Thank you for standing by. And welcome to the AllianceBernstein Second Quarter 2014 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session and I will give you the instructions on how to ask a question at that time. As a reminder, this conference is being recorded, and will be available for replay for one week. I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein Miss Andrea Prochniak. Please go ahead.

Thank you, Anastasia. Hello, and welcome to our second quarter 2014 earnings review. This conference call is being webcast and accompanied by a slide presentation that is posted in the Investor Relations section of our website. Our Chairman and CEO, Peter Kraus; CFO, John Weisenseel; and COO, Jim Gingrich will present our financial results and take questions after our prepared remarks. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I’d like to point out the Safe Harbor language on Slide 1 of our presentation. You can also find our Safe Harbor language in the MD&A of our 2013 Form 10-K and in our second quarter 2014 Form 10-Q which we filed this morning. Under Regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call. We are also live tweeting today’s earnings call. You can follow us on Twitter using our handle @AllianceBernstn. Now I’ll turn the call over to Peter

Thanks, Andrea, and thank you all for joining us today. Let’s begin with a firm-wide overview which is on Slide 3. Our second quarter results demonstrate the progress we keep making to deliver for our clients. During the quarter, not only did our firm-wide gross sales increase by nearly [60%]. Our gross redemptions declined by 21% through our lowest level since the third quarter of ’06. As a result, net flows improved by $12.7 billion to a positive $8.3 billion, our highest quarterly net inflow number since the fourth quarter of 2007. I told you on our first quarter call that our muted gross sales were a function of the timing of fundings. As expected, we had several large mandates fund during the second quarter. We also experienced lower volatility, better retail sales trends in Asia ex Japan as well. Both equity and fixed income markets were constructive during the quarter which contributed to our AUM growth. We finished the quarter with AUM of $480 billion; investment performance contributed $15 billion to our $26 billion sequential quarter increase. We successfully closed our acquisition of CPH Capital. Our global core equity manager added another $2.9 billion. Average AUM was higher versus both prior periods as well. Slide four attracts our quarterly flow trends across channels. Institutional gross sales of $10.5 billion were our highest since the second quarter of ’08 and up 36% versus the prior year’s quarter of $7.7 billion. Institutional net flows at $6.8 billion were our highest since the fourth quarter of 2007. Retail net flows of $2 billion turned positive for the first time since the first quarter of last year, the result of both higher sales and lower redemptions. In the Private Client, we had one large low fee redemptions during the quarter, which drove the…

Thank you, Peter. As always, I’ll focus primarily on our adjusted results in my remarks today. Our standard GAAP reporting is included in this presentation’s appendix, our press release and our 10-Q. Let’s start with the highlights on Slide 15. Second quarter adjusted revenues increased sequentially and versus the second quarter of 2013 due in both cases to higher based fees on higher average AUM and increased performance fees. Our second quarter adjusted operating margin of 22.9% compares to 21.9% in the first quarter and 22.2% in the second quarter of 2013 as revenue growth outpaced increased expenses. Adjusted earnings per unit were $0.45 versus $0.39 in the first quarter and $0.41 in the prior year quarter. Now I’ll review the quarterly GAAP to adjusted operating metrics reconciliation on Slide 16. As you can see we excluded second quarter acquisition related expenses mainly severance and temporary service fees related to the W.P. Stewart and CPH acquisitions which were included in GAAP expenses. As a result, adjusted operating income was $1 million higher than GAAP operating income. Now we’ll turn to the adjusted income statement on Slide 17. Second quarter adjusted net revenues of $632 million were up 6% versus the first quarter as well as the second quarter of 2013. As a result, adjusted operating income of $144 million for the quarter was up 10% sequentially and up 8% as compared to the prior year quarter. We earned $0.45 per unit on an adjusted basis which will also be our quarterly cash distribution. Slide 18 provides more detail on our adjusted revenues. With average AUM up across all three of our distribution channels, base fees increased 5% sequentially. They are up 4% versus the second quarter of 2013 primarily due to an increase of Private Client base fees. Performance fees…

(Operator Instructions) Your first question comes from Michael Kim with Sandler O’Neill. Your line is open.

Good morning, this is actually Andrew [DiZio] filling in for Michael. My first question has to do with margins. So I noticed that net flows have turned positive, and it seems like there is a -- momentum continues to build more broadly. AUM and revenues continue to trend higher, and the expense base is more streamlined versus prior cycles. So just wondering how you see the margin trajectory playing out, assuming a more constructive market backdrop?

We’ve been able to continue to expand our margin, which we’ve been very pleased with. We continue to be focused on keeping expense in check. And I think in terms of margin expenses from here it’s really depending upon an increase in revenue and a continued increase in AUM. Our incremental margin continues to increase as well, so for the current quarter, the incremental margin was actually 39%, compares to 35% of where it was in the second of last year. So, again we continue to make improvements on the incremental margin side, continue to manage the expenses tightly, and as revenues continue to increase hopefully you will see more and more of that drop through to the bottom line.

Great. Thanks. And then next, if I look at your equities performance, I think at a high level, it is fair to say that the one-year numbers are quite strong. But the three-year track records are still a bit more uneven, broadly speaking. So just looking ahead, as prior under-performance increasingly rolls off the three-year numbers, just wondering if you think that could be a near-term catalyst for a step-up in demand for those portfolios. Or do you feel like you still need another year or so of good relative returns?

Andrew, its Peter. I think that the equity performance is being noticed by institutional investors, consultants, and retail home offices. And I think as we talk more about our performance and our new services with them and the broader lineup we have. And as the performance continues, I think that investors will begin to allocate more capital to us. The speed of that, the timing of that is awfully hard to gauge. But what we do notice that our equity flows – our active equity flows are getting better. Much of that is redemption activity falling, but some of that is actually new services and existing services gathering assets. We have existing clients who have been with us a long time in our core services, who are saying to us, we are performing better, in some cases the best of any of their managers. That’s going to have a positive impact over time.

All right. Great. Thanks. Thanks for taking my call.

Your next question comes from Tom Whitehead with Morgan Stanley. Your line is open.

Great. Thanks for taking my questions, guys. I want to start on the institutional pipeline. Could you maybe help us breakout a little bit more what’s in that $4.3 billion today? I know, the RFP activity is up, but I just trying to get a sense for the makeup of that 4.3 and you know, is the increased in the fee rate in that channel due to the product mix or is there something more there?

Well, first of all, I think we do give you a reasonable list of the large things in the asset class -- asset class that’s in the pipeline, that’s on slide five on the bottom right hand corner. So you can see there that there are both a mixture of fixed income and equity alternative and multi-asset opportunities. I think if you were looking at that slide over time and comparing it to information we’ve given in the past, there is more diversification here, and indeed more equity. And that, I think bodes well for the objective of diversifying the business. In addition to slide above that, which I’m sure you saw, shows a market change in RFP activity particularly in equities. Now that is to some extent low number of RFPs in previous periods, but it’s still a stunning percentage change of 120%. So, we see the pipeline being more diverse, and we see the RFP activity being much more significant. We also have added to the equity lineup, as you know, W.P. Stewart and CPH Capital, both of which will attract significant RFP activity that’s true factually in the case WPS. But it will also be true for CPH.

Okay, great. That’s helpful. And then, just on performance fees. So $20 million this quarter, is it fair to assume that the AB recovery fund, if I heard correctly, I think that’s $7 million that’s not going to recur? And then of the select absolute alpha fund, just curious as to sort of the level of performance, the level of alpha you guys have to generate to get that $11 million and what we – I know it’s a moving target and its hard to predict, but what to sort of expect in terms of magnitude from that going forward?

Well, the performance fees -- our traditional fees are 20% of performance. So, it’s an absolute return fund. You can do the math, I don’t think its -- there’s nothing uncomplicated about that. It’s pretty straight forward.

Okay. And then just to clarify the $7 million on the recovery fund that is -- that was from the liquidation, if I heard correctly, right?

Yeah. This is John. That’s correct. And just to clarify as well. On the performance fees we recognize them as the conclusion of the calculation period. So with the select absolute alpha fund it’s an annual period that ended in May. And that’s why we did the calculation and we recognize the revenue. So, for example, for that fund you’re not going to see any additional revenue next quarter, right. You have to wait another year.

Right, right. Okay. All right. Thank you.

Your next question comes from Bill Katz with Citi. Your line is open.

Hi. This is Steve Fullerton filling in for Bill. So it seems like the private client business is benefiting from strong alternative flows. Is there in the same – excuse me, is there same traction in retail and you see clients also gravitating towards alternative type products in that channel?

We have built a pretty strong lineup in liquid alternatives in retail, both in [uses] funds and in 40-Act funds and we’ll continue to add to that. And so, I think in word, we do see that as an increasing opportunity for us and we see clients, meaning investors broadly speaking interested in that space. I don’t want to overestimate it. I don’t want to oversell it. It is a new asset class for many people and it’s also quite a diverse asset class. So when you talk about liquid alternatives there are single managers, there multi-managers and there is all kinds of things in those classes. But for us, it’s an increased area of focus. We are one of the few managers with actually a broad lineup in that space, not just one manager here, one manager there. And I think we will capture more than our fair share of opportunity in that space given that we’re populating product in many different markets on many different platforms.

Okay. Great. And then just tactically on the G&A decline quarter-by-quarter. Is the 106 a good run rate in the next quarter? And I know it increase year-on-year and you gave some color there. But is this a good run rate going forward?

The G&A has been within a fairly tight range the past couple of quarters. And so, I think you just going to see it within this tight range, move around, keeping in mind there’s lots of things in there, there is foreign currency revaluation, there is errors, there’s professional fees, lots of things in there. But I think what you see in the past is just been fluctuating within a range and that’s what we should be able to expect going forward.

Great. Thank you.

Your next question comes from Cynthia Mayer with Bank of America Merrill Lynch. Your line is open.

Hi. Thanks a lot. So I just digging into the flows a little bit more. It looks like this quarter you had equity outflows and very strong institutional fixed income sales, which were up quite a bit. So, can you give a sense of what the biggest inflows were on the fixed income side by dollar amount not fees? And then on equity, are those redemptions, concentrated in any particularly area? It sounds like it’s improving, but not sure where?

Yes. To be a little bit careful about the equity between passive and active. So, most of the outflow is in the passive side not the active side. And what is selling in fixed income global bond, U.S. investment grade, U.K. credit, Canadian core, are some of the larger ones, some other diversifiers that we saw in institutional, [China] value, international -- excuse me, strategy value, international strategic value, Asia-ex Japan value, so we’ve seen a little bit of nibbling away, meaning growth at the value portfolio, at the value platform and that’s been a good story for us.

Okay. Just to clarify, I’m seeing a $1 billion in equity -- active equity outflows. Does that sound right?

That’s correct.

That is correct. But there are larger flows.

Only 0.2 and passive equity outflows.

That in total, yes.

Right. Okay. And then, just wondering if you can give any color on quarter to date first, because there been a lot of headlines on pressure on high yield and just not sure if that would carry to your -- over to your retail business?

Well look, we’ve had a much better quarter than we had last year this time. And we had talked about the fact that we thought our clients would come back to our platform which they did. We also recognize and I think clients recognize that they are still interested in yield. And we also believe clients recognize that the sale-off of August last year gave rise to a pretty attractive return after that of some 6% or so percent. And so there’s been a more modest exit this year in front of anticipation that interest rates will up and the fed will change its policy. I don’t think that we would expect there to be an absence of volatility in that market. We continue to believe that there will be volatility there and we continue to believe that that volatility will be driven by expectations of central bank activity particularly in the fed. One of the things we’ve been able to do is introduce new services or different services that have a different risk profile. I mentioned the European product -- income product which doesn’t have U.S. interest rate risk, and one can take a position that the ECB interest rates will be more modest, and go up as fast, may actually go down. And that could have an offsetting effect in terms of risk and return for clients in that space. So, we think we’re little bit more diversified. Clients have little more experience about how this work. But don’t take my comments to mean that we don’t think there’s any volatility going forward, because we do believe there is.

Okay. Thanks a lot.

(Operator Instructions) Your next question comes from Gregory Warren with Morningstar. Your line is open.

Yes. Thanks for taking my question. Just stepping back to conversations we’re having of about flows in the equity side. And your flows are significantly better than they had been in the past and a lot of that due to low redemption activity. And we look at the flows for the industry overall, most of its passive. If there is any money coming in, it’s coming on the international side. But just wondering, given the competition for active equity flows, are going to be much differ, given the fact that a lot of managers are rolling off bad five-year numbers this year and the next year, what gives you confidence that you’re going to be able to pickup your fair share of assets as they become available?

Well, I think couple of things. All good points. One is that, our core services, we’ve been very persistent with our strategy. Haven’t wavered, stuck to our knitting. And we have been able to show clients that by doing that we can produce the performance that we have expected. And in those core services -- and I think this is largely going to be institutional and sub-advised retail, buyers of those services recognize that persistency. So, even though we will benefit like others as you say of bad years rolling off, we also benefit from the persistency and consistency that we’ve stated we have and have shown over the last five years. So there’s some value to that as a differentiator. Secondly, as we’ve expanded the equity platform quite dramatically, and there’s a number of services that we’ve bought to investors both new people to the firm, as well as new services created by the existing investment teams that are more concentrated, higher active share, are unique sometimes really differentiated in their space and we’ve talked to a number of those and those are attracting flow, because they are different, they are unique. And they also are part of a broad platform that we are able to talk about with again large clients who are allocating assets and give them alternatives for their financial advisors and their clients, to actually provide that kind of equity return over time. So that differentiates as well. Now, you’re right. It’s a competitive world. And those categories, for example, core activities, global core activities have a lots and lots of mangers and you have to have something different and unique. We think in some cases we do. CPH Capital would be an example of that.

Okay. Just one we think about the equity, the active equity side of the business. And I know you guys don’t look at it this way anymore and don’t report it this way. But we think about the breakdown between say value and growth, which of those do you feel you have clients, because we have those conversations in the past about you’re having some long standing clients been with you 10, 15 years have stuck with you guys throughout, which ones do you feel are more of those stickier assets on the value or the growth side and which areas do you feel better about as far as generating growth as we move forward?

It’s a tough question to answer, because projecting how the performance is going to rollout on those two services or any services is hard to do. But let’s assume that we have a continuation of the performance. I think we have seen particularly in the value side, additions by existing clients to existing portfolios. And they’re probably are both in the pure growth world and in the value -- pure value world, deep value world, very few competitors. There is not lot left. Many people have migrated to relative value or less aggressive growth for example the Thematic growth portfolio there are just not a lot of competitors in Thematic growth. And I think that we’ll probably benefit from that too.

Good. Thanks for taking my questions. It’s good to see guys, definitely getting back on track here.

There are no additional questions at this time. I turn the call back over to Ms. Prochniak.

Thanks everyone for participating in today’s call. IR is available to the rest of the day if you have any follow-up questions. Thanks and have a great day.