30, 2007 reflect an increase of $15.7 million, or 17.8%, and $19.1 million, or 6.7%, respectively, from the corresponding periods in 2006. These increases were primarily the result of higher revenues from European operations. U.S. revenues also increased in the third quarter of 2007, but decreased for the nine-month period ended September 30, 2007.

Recent declines in commission rates charged by broker-dealers are likely to continue and may accelerate. Increasing use of electronic trading systems and algorithmic trading strategies (which permit investors to execute securities transactions at a fraction of typical full-service broker-dealer charges) and pressure exerted by funds and institutional investors are likely to result in continuing, perhaps significant, declines in commission rates, which would, in turn, reduce the revenues generated by our Institutional Research Services.

Dividend and Interest Income and Interest Expense

Dividend and interest income consists of investment income, interest earned on United States Treasury Bills and interest earned on collateral given for securities borrowed from brokers and dealers. Interest expense includes interest accrued on cash balances in customers’ brokerage accounts and on collateral received for securities loaned. Dividend and interest income, net of interest expense, for the three-month and nine-month periods ended September 30, 2007 increased $0.9 million and $4.1 million, respectively, from the corresponding periods in 2006. The increases for the three-month and nine-month periods were due primarily to increased stock borrowing activity as a result of higher brokerage balances in 2007.

Investment Gains (Losses)

Investment gains (losses), consisting primarily of realized and unrealized gains or losses on trading investments related to deferred compensation plan obligations and realized gains or losses on available-for-sale investments, increased $6.9 million and $37.8 million, respectively, for the three-month and nine-month periods ended September 30, 2007 compared to the corresponding periods in 2006. The increase in the third quarter of 2007 primarily reflects realized gains on sales of available-for-sale investments. The year-to-date increase was due primarily to significant mark-to-market gains on investments related to deferred compensation plan obligations. The impact of these gains on our obligations to plan participants is amortized over the vesting period of the awards, or immediately for fully vested awards.

Other Revenues

Other revenues consist of fees earned for transfer agency services provided to our mutual funds, fees earned for administration and recordkeeping services provided to our mutual funds and the general accounts of AXA and its subsidiaries, our equity in the earnings of investments in limited partnership hedge funds that we sponsor and manage, and other miscellaneous revenues. Other revenues for the three-month and nine-month periods ended September 30, 2007 decreased $14.3 million and $5.3 million, respectively, from the corresponding periods in 2006 due primarily to equity losses in the third quarter 2007, and lower equity gains on a year-to-date comparative basis, on hedge fund investments.

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Expenses

The following table summarizes the components of expenses:

	Three Months Ended										Nine Months Ended
	9/30/07		9/30/06		$ Change			% Change			9/30/07		9/30/06		$ Change		% Change
	(in millions)
Employee compensation and benefits	$	447.0	$	375.7	$	71.3			19.0	%	$	1,363.4	$	1,119.8	$	243.6		21.8	%
Promotion and servicing		171.1		145.9		25.2			17.3			504.6		448.5		56.1		12.5
General and administrative		144.3		132.0		12.3			9.3			426.5		386.3		40.2		10.4
Interest		6.0		5.9		0.1			0.5			20.5		20.2		0.3		1.3
Amortization of intangible assets		5.1		5.2		(0.1	)		(0.1	)		15.5		15.5		—		—
Total	$	773.5	$	664.7	$	108.8			16.4		$	2,330.5	$	1,990.3	$	340.2		17.1

Employee Compensation and Benefits

We had 5,433 full-time employees at September 30, 2007 compared to 4,738 at September 30, 2006. Employee compensation and benefits, which represented approximately 58% and 57% of total expenses in the respective three-month periods ended September 30, 2007 and 2006, include base compensation, cash and deferred incentive compensation, commissions, fringe benefits, and other employment costs.

Base compensation, fringe benefits and other employment costs for the three-month and nine-month periods ended September 30, 2007 increased $23.8 million, or 17.4%, and $75.8 million, or 19.2%, respectively, from the corresponding periods in 2006, primarily as a result of increased headcount, annual merit increases, and higher fringe benefits. Incentive compensation for the three-month and nine-month periods ended September 30, 2007 increased $28.0 million, or 19.0%, and $108.7 million, or 24.1%, respectively, from the corresponding periods in 2006, primarily as a result of the increase in full-time employees, higher estimated annual bonus payments, and higher deferred compensation expense. In comparison with the corresponding periods in 2006, commission expense for the three-month and nine-month periods ended September 30, 2007 was higher by $19.5 million, or 21.4%, and by $59.1 million, or 21.7%, respectively, due to higher sales volume across all distribution channels.

Promotion and Servicing

Promotion and servicing expenses, which represented approximately 22% of total expenses in both of the respective three-month periods ended September 30, 2007 and 2006, include distribution plan payments to financial intermediaries for distribution of company-sponsored mutual funds and amortization of deferred sales commissions paid to financial intermediaries for the sale of back-end load shares of our sponsored mutual funds. See “Capital Resources and Liquidity” in this Item 2 and Note 5 to AllianceBernstein’s condensed consolidated financial statements contained in Item 1 of this Form 10-Q for further discussion of deferred sales commissions. Also included in this expense category are costs related to travel and entertainment, advertising, promotional materials, and investment meetings and seminars for financial intermediaries that distribute our mutual fund products.

Promotion and servicing expenses for the three-month and nine-month periods ended September 30, 2007 increased $25.2 million, or 17.3%, and $56.1 million, or 12.5%, respectively, from the corresponding periods in 2006, primarily due to higher distribution plan payments, travel and transfer fees.

General and Administrative

General and administrative expenses, which represented approximately 19% and 20% of total expenses in the respective three-month periods ended September 30, 2007 and 2006, are costs related to operations, including technology, professional fees, occupancy, communications, minority interests in consolidated subsidiaries, and similar expenses. General and administrative expenses for the three-month and nine-month periods ended September 30, 2007 increased $12.3 million, or 9.3%, and $40.2 million, or 10.4%, respectively, from the corresponding periods in 2006. The increase was primarily due to higher occupancy and technology costs, partially offset by lower legal costs.

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Non-Operating  Income

Non-operating income consists of contingent purchase price payments earned from the disposition in 2005 of our cash management services. Non-operating income for the three-month and nine-month periods ended September 30, 2007 increased $0.3 million, or 7.7%, and decreased $4.7 million, or 29.0%, respectively, compared to the corresponding periods in 2006.  The year-to-date decrease reflects the recognition of a $7.5 million gain contingency during the second quarter of 2006 (resulting from the expiration of a “clawback” provision).

Taxes on Income

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 filed. Foreign corporate subsidiaries are generally subject to taxes in the foreign jurisdictions where they are located.

Income tax expense for the three-month and nine-month periods ended September 30, 2007 increased $14.5 million, or 71.4%, and $38.3 million, or 79.7%, respectively, from the corresponding periods in 2006, primarily as a result of increased earnings and a higher effective tax rate reflecting higher earnings of our foreign subsidiaries (primarily in the U.K. and Japan).

Earlier this year, Congress proposed tax legislation that would cause certain partnerships whose partnership interests are traded in a public market and that derive income from investment adviser or asset management services to be taxed as corporations, thus subjecting their income to a higher level of income tax. In its current form, the proposed legislation would not affect AllianceBernstein, which is a private partnership. For additional information, see Part II, Item 1A of this Form 10-Q.

CAPITAL RESOURCES AND LIQUIDITY

The following table identifies selected items relating to capital resources and liquidity:

	Nine Months Ended September 30,
	2007			2006			% Change
	(in millions)
Partners’ capital, as of September 30	$	4,592.6		$	4,404.4			4.3	%
Cash flow from operations		1,217.2			1,019.1			19.4
Proceeds from sales (purchases) of investments, net		29.0			(52.2	)		n/m
Capital expenditures		(87.9	)		(75.0	)		17.2
Distributions paid		(1,017.7	)		(774.9	)		31.3
Purchases of Holding Units		(12.5	)		(16.6	)		(24.7	)
Issuance of Holding Units		—			47.2			(100.0	)
Additional investments by Holding with proceeds from exercise of compensatory options to buy Holding Units		41.4			63.2			(34.5	)
(Repayment) issuance of commercial paper, net		(191.6	)		169.6			n/m
Available Cash Flow		945.4			734.4			28.7
Distributions per AllianceBernstein Unit		3.60			2.82			27.7

Cash and cash equivalents of $687.4 million as of September 30, 2007 decreased $5.3 million from $692.7 million at December 31, 2006. Cash inflows are primarily provided by operations, proceeds from sales of investments, and additional investments by Holding using proceeds from exercises of compensatory options to buy Holding Units. Significant cash outflows include cash distributions paid to the General Partner and unitholders, capital expenditures, the repayment of commercial paper, purchases of investments, and purchases of Holding Units to fund deferred compensation plans.

Contingent Deferred Sales Charge

See Note 5 to AllianceBernstein’s condensed consolidated financial statements contained in Item 1 of this Form 10-Q.

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Debt and Credit Facilities

Total committed credit, debt outstanding and weighted average interest rates as of September 30, 2007 and December 31, 2006 were as follows:

	September 30, 2007							December 31, 2006
	Committed Credit		Debt Outstanding		Interest Rate			Committed Credit		Debt Outstanding		Interest Rate
	(in millions)
Commercial paper(1)	$	—	$	163.0		5.2	%	$	—	$	334.9		5.3	%
Revolving credit facility(1)		800.0		—		—			800.0		—		—
Total	$	800.0	$	163.0		5.2		$	800.0	$	334.9		5.3

⁽¹⁾ Our revolving credit facility supports our commercial paper program; amounts borrowed under the commercial paper program reduce amounts available for other purposes under the revolving credit facility on a dollar-for-dollar basis.

In February 2006, we entered into an $800 million five-year revolving credit facility with a group of commercial banks and other lenders. The revolving credit facility is intended to provide back-up liquidity for our $800 million commercial paper program. Under the revolving credit facility, the 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 were in compliance with the covenants as of September 30, 2007. To supplement this revolving credit facility, in April 2007 we entered into a $100 million three-month, renewable uncommitted loan agreement with a major bank, which expired in October 2007.

In August 2001, we issued $400 million 5.625% Notes (“Senior Notes”) pursuant to a shelf registration statement that originally permitted us to issue up to $600 million in senior debt securities.  The Senior Notes matured in August 2006 and were retired using cash flow from operations and proceeds from the issuance of commercial paper.  We currently have $200 million available under the shelf registration statement for future issuances.

We currently maintain a $100 million extendible commercial notes (“ECN”) program as a supplement to our commercial paper program. ECNs are short-term uncommitted debt instruments that do not require back-up liquidity support.

In 2006, SCB LLC entered into four separate uncommitted line of credit facility agreements with various banks, each for $100 million.  During January and February of 2007, SCB LLC increased three of the agreements to $200 million each and entered into an additional agreement for $100 million with a new bank. As of September 30, 2007, no amounts were outstanding under these credit facilities.

Our substantial capital base and access to public and private debt, at competitive terms, 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 to meet our financial obligations.

COMMITMENTS AND CONTINGENCIES

AllianceBernstein’s capital commitments, which consist primarily of operating leases for office space, are generally funded from future operating cash flows.

See Note 5 to AllianceBernstein’s condensed consolidated financial statements contained in Item 1 of this Form 10-Q for a discussion of our mutual fund distribution system and related deferred sales commission asset and of certain legal proceedings to which we are a party.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the condensed consolidated financial statements and notes to condensed 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.

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Deferred Sales Commission Asset

Management tests the deferred sales commission asset for recoverability quarterly. Significant assumptions utilized to estimate the company’s future average assets under management and undiscounted future cash flows from back-end load shares 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, 2007, management used average market return assumptions of 5% for fixed income and 8% for equity 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 19% to 25% for U.S. fund shares and 21% to 32% for non-U.S. fund shares, determined by reference to actual redemption experience over the five-year, three-year, one-year and current periods ended September 30, 2007, calculated as a percentage of the company’s 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. Management determined that the deferred sales commission asset was not impaired as of September 30, 2007. 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.

Goodwill

As a result of the adoption of SFAS No. 142, goodwill is tested at least annually, as of September 30, for impairment. Significant assumptions are required in performing goodwill impairment tests. Such tests include determining whether the estimated fair value of AllianceBernstein, the reporting unit, exceeds its book value. There are several methods of estimating AllianceBernstein’s fair value, which includes valuation techniques such as market quotations and discounted expected cash flows. In developing estimated fair value using a discounted cash flow valuation technique, business growth rate assumptions are applied over the estimated life of the goodwill asset and the resulting expected cash flows are discounted to arrive at a present value amount that approximates fair value. These assumptions consider all material events that have impacted, or that we believe could potentially impact, future discounted expected cash flows. As of September 30, 2007, the impairment test indicated that goodwill was not impaired. However, future tests may be based upon different assumptions which may or may not result in an impairment of this asset. Any impairment could reduce materially the recorded amount of the goodwill asset with a corresponding charge to our earnings.

Intangible Assets

Acquired intangibles are recognized at fair value and amortized over their estimated useful lives of twenty years. Intangible assets are evaluated for impairment quarterly. A present value technique is applied to management’s best estimate of future cash flows to estimate the fair value of intangible assets. Estimated fair value is then compared to the recorded book value to determine whether an impairment is indicated. The estimates used include estimating attrition factors of customer accounts, asset growth rates, direct expenses and fee rates. We choose assumptions based on actual historical trends that may or may not occur in the future. Management believes that intangible assets were not impaired as of September 30, 2007. However, future tests may be based upon different assumptions which may or may not result in an impairment of this asset. Any impairment could reduce materially the recorded amount of intangible assets 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 mortality rates. The assumptions are reviewed annually and may be updated to reflect the current environment. A summary of the key economic assumptions are described in Note 14 to AllianceBernstein’s consolidated financial statements in our Form 10-K for the year ended December 31, 2006. In accordance with U.S. generally accepted accounting 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.

25

In developing the expected long-term rate of return on plan assets of 8.0%, we 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. 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 is not expected to 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 investment strategy is measured against the Lehman Brothers Aggregate Bond Index. The actual rate of return on plan assets was 9.0%, 13.7%, and 9.0% in 2006, 2005, and 2004, 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 2006 net pension charge of $4.9 million by approximately $0.1 million.

The objective of our discount rate assumption was to reflect the rate at which the pension benefits could be effectively settled. In making this determination, we took into account the timing and amount of benefits that would be available under the plan’s lump sum option. To that effect, our methodology for selecting the discount rate as of December 31, 2006 was to match 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. The selection of the 5.90% discount rate as of December 31, 2006 represents the approximate mid-point (to the nearest five basis points) of the single rates determined under two independently constructed yield curves, one of which, prepared by Mercer Human Resources, produced a rate of 5.94%; the other, prepared by Citigroup, produced a rate of 5.89%. The discount rate as of December 31, 2005 was 5.65%, which was used in developing the 2006 net pension charge. A lower discount rate increases pension expense and the present value of benefit obligations. 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 2006 net pension charge of $4.9 million by approximately $0.6 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 in accordance with SFAS No. 5, which requires a loss contingency to be recorded if it is probable and reasonably estimable as of the date of the financial statements. See Note 5 to AllianceBernstein’s condensed consolidated financial statements contained in Item 1 of this Form 10-Q.

ACCOUNTING PRONOUNCEMENTS

See Note 9 to AllianceBernstein’s condensed consolidated financial statements contained in Item 1 of this Form 10-Q.

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 performance of sponsored investment products and separately managed accounts, general economic conditions, 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 Part I, Item 1A of our Form 10-K for the year ended December 31, 2006 and Part II, Item 1A of this Form 10-Q. Any or all of the forward-looking statements that we make in this Form 10-Q or 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.

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The forward-looking statements referred to in the preceding paragraph include statements regarding 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 results of operations or financial condition, any settlement or judgment with respect to a legal proceeding could be significant, and could have a material adverse effect on our results of operations or financial condition.

The forward-looking statements referred to above also include a description of estimated earnings guidance and related assumptions provided for full year 2007, which was included in our third quarter 2007 Earnings Release, and which is not being updated in this Report.  That earnings guidance was based on information available as of the date of the Earnings Release and a number of assumptions, including, but not limited to, the following:  net asset inflows for the fourth quarter of 2007 continuing at levels similar to the third quarter of 2007 (adjusted to exclude the above-referenced $6 billion of index mandate terminations) and assumes equity and fixed income market returns at annual rates of 8% and 5%, respectively, for the fourth quarter. Net inflows of client assets are subject to domestic and international securities market conditions, competitive factors, and relative performance, each of which may have a negative effect on net inflows; capital market performance is inherently unpredictable. In view of these factors, and particularly given the volatility of capital markets (and the effect of such volatility on performance fees and the value of investments in respect of incentive compensation) and the difficulty of predicting client asset inflows and outflows, our earnings estimates should not be relied on as predictions of actual performance, but only as estimates based on assumptions that may or may not be correct. There can be no assurance that we will be able to meet the investment and service goals and needs of our clients or that, even if we do, it will have a positive effect on our financial performance.

In addition, the forward-looking statements we make in this Report include our anticipation that the level of net asset flows into our institutional channel will improve in 2008 due to our growing momentum in the defined contribution market, that robust growth will continue in our private client channel, and that we are optimistic about the long-term outlook for our retail business. The market for defined contribution plan investment services is highly competitive and we may not be successful in winning new mandates.  Also, 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 we currently anticipate.  Growth in the private client and retail channels may be impaired by changes in competitive and securities market conditions and relative performance. The actual performance of the capital markets and other factors beyond our control will affect our investment success for clients and asset inflows.

OTHER INFORMATION

With respect to the unaudited condensed consolidated interim financial information of AllianceBernstein for the three-month and nine-month periods ended September 30, 2007, included in this quarterly report on Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information.  However, their separate report dated November 2, 2007 appearing herein states that they did not audit and they do not express an opinion on the unaudited condensed consolidated interim financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.  PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act for their report on the unaudited condensed consolidated interim financial information because that report is not a “report” or a “part” of registration statements prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Securities Act.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to AllianceBernstein’s market risk for the quarterly period ended September 30, 2007.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

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 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 participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures are effective.

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Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the third quarter of 2007 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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