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December 31, 2009 Capital Markets Outlook New Landscape Generates Opportunities The information herein reflects prevailing market conditions and our judgments as of the date of the presentation, which are subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, 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. Neither this presentation nor any of its contents may be used for any purpose without the consent of AllianceBernstein. Investment Products Offered: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed Introduction The markets have responded to continued signs of economic recovery As governments begin the process of withdrawing monetary and fiscal stimulus, risks remain regarding timing and execution New global economic patterns have emerged in the wake of the financial crisis Identifying companies and industries that will benefit from these changes creates opportunities for active managers AllianceBernstein.com 1 Equities and Credit Sharply Higher in 2009… Returns in USD 4Q:2009 Returns Equities 8.5% 6.0% EM US “Safe” Assets Credit 2.2% EAFE 5.2% 3.3% 2.4% 1.5% Global US Emerging Global High CMBS Market Corp Yield Debt 0.6% Japan Gov’t -0.1% -1.3% Euro Gov’t US Gov’t 2009 Returns 78.5% 57.7% 26.5% 31.8% 28.5% 34.2% 16.6% 1.4% 4.1% -3.6% Past performance does not guarantee future results. As of December 31, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Bloomberg, Barclays Capital, MSCI, S&P and AllianceBernstein AllianceBernstein.com 2 …in Response to an Improved Economic Outlook AllianceBernstein Real GDP Forecasts 6.4% 3.5% 3.5% 2.4% 1.9% 1.0% -2.5% -2.3% -3.9% -5.4% Global Japan 2009E Euro Area US Emerging Countries 2010F Current estimates and forecasts may not be attained. As of January 4, 2010 Source: AllianceBernstein AllianceBernstein.com 3 Confidence, While Still Weak, Is Improving G7 Confidence Measures 104 102 Consumer Neutral 100 98 96 Business 94 92 90 00 01 02 03 04 05 06 07 08 09 Historical analysis does not guarantee future results. As of September 30, 2009 Source: Organisation for Economic Co-operation and Development (OECD) AllianceBernstein.com 4 Bank Willingness to Lend Is Becoming Less Restrictive Bank Willingness to Make Consumer Installment Loans 40 More Willing Percent 20 0 -20 Less Willing -40 -60 97 98 99 00 01 02 03 04 05 06 07 08 09 Historical analysis does not guarantee future results. As of September 30, 2009 Source: Haver Analytics and US Federal Reserve AllianceBernstein.com 5 Significant Fiscal Stimulus Remains in Pipeline Fiscal Stimulus 100 Still to Come Percent 80 60 40 Realized* 20 0 US Total Stimulus Approved: “Realized” as % of 2008 GDP: China US $787 Bil. 2.0% US $790 Bil. 6.0% Estimates and “Still to Come” stimulus subject to change. As of December 31, 2009 *Includes realized tax cuts and amount paid out; China “realized” figure is an estimate. Source: CEIC Data, Congressional Budget Office, Recovery Accountability and Transparency Board, US federal agency financial and activity reports, and AllianceBernstein AllianceBernstein.com 6 Inflation: Three Key Factors to Watch Aggregate Demand vs. Supply Wage Growth Money and Credit Growth High High High Medium Medium Medium Low Low Low Historical analysis does not guarantee future results. Our framework marries the essential teachings about inflation from the major macroeconomic schools of thought with empirical evidence from a study of 180 countries over the past 40 years. Among other things, the empirical analysis examined those periods when a country went from low inflation (0%–5%) to high inflation (10%+) over a five-year span. Of these periods, 100% exhibited above-average money growth, 95% showed above-average wage growth and, qualitatively, 100% had aggregate demand exceeding aggregate supply. Source: AllianceBernstein AllianceBernstein.com 7 As Growth Accelerates, Interest Rates Should Rise Nominal World GDP Growth and Official Interest Rate 10 GDP Growth 8 Percent 6 4 2 Official Interest Rate 0 -2 -4 97 98 99 00 01 02 03 04 05 06 07 08 09 10F Historical analysis and forecasts do not guarantee future results. Projections may not come to pass. Historical data through September 30, 2009; forecasts through December 31, 2010 Official interest rate is a composite of 32 countries, including the developed economies and a sampling of emerging economies. Source: Haver Analytics, various central banks and AllianceBernstein AllianceBernstein.com 8 How Fast, and How Far? Official Interest Rates Percent 2003–2007 2009* 2010F* 6.7 6.0 5.3 4.7 3.4 2.8 2.3 2.0 1.0 0.2 0.1 0.1 Japan Euro Area 2.0 0.3 0.5 US UK China Historical analysis and forecasts do not guarantee future results. Projections may not come to pass. As of December 31, 2009 *At year-end; 2010 forecasts are AllianceBernstein’s. Source: Bloomberg and AllianceBernstein AllianceBernstein.com 9 Long-Term Budget Projections Tend to Extrapolate Current Trends US Federal Budget US$ Billion Projection Made in 236 FY1990 1990 for Actual FY2000 -221 -269 FY2000 Actual 444 126 FY2009 Actual Projection Made in FY2009 2009 for FY2019 Actual FY2019* Actual FY1999 Projection Actual Made in 1999 for FY2009 ? -722 -1,417 -1417 Historical analysis and future projections do not guarantee future results. Projections may not come to pass. As of December 31, 2009 *Assumes a baseline GDP growth of 2.5% over 10 years Source: Office of Management and Budget AllianceBernstein.com 10 Anxiety about the Future Obscures Opportunity Anxiety Opportunity US and other developed market consumers are too indebted to resume spending Growing middle class in emerging markets are the key to consumption growth The weak dollar is a sign of no confidence in the US The falling dollar is part of a necessary correction to an unhealthy imbalance Regulation and uncertainty will stifle economic growth Innovation and productivity gains are as strong as ever AllianceBernstein.com 11 The US Is Not the Only Driver of Consumption Emerging Markets’ Share of Global Real Consumption Growth Percent of Total 46% Latin America 29% Asia ex Japan 22% EEMEA Total Global Consumption Growth: 1990s 2000–2005 2006–2008 2.8% 3.9% 3.3% Historical analysis does not guarantee future results. Source: Haver Analytics, International Financial Statistics, World Bank and AllianceBernstein AllianceBernstein.com 12 We Believe The US Dollar Is Not at Risk of Losing Reserve Status Daily Currency Transactions US$ Billion US Dollar as a Share of Capital Market Transactions 3,000 US GDP as a Share of World GDP 24% 1,500 48% 52% 40% 0 US Dollar Euro Yen Historical analysis does not guarantee future results. As of December 31, 2009 *Includes debt securities issued by nonresidents **Excludes interbank loans Source: Bank of International Settlements, European Central Bank, MSCI and AllianceBernstein AllianceBernstein.com International Global Debt Equities Securities* CrossBorder Loans** 13 Weak Dollar Is Attracting Foreign Investment to the US and Driving a Shift in Trade Flows Real US Trade Deficit Foreign Direct Investment in the US 98 350 01 04 07 09* 0 -200 250 US$ Billions US$ Billions 300 200 150 100 -400 -600 50 0 02 03 04 05 06 07 08 -800 Historical analysis does not guarantee future results. Left as of December 31, 2008. Right as of September 30, 2009. *Based on first three quarters Source: Bureau of Economic Analysis, Haver Analytics and US Federal Reserve AllianceBernstein.com 14 Innovation Should Continue to Drive Economic Growth and Create Investment Opportunities Technological Revolutions 1923 Television 1928 Penicillin 1829 Steam Locomotive 1818 Bicycle 1846 Anaesthesia 1800 1876 Telephone 1895 X-Ray 1900 1827 Ohm's Law (Electricity) 1893 1865 Mendel's Radio Law (basis of 1903 genetics) 1885 Aeroplane First Car 1860 Internal Combustion Engine 1880 Electric Lighting 1942 Nuclear Reactor 1971 Microprocessor 2003 First Human Genome Sequenced 1990 World Wide Web 2000 1985 1953 1977 Helical Mobile DNA Finger Structure Phone Printing of DNA Discovered 1973 Genetically Modified Organism & Personal Computer Source: AllianceBernstein AllianceBernstein.com 15 Equity Markets Look Attractive by Long-Term Measures, But Fairly Valued on Current Levels of Earnings Price to Book Price to Sales Price to Earnings MSCI World MSCI World MSCI World 18.2× 17.7× 2009E Historical Average 2.5× 1.9× 1.0× Current Historical Average Current 1.2× Historical Average Historical analysis and current estimates do not guarantee future results. As of December 31, 2009 Historical averages are calculated by averaging monthly values looking back 10 years. Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: FactSet, MSCI and AllianceBernstein AllianceBernstein.com 16 Global Profitability Is at a Cyclical Low MSCI World ROE* 18 16 Percent 14 Long-Term Average: 12.0% 12 10 8 Current: 6.6% 6 89 92 95 98 01 04 07 Historical analysis does not guarantee future results. As of December 31, 2009 *Defined as price/book value divided by price/earnings Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: MSCI and AllianceBernstein AllianceBernstein.com 17 Companies Have Started to Beat Earnings Estimates Positive 3Q:2009 Earnings Surprises* EPS 82% 58% Sales 56% 53% 46% 32% US Europe Japan Historical analysis does not guarantee future results. As of December 31, 2009 *US represented by companies in the S&P 500, Europe by MSCI Europe and Japan by Nikkei 225; data are as of November 30, 2009. Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Bloomberg, MSCI, Thomson I/B/E/S and Bernstein AllianceBernstein.com 18 As Earnings Recover, Valuations Look More Attractive MSCI World Operating Earnings per Share 100 US Dollars 90 2011 Consensus Earnings Growth 21% 80 70 2010 Consensus Earnings Growth 28% Trend 60 50 07 08 09E 10E 11E P/FE 17.6x 14.1x 11.7x Past performance and current estimates do not guarantee future results. Actual earnings through December 31, 2008; 2009–2011 consensus estimates as of December 17, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: FactSet, Thompson I/B/E/S, MSCI and AllianceBernstein AllianceBernstein.com 19 As Risk Appetite Returns, “Safe Havens” Underperform Returns (%) 2008 30 2009 VIX* 40.0 30 10 10 -10 -10 -30 -30 -50 -50 US US Global Global CommTreas Dollar Corps Equities odities VIX* 21.7 US US Global Global CommTreas Dollar Corps Equities odities Historical analysis does not guarantee future results. *At year-end; CBOE volatility index Categories represented by: Barclays Capital US Treasury Index; US dollar versus trade-weighted basket of currencies; Barclays Capital Global Aggregate–Corporates Index, hedged into US dollars; S&P GSCI Total Return Index; and MSCI World, hedged into US dollars Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Barclays Capital, Bloomberg, CBOE, MSCI and S&P AllianceBernstein.com 20 Company- and Industry-Specific Factors Increasingly Drive Stock Performance MSCI World Intra-Index Correlation of Performance 0.5 Correlation 0.4 Less Stock-Specific 0.3 0.2 More Stock-Specific 0.1 0.0 02 03 04 05 06 07 08 09 Historical analysis does not guarantee future results. As of December 31, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Credit Suisse, MSCI and AllianceBernstein AllianceBernstein.com 21 The Spread Opportunity Has Been Largely, Although Not Fully, Captured Global Corporate Bond Spreads to Treasuries 2007–2009 High Yield Inv. Grade Dec 2008 Basis Points 1,500 1,000 Dec 2009 500 Dec 2007 0 A BBB BB B Historical analysis does not guarantee future results. As of December 31, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Barclays Capital and Merrill Lynch AllianceBernstein.com 22 Sound Research Is a Must In a Lower-Yield Landscape Global Investment-Grade Corporates (%) Global High Yield (%) 86.3 17.0 16.9 7.8 5.5 1.1 8.4 4.5 0.7 6.5 1.1 Dec 07 Dec 08 8.7 6.2 Dec 09 Dec 07 21.1 18.6 8.5 8.5 Highest Yielding Issue Median Yield 5.0 Dec 08 Lowest Yielding Dec 09 Issue Historical analysis does not guarantee future results. As of December 31, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: Barclays Capital and Merrill Lynch AllianceBernstein.com 23 The Worst Year in Market History Followed By One of the Best Annual Stock Market Returns MSCI World Index Number of Positive Years: 30 75% Number of Negative Years: 10 25% 2008 -50 to -40 -40 to -30 1974 2002 2001 2000 1990 1973 1992 1981 1970 2007 2005 1994 1984 1982 1977 -30 to -20 -20 to -10 -10 to 0 0 to 10 2004 1997 1996 1991 1989 1987 1979 1978 1976 1971 2009 2006 1999 1998 1995 1993 1988 1983 1980 1972 2003 1975 1986 1985 10 to 20 20 to 30 30 to 40 40 to 50 Percentage Total Return Historical analysis does not guarantee future results. As of December 31, 2009 Individuals cannot invest directly in an index. Please see slide 27 for index definitions. Source: MSCI and FactSet AllianceBernstein.com AllianceBernstein 24 Anxiety Creates Opportunity Economic recovery is gaining steam Policy risks remain Anxiety about the future… …continues to generate investment opportunities AllianceBernstein.com 25 A Word About Risk Past performance is no guarantee of future results. The investment return and principal value of an investment in any Fund will fluctuate as the prices of the individual securities in which they invest fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be “value” stocks are able to turn their business around or successfully employ corrective strategies that would result in stock prices that rise as initially expected. Investments in foreign securities may magnify fluctuations due to changes in foreign exchange rates and the possibility of substantial volatility due to political and economic uncertainties in foreign countries. Because a Fund may invest in emerging markets and in developing countries, an investment also has the risk that market changes or other factors affecting emerging markets and developing countries, including political instability and unpredictable economic conditions, may have a significant effect on a Fund's net asset value. Investing in non-US securities may be more volatile because of political, regulatory, market and economic uncertainties associated with such securities. These risks are magnified in securities of emerging or developing markets. While a Fund may invests principally in common stocks and other equity securities, in order to achieve its investment objectives, a Fund may at times use certain types of investment derivatives, such as options, futures, forwards and swaps. These instruments involve risks different from, and in certain cases, greater than, the risks presented by more traditional investments. These risks are fully discussed in each Fund’s prospectus. AllianceBernstein.com 26 Index Descriptions Following is a description 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. Standard & Poor's Index (S&P 500) Widely regarded as the best single gauge of the US equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the US economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of US equities, it is also an ideal proxy for the total market. The S&P 500 is part of a series of US indices that can be used as building blocks for portfolio construction. With close to $1 trillion in indexed assets, the S&P US indices have earned a reputation for being not only leading market indicators, but also investable portfolios designed for cost efficient replication or the creation of index-linked products. MSCI Europe Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the developed markets in Europe. As of June 2007, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Morgan Stanley Capital International (MSCI) World Index is a market capitalization–weighted index that measures the performance of stock markets in 23 countries. Morgan Stanley Capital International (MSCI) Emerging Market Index is a free float–adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. It consists of 26 emerging market country indices. TOPIX Index measures stock prices on the Tokyo Stock Exchange (TSE). VIX Index or Chicago Board Options Exchange (CBOE) Volatility Index shows the market's expectation of 30-day volatility constructed using the implied volatilities of a wide range of S&P 500 index options. AllianceBernstein.com 27 Index Descriptions (continued) Barclays Capital US Dollar Emerging Market Index includes USD-denominated debt from emerging markets in the following regions: Americas, Europe, Middle East, Africa, and Asia. As with other fixed income benchmarks provided by Barclays Capital, the index is rules-based, which allows for an unbiased view of the marketplace and easy replicability. Barclays Capital Global Aggregate - Corporate Bond Index tracks the performance of investment grade corporate bonds publicly issued in the global market found in the Global Aggregate. Barclays Capital Global High Yield Index provides a broad-based measure of the global high-yield fixed income markets. The Global High-Yield Index represents that union of the U.S. High-Yield, Pan-European High-Yield, U.S. Emerging Markets HighYield, CMBS High-Yield, and Pan-European Emerging Markets High-Yield Indices. Barclays Capital US Corporate High Yield Index covers the USD-denominated, non-investment grade, fixed-rate taxable corporate bonds that are classified as high-yield in the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Excludes Emerging Markets. Barclays Capital Commercial Mortgage-Backed Securities (CMBS) Index tracks the performance of US dollar denominated commercial mortgage-backed securities publicly issued in the US domestic market. Barclays Capital US Treasury Index includes fixed-rate, local currency sovereign debt that make up the US Treasury sector of the Global Aggregate Index. Barclays Capital Japan Treasury Index includes fixed-rate, local currency sovereign debt that make up the Japanese Treasury sector of the Global Aggregate Index. Barclays Capital Euro Treasury Index includes fixed-rate, local currency sovereign debt that make up the Euro Treasury sector of the Global Aggregate Index. JP Morgan Emerging Markets Bond Index Plus (EMBI+) tracks total returns for external-currency-denominated debt instruments of the emerging markets: Brady bonds, loans and Eurobonds. It offers coverage of 21emerging market countries AllianceBernstein.com 28 16874 AllianceBernstein Investments, Inc. (ABI) is the distributor of the AllianceBernstein family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds. ©2010