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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%
AllianceBernstein.com CMO 2Q 2014 | 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
AllianceBernstein.com CMO 2Q 2014 | 5
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
AllianceBernstein.com CMO 2Q 2014 | 6
–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
AllianceBernstein.com CMO 2Q 2014 | 7
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
AllianceBernstein.com CMO 2Q 2014 | 8
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
AllianceBernstein.com CMO 2Q 2014 | 9
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
AllianceBernstein.com CMO 2Q 2014 | 10
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
AllianceBernstein.com CMO 2Q 2014 | 11
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*
AllianceBernstein.com CMO 2Q 2014 | 12
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
AllianceBernstein.com CMO 2Q 2014 | 13
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
AllianceBernstein.com CMO 2Q 2014 | 14
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
AllianceBernstein.com CMO 2Q 2014 | 15
–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)
AllianceBernstein.com CMO 2Q 2014 | 16
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
AllianceBernstein.com CMO 2Q 2014 | 17
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
AllianceBernstein.com CMO 2Q 2014 | 18
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*
AllianceBernstein.com CMO 2Q 2014 | 19
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
AllianceBernstein.com CMO 2Q 2014 | 20
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
AllianceBernstein.com CMO 2Q 2014 | 21
–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†
AllianceBernstein.com CMO 2Q 2014 | 22
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
AllianceBernstein.com CMO 2Q 2014 | 23
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%
AllianceBernstein.com CMO 2Q 2014 | 24
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
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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
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0 25 50 75 100 125 150
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August 1982 March 2009
August 1921
December 1987
May 1947
Five Largest S&P 500 Rallies by Percentage Gain, Trough to Peak
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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.
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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.
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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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