Thank you for standing by, and welcome to the AllianceBernstein Second Quarter 2010 Earnings Review. At this time, all participants are in a listen-only mode. After the formal remarks, there will be a question-and-answer session. I will give you instructions on how to ask a question at that time. As a reminder, this conference call is being recorded and will be replayed for one week. I would now like to turn the conference call over to your host for this call, the Director of Investor Relations for AllianceBernstein, Mr. Philip Talamo. Please go ahead, sir.

Thank you, Christie. Good morning, everyone. And welcome to our second quarter 2010 earnings review. As a reminder, this conference call is being webcast and supported by a slide presentation that can be found in the Investor Relations section of our website at www.alliancebernstein.com/investor relations. Here in New York, we have our Chairman and Chief Executive Officer, Peter Kraus; and our Chief Financial Officer, John Howard. Joining us from our London office is, is our Chief Operating Officer, David Steyn. I would like to take this opportunity to note that some of the information we present today is forward-looking in nature, and is subject to certain SEC rules and regulations regarding disclosure. Our cautionary language regarding forward-looking statements can be found on page two of our presentation, as well as in the MD&A section of our 2009 10-K and second quarter 2010 10-Q which we filed earlier this morning. In light of the SEC's regulation, FD, management they only address inquiries of the material nature from the investment community in a public forum. Therefore we encourage you to ask all such questions on this call. And now, I'll turn the call over to Peter.

Thanks Phil. To be upfront about this quarter, our second quarter wasn't what we would have like; performance in value and growth equities was challenged in April and May. Although we liked the security selections in the portfolio today, and we're pretty confident about those the portfolio construction, we really didn't see the performance we would have expected in the April and May market decline. Financial results as you've seen were also weaker than we would have liked due primarily to losses from the mark-to-market and deferred compensation balances and other reductions and revenue caused by the market declines in the quarter. Fixed income performance however continued to strong results allowing us to raise 5 billion net positive flows during the second quarter, asset say a roughly around 200 billion. One aspect of the quarter to note however is that we're kind of --we're certainly busier. We've talked about gross sales in the past and the need to grow this. This is the fourth consecutive quarter of higher firm wide gross sales. This is has the obvious and expected impact of improving our net flows. As corporations consider more flexibility in the retirement plans and look forward in the future we've seen encouraging strength in our CRS strategy providing returns on our investment in this platform. And lastly, our efforts in building our alternative platform are on track. The various funds we have initiated are successfully executing their strategy. One thing we'd discussed in the past is our geographic diversification. This continues to be a positive force. We've mentioned this our global footprint and here are a few recent facts. 36% of our assets and management are derived from non-U.S. clients, and 54% of our AUM is invested globally. What's attractive about this is our footprint allows us to capture…

Thank you, Peter. Peter has given a high level overview of our second quarter, what I like to do is to drill down and provide a little bit more detail in some of the key points which he has raised. So let me start with performance which we summarize on page three. And as Peter side, on the equity side of our business, the second quarter was a challenging quarter. In some senses, the quarter wasn't a typical quarter dominated it was by the fiscal crisis here in Europe. A fiscal crisis, this has lead to the largest post recovery correction in decacdes. The S&P down 11.4% in the second quarter. ETF markets down 14% in the second quarter and the volatility index spiking from 17.6 to 34.5 with risk aversion, investors have focused on macro risks, not micro opportunities, not fundamentals. As the Wall Street journal reported in the second quarter not since the crash of 1987 have stocks moved so much in lock step but at another level, the second quarter was typical with 40 plus years experience as it bottom up proprietary research-driven stock picking active investment manager. One thing we've learned is that premiums come in spurts, for example if we look at the six largest value recoveries of the last 40 years, 33% of the recovery in value stocks, cheap stocks actually trailed their broader index. and there is nothing at all about this give back in this second quarter in terms of this length or depth which looks a typical or different from our prior experience, and as fundamentals and price of diverge, diverge in the second quarter, so the long-term investor opportunity has got greater is with that in mind just referring to have Peter commented about how our portfolios are constructed that…

Thanks David. Good morning everyone. I will start with a high level recap of the results we reported earlier this morning. As Peter mentioned our earnings were down this quarter from Q1, we took significant investment losses on our deferred comp investments, consolidated venture fund and seed capital investments. As global markets decline in the second quarter. On the expense side, we made an investments in personnel, strategic hire to support our new business initiatives and increased client related travel and conferences to support servicing and sales efforts. As for the numbers GAAP revenues were down 5% from the prior year quarter in the first quarter of 2010. GAAP expenses were down 1% from both prior periods primarily due to lower deferred comp expenses associated with the Q2 market decline. Our tax rate increased to about 12% in Q2 versus 9% in the first quarter because their earnings declined from Q1 to Q2 was largely in our domestic subsidiaries which have a much lower tax rate. Earnings in our foreign subsidiaries which are taxed at higher rates represented a larger proportion of our global net income. This two is a function of the losses on deferred comp investments as most of our employees are U.S. based. We are projecting an effective tax rate of about 10% for calendar 2010. As mentioned on last quarters call we received our final trail payment from the sale of our money market business to federated in the second quarter. GAAP earnings were $0.31 per unit and adjusted earnings were $0.38. Let's move on slide 12 to discuss adjusted earnings. So, what are adjusted earnings and why are they important. We believe they are more relevant to how we monitor our performance and that hope investors better understand the underlying trends in our results. We…

(Operator Instructions). Your first question comes from the line of Michael Kim with Sandler O'Neill.

Hey, guys. Good morning. Can you first just give us a lay of the land in the institutional channel, where do you think you are from a flow standpoint and do you feel like there are still redemptions to come because we really haven't seen maybe any big shifts from the institutions but maybe these could be offset by renewed interests from other areas of the business.

Well, why don't I kick off on that one. Clearly the good news on the flow on the institutional side is widespread traction in fixed income space. We would consider on this in the past. Part of that is because of the competitive nature of our services and performance in fixed income artifacts to be shift with in pension from largely worldwide, out of equities or reducing equities and into fixed income, a shift which predates the credit crisis of 2008 but certainly was accelerated by the credit crisis of 2008. Now whilst it's perhaps a little bit rash to say that is a secular shift, it's certainly a shift which is showing no sign at this point of abating. So on the positive side of flow's the combination of that asset allocation shift by institutions, by the way not just limited to pension funds but certainly led by pension funds and the competitive nature of our performance in that space has been very positive. On the equity side, I think you're seeing the mirror image of that, that particularly domestic large caped equipped services, arguably worldwide are in retreat, retreat both because the proportion of the pie which is in equities has gone down. Then the portion which is in domestic has gone down and then the portion in domestic which is inactive has gone down. More positively on the equity side, we continue to see flows in the industry going into global which is global equities which has been a major source of business for this firm over the past decade. So my slightly long winded answer is it's a very complex picture. Fixed income, good; domestic equity, continuing to climb in asset exposure and global equities still positive. Does that address your question?

Yup. That's very helpful. And then maybe secondly, just more conceptually now that Sharon I now I guess the equity CIO, any sense that you're kind of moving towards a more centralized structure on the investment side and just how are you thinking about that structure going forward? Thanks.

No Michael, we're going to continue to be focused on what we would prefer to stall purity in investing, so there is growth investing and value investing. There is research staffs, and portfolio managers will continue to be separate and Sharon will in a simple way of thinking that it continued to be as she has been player, coach on the value side and coach as it relates to the growth, the grow team. We think there are three main advantages and having a CIO of equities; one is the leverage ability in Sharon's formidable investment experience. Secondly, in understanding how to actually harness opportunities in investing across the globe in areas like risk and third in understanding the excellence in research and in bolstering and embellishing the research process in both of the specific style activities, growth and value. So, in the word no we don't intend to back off of for to reduce our investment in the style-pure activities to the equity platform.

Okay, thanks for taking my questions.

Thank you. Your next question comes from the line of Robert Lee with KBW.

Thanks. Good morning everyone. Could you folks on the DC business a little bit. I guess Peter, David both made some comments regarding seeing true momentum there is it particularly any kind of is it more that part of your unfunded pipeline is more in the DC business or there is more conversations and to extend just you are starting to maybe see more wins or compete for more business. Are you able to get some of your investment selections as part of your overall pipeline, I'm going to know you also have, you obviously have this business managing the quite path, but have you been able to just kind of sort of your own investment selections as well?

I think the answer to that is sort of yes, and yes and we will see. Let me try to answer in slightly more detail. I think one of the characteristics of DC is it got a longer sales cycle than the DB business for a whole host of reasons. Many more stakeholders, many more constituents, it's much, much more complex when moving a plan when putting in structures such as our customized retirement systems. There is a great deal of what we call plumbing to do. There is a participant communication to do, so in some senses the search and activity which we're beginning to see now is like the tip of the iceberg, and actually things been going on for some period of time, out of sight. The customized retirement strategy initiative of something we've focused a great deal of resources on over the past few years, and you're right that two component pieces here in one sense there's the platform which we're supplying to some extremely large sophisticated institutions and then in time, we would also hope that we would have standalone services of AllianceBernstein capabilities embedded in that platform, but the first comes before the second, but we definitely see this as a key growth initiative of the firm, and potentially something which could -- they build a very attractive business, but also more of sticky characteristics.

Okay, great and maybe this is my follow-up, could you maybe update us a little bit on where you're seeing from kind of a investor behavior as kind of how -- maybe how you'd progress over the second part of Q2 and into Q3 here, I mean I know you mentioned that you've seen – there was a pick up in the – institutional pipeline but any color you can provide on, does it feel like private clients are kind of all gone on how are they more so than usual or any kind of color you could provide on kind of business trends and investor's psychologies to get into Q2 here.

Sure, I know most of all of us might wish wherever to go on holiday and give us a few weeks off during the summer. I don't think there is that much evidence of private clients during on holiday. In fact, if anything across the multiple sectors, there's evidence of a wall of money sitting to be engaged within the market. I mean even in the institutional space a casual things are say perhaps unprecedented levels. So, the activity levels within the private client business are tracking very consistently with at this stage in comparable recoveries from their market. As I said on the last earnings call, is that there is a difference. The difference is not in the number of relationships we're opening up. The difference is in the size of the funding of the relationship. So, whereas four years ago, you pitch for $20 million mandate you either got it or you didn't, today you pitch for a client to $20 million and you perhaps get $10 million zipped in the bank. Having said, which I spoke earlier about the incremental we're risking which is taking place in the private client business, I mean, it's slow, it's gradual but it's real. If I were to give you a data points on that, if you looked at calendar year 2009, near constant your money of the firm in private client swing 54% into fixed income, 46% into equities. So sorry, 61% fixed income, 39% equities. So far this year, first half of this year is a 54% fixed income, 46% equities. So, a meaningful re-risking is underway.

Well, thank you very much.

Thank you. Your next question comes from the line of Craig Siegenthaler with Credit Suisse.

Just to talk about net flows for a second. You sound like there could be some good improvement in the Luxembourg channel, you mentioned dynamic asset allocation, and just talk about D.C., what area is the business are you kind of most worried about from a kind of a net flow standpoint over the next 12 month?

Well, I think the area of which continues to frustrate each of us the right way to put is the sub-advisory channel which saw a significant de-risking thrust. So a significant de-risking take place post 2008 and we continue to see a very little evidence of that reversing. Again as a slightly sweeping generalization, I'm talking about the de-risking; we saw a meaningful asset moving into passive. And we're not seeing that term turn around so that's discouraging. On the mutual fund side, I think looking at the events of the second quarter in some sense is we were protected though we were helped by the fact that recent success has been heavily skewed towards fixed income and the big flows across the industry in mutual fund space were out of equities. So, the picture right now in retail in terms of flows is looking reasonably healthy.

And then to walk on the fixed income side, do you feel a little more comfortable of some of the high yielding areas of that fixed income product that are little bit more kind of anti inflationary fighting, like emerging market bond funds and global bond funds and you're more concerned maybe your core and core plus products just on a 12 month basis.

Well I think the answer to that is the flows have been, not just for us but the flows have been most positive in the industry in things like global and high yield and we would expect that to continue and we're particularly competitive in that space.

Got it. Thank you for taking my questions.

Thank you. Your next question comes from the line of Bill Katz with Citigroup.

Hey, thank you. Good morning everyone. Just coming back to the institutional business on the redemption side, given your moping disclosure would suggest that's been a bit of a slowdown as we exited the quarter. Just wondering if you could talk a little bit about the trends on the redemption side?

I'm sorry. I'm not quite sure I understood that question.

Could you talk about, on the institutional side, you could certainly talk about the redemption pace entering and existing the second quarter?

I'm happy to but I'll be loathed to draw too many conclusions from it. June was a good month. So we exited the quarter will all three channels in positive territory. That's one month. I don't think at this point there are any particular trends I would highlight, certainly not in the course of that three month period which I would extrapolate forward into future quarters in terms of the redemption picture.

Okay, second question. So it comes back to discussions about some of the headcount additions you've made during the quarter. Just wondering if you could talk a little about the pro forma impact on third quarter expense run rate if any?

Bill, its John. If you look at our compensation process, as you know we record compensation based on a compensation ratio. So the first half, the compensation ratio was 49.2%. The investments are within that ratio. So that's part of the reason why the ratio ticked up slightly from 48.5 in calendar 2009 to 49.2 in the first half of 2010. So I think you should, you think about in the context of a slightly higher ratio.

Okay, thank you.

Thank you. Your next question comes from the line of Marc Irizarry with Goldman Sachs.

Oh, great, thanks. Peter, question for you. If you look at, if you forget about others for a second, just look at the equity versus fixed income, its pretty balanced between the two. When you think about the alternatives business and you talked about real estate as sort of the first step and when you look at the overall business and the roll of our alternatives, is there a way for you to accelerate your growth there or what sort of a game plan to build out some of the other capabilities that institutions and retail investors might be looking for?

Well I think Marc; it's a step by step process. We have launched a number of alternative investments in not only the real estate but also in the hedge fund space inside of the firm and in connection with an outside hedge fund manager. We also have -- and it was announced today, two people internally looking at organizing a oil and gas, early stage oil and gas investing activity. I think what you're going to see from us in the next call it three to six months is a continued drum beat of new opportunities in that space that will round out a full some offering of internal hedge fund opportunities and potentially external hedge fund opportunities that both our individual and institutional clients can take advantage of.

Okay, great and then just on the retail part of the business, it looks like non-U.S. retain in particular have seen some gross sales trends are very strong that in the quarter, can you just comment on those trends that you're seeing in non-U.S. retail versus U.S. retail?

Sure. I mean actually over the recent quarters the way we had framed this is that the turnaround in our retail business excluding sub-advisory was being led for us first of all in Asia then working it's way Westwards Europe and then to the United States, and it's being led by fixed income. Those trends continue -- I mean what is encouraging is how much the sales activity in United States have picked up to catch up with the improved momentum outside of the United States of America. I think there is a broadening of distribution, which will take time to mature, but will make it less lumpy, but I don't think there is any reversal of the fundamental trend what's leading the game at the minute for us is, is fixed income.

All right, thanks.

Thank you. (Operator Instructions) Your next question comes from the line of Cynthia Mayer with Bank of America Securities.

Hi. Good morning. If you look at some of the discretionary spending items you have like conferences, travel, recruiting even cash bonuses some of which were up in 2Q versus 1Q, can you give a sense of whether collectively you expect that spending level to be sustained here in the second half? I think you mentioned conferences are somewhat seasonal and will be going down, but other than that can you give us a sense of the outlook?

Sure, which despite the conferences Cynthia spot on? They are, typically are higher in the first half of the year and for in 2010 conferences were higher for us in Q2, so they should and they will drop in the second half, and that's probably 2.5 to $3 million, probably $2.5 million savings on a quarterly basis moving forward into the second half with respect to recruiting cost they should fall from the Q2 run rate in the second half, a little bit difficult to predict as the number should come down versus Q2. I think those were the two specific items that I had, I point or anything else that you have a particular questions on with respect to discretionary. Cash bonuses you did mention, and that's going to be based on the comp ratio. So I think that's not, that's not a Q2 only event. We book it based on the comp ratio. We are 49.2 for the year, and we look at that on a quarterly basis based on revenue trends, and some of the investments that we're making.

Right, okay and are you comfortable with the 49.2 going forward?

That's on year-to-date basis and specifically for the quarter and the second quarter the rate was 49.8 in that range of 49.8 to 49.2 is probably reasonable on the short-term next quarter.

Okay. And then Peter you just mentioned on another answer that within the alternate initiative you are thinking of including external hedge fund opportunities. I'm just wondering if you could clarify how that would work, or are you thinking on the fund-to-funds business, is that for private client or institutional?

While we said many times in the past that we've looked at external hedge funds and we are continuing to do that. There is a particular activity that we have joined up with one other external hedge fund that we are talking with clients about and that's really what I was referring to. It's hard to talk about specific funds in these calls so I won't be able to do that but I think you will see a constant investigation on our part on how we continue to broaden our hedge fund activities.

Okay. Thank you.

Thank you. You do have a follow-up question from the line of Bill Katz with Citi Group.

Hey thanks very much. If you would adjust for the 5 million or so of usual expenses I think in the distribution line. Your revenues were up about 3% sequentially but the residual expense were about 11%. I just want to know if my math is right and if that is right can you talk about the dynamics between the revenues and the expenses and sort of the margin trend here or any other unusual items in the quarter.

Let me just speak at a high level and I think I'll focus your attention on the slide 16 for the bridge to show some of the major variances and I will focus on those. Severance is up; well just speak specifically about compensation. The compensation rate increased over the first quarter, we are 49.8 in the comp ratio for Q2, 49.2 year-to-date. Severance was higher $5 million in Q1 to Q2 and recruiting was higher by 4 million and that was $7 million in Q2 specifically. With respect to promotion and servicing expenses the big driver there was $5.5 million increase in travel and conferences and as I responded to Cynthia's question probably about half of that would drop in the second half of the year in a quarterly basis due to the high concentration of conferences in Q2 and then with respect to the G&A expenses they were flat, if you pull out the FX losses Q1 to Q2. So, we're about a if you pull up the FX loss in the second quarter it would have been a $127.5 million for G&A. So, these are the big movers consequently Q1 to Q2.

Okay if I just have a follow-up, my question is more specific to the distribution planned payment line which was 71 million this quarter if you subtract that you will get the bulk of the travel and the conferences. You are still 65 and that's a $0.11 growth sequentially maybe something in the first quarter that was unusually you saw beginning at 3% lift and related revenues. Is there anything going on between those dynamics?

Yeah I would look at distribution P&L on a net basis. So, taking distribution revenues less distribution related payments and the amortization of the DSE and if you look at those one revenue and two expenses that are net basis they were slightly positive around a few grand positive in the second quarter down some little over $1 million in Q1. Those numbers were slightly negative in the third quarter of last year and in the fourth quarter of last year. If you look at the trailing four quarters the net distribution P&L if positive were minus a $1 million up or $1 million down. So, it's within the normal range.

Okay. Thank you.

Thank you. Your next question comes from the line of Roger Smith with Macquarie.

Thanks. I want to just stay right now on this because it looks like if I look at what was reported in the first quarter of 2010 in this press release versus last press release but it looks like there is stuff that was moved from other plan and distribution payments and maybe if we just understand what happened there that might help us see the differences better.

Sure absolutely Roger very, very good point. We did have some re classes within promotion servicing expenses. So it was not between expense categories, between G&A and [P&S]. It was just within promotion servicing. There are three line items within our [P&S] expense, distribution, planned payments, the amortization of the DSE and other. We had -- there were distribution related expenses that were included in other historically and that beginning in Q2 we re classed those into distribution plan payments. We've actually broadened the category; now call it distribution related payments. The re-class in the first quarter was a little over $8 million and the re-class since Q2 of 2009 was about 6.4. So, total promotion servicing expenses did not change. It's just a re alignment between those individual components of promotion and servicing expenses. If you look at the reconciliation, the six quarter reconciliation within the press release and the 10-Q, you can all of those numbers going back since the first quarter of 2009. So it's a good point Roger. There was some movement within [P&S].

Okay, thanks very much.

There are no more questions in queue.

If I could just go back to Marc's question because I cant give you greater granularity. You asked about the trends within resale flows. First half this year over last year we're up over 100%. Fixed income is up over 200%, value sales up 55%, gross sales up 48% and then when you look at what it is being led by I said Asia had led. That's up 162% and U.S. coming up in the rear if you want to put it that way, up 33%. We would expect that to even out over time.

Okay, great, thanks everyone. And as always the IR team is available for your calls and questions later today. Have a good day.

Thank you everyone for participating in our conference call. Please feel free contact investor relations with any further questions. Have a great evening. You may now disconnect.