EXHIBIT 13.1
The following is an excerpt from AllianceBernstein L.P.'s Annual Report on Form
10-K for the fiscal year ended December 31, 2007 (the "AllianceBernstein Annual
Report"). As used in Item 1A - Risk Factors below, the words "we" and "us" refer
collectively to AllianceBernstein L.P. and its subsidiaries, or their officers
and employees. Item references in the excerpt below refer to item numbers in the
AllianceBernstein Annual Report. Unless otherwise defined, capitalized terms
used in this Exhibit 13.1 are defined under "Explanatory Note" directly
following the excerpt.
ITEM 1A. RISK FACTORS
Please read this section along with the description of our business in Item
1, the competition section just above, and AllianceBernstein's financial
information contained in Items 6, 7, and 8. The majority of the risk factors
discussed below directly affect AllianceBernstein. These risk factors also
affect Holding because Holding's principal source of income and cash flow is
attributable to its investment in AllianceBernstein. See also "Cautions
Regarding Forward-Looking Statements" in Item 7.
CHANGES IN FINANCIAL MARKET LEVELS HAVE A DIRECT AND SIGNIFICANT IMPACT ON OUR
ASSETS UNDER MANAGEMENT; A SIGNIFICANT REDUCTION IN ASSETS UNDER MANAGEMENT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES, FINANCIAL CONDITION,
RESULTS OF OPERATIONS, AND BUSINESS PROSPECTS.
Performance of financial markets (both domestic and international), global
economic conditions, interest rates, inflation rates, tax regulation changes,
and other factors that are difficult to predict affect the mix, market values,
and levels of assets under management. Investment advisory and services fees,
the largest component of revenues, are generally calculated as a percentage of
the value of assets under management and vary with the type of account managed.
Accordingly, fee income generally increases or decreases as assets under
management increase or decrease and is affected by market appreciation or
depreciation, inflow of new client assets (including purchases of mutual fund
shares), and outflow of client assets (including redemption of mutual fund
shares). In addition, changing market conditions and investment trends,
particularly with respect to retirement savings, may reduce interest in certain
of our investment products and may result in a reduction in assets under
management. In addition, a shift towards fixed income products might result in a
related decline in revenues and income because we generally earn higher revenues
from assets invested in our equity services than in our fixed income services.
Declines in financial markets or higher redemption levels in
company-sponsored mutual funds, or both, as compared to the assumptions we have
used to estimate undiscounted future cash flows from distribution plan fees, as
described in Item 7, could result in impairment of the deferred sales commission
asset. Due to the volatility of financial markets and changes in redemption
rates, we are unable to predict whether or when a future impairment of the
deferred sales commission asset might occur. The occurrence of an impairment
would result in a material charge to our earnings.
During the second half of 2007, significant weakness and volatility in
global credit markets, particularly the rapid deterioration of the mortgage
markets in the United States and Europe, spread to broader financial markets and
began to adversely affect global economic growth. These difficulties had an
adverse impact on our 2007 results of operations. Specifically, they adversely
affected the investment performance for clients in most of our equity and hedge
fund services. As a result, the amount of performance-based fees we earned in
2007 was significantly reduced. The weakness in global financial markets has
continued thus far in 2008, causing a $49 billion decline in AUM during January
2008. Our 2008 results of operations would be adversely affected should this
trend continue.
OUR BUSINESS IS DEPENDENT ON INVESTMENT ADVISORY, SELLING AND DISTRIBUTION
AGREEMENTS THAT ARE SUBJECT TO TERMINATION OR NON-RENEWAL ON SHORT NOTICE.
We derive most of our revenues pursuant to written investment management
agreements (or other arrangements) with institutional investors, mutual funds,
and private clients, and selling and distribution agreements between
AllianceBernstein Investments and financial intermediaries that distribute
AllianceBernstein Funds. Generally, the investment management agreements (and
other arrangements) are terminable at any time or upon relatively short notice
by either party. The selling and distribution agreements are terminable by
either party upon notice (generally not more than 60 days) and do not obligate
the financial intermediary to sell any specific amount of fund shares. In
addition, investors in AllianceBernstein Funds can redeem their investments
without notice. Any termination of, or failure to renew, a significant number of
these agreements, or a significant increase in redemption rates, could have a
material adverse effect on our revenues, financial condition, results of
operations, and business prospects.
OUR ABILITY TO ESTABLISH NEW CLIENT RELATIONSHIPS AND MAINTAIN EXISTING ONES IS
PARTLY DEPENDENT ON OUR RELATIONSHIPS WITH VARIOUS FINANCIAL INTERMEDIARIES AND
CONSULTANTS THAT ARE NOT OBLIGATED TO CONTINUE TO WORK WITH US.
Our ability to market our Retail Products and Services, sub-advisory
services, and certain other investment services is partly dependent on our
access to securities firms, brokers, banks, and other intermediaries. These
intermediaries generally offer their clients investment products in addition to,
and in competition with, our products. In addition, certain institutional
investors rely on consultants to advise them on the choice of investment
adviser, and our Institutional Investment Services are not always considered
among the best choices by all consultants. Also, our Private Client Services
group relies on referrals from financial planners, registered investment
advisers, and other professionals. We cannot be certain that we will continue to
have access to, or receive referrals from, these third parties. Loss of such
access or referrals could have a material adverse effect on our revenues,
financial condition, results of operations, and business prospects.
WE MAY BE UNABLE TO CONTINUE TO ATTRACT AND RETAIN KEY PERSONNEL.
Our business depends on our ability to attract, retain, and motivate highly
skilled, and often highly specialized, technical, managerial, and executive
personnel; there is no assurance that we will be able to do so.
The market for qualified research analysts, portfolio managers, financial
advisers, traders, and other professionals is extremely competitive and is
characterized by frequent movement of these investment professionals among
different firms. Portfolio managers and financial advisers often maintain
strong, personal relationships with their clients so their departure could cause
us to lose client accounts, which could have a material adverse effect on our
revenues, financial condition, results of operations, and business prospects.
INVESTMENT PERFORMANCE CONSISTENTLY BELOW CLIENT EXPECTATIONS COULD LEAD TO LOSS
OF CLIENTS AND A DECLINE IN REVENUES.
Our ability to achieve investment returns for clients that meet or exceed
investment returns for comparable asset classes and competing investment
services is a key consideration when clients decide to keep their assets with us
or invest additional assets, as well as a prospective client's decision to
invest. Our inability to meet relevant investment benchmarks could result in
clients withdrawing assets and in prospective clients choosing to invest with
competitors. This could also result in lower investment management fees,
including minimal or no performance-based fees, which could result in a decline
in our revenues.
WE MAY ENTER INTO MORE PERFORMANCE-BASED FEE ARRANGEMENTS WITH OUR CLIENTS IN
THE FUTURE, WHICH COULD CAUSE GREATER FLUCTUATIONS IN OUR REVENUES.
We sometimes charge our clients performance-based fees. In these
situations, we charge a base advisory fee and are eligible to earn an additional
performance-based fee or incentive allocation that is calculated as either a
percentage of absolute investment results or a percentage of investment results
in excess of a stated benchmark over a specified period of time. In addition,
many performance-based fees include a high-watermark provision, which generally
provides that if a client account underperforms relative to its performance
target (whether absolute or relative to a specified benchmark), it must gain
back such underperformance before we can collect future performance-based fees.
Therefore, if we do not exceed our performance target for a particular period,
we will not earn a performance-based fee for that period and, for accounts with
a high-watermark provision, we will impair our ability to earn future
performance-based fees. For example, for many of our hedge funds, performance in
the fourth quarter of 2007 produced losses and was significantly below
performance targets. With approximately 70% of our hedge fund assets subject to
high-watermarks, we ended
2007 with approximately 50% of our hedge fund AUM with high-watermarks of 10% or
more. This will make it very difficult for us to earn performance-based fees in
most of our hedge funds in 2008.
We are eligible to earn performance-based fees on approximately 16% of the
assets we manage for institutional clients and approximately 8% of the assets we
manage for private clients (in total, approximately 11% of our company-wide
AUM). Our performance-based fees in 2007 were $81.2 million, in 2006 were $235.7
million, and in 2005 were $131.9 million. Our performance-based fees are an
increasingly important part of our business, in particular due to our hedge fund
AUM. As the percentage of our AUM subject to performance-based fees grows,
seasonality and volatility of revenue and earnings are likely to become more
significant.
UNPREDICTABLE EVENTS, INCLUDING NATURAL DISASTER, TECHNOLOGY FAILURE, AND
TERRORIST ATTACK, COULD ADVERSELY AFFECT OUR ABILITY TO CONDUCT BUSINESS.
War, terrorist attack, power failure, natural disaster, and rapid spread of
serious disease could interrupt our operations by:
o causing disruptions in U.S. or global economic conditions, thus
decreasing investor confidence and making investment products generally
less attractive;
o inflicting loss of life;
o triggering massive technology failures or delays; and
o requiring substantial capital expenditures and operating expenses to
remediate damage and restore operations.
Our operations require experienced, professional staff. Loss of a
substantial number of such persons or an inability to provide properly equipped
places for them to work may, by disrupting our operations, adversely affect our
revenues, financial condition, results of operations, and business prospects.
WE DEPEND ON VARIOUS SYSTEMS AND TECHNOLOGIES FOR OUR BUSINESS TO FUNCTION
PROPERLY AND TO SAFEGUARD CONFIDENTIAL INFORMATION.
We utilize software and related technologies throughout our business,
including both proprietary systems and those provided by outside vendors.
Although we have established and tested business continuity plans, we may
experience systems delays and interruptions and it is not possible to predict
with certainty all of the adverse effects that could result from our failure, or
the failure of a third party, to efficiently address these problems. These
adverse effects could include the inability to perform critical business
functions or failure to comply with financial reporting and other regulatory
requirements, which could lead to loss of client confidence, harm to our
reputation, exposure to disciplinary action, and liability to our clients.
Accordingly, potential system failures and the cost necessary to correct those
failures could have a material adverse effect on our revenues, financial
condition, results of operations, and business prospects.
In addition, we could be subject to losses if we fail to properly safeguard
sensitive and confidential information. As part of our normal operations, we
maintain and transmit confidential information about our clients as well as
proprietary information relating to our business operations. Our systems could
be damaged by unauthorized users or corrupted by computer viruses or other
malicious software code, or authorized persons could inadvertently or
intentionally release confidential or proprietary information. Such disclosure
could, among other things, allow competitors access to our proprietary business
information and require significant time and expense to investigate and
remediate the breach.
A FAILURE OF OUR OPERATIONS OR THOSE OF THIRD PARTIES WE RELY ON, INCLUDING
FAILURES ARISING OUT OF HUMAN ERROR, COULD DISRUPT OUR BUSINESS, DAMAGE OUR
REPUTATION, AND REDUCE OUR REVENUES.
Weaknesses or failures in our internal processes or systems could lead to
disruption of our operations, liability to clients, exposure to disciplinary
action, or harm to our reputation. Our business is highly dependent on our
ability to process, on a daily basis, large numbers of transactions, many of
which are highly complex, across numerous and diverse markets. These
transactions generally must adhere to investment guidelines, as well as
stringent legal and regulatory
standards.
Despite the contingency plans and facilities we have in place, our ability
to conduct business may be adversely affected by a disruption in the
infrastructure that supports our operations and the communities in which they
are located. This may include a disruption involving electrical, communications,
transportation or other services used by AllianceBernstein or third parties with
which we conduct business. If a disruption occurs in one location and our
employees in that location are unable to occupy our offices or communicate with
or travel to other locations, our ability to conduct business with and on behalf
of our clients may suffer, and we may not be able to successfully implement
contingency plans that depend on communication or travel.
Our obligations to clients require us to exercise skill, care, and prudence
in performing our services. Despite our employees being highly trained and
skilled, the large number of transactions we process makes it highly likely that
errors will occasionally occur. Should we make a mistake in performing our
services that cost us or our clients money, we have a duty to act promptly to
put the clients in the position they would have been in had we not made the
error. The occurrence of mistakes, particularly significant ones, can have a
material adverse effect on our reputation, revenues, financial condition,
results of operations, and business prospects.
WE MAY NOT ACCURATELY VALUE THE SECURITIES WE HOLD ON BEHALF OF OUR
DISCRETIONARY CLIENTS OR OUR COMPANY INVESTMENTS.
In accordance with applicable regulatory requirements, our obligations
under investment management agreements with our clients, and, if the client is a
U.S. Fund, the approval and direction of the U.S. Fund's board of directors or
trustees, we employ procedures for the pricing and valuation of securities and
other positions held in client accounts or for company investments. We have
established a Valuation Committee, composed of senior officers and employees,
which oversees pricing controls and valuation processes. Where market quotations
for a security are not readily available, the Valuation Committee determines a
fair value for the security.
Extraordinary volatility in financial markets, significant liquidity
constraints, or our not adequately accounting for one or more factors when fair
valuing a security could result in our failing to properly value securities we
hold for our clients or investments accounted for on our balance sheet. Improper
valuation would likely result in our basing fee calculations on inaccurate AUM
figures, our striking incorrect net asset values for company-sponsored mutual
funds, or, in the case of company investments, our inaccurately calculating and
reporting our financial condition and operating results. Although the overall
percentage of our AUM that we fair value is not significant, inaccurate fair
value determinations can harm our clients and create regulatory issues.
OUR BUSINESS IS BASED ON THE TRUST AND CONFIDENCE OF OUR CLIENTS; ANY DAMAGE TO
THAT TRUST AND CONFIDENCE CAN CAUSE ASSETS UNDER MANAGEMENT TO DECLINE AND CAN
HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES, FINANCIAL CONDITION, RESULTS OF
OPERATIONS, AND BUSINESS PROSPECTS.
We are dedicated to earning and maintaining the trust and confidence of our
clients; the good reputation created thereby is essential to our business.
Damage to our reputation could substantially impair our ability to maintain or
grow our business.
WE MAY NOT ALWAYS SUCCESSFULLY MANAGE ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
THAT ARISE IN OUR BUSINESS.
Our reputation is one of our most important assets. As our business and
client base expand, we increasingly must manage actual and potential conflicts
of interest, including situations where our services to a particular client
conflict, or are perceived to conflict, with the interests of another client, as
well as situations where certain of our employees have access to material
non-public information that may not be shared with all employees of our firm.
Failure to adequately address potential conflicts of interest could adversely
affect our revenues, financial condition, results of operations, and business
prospects.
We have procedures and controls that are designed to address and manage
conflicts of interest, including those designed to prevent the improper sharing
of information. However, appropriately managing conflicts of interest is
complex and difficult, and our reputation could be damaged and the willingness
of clients to enter into transactions in which such a conflict might arise may
be affected if we fail, or appear to fail, to deal appropriately with conflicts
of interest. In addition, potential or perceived conflicts could give rise to
litigation or regulatory enforcement actions.
RATES WE CHARGE FOR BROKERAGE TRANSACTIONS HAVE DECLINED SIGNIFICANTLY IN RECENT
YEARS, AND WE EXPECT THOSE DECLINES TO CONTINUE, WHICH COULD HAVE AN ADVERSE
EFFECT ON OUR REVENUES.
Fee rates charged for brokerage transactions have declined significantly in
recent years and this has affected our Institutional Research Services revenues.
In 2007, increases in transaction volume more than offset decreases in rates,
but this may not continue. Brokerage transaction revenues are also affected by
the increasing use of electronic trading systems which charge transaction fees
for execution-only services that are a small fraction of the full service fee
rates traditionally charged by SCB and other brokers for brokerage services and
the provision of proprietary research. Also, regulatory changes in the United
Kingdom and the United States have resulted or will result in investors being
given more information regarding the allocation of amounts they are paying for
brokerage between execution services and research services and this may further
reduce the willingness of investors to pay current rates for full-service
brokerage. All of these factors may result in reductions in per transaction
brokerage fees that SCB charges its clients; we expect these reductions to
continue.
THE COSTS OF INSURANCE ARE SUBSTANTIAL AND MAY INCREASE.
Our insurance expenses are significant and can fluctuate significantly from
year to year. They increased in 2007, and additional increases in the future are
possible. In addition, certain insurance coverage may not be available or may
only be available at prohibitive costs. As we renew our insurance policies, we
may be subject to additional costs resulting from rising premiums, the
assumption of higher deductibles and/or co-insurance liability, a revised
premium-sharing arrangement with certain U.S. Funds, and, to the extent certain
U.S. Funds purchase separate directors and officers/errors and omissions
liability coverage, an increased risk of insurance companies disputing
responsibility for joint claims. Higher insurance costs and incurred deductibles
reduce our net income.
OUR BUSINESS IS SUBJECT TO PERVASIVE GLOBAL REGULATION, THE COMPLIANCE WITH
WHICH COULD INVOLVE SUBSTANTIAL EXPENDITURES OF TIME AND MONEY, AND THE
VIOLATION OF WHICH COULD RESULT IN MATERIAL ADVERSE CONSEQUENCES.
Virtually all aspects of our business are subject to federal and state laws
and regulations, rules of securities regulators and exchanges, and laws in the
foreign countries in which our subsidiaries conduct business. If we violate
these laws or regulations, we could be subject to civil liability, criminal
liability, or sanction, including revocation of our and our subsidiaries'
registrations as investment advisers or broker-dealers, revocation of the
licenses of our employees, censures, fines, or temporary suspension or permanent
bar from conducting business. A regulatory proceeding, even if it does not
result in a finding of wrongdoing or sanction, could require substantial
expenditures of time and money. Any such liability or sanction could have a
material adverse effect on our revenues, financial condition, results of
operations, and business prospects. These laws and regulations generally grant
supervisory agencies and bodies broad administrative powers, including, in some
cases, the power to limit or restrict doing business for failure to comply with
such laws and regulations. Moreover, regulators in non-U.S. jurisdictions could
change their policies or laws in a manner that might restrict or otherwise
impede our ability to market, distribute, or register investment products in
their respective markets. These local requirements could increase the expenses
we incur in a specific jurisdiction without any corresponding increase in
revenues from operating in the jurisdiction.
Due to the extensive laws and regulations to which we are subject, we
devote substantial time and effort to legal and regulatory compliance issues. In
addition, the regulatory environment in which we operate changes frequently and
regulations have increased significantly in recent years. We may be adversely
affected as a result of new or revised legislation or regulations or by changes
in the interpretation or enforcement of existing laws and regulations.
THE FINANCIAL SERVICES INDUSTRY IS INTENSELY COMPETITIVE.
We compete on the basis of a number of factors, including our array of
investment services, our investment performance for our clients, innovation,
reputation, and price. As our global presence continues to expand, we may face
competitors with more experience and more established relationships with
clients, regulators and industry participants in the relevant market, which
could adversely affect our ability to expand.
WE ARE INVOLVED IN VARIOUS LEGAL PROCEEDINGS AND REGULATORY MATTERS AND MAY BE
INVOLVED IN SUCH PROCEEDINGS IN THE FUTURE, ANY ONE OR COMBINATION OF WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES, FINANCIAL CONDITION,
RESULTS OF OPERATIONS, AND BUSINESS PROSPECTS.
We are involved in various matters, including employee arbitrations,
regulatory inquiries, administrative proceedings, and litigation, some of which
allege material damages, and we may be involved in additional matters in the
future. Litigation is subject to significant uncertainties, particularly when
plaintiffs allege substantial or indeterminate damages, or when the litigation
is highly complex or broad in scope. We have described pending material legal
proceedings in Item 3.
STRUCTURE-RELATED RISKS
THE PARTNERSHIP STRUCTURE OF HOLDING AND ALLIANCEBERNSTEIN LIMITS UNITHOLDERS'
ABILITIES TO INFLUENCE THE MANAGEMENT AND OPERATION OF ALLIANCEBERNSTEIN'S
BUSINESS AND IS HIGHLY LIKELY TO PREVENT A CHANGE IN CONTROL OF HOLDING AND
ALLIANCEBERNSTEIN.
The General Partner, as general partner of both Holding and
AllianceBernstein, generally has the exclusive right and full authority and
responsibility to manage, conduct, control, and operate their respective
businesses, except as otherwise expressly stated in their respective Amended and
Restated Agreements of Limited Partnership. Holding and AllianceBernstein
unitholders have more limited voting rights on matters affecting
AllianceBernstein than do holders of common stock in a corporation. Both Amended
and Restated Agreements of Limited Partnership provide that unitholders do not
have any right to vote for directors of the General Partner and that unitholders
can only vote on certain extraordinary matters (including removal of the General
Partner under certain extraordinary circumstances). Additionally, the
AllianceBernstein Partnership Agreement includes significant restrictions on
transfers of AllianceBernstein Units and provisions that have the practical
effect of preventing the removal of the General Partner, which are highly likely
to prevent a change in control of AllianceBernstein's management.
ALLIANCEBERNSTEIN UNITS ARE ILLIQUID.
There is no public trading market for AllianceBernstein Units and
AllianceBernstein does not anticipate that a public trading market will ever
develop. The AllianceBernstein Partnership Agreement restricts our ability to
participate in a public trading market or anything substantially equivalent to
one by providing that any transfer which may cause AllianceBernstein to be
classified as a "publicly traded partnership" as defined in Section 7704 of the
Code shall be deemed void and shall not be recognized by AllianceBernstein. In
addition, AllianceBernstein Units are subject to significant restrictions on
transfer; all transfers of AllianceBernstein Units are subject to the written
consent of AXA Equitable and the General Partner pursuant to the
AllianceBernstein Partnership Agreement. Generally, neither AXA Equitable nor
the General Partner will permit any transfer that it believes would create a
risk that AllianceBernstein would be treated as a corporation for tax purposes.
AXA Equitable and the General Partner have implemented a transfer policy that
requires a seller to locate a purchaser, and imposes annual volume restrictions
on transfers. You may request a copy of the transfer program from our corporate
secretary (corporate.secretary@alliancebernstein.com). Also, we have filed the
transfer program as Exhibit 10.11 to this Form 10-K.
CHANGES IN THE PARTNERSHIP STRUCTURE OF HOLDING AND ALLIANCEBERNSTEIN AND/OR
CHANGES IN THE TAX LAW GOVERNING PARTNERSHIPS WOULD HAVE SIGNIFICANT TAX
RAMIFICATIONS.
Holding, having elected under Section 7704(g) of the Code, to be subject to
a 3.5% federal tax on partnership gross income from the active conduct of a
trade or business, is a "grandfathered" publicly-traded partnership ("PTP") for
federal income tax purposes. Holding is also subject to the 4.0% UBT, net of
credits for UBT paid by AllianceBernstein. In order to preserve Holding's status
as a "grandfathered" publicly-traded partnership for federal income tax
purposes, management ensures that Holding does not directly or indirectly
(through AllianceBernstein) enter into a substantial new line of business. A
"new line of business" would be any business that is not closely related to
AllianceBernstein's historical business of providing research and diversified
investment management and related services to its clients. A
new line of business is "substantial" when a partnership derives more than 15%
(by value) of its gross income from, or uses more than 15% of its total assets
in, the new line of business.
AllianceBernstein is a private partnership for federal income tax purposes
and, accordingly, is not subject to federal and state corporate income taxes.
However, AllianceBernstein is subject to the 4.0% UBT. Domestic corporate
subsidiaries of AllianceBernstein, which are subject to federal, state and local
income taxes, are generally included in the filing of a consolidated federal
income tax return with separate state and local income tax returns being filed.
Foreign corporate subsidiaries are generally subject to taxes at higher rates in
the foreign jurisdiction where they are located. As our business increasingly
operates in countries other than the U.S., our effective tax rate continues to
increase because our international subsidiaries are subject to corporate level
taxes in the jurisdictions where they are located.
In order to preserve AllianceBernstein's status as a private partnership
for federal income tax purposes, AllianceBernstein Units must not be considered
publicly traded. The AllianceBernstein Partnership Agreement provides that all
transfers of AllianceBernstein 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 would be subject to federal and state corporate income tax on
its net income. Furthermore, as noted above, should AllianceBernstein enter into
a substantial new line of business, Holding, by virtue of its ownership of
AllianceBernstein, would lose its status as a grandfathered publicly-traded
partnership and would become subject to corporate income tax as set forth above.
In 2007, Congress proposed tax legislation that would cause certain PTPs to
be taxed as corporations, thus subjecting their income to a higher level of
income tax. Holding is a PTP that derives its income from asset manager or
investment management services through its ownership interest in
AllianceBernstein. However, the legislation, in the form proposed, would not
affect Holding's tax status. In addition, we have received consistent
indications from a number of individuals involved in the legislative process
that Holding's tax status is not the focus of the proposed legislation, and that
they do not expect to change that approach. However, we cannot predict whether,
or in what form, the proposed tax legislation will pass, and are unable to
determine what effect any new legislation might have on us. If Holding were to
lose its federal tax status as a grandfathered PTP, it would be subject to
corporate income tax, which would reduce materially its net income and quarterly
distributions to Holding Unitholders.
In its current form, the proposed legislation would not affect
AllianceBernstein because it is a private partnership.
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EXPLANATORY NOTE:
The following terms used in Item 1A - Risk Factors directly above have the
following meanings:
"AllianceBernstein" -- AllianceBernstein L.P. (Delaware limited partnership),
the operating partnership, and its subsidiaries and, where appropriate, its
predecessors, AllianceBernstein Holding and ACMC, Inc. and their respective
subsidiaries.
"AllianceBernstein Units"-- units of limited partnership interest in
AllianceBernstein.
"General Partner" -- AllianceBernstein Corporation (Delaware corporation), the
general partner of AllianceBernstein and AllianceBernstein Holding and a
wholly-owned subsidiary of AXA Equitable, and, where appropriate, ACMC, Inc.,
its predecessor.
"Holding" -- AllianceBernstein Holding L.P. (Delaware limited partnership).
"SCB" -- Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein Limited,
together, each of which is a wholly-owned subsidiary of AllianceBernstein.