1 The Phillips Group of A Division of Wiley Bros. – Aintree Capital, LLC Section Three Why Asset Allocation Matters

1The Phillips Group of

A Division of Wiley Bros. – Aintree Capital, LLC

Section Three

Why Asset Allocation Matters

2

Lehman Aggregate

Bond Index

AverageBondFund

Investor

AverageStock Fund

Investor

InflationS&P 500

Annualized Returns1985–2005

Our Investment Philosophy

Individual Investors Have Underperformed Benchmarks

The Phillips Group of


11.9%

3.0%3.9%

9.7%

1.8%

*THE ABOVE PRICES, QUOTES, YIELDS, ETC. HAVE BEEN OBTAINED FROM SOURCES WE BELIEVE TO BE RELIABLE, BUT CANNOT BE GUARANTEED. ERRORS AND OMISSIONS EXCEPTED.

3

Source Ibbotson Associates. Note Study based on ten years of quarterly data.

Cross products account for 2.1% of the variance.

Asset Allocation Policy91.5%

Other Factors2.1%

Market Timing1.8%

Security Selection4.6%

The Brinson, Hood & Beebower Study, conducted in 1987, and updated in 1991, found that nearly 92% of the variation in pension funds' returns from 1977 to 1987 were attributable to the asset allocation decision.

• The Phillips Group believes that portfolios should be managed in accordance with a strategic asset allocation plan that thoroughly reflects an investor’s long-term objectives and risk tolerance.

• Research has shown that allocation of assets among stocks, bonds, and cash equivalents is the primary determinant of long-term investment results. Since each asset class responds differently to shifts in the economy and financial markets, each asset class adds its own dimension to a portfolio’s performance. Active and effective allocation is the key to enhancing results.

• Many non-U.S. stocks and bonds have historically had relatively low correlations with U.S. stocks and bonds as well as with each other. A carefully selected portfolio of domestic and international securities offers significant diversification opportunities while potentially lowering the portfolio’s volatility and increasing its returns.


Step One: The Importance of Asset Allocation



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Step Two: Combine Low Correlated Assets

US Growth

International

US Value

Short-Term Bonds

REITs

CashNo Correlation 0

High Correlation 1.0

1984–2005

US Small-Cap

Intermediate-Term Bonds

High Yield




5

US Stocks

(29.2)%

(42.7)

(14.2)

(17.2)

(29.6)

(14.7)

(13.4)

(40.9)

(25.2)%

2.2%

4.6

1.5

21.7

2.3

5.2

4.7

36.5

9.8%

Dec 68–Jun 70

Jan 73–Sep 74

Jan 77–Feb 78

Dec 80–Jul 82

Sep 87–Nov 87

Jun 90–Oct 90

May 98–Aug 98

Apr 00–Mar 03

Average

US Bonds


The Benefit of Low Correlation




6


Why Stock and Bond Combinations

7

8

9

10

11

12

13

5 7 9 11 13 15 17

1970−2005

100% Bonds

100% Stocks

60/40

Risk (%)

30/70



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Step Three: Combine Growth and Value

16.4%

10.2%6.2%

23.5%

31.1%

24.5%

12.4%

22.2%

10.0%

(6.7)%

3.7%

40.8%

80 81–88 89–91 92–93 94–99 00–05

Value Stocks

Growth Stocks

Annualized Returns




8

1970−2004

% in Foreign Stocks

Past performance is no guarantee of future results.Through December 31, 2004 US Stocks are represented by the S&P 500 Index of stocks. Foreign stocks are represented by the MSCI (Morgan Stanley Capital International) EAFE Index. The chart presents various combinations of the US and Foreign Stock components, including the highlighted 70% U.S/30% foreign combination. An investor cannot invest directly in an index, and its results are not indicative of any investment, including the Wealth Strategies Funds. Volatility is defined as the annualized standard deviation of portfolio returns for the period from 1970 to 2004. Source: MSCI, Standard & Poor’s and AllianceBernstein.

Volatility (%)


Step Four: Globalize the Portfolio

13

14

15

16

17

0 10 20 30 40 50 60 70 80 90 100



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Oil & Gas

Banking

AutomobilesToyotaDaimler Chrysler

BPShell

HSBC HoldingsUBS

Non-US Share of IndustryBy Market Value: December 31, 2005

Examples

82%

72%

60%

International investing is subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditionsSource: MSCI World Index


Larger Universe of Opportunity



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Correlations with US Stock Market1975–2004

ExxonMobil 79%

AFLAC 75

Intel 71

Motorola 68

Coca-Cola 68

Colgate-Palmolive 67

Avon 65

McDonald’s 65

Gillette 61

IBM 60

MultinationalUS Companies

% of Sales Outside US

EAFE Index

Past performance is no guarantee of future results. Through December 31, 2004Morgan Stanley Capital International (MSCI) EAFE Index, unhedgedIndexes are unmanaged and do not include fees and expenses associated with an investment in a mutual fund. An investor cannot invest directly in an index, and its results are not indicative of any specific investment including any AllianceBernstein mutual fund. See page 39 for a description of each index.Source: MSCI, Standard & Poor’s and AllianceBernstein

0

1.00Performance in step with S&P 500

No relationshipwith S&P 500

0.56

0.87


US Multinationals Do Not Diversify as Well



11

Rebalancing increases the consistency of returns

Unrebalanced

Higher Probability

Lower Probability

Rebalancing increases the median return

Rebalanced

Unrebalanced

Median Return

Rebalancing reduces the likelihood of bad outcomes

Ancillary Services

Step Five: Rebalance



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Hypothetical Average Annual Return1970–200418.6%

11.1%8.8%

12.4%

Timing Styles withPerfect Foresight

67% Right* 50% Right* AnnuallyRebalanced 50/50

BlendPast performance is no guarantee of future results.The chart above shows the average annual historical return of an investment in “growth” stocks and “value” stocks (as defined below) where the investors decision to time the growth or value cycle, on an annual basis, is shown in percentages of how correct in hindsight their timing to switch was. A 50/50 blend investment with automatic rebalancing annually is in yelow. The “growth” and “value” stocks used in this presentation are determined as follows: beginning with all publicly traded stocks on the US stock exchanges (not just the S&P 500), the 30% of stocks with the highest price-to-book ratios represent “Growth.” The 30% of the stocks with the lowest price-to-book ratios represent “Value.” The middle 40% of the companies are excluded. These returns do not include fees and expenses associated with an investment in a mutual fund. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including any AllianceBernstein mutual fund.*Assumes an attempt to market time but invest in the lower performer (value or growth) during the years in which the difference between the two was highest, missing the best 33% or best 50%Source: Fama/French and AllianceBernstein


Step Five: Rebalance



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Past performance is no guarantee of future results.Rolling periods are measured from January 1, 1970 through December 31, 2004The 50/50 growth and value composite is a hypothetical composite comprising 50% “growth stocks” (i.e., the top 30% of all stocks publicly traded on American exchanges ranked by price-to-book ratios) and 50% value stocks (i.e., the bottom 30% of such stocks). The 50/50 portfolio is rebalanced monthly, as necessary, to maintain its growth and value proportions; transaction charges for rebalancing are not taken into account Source: Fama/French, Standard & Poors


Blending Styles Adds Consistency

58% of the time

91% of the time78%

of the time 70% of the time

12-Months 3-Year 5-Year 10-Year

% of Time Rebalanced 50/50 Blend Outperformed the S&P 5001970–2005



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1 The Phillips Group of A Division of Wiley Bros. – Aintree Capital, LLC Section Three Why Asset Allocation Matters