48751 gen-6340-0414-3 · corporate fundamentals remain strong firms with consistent profits and...

2014

Investment Products Offered • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed

The information herein refl ects prevailing market conditions and our judgments as of the date of this document, which are subject to change. In preparing this document, we have relied upon and assumed, without independent verifi cation, the accuracy and completeness of all information available from public sources. Opinions and estimates may be changed without notice and involve a number of assumptions which may not prove valid. There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.

Identifying Opportunities, Avoiding Risks as Growth Continues

The Big Picture

Continued moderate global growth expected, with little inflation pressure

Interest rates globally should remain low, and yield curves steep

Position fixed-income portfolios for gradually rising rates

Balance credit and yield-curve risk

Take advantage of muni opportunities—particularly in credit

Don’t stretch for yield

Equity valuations vary by region but offer ongoing return potential

The market landscape favors active management

Corporate fundamentals remain strong

Firms with consistent profits and dividend growth offer compelling opportunities

Current analysis does not guarantee future results. As of March 31, 2014 Source: AllianceBernstein

CMO 2Q 2014 | 1AllianceBernstein.com

4.0% 1.9%

7.0%

3.8% 0.9% 1.3% 3.3%

2.6% 2.8% 2.9%

–0.4% 0.7% 1.8% 1.1%

4.4% –8.6% –9.5%

2.5% 2.3%

–2.7% –2.6%

0.1% –4.1%

6.5%

–2.6% 22.8%

32.4% 38.8%

2013 Returns Annualized Returns Since February 2009

Returns in US dollars

Risk Markets Take a Breather

1Q:2014 Returns

Past performance does not guarantee future results. As of March 31, 2014 Global high yield, global corporates and Japan and euro-area government bonds in hedged USD terms. All other non-US returns in unhedged USD terms An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. *Europe, Australasia and the Far East **Treasury Inflation-Protected Securities †Global Real Estate Investment Trusts Source: Barclays, FactSet, FTSE, MSCI, S&P Dow Jones and AllianceBernstein

Japan

Global High Yield

US

Euro Area

Emerging-Market Debt Global Corporates

EAFE*

US Small-Cap

Emerging Markets

Equities

Credit

Government Bonds

Commodities Alternatives

Global REITs† TIPS**

Municipals

US Large-Cap

24.2% 6.0% 4.9%

5.0% 2.4% 3.1% 5.6%

8.5% 13.1%

18.7%

17.3% 17.1%

22.8% 26.0%

CMO 2Q 2014 | 2AllianceBernstein.com

AllianceBernstein.com CMO 2Q 2014 | 3

Emerging Market Concerns Have Dominated Headlines…

Russian Troops Mass at Border with Ukraine

March 13, 2014

Figures represent purchasing power parity valuation of country GDP in 2012. Total share of global GDP in 2012 = 22.3%. Source: AllianceBernstein

The Crisis in Venezuela

March 13, 2014

Brazil 2.8%

Venezuela 0.5%

Argentina

China 14.7%

Russia 3.0%

Ukraine

Argentina Takes Its Debt Case to the U.S. Supreme Court

February 25, 2014

S&P Cuts Brazil Credit Rating, Citing

Weak Growth March 24, 2014

More China Trust Product Defaults Trigger

Shadow Banking Fear February 12, 2014

0.9%

0.4%


35

40

45

50

55

60

08 09 10 11 12 13 14P

erce

nt

…but the Impact on the Global Economy Should Be Modest

Historical analysis does not guarantee future results. Left chart as of March 31, 2014; right chart through February 28, 2014 *PMI: Purchasing Managers’ Index. An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. Source: Bank of England, Bloomberg, Consensus Economics, Deutsche Bank, European Central Bank, Eurostat, Haver Analytics, International Monetary Fund (IMF), J.P. Morgan, Markit and AllianceBernstein

The Emerging/Developed Growth Gap Is Narrowing

Export Exposure to Emerging World Is Moderate

Exports to Emerging Markets PMI*

0

3

6

9

12

Ger

man

y

Eur

o A

rea

Italy

Japa

n

Spa

in

Fran

ce US

Per

cent

of G

DP

Emerging Markets

Developed Markets


We Expect Moderate Growth and Low Inflation to Continue

Historical analysis and current forecasts do not guarantee future results. Left chart as of April 1, 2014; right chart as of December 31, 2013. Dotted lines represent AllianceBernstein forecasts. *Eastern Europe, Middle East and Africa; includes Hungary, Poland, Russia, South Africa and Turkey Source: Bank of England, Bloomberg, CEIC Data, Deutsche Bank, European Central Bank, Eurostat, Haver Analytics, International Monetary Fund, J.P. Morgan, Markit and AllianceBernstein

–4

–2

0

2

4

6

06 07 08 09 10 11 12 13 14P

erce

nt A

nnua

lized

Developed Markets ex US and Japan

Japan

US

6.2%

4.7%

1.5%

2.4%

2.0%

2.4%

1.9%

1.7%

1.2%

–0.4%

6.0%

4.4%

2.1%

3.1%

1.9%

2.0%

3.2%

2.9%

2.4%

1.3%

Asia ex Japan

Emerging Markets

Japan

Global

EEMEA*

Latin America

United States

United Kingdom

Developed Markets

Euro Area 20132014 F

Developed-Market Inflation Rates

AllianceBernstein Global GDP Forecasts

F


–6

–3

0

3

6

3Q:0

9

2Q:1

0

1Q:1

1

4Q:1

1

3Q:1

2

2Q:1

3

Year

-ove

r-Yea

r % C

hang

e

Private Sector GDP

Public Sector GDP

Historical analysis does not guarantee future results. Left chart as of March 31, 2014; right chart through February 28, 2014 *Federal deposits: withheld income & employment taxes. Data represents 20-day moving average. Source: Haver Analytics, US Bureau of Economic Analysis (BEA), US Bureau of Labor Statistics, US Federal Reserve Board and AllianceBernstein

US: Improving Economic Fundamentals

Strong Private Sector, Improving Public Outlook

The Labor Market Is Healing

2014

Fo

reca

st

3

5

7

9

11

100

120

140

160

180

00 02 04 06 08 10 12 14

Million W

orkers

US

D B

illio

ns Tax

Receipts* (Left Scale)

Underemployed and Discouraged Workers


0

30

60

90

80 84 88 92 96 00 04 08 12

US

D T

rillio

ns

2013 Increase: $10 Trillion Directly Held Equities: $3.5 Trillion* Household Real Estate: $2.0 Trillion Indirectly Held Equities: $2.0 Trillion Other: $2.5 Trillion**

US: Promising Environment for Consumption

The “Wealth Effect” Cuts Across Income Levels

Historical analysis does not guarantee future results. Left chart through December 31, 2013; right chart through March 31, 2014 *Directly held equities do not include equities held through life insurance companies, pension plans, federal government reti rement funds or mutual funds. **Other includes pension fund reserves, equities in noncorporate business, miscellaneous and security credit. †Consumer sentiment measured by the University of Michigan Consumer Sentiment Index. Source: BEA, Haver Analytics, National Association of Realtors, University of Michigan, US Bureau of Labor Statistics, US Census Bureau, US Federal Reserve Board and AllianceBernstein

Consumer Confidence Is on an Upswing

50

70

90

110

00 02 04 06 08 10 12 14

Inde

x

US Household Net Worth Consumer Sentiment†

All-Time High


US: More Credit Is Available to Fuel Economic Growth

Historical analysis does not guarantee future results. Left chart through February 1, 2014; right chart through October 31, 2013 Source: US Federal Reserve and US Federal Reserve Board

Solid Growth Continues in Business Lending Green Shoots Appearing in Housing Finance

Conforming Loan Characteristics Commercial and Industrial Lending Four-Quarter Moving Average

20

40

60

80

98 01 04 07 10 13U

SD B

illion

s 74

76

78

80

82

752

756

760

764

768

10 11 12 13 14P

ercent Leve

l

FICO Credit Score

Loan-to-Value Ratio


Euro Area: Modest Growth, Low Inflation

Historical analysis and current forecasts do not guarantee future results. Left chart through February 28, 2014; right chart as of November 30, 2013 Source: Haver Analytics, IMF, Markit and AllianceBernstein

–1

0

1

2

3

4

5

07 08 09 10 11 12 13 14Ye

ar-o

ver-

Year

% C

hang

e F

2014 Forecast

Euro-Area Consumer Price Index Inflation

35

40

45

50

55

60

07 08 09 10 11 12 13 14

Inde

x Euro-Area Composite PMI


China: Economic Reform Expected to Continue…with Volatility

20

25

30

35

40

45

50

55

79 86 93 00 07 14

Per

cent

age

of G

DP

Investment Rate

Consumption Ratio

Saving Rate

Historical analysis does not guarantee future results. Left chart as of January 22, 2014; right chart as of January 30, 2014 Source: Bernstein Research, CEIC Data and AllianceBernstein

Seeking to Spur Greater Consumption

China Nowhere Near US’s Subprime Risk

0 50 100 150 200 250

SingaporeItaly

IndonesiaJapan

Hong KongSpain

GermanyChina

UKBrazilTotal

South KoreaMexico

Euro AreaSouth AfricaNetherlands

US (2013)US (2007)

Shadow Banking as a Percent of Banking Assets

F


US Rates: Likely a Long Path to “Normal”

Current analysis and forecasts do not guarantee future results. As of April 11, 2014 An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. *Yield curves projected based on historical analysis of Treasury yield curves and on applying the slope to the fed funds rate projections as implied by the forward market. **Basis point (b.p.): A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. Source: Barclays, Bloomberg and AllianceBernstein

June 30, 2003– June 30, 2006

Change in Yields

Annualized Return

Fed Funds +425 b.p.** —

10-Year US Treasury +161 b.p. –0.09%

10-Year Municipal AAA +91 b.p. +1.91%

US Aggregate +223 b.p. +2.05%

Corporates +201 b.p. +1.96%

High Yield –25 b.p. +8.63%

Municipal High Yield –213 b.p. +10.50%

The 2003 2006 Interest-Rate Cycle

0

2

4

6

Per

cent

30 Yrs.

10 Yrs.

2 Yrs.

3 Mos.

March 31, 2014 April 2015

April 2017

April 2019

Market Implied Fed Funds Rates*


Fixed-Income Portfolios: Positioning for a Rising-Rate Environment

Historical analysis does not guarantee future results. As of December 31, 2013 Bar height may differ due to rounding. *Barclays Muni 10-Year beta is calculated against the 10-year US Treasury. All others are calculated against US Treasuries represented by Barclays US Treasury (weighted index of all US Treasuries). An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Source: Barclays and AllianceBernstein

Bond Index Betas vs. US Treasuries January 1999–December 2013

0.9

0.7 0.7

0.5 0.5

–0.4

Barclays USTreasury:US TIPS

BarclaysUS Credit

Barclays USAggregate

Barclays GlobalAggregate Hedged

Barclays Muni10-Year*

Barclays US HighYield Credit


Australia 8.9

Canada 8.3

UK 16.1

Japan 2.6

US 9.8

Hedged Global Bonds Diversify Rate Exposure…Without Currency Risk

Euro Area 1.0

US 5.9

Japan 2.9

UK 7.2

Australia 0.3

Canada 5.6

Japan 1.4

UK –1.6

US –3.6

Euro Area 4.1

Australia –5.9

Canada –1.9

2009

Euro Area 2.6

2011

9.8 10.0 6.9

Country Returns Vary Across Cycles

Global Bond Returns Hedged to USD (Percent)*

2010

13.5

Best Performer

Worst Performer

Gap between best and worst

Past performance does not guarantee future results. Please refer to slide 26 for important risk information related to investing in emerging markets and foreign currencies. These returns are for illustrative purposes only and do not reflect the performance of any fund. Please see end of presentation for index information. Left chart as of December 31, 2013; right chart as of March 31, 2014 *Returns represented by respective Barclays government bond indices within each country. An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. **Correlation is a statistical measure of how two values move in relation to each other. EM currency represented by WisdomTree Emerging Currency Strategy Fund (CEW); developed currency represented by PowerShares DB US Dollar Index Bullish Fund (UUP) Source: Barclays, Bloomberg, Haver Analytics, Invesco, J.P. Morgan, MSCI, S&P Dow Jones, US Department of the Treasury, WisdomTree Investments, national accounts and AllianceBernstein

2012

Euro Area 11.2

US 2.0

Canada 1.4

Australia 1.4

UK 2.4

Japan 2.2

1.0

–0.4

0.1

0.7 0.7

S&P 500 Barclays GlobalTreasuryHedged

Barclays GlobalTreasuryUnhedged

EM Currency DevelopedCurrency

12.3 13.8

2.64.9

10.77.2

S&P 500 MSCI World BarclaysGlobal

TreasuryHedged

BarclaysGlobal

TreasuryUnhedged

EMCurrency

DevelopedCurrency

Three-Year Correlation to Equity**

Three-Year Volatility (Percent)**

EM Currency Has Not Provided Diversification

2013

Euro Area 2.5

US –2.8

UK –4.4

Canada –3.1

Japan 2.3

Australia –2.4

6.8


0

200

400

600

800

1,000

BB B CCC

Opt

ion-

Adj

uste

d S

prea

d (b

.p.)

Not the Time to Reach for Yield in Taxable Bonds

Historical analysis does not guarantee future results. Left chart as of March 31, 2014; center chart through March 31, 2014; right chart as of December 31, 2013. Precrisis average is for the period of September 30, 1995–December 31, 2007. A credit rating is a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is highest (best) and D is lowest (worst). Ratings are subject to change. Investment-grade securities are those rated BBB and above. Source: Barclays, Moody’s and AllianceBernstein

CCC-Rated Bond Discount Is Gone

11

24

46

76

BB B CCC CC–C

Per

cent

Lower-Rated Defaults Are Substantial

25

50

75

100

125

90 94 98 02 06 10 14

Pric

e as

Per

cent

of P

ar

Par

Lower-Rated Bond Spreads Are Tight

Industrials

Five-Year Cumulative Default Rates 1983–2013

Current

Precrisis Average


–30

0

30

60

90

07 08 09 10 11 12 13

Cumulative Returns

Per

cent

Bank Loan Trade Gets More Crowded

Historical analysis does not guarantee future results. Left chart through March 20, 2014; middle graph as of March 25, 2014; right graph as of March 31, 2014 *Refinancing is on a cumulative basis as a percentage of loans outstanding on December 31, 2013. Performance for bank loans is represented by Barclays US High-Yield Loan. Performance for US high-yield bonds is represented by Barclays US Corporate High-Yield 2% Issuer-Capped Bond. Source: Barclays, Morningstar, S&P Capital IQ and AllianceBernstein

Massive Refinancing, Falling Spreads

Covenant-Light and CCC Issuance Is Growing High-Yield Bonds Continued to Lead

Bonds Loans 14

20

40

60

80

460

500

540

580

Jan

13

Apr

13

Jun

13

Sep

13

Dec

13

Mar

14

Bas

is P

oint

s

3-Year Loan Effective Spread (Left Scale)

Refinancing*

Percent

0

2

4

6

8

0

20

40

60

80

05 06 07 08 09 10 11 12 13YTD

Per

cent

Percent

CCC % of New Issuance Covenant-Light % of New Issuance (Left Scale)


Do Non-Traditional Bond Funds Create More Credit Risk?

As Investors Search for Alternatives to Core…

Historical analysis does not guarantee future results. As of December 31, 2013 *Correlation from February 2011 through December 2013. Includes only largest 25 funds based on asset size in Morningstar Nontraditional Bond category. Source: Barclays, Bloomberg, Morningstar and AllianceBernstein

…They’re Often Taking on More Credit Exposure

Annual Core and Nontraditional Bond Flows 2009–2013 (USD Billions)

Nontraditional Bond Funds Correlations to Treasuries and High Yield*

–0.5

–0.3

0.0

0.3

0.5

0.8

1.0

1.3

–1.0 –0.8 –0.5 –0.3 0.0 0.3 0.5 0.8 1.0

Cor

rela

tion

to U

S H

igh

Yiel

d Correlation to US Treasuries

Barclays US Aggregate

Barclays Corporate US High-Yield Issuer-Capped

S&P 500

Low Correlations High

Correlations

Hig

h C

orre

latio

ns

Low

Cor

rela

tions

Bank Loans

111.5

62.9 41.4

112.5

–69.4

11.4

29.4

10.2

6.0

53.4

2009 2010 2011 2012 2013

Intermediate-Term Bond Nontraditional Bond


2.7 2.5

4.4 4.2

8.5

Treasury AAAMuni

Taxable-EquivalentYield AAA

Muni

BBBCorp

Taxable-EquivalentYield BBB

MuniP

erce

nt

–20

–15

–10

–5

0

5

10

15

07 08 09 10 11 12 13 14

US

D T

rillio

ns

Historical analysis does not guarantee future results. As of March 31, 2014. Nominal yields. A credit rating is a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condit ion. AAA is highest (best) and D is lowest (worst). Ratings are subject to change. Investment-grade securities are those rated BBB and above. Barclays long indices are used for each respective rating category. Source: Barclays, Bloomberg, The Bond Buyer, Delphis Hanover, Investment Company Institute, J.P. Morgan, Moody’s Analytics, Municipal Market Data, Thomson Reuters, US Federal Reserve, The Yield Book and AllianceBernstein

Municipals: Technical Factors Create Compelling Opportunity, in Our View

May–Dec 2013 Outflows: $63.8 Billion, 10.5% of Assets

Recent Investor Outflows Have Been Substantial

Municipal Fund Flows 10-Year Yields

Muni Yields Are Attractive vs. Taxable Equivalents


0.10

0.04

0.01

0.24 0.24

0.13

0.20

0.11

0.20

0.00

05 06 07 08 09 10 11 12 13 14

Per

cent

Municipal Bonds Have Weathered the Financial Crisis

Historical analysis does not guarantee future results. Through March 31, 2014 *Payment defaults only All data exclude 2011 default by American Airlines parent AMR. Source: Distressed Debt newsletter, J.P. Morgan and AllianceBernstein

What Investors Are Reading About Detroit and Puerto Rico

Underfunded pension funding

What Investors Are NOT Reading About 16 straight quarters of year-over-year tax revenue growth

Tax-revenue collections are at their highest levels ever

48 out of 50 states have enacted pension reform measures

The average level of pension funding is an adequate 76%

There were 48 defaults (2013) out of 90,000 municipalities

Municipals Outstanding = US$3.7 Trillion

Municipal Default Rates*


0.4 1.4

2.4 2.6 2.7 3.2 3.6 3.9

0.4

1.5

1.5 1.4 1.2 0.8 0.4

0.1

0

2

4

6

1 2 3 4 5 6 7 8 9 10

Maturity (Years)

Municipals: Opportunities Across the Curve

Past performance and current analysis do not guarantee future results. As of March 31, 2014 *Roll is the natural price gain that a bond experiences as it ages, assuming interest rates are unchanged. Source: Barclays, Bloomberg, Delphis Hanover, J.P. Morgan, Municipal Market Data, Thomson Reuters, The Yield Book and AllianceBernstein

Rol

l Plu

s Yi

eld

(Per

cent

)

Low available supply, similar after-tax yields for each

Steepest part of curve, roll* plus yield most favorable

Credit attractive, supply concentrated at long maturities

Short End: Combine Municipals and Taxables

Intermediate/Long End: Focus on High Grade and Duration Exposure

Long End: Access Credit

0.8

AA Municipal Roll 1–3 Year US Agg ex Governments

Municipal BBB AA Municipal Yield

5.0

2 5 8 9 10 15 20 30

5.0


Valuation Landscape Requires Active Approach

Past performance does not guarantee future results. As of February 28, 2014 *Quartile rankings of equity valuations since 1970 **1990–2014. Percentile ranks of the monthly relative valuation based on the sector P/FE versus Bernstein US Large Cap equities universe P/FE each month An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Source: Center for Research in Security Prices (CRSP), MSCI, S&P Dow Jones and AllianceBernstein

Valuations* Are Below Median Except in the US

76% 81%

72%

46% 56%

46%

34%

21% 20%

Price/ForwardEarnings

Price/CashEarnings

Price/Book

Expensive

Cheap

US EAFE Emerging Markets

Historical Relative Valuation** by Sector Price to Forward Earnings

50th Percentile

82nd Consumer Discretionary Expensive

Cheap

78th Utilities

67th Materials

35th Energy

21st Consumer Staples 15th Information Technology


–3

0

3

6

9

12

0.0

0.1

0.2

0.3

0.4

04 06 08 10 12 14

Inde

x

Percent

0

10

20

30

40

50

60

88 93 98 03 08 13

Inde

x Average

Correlations Are Near Normal and Return Dispersion Is Poised to Rise

Stock Correlations* Have Returned to Near Normal

Left chart through March 31, 2014; right chart through February 28, 2014 *Based on the equally weighted average of pairwise correlations of the MSCI World universe using six months of daily returns from July 1988. Correlation is a statistical measure of how two values move in relation to each other. **Three-month rolling dispersion of returns within the Bernstein US large-cap universe † Alpha is a measure of performance of a manager’s excess returns. Six-month rolling premium of top quartile of US large-cap managers versus the S&P 500. An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Source: Bloomberg, CRSP, eVestment Alliance, MSCI, S&P Dow Jones and AllianceBernstein

Active Management Has Thrived in High Dispersion

Dispersion**

(Left Scale)

Manager Alpha†


Top-Line Sales Growth Should Continue to Boost Earnings

Historical analysis and current forecasts do not guarantee future results. Left chart as of March 31, 2014; right chart as of December 19, 2013 *Trailing 12-month EPS **Drivers of S&P 500 EPS growth based on bottom-up sell-side estimates An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Source: Bloomberg, Compustat, MSCI, S&P Dow Jones and AllianceBernstein

Earnings per Share (EPS)* Have Continued to Rise

Higher Sales Growth** Should Drive Earnings

Financials Margin Growth Sales Growth

0

40

80

120

160

90 94 98 02 06 10 14

USD

Next 12 Months— Consensus Estimates: S&P 500: +8% MSCI EAFE: +25%

3.2 4.0 4.3

2.9 3.0

4.6

3.4 1.9

2.0 9.5 8.9

10.9

0

4

8

12

2013E 2014F 2015F

Per

cent

MSCI EAFE

S&P 500


Corporate Fundamentals Are Strong

Historical analysis and current forecasts do not guarantee future results. Left chart through March 31, 2014; right table through February 28, 2014 *Net debt/equity is total debt less cash and cash equivalents. **Return on equity and free-cash-flow yield based on data from AllianceBernstein US large-cap universe; capitalization weighted, excluding financials. Average net profit margins were 6.3% since 1952. Source: Bloomberg, Compustat, CRSP, Deutsche Bank, Empirical Research Partners, MSCI, S&P Dow Jones and AllianceBernstein

Earnings and Balance Sheet Quality Are Higher

Cash Levels Are High and Debt Remains Low

0

3

6

9

12

15

0

40

80

120

160

200

82 88 94 00 06 12

Per

cent

Percent

Net Debt/Shareholders’ Equity (S&P 500; Left Scale)

Cash/Assets

Mar 24, 2000

Oct 31, 2007

Feb 28, 2014

Cash Flow per Share $87 $75 $206

Net Debt/Equity* 171% 156% 43%

Return on Equity** 20% 22% 22%

Free-Cash-Flow Yield** 1.8% 3.7% 3.8%

Net Profit Margins 6.7% 7.6% 8.8%


0.5

1.0

1.5

2.0

2.5

52 62 72 82 92 02 12R

atio

(×)

Consistent Profits and Dividend Growth Offer a Compelling Opportunity

Historical analysis does not guarantee future results. Left chart as of March 31, 2014; right chart through February 28, 2014 *Factor efficacy following periods of multiple expansion and modest earnings growth; information ratios for US large-cap equities from January 1979 through March 2014 **Represents large-cap stocks’ highest quintiles of dividend growth and dividend yield and the ratio of their trailing P/Es Source: CRSP, FactSet, MSCI, Russell Investments, S&P Dow Jones, company reports and AllianceBernstein

Dividend Growth Is Cheaper than Dividend Yield**

Average

Dividend Growth Is Cheap

Dividend Yield Is Cheap

“Growthy” Factors Have Prevailed After Periods of Multiple Expansion*

1.3 1.1

0.8

0.3 0.3

–0.1 –0.2 –0.4 –0.4 –0.5

–0.8

0.0

0.8

1.6

Info

rmat

ion

Rat

io

Thre

e-M

onth

Rev

isio

ns

Gro

ss M

argi

n

Cap

ex to

Dep

reci

atio

n

Ret

urn

on E

quity

Pric

e/Fr

ee C

ash

Flow

Pric

e/S

ales

Div

iden

d Yi

eld

Bet

a

Pric

e/Fo

rwar

d E

arni

ngs

Pric

e/B

ook


Previous Equity Market Cycles Have Been Long-Lived

Historical analysis does not guarantee future results. Through March 31, 2014 Cumulative price returns of the S&P 500 Index from market troughs to market peaks. Current bull run from March 9, 2009 through March 31, 2014. An investor cannot invest directly in an index and its performance does not reflect the performance of any AllianceBernstein portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio. Source: S&P Dow Jones and AllianceBernstein

–100

0

100

200

300

400

500

600

700

0 25 50 75 100 125 150

Per

cent

Months

August 1982 March 2009

August 1921

December 1987

May 1947

Five Largest S&P 500 Rallies by Percentage Gain, Trough to Peak


A Word About Risk

The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This document is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AllianceBernstein L.P. or its affiliates.

Important Risk Information Related to Investing in Equity and Short Strategies

All investments involve risk. Equity securities may rise and decline in value due to both real and perceived market and economic factors as well as general industry conditions.

A short strategy may not always be able to close out a short position on favorable terms. Short sales involve the risk of loss by subsequently buying a security at a higher price than the price at which it sold the security short. The amount of such loss is theoretically unlimited (since it is limited only by the increase in value of the security sold short). In contrast, the risk of loss from a long position is limited to the investment in the long position, since its value cannot fall below zero. Short selling is a form of leverage. To mitigate leverage risk, a strategy will always hold liquid assets (including its long posit ions) at least equal to its short position exposure, marked to market daily.

Important Risk Information Related to Investing in Emerging Markets and Foreign Currencies

Investing in emerging-market debt poses risks, including those generally associated with fixed-income investments. Fixed-income securities may lose value due to market fluctuations or changes in interest rates. Longer-maturity bonds are more vulnerable to rising interest rates. A bond issuer’s credit rating may be lowered due to deteriorating financial condition; this may result in losses and potentially default, or failure to meet payment obligations. The default probability is higher in bonds with lower, noninvestment-grade ratings (commonly known as “junk bonds”).

There are other potential risks when investing in emerging-market debt. Non-US securities may be more volatile because of the associated political, regulatory, market and economic uncertainties; these risks can be magnified in emerging-market securities. Emerging-market bonds may also be exposed to fluctuating currency values. If a bond’s currency weakens against the US dollar, this can negatively affect its value when translated back into US-dollar terms.

Bond Ratings Definition

A measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition, and not based on the f inancial condition of the fund itself. AAA is highest (best) and D is lowest (worst). Ratings are subject to change. Investment-grade securities are those rated BBB and above. If applicable, the Pre-Refunded category includes bonds which are secured by US government securities and therefore are deemed high-quality investment grade by the advisor.


Index Definitions

Barclays 1-3 Year US Aggregate Bond Index: An unmanaged index representing securities that are SEC-registered, taxable, and USD-denominated. The index covers the US investment-grade fixed-rate bond market with 1- to 3-year maturities, with index components including corporate securities, mortgage passthrough securities, and asset-backed securities.

Barclays EM USD Aggregate Index: A flagship hard-currency emerging-market-debt benchmark that includes USD-denominated debt from sovereign, quasi-sovereign and corporate EM issuers. The index is broad based in its coverage by sector and by country, and reflects the evolution of EM benchmarking from traditional sovereign bond indices to aggregate-style benchmarks that are more representative of the EM investment choice set. (Represents emerging-market debt on slide 2.)

Barclays Global Aggregate–Corporate Bond Index: Tracks the performance of investment-grade corporate bonds publicly issued in the global market found in the Global Aggregate. (Represents global corporates on slide 2.)

Barclays Global High Yield Index: Provides a broad-based measure of the global high-yield fixed-income markets. It represents the union of the US High Yield, Pan-European High Yield, US Emerging Markets High Yield, CMBS High Yield and Pan-European Emerging Markets High Yield Indices. (Represents global high yield on slide 2.)

Barclays Global Treasury: Australia Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Australian Treasury sector of the Global Aggregate Index.

Barclays Global Treasury Bond Index: Tracks fixed-rate, local-currency sovereign debt of investment-grade countries. The index represents the Treasury sector of the Global Aggregate Index and currently contains issues from 37 countries denominated in 23 currencies. The three major components of this index are the US Treasury Index, the Pan-European Treasury Index and the Asian-Pacific Treasury Index, in addition to Canadian, Chilean, Mexican and South African government bonds.

Barclays Global Treasury: Canada Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Canadian Treasury sector of the Global Aggregate Index.

Barclays Global Treasury: Euro Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Euro Area Treasury sector of the Global Aggregate Index. (Represents euro-area government bonds on slide 2.)

Barclays Global Treasury: Japan Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the Japanese Treasury sector of the Global Aggregate Index. (Represents Japan government bonds on slide 2.)

Barclays Global Treasury: United Kingdom Bond Index: Includes fixed-rate, local-currency sovereign debt that makes up the UK Treasury sector of the Global Aggregate Index.

Barclays Municipal Bond Index: A rules-based, market value–weighted index engineered for the long-term tax-exempt bond market. (Represents municipals on slide 2.)

Barclays US Aggregate Bond Index: A broad-based benchmark that measures the investment-grade, US dollar–denominated, fixed-rate taxable bond market, including US Treasuries, government-related and corporate securities, mortgage-backed securities (MBSs [agency fixed-rate and hybrid ARM passthroughs]), asset-backed securities (ABSs) and commercial mortgage-backed securities (CMBSs).

Following are definitions of the indices referred to in this presentation. It is important to recognize that all indices are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. Investors cannot invest directly in an index, and its performance does not reflect the performance of any AllianceBernstein mutual fund.


Index Definitions (continued)

Barclays US Corporate Bond Index: A broad-based benchmark that measures the investment-grade, USD-denominated, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by US and non-US industrial, utility and financial issuers that meet specified maturity, liquidity and quality requirements.

Barclays US Corporate High-Yield 2% Issuer Capped Bond Index: A component of the US Corporate High-Yield Bond Index, which covers the universe of fixed-rate, noninvestment-grade corporate debt of issuers in developed-market countries. It is not market-capitalization weighted—each issuer is capped at 2% of the index.

Barclays US High-Yield Loan Index: An unmanaged index that provides broad and comprehensive total return metrics of the universe of USD-denominated syndicated term loans.

Barclays US Treasury Inflation-Protected Securities (TIPS) Index: Consists of inflation-protected securities issued by the US Treasury. (Represents TIPS on slide 2.)

Barclays US Treasury Index: Includes fixed-rate, local-currency sovereign debt that makes up the US Treasury sector of the Global Aggregate Index. (Represents US government bonds on slide 2.)

Dow Jones-UBS Commodities Index Total Return: Consists of exchange-traded futures on 19 physical commodities that are weighted to account for economic significance and market liquidity. (Represents commodities on slide 2.)

FTSE EPRA/NAREIT Global Real Estate Index: Designed to represent general trends in eligible real estate equities worldwide. (Represents global REITs on slide 2.)

J.P. Morgan Emerging Markets Bond Index Global Diversified: Limits the weights of countries with larger debt stocks by only including a specified portion of these countries' eligible current face amounts of debt outstanding.

MSCI EAFE Index: A free float–adjusted, market capitalization–weighted index designed to measure developed-market equity performance, excluding the US and Canada. It consists of 22 developed-market country indices. (Represents EAFE on slide 2.)

MSCI Emerging Markets Index: A free float–adjusted, market capitalization–weighted index designed to measure equity-market performance in the global emerging markets. It consists of 21 emerging-market country indices. (Represents Emerging Markets on slide 2.)

MSCI World Index: A market capitalization–weighted index that measures the performance of stock markets in 24 countries.

PowerShares DB US Dollar Index Bullish Fund (UUP): Designed for investors who want a cost-effective and convenient way to track the value of the US dollar relative to a basket of the six major world currencies—the euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc (collectively, the “Basket Currencies”).

Russell 2000 Index: Measures the performance of the small-cap segment of the US equity universe. It is a subset of the Russell 3000 Index representing approximately 8% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. (Represents US small-cap on slide 2.)

S&P 500 Index: Includes a representative sample of 500 leading companies in leading industries of the US economy. (Represents US large-cap on slide 2.)

WisdomTree Emerging Currency Fund (CEW): Includes the following constituent currencies: Mexican peso, Brazilian real, Chilean peso, South African rand, Polish zloty, Russian ruble, Turkish new lira, Chinese yuan, South Korean won, Indonesian rupiah, Indian rupee and Malaysian ringgit.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI.

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