avatar Alliancebernstein National Municipal Income Fund, Inc. Finance, Insurance, And Real Estate

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    2019 ANNUAL REPORT Delivering Differentiated Growth, Excellence and Innovation


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    2019 FINANCIAL HIGHLIGHTS AB HOLDING (The Publicly Traded Partnership) Years Ended December 31 2019 2018 2017 1 Adjusted Net Income (USD Thousands) $242,083 $259,700 $218,979 Adjusted1 Diluted Net Income per Unit $2.52 $2.67 $2.30 Distributions per Unit $2.53 $2.68 $2.30 AB (The Operating Partnership) Years Ended December 31 2019 2018 2017 Assets Under Management (USD Millions) $622,915 $516,353 $554,491 1 Adjusted Revenues (USD Thousands) $2,916,615 $2,925,604 $2,712,899 Adjusted1 Operating Income (USD Thousands) $802,444 $852,059 $750,118 Employees 3,811 3,641 3,466 ASSETS UNDER MANAGEMENT (USD Billions) By Investment Service By Channel By Client Location Fixed Income Passive2 $9 Private Wealth Fixed Income 16% Equity Passive2 Active Non-US 35% $60 Other3 $101 $71 $217 Institutions $306 $283 45% $239 $406 Equity Active $177 Retail 39% US 65% 1 The adjusted financial measures are all non-GAAP financial measures. See pages 39–40 and pages 47–50 of the enclosed Form 10-K for reconciliations of GAAP financial results to adjusted financial results and notes describing the adjustments. 2 Includes index and enhanced index services 3 Includes multi-asset solutions and services, and certain alternative investments


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    LETTER FROM THE CEO In many respects, 2019 was a gratifying year for our firm. Our global platform enjoyed broad-based growth, demonstrating strong progress in executing on our strategy. Investments to revitalize our active equities platform and diversify our global business produced distinguished results and positioned the firm to sustain our momentum. Operationally, we continue to execute on our corporate relocation to Nashville, with 650 employees based in Nashville at year-end and a target of 1,250 over time. Our management team continues to evolve and strengthen, reflecting several key leadership appointments which position us well for the future. I would also like to formally welcome our newest board members, Nella Domenici and Kristi Matus, and thank Barbara Fallon-Walsh and Shelley Leibowitz for their service and insights provided to the Board over the last two years. MARKET ENVIRONMENT economic consequences of Brexit are still to be determined, the Global financial markets performed very well in 2019, supported results of the special election held in December 2019 boosted by three interest-rate cuts from the US Federal Reserve, which the pound and the UK equity market. In Asia, equity markets were designed to prevent negative impacts from global risks posted more modest gains in the wake of uncertainty arising that emerged during the year. Outside the US, central banks also from the continued demonstrations in Hong Kong. China worked provided additional monetary accommodation, boosting global to balance the short-term need for economic stimulus against financial markets broadly even as aggregate growth slowed in the medium-term need to reduce debt levels in its economy. 2019. Investor optimism about the eventual resolution of the ASSET FLOWS AND FINANCIALS trade dispute between the United States and China provided While active fund management continued to experience secular, a significant boost to global equities in the fourth quarter of persistent pressure from passive strategies, 2019 was an 2019. In addition, the Federal Reserve resumed expansion of improvement. In the US, total industry-wide active mutual fund its balance sheet late in the year, a move viewed by many as outflows improved to $34 billion in 2019 compared to $286 indicative of its willingness to keep liquidity ample. Subdued billion in 2018, driven by active fixed-income US mutual funds, inflation allowed interest rates to remain low, which supported which experienced inflows of $272 billion. Active equity US both economic growth and strong financial market performance. mutual fund outflows worsened to $289 billion in 2019, an In the US, equity markets rallied to finish the year with record- increase of 16% year over year. high point gains. Despite a downturn in manufacturing and Amid these industry headwinds, AB’s global platform achieved businesses generally hesitant to invest, consumer spending active organic growth of 6.5%, our best year in more than remained at a healthy level and the labor market was strong, with a decade. This reflected a very strong year in fixed income the unemployment rate at a 50-year low. Inflation continued to and continuing success with active equities, well diversified approximate the Federal Reserve’s target and, barring a material by channel and region. Combined with strong markets, our deterioration in the US economy, the Federal Reserve indicated organic growth grew our AUM to $623 billion, up 21% from a pause in rate cuts. the prior year, while our fee rate remained essentially flat. Improved global economic data and alleviated trade tensions Our commitment to delivering differentiated return streams sparked a rally in international equities and a weakening of the to our clients led to consistent results in both investment US dollar. As a result, eurozone equity markets rallied. While the performance and flows. In Retail, we achieved record full-


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    year gross sales of $75 billion, which was $19 billion, or 34%, Furthermore, our Equity services have generated 11 straight above our historical high. This resulted in active net inflows of quarters of positive net flows. In our Institutional channel, the firm $27 billion, or 20% organic growth. During 2019, 33 AB funds generated $2.9 billion of active equity net inflows, or a 9% organic across asset classes each had more than $100 million in net growth rate, and our pipeline of $15.1 billion in AUM showed inflows. In Institutional, active equity gross sales of $9.2 billion growth of 56% year over year, with a record annualized fee base were our highest since 2008, with net inflows of $2.9 billion, greater than $40 million. In Private Wealth, while our gross sales in or 9% organic growth. Our $15.1 billion institutional pipeline 2019 of $11.3 billion represented a year-over-year decrease, we at year-end showed growth of 56% from the prior year, continued to make progress on improving our mix of ultrahigh-net- reflecting strength across asset classes. worth accounts, with a 5% annual increase in new relationships with AUM of at least $20 million. For a fifth consecutive year, we PROGRESS ON THE STRATEGY experienced organic growth in client relationships with asset In 2019, the firm’s results demonstrated meaningful progress in allocations that include Alternative offerings. executing on our Growth Strategy. Below are key metrics related to the three pillars of the Growth Strategy: We continued to successfully develop and raise capital for new Alternatives services, which we are offering across our buy-side + Deliver Differentiated Return Streams to AB’s Clients distribution channels. Launches in 2019 included a fund-of- The firm’s investment teams continue to focus on consistently funds joint venture with Abbott Capital Management, our third delivering differentiated return streams to our clients. We believe US real estate fund and three real estate co-investment funds. that, over time, the ability to produce idiosyncratic returns that cannot be easily replicated will be central to sustaining our + Maintain Continuous and Rigorous Focus on competitive advantage. In 2019, performance in our Fixed Expense Management Income suite of products exhibited continued strength, with 86% Expense management remains a primary focus for us. In 2019, we of assets in outperforming services for the one-year period, made substantial progress on a key pillar of this strategy, which 81% for the three-year period and 92% for the five-year period we had initially announced in 2018: the relocation of our corporate ended December 31, 2019. In active equity, 43% of assets headquarters from New York City to Nashville. We expect that the were in outperforming services for the one-year period, 62% for Nashville office will house approximately 1,250 employees over the three-year period and 84% for the five-year period ended time (up from our prior target of 1,050) and generate savings of December 31, 2019. Additionally, at year-end 2019, 69% of US $75 million to $80 million annually upon completion of the move. fund assets and 66% of non-US fund assets were rated either 4 or 5 stars by Morningstar. Operationally, we remain focused on making appropriate resource tradeoffs in support of key growth initiatives. For example, several + Commercialize and Scale AB’s Suite of Services strategic technology investments are being made to provide the Growing both the diversity of our offerings to meet the needs of foundation for our next generation of products. On the human an evolving, complex global client base, and the scale of these capital side, we remain well positioned to compete for top talent services remains a key focus of our firm. In our Retail channel, we driving our investment and operational performance. Total adjusted had record gross sales of $75 billion in 2019, up 39% year over compensation and benefits expense in 2019 increased by 0.6% year, with net flows positive across all regions. We experienced compared to 2018; however, overall the median compensation record Retail net inflows of $24 billion in 2019, or a 13% decreased, reflecting the transition of roles to lower-cost locations. organic growth rate, driven by our Global Fixed Income services.


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    PEOPLE AND CULTURE (portfolios that deliver on the “responsibility dimension” in addition AB’s greatest competitive advantage remains its people, who to traditional risk and return targets). In 2019, AB accelerated our continually strive to provide better results for our clients. We efforts to enhance our research insights by building proprietary foster a culture of relentless ingenuity, built upon tenacity, creative ESG research platforms across equities, fixed income and thinking, teamwork and accountability, and each employee at AB multi-asset. To execute upon this, we entered into a collaboration has a unique voice that deserves to be heard, creating diversity of agreement with Columbia University’s Lamont Doherty Earth thought. AB’s 30 combined Employee Resource and Employee Institute to develop a first-of-its-kind curriculum on climate Wellness Groups around the world cultivate a dynamic, diverse and science and investment implications. All our investors will take inclusive environment. To further advance these efforts, we hosted part in the training, and in 2020 we will pilot formats to bring that a Global Day of Understanding in partnership with the CEO Action expertise to our clients. We turned the ESG lens on ourselves and for Diversity & Inclusion, and the firm earned its fifth consecutive have been hard at work establishing corporate goals around social perfect score on the Human Rights Campaign Foundation’s impact, diversity and equality, and governance. As one example, Corporate Equality Index, ranking AB as one of the best places to through constructing our Nashville headquarters and our planned work for LGBTQ equality in the US. In 2019, we also launched our New York staff move to Hudson Yards, we are on track with our Career Catalyst program, which pairs female VPs and ethnically midterm goal of providing sustainable work environments for our diverse VPs with SVPs to provide career support and guidance. employees, targeting 42% by 2021 and 65% by 2025. AB constantly strives to make the firm the best place for talented LOOKING FORWARD people to build successful careers. The Associate Leadership As of the writing of this letter, 2019 seems like a long time ago. Council provides associates worldwide with opportunities for The spread of the novel coronavirus as a global pandemic has networking, exposure to senior leadership, career mobility and skill caused widespread suffering, and economic activity across the development. AB is also committed to serving the communities world has dropped sharply in its wake. Equity and fixed-income where its employees live and work. In 2019, we launched AB markets have followed suit and fallen substantially. Operating Gives Back, a comprehensive platform for volunteerism, gift- mostly remotely, AB’s talented and dedicated people are matching and grant-giving activities. Approximately 1,538 working diligently to help our clients navigate through tumultuous employees participated in our 2019 Global Day of Service markets. While there will be enormous challenges to overcome, initiative, which included 112 volunteer events in support of 96 I believe AB is well positioned to capitalize on the opportunities global organizations for a total of 5,841 volunteer hours. Citizen that will undoubtedly arise as the severity of this health crisis Schools, a leading nonprofit that provides middle-school students abates and the unprecedented level of fiscal and monetary with hands-on learning outside the classroom to prepare for their support begins to impact the global economy. We remain very futures, named AB its 2019 Corporate Partner of the Year. appreciative of the trust that you, our unitholders, and our clients place in us. The prayers of AB’s employees are with all those SUSTAINABILITY impacted by the health and economic crises we collectively face. As both a fiduciary and a research firm, we believe that behaving and investing responsibly go hand in hand, a theme outlined Sincerely, in our Responsible Investing Annual Report and Corporate Responsibility webpages, published in the fourth quarter. We have an unwavering commitment to advancing our efforts as a responsible firm, fully integrating ESG considerations in our Seth P. Bernstein, investment processes and designing purpose-driven solutions President and Chief Executive Officer


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    AB DIRECTORS AND EXECUTIVE OFFICERS BOARD OF DIRECTORS1 EXECUTIVE OFFICERS Ramon de Oliveira3, 5 Nick Lane Seth P. Bernstein Chairman of the Board President, AXA Equitable Life President and Chief Executive Officer Seth P. Bernstein4, 5 Kristi Matus3, 4 President and Chief Independent Director James A. Gingrich Executive Officer Chief Operating Officer Das Narayandas4 Paul L. Audet2, 3 Independent Director Kate C. Burke Independent Director Chief Administrative Officer Mark Pearson3, 4, 5 Nella Domenici2 Director, President and Laurence E. Cranch Independent Director Chief Executive Officer, General Counsel Equitable Holdings Jeffrey Hurd Ali Dibadj6 Chief Operating Officer, Charles Stonehill2 Head of Finance and Strategy Equitable Holdings Independent Director John C. Weisenseel Daniel G. Kaye2, 3 Chief Financial Officer Independent Director 1 AB Directors as of April 1, 2020. Ms. Matus was elected to the Board and the Compensation and Workplace Practices Committee and the Corporate Governance Committee on July 1, 2019 and Ms. Domenici was elected to the Board and the Audit and Risk Committee on January 1, 2020. 2 Member of the Audit and Risk Committee 3 Member of the Compensation and Workplace Practices Committee 4 Member of the Corporate Governance Committee 5 Member of the Executive Committee 6 Mr. Dibadj was appointed Head of Finance & Strategy on March 30, 2020


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    AllianceBernstein Holding L.P. Form 10-K 2020


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    UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2019 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-09818 ALLIANCE BERNSTEIN HOLDING L.P. (Exact name of registrant as specified in its charter) Delaware 13-3434400 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1345 Avenue of the Americas, New York, NY 10105 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (212) 969-1000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Units Rep. Assignments of Beneficial AB New York Stock Exchange Ownership of LP Interests in AB Holding (“Units”) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes È No ‘ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘ Emerging growth company ‘ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È The aggregate market value of the units representing assignments of beneficial ownership of limited partnership interests held by non-affiliates computed by reference to the price at which such units were last sold on the New York Stock Exchange as of June 30, 2019 was approximately $2.7 billion. The number of units representing assignments of beneficial ownership of limited partnership interests outstanding as of December 31, 2019 was 98,192,098. (This figure includes 100,000 general partnership units having economic interests equivalent to the economic interests of the units representing assignments of beneficial ownership of limited partnership interests.) DOCUMENTS INCORPORATED BY REFERENCE This Form 10-K does not incorporate any document by reference.


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    Table of Contents Glossary of Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 AB Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 37 Executive Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 AB Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 AB Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 AB Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 AB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . .128 Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129 Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130 Part III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . .162 Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . .167 Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .169 Part IV Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .170 Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .173 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174


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    Glossary of Certain Defined Terms “AB” – AllianceBernstein L.P. (Delaware limited partnership formerly known as Alliance Capital Management L.P., “Alliance Capital”), the operating partnership, and its subsidiaries and, where appropriate, its predecessors, AB Holding and ACMC, Inc. and their respective subsidiaries. “AB Holding” – AllianceBernstein Holding L.P. (Delaware limited partnership). “AB Holding Partnership Agreement” – the Amended and Restated Agreement of Limited Partnership of AB Holding, dated as of October 29, 1999 and as amended February 24, 2006. “AB Holding Units” – units representing assignments of beneficial ownership of limited partnership interests in AB Holding. “AB Partnership Agreement” – the Amended and Restated Agreement of Limited Partnership of AB, dated as of October 29, 1999 and as amended February 24, 2006. “AB Units” – units of limited partnership interest in AB. “AUM” – AB’s assets under management. “AXA” – AXA (société anonyme organized under the laws of France) is the holding company for the AXA Group, a worldwide leader in financial protection. “Bernstein Transaction” – AB’s acquisition of the business and assets of SCB Inc., formerly known as Sanford C. Bernstein Inc., and the related assumption of the liabilities of that business, completed on October 2, 2000. “Equitable America” – Equitable Financial Insurance Company of America (f/k/a MONY Life Insurance Company of America, an Arizona corporation) and a subsidiary of Equitable Holdings. “Equitable Holdings” or “EQH” – Equitable Holdings, Inc. (Delaware corporation) and its subsidiaries other than AB and its subsidiaries. “Equitable Life” – AXA Equitable Life Insurance Company (New York stock life insurance company), a subsidiary of Equitable Holdings, and its subsidiaries other than AB and its subsidiaries. “Exchange Act” – the Securities Exchange Act of 1934, as amended. “ERISA” – the Employee Retirement Income Security Act of 1974, as amended. “GAAP” – U.S. Generally Accepted Accounting Principles. “General Partner” – AllianceBernstein Corporation (Delaware corporation), the general partner of AB and AB Holding and a sub- sidiary of Equitable Holdings, and, where appropriate, ACMC, LLC, its predecessor. “Investment Advisers Act” – the Investment Advisers Act of 1940, as amended. “Investment Company Act” – the Investment Company Act of 1940, as amended. “NYSE” – the New York Stock Exchange, Inc. “Partnerships” – AB and AB Holding together. “SEC” – the United States Securities and Exchange Commission. “Securities Act” – the Securities Act of 1933, as amended. ii


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    PART I Item 1. Business The words “we” and “our” in this Form 10-K refer collectively to AB Holding and AB and its subsidiaries, or to their officers and employees. Similarly, the words “company” and “firm” refer to both AB Holding and AB. Where the context requires distinguishing between AB Holding and AB, we identify which company is being discussed. Cross-references are in italics. We use “global” in this Form 10-K to refer to all nations, including the United States; we use “international” or “non-U.S.” to refer to nations other than the United States. We use “emerging markets” in this Form 10-K to refer to countries included in the Morgan Stanley Capital International (“MSCI”) emerging markets index, which are, as of December 31, 2019: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates. Clients We provide research, diversified investment management and related services globally to a broad range of clients through our three buy-side distribution channels: Institutions, Retail and Private Wealth Management, and our sell-side business, Bernstein Research Services. See “Distribution Channels” in this Item 1 for additional information. As of December 31, 2019, 2018 and 2017, our AUM were approximately $623 billion, $516 billion and $554 billion, respectively, and our net revenues as of December 31, 2019, 2018 and 2017 were approximately $3.5 billion, $3.4 billion and $3.3 billion, respectively. EQH (our parent company), AXA and their respective subsidiaries, whose AUM consist primarily of fixed income investments, constitute our largest clients. Our EQH affiliates represented approximately 18%, 18% and 17% of our AUM as of December 31, 2019, 2018 and 2017, and we earned approximately 3% of our net revenues from services we provided to them in each of those years. AXA and its subsidiaries represented approximately 5%, 6% and 6% of our AUM as of December 31, 2019, 2018 and 2017, and we earned approximately 2% of our net revenues from services we provided to them in each of those years. See “Distribution Channels” below and “Assets Under Management” and “Net Revenues” in Item 7 for additional information regarding our AUM and net revenues. Generally, we are compensated for our investment services on the basis of investment advisory and services fees calculated as a per- centage of AUM. For additional information about our investment advisory and services fees, including performance-based fees, see “Risk Factors” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7. Research Our high-quality, in-depth research is the foundation of our business. We believe that our global team of research professionals, whose disciplines include economic, fundamental equity, fixed income and quantitative research, gives us a competitive advantage in achieving investment success for our clients. We also have experts focused on multi-asset strategies, wealth management and alternative investments. Corporate Responsibility As a fiduciary, responsible investor and research firm, we believe that being a responsible company and investing responsibly are linked. The views of governments, communities, consumers and other stakeholders continue to evolve on responsible behavior, and firms are rethinking their purpose beyond maximizing shareholder value. Increasingly, investors are more closely scrutinizing companies, including investment managers (like us), to determine how committed they are to corporate responsibility. At AB, we are working to become a better firm. To us, this means giving back to the communities in which we work through our firm-wide philanthropic initiative, AB Gives Back, and reducing our environmental footprint by increasing our use of “green buildings,” such as our new headquarters in Nashville, Tennessee. Additionally, by promoting diversity and inclusion, we are afforded different perspectives and ways of thinking, which can lead to better outcomes for our clients. Annual Report 2019 1


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    Also, striving to be more responsible gives us a richer perspective for evaluating other firms. As longtime fundamental investors with a strong research heritage, we have integrated environmental, social and governance (“ESG”) considerations into various processes. This helps us make fully informed risk/return assessments and draw insightful investment conclusions. Further, we have invested in technology and innovation to enable our investment teams to formalize their ESG evaluations and share insights from our engage- ments with other companies. We provide additional information in this regard in our corporate responsibility report, which can be found under “Corporate Responsibility – Overview” on our Internet site. Investment Services Our broad range of investment services includes: • Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities; • Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies; • Passive management, including index and enhanced index strategies; • Alternative investments, including hedge funds, fund of funds, direct lending and private equity; and • Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds. Our services span various investment disciplines, including market capitalization (e.g., large-, mid- and small-cap equities), term (e.g., long-, intermediate- and short-duration debt securities), and geographic location (e.g., U.S., international, global, emerging markets, regional and local), in major markets around the world. Our AUM by client domicile and investment service as of December 31, 2019, 2018 and 2017 were as follows: By Client Domicile ($ in billions): U.S. Non-U.S. $217 $177 $200 35% 34% 36% $406 $339 $354 65% 66% 64% December 31, 2019 December 31, 2018 December 31, 2017 By Investment Service ($ in billions): U.S. Non-U.S. $338 $285 $285 $231 $291 $263 54% 46% 55% 45% 53% 47% December 31, 2019 December 31, 2018 December 31, 2017 2 AB


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    Distribution Channels Institutions We offer to our institutional clients, which include private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as EQH and its subsidiaries, separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles (“Institutional Services”). We manage the assets of our institutional clients pursuant to written investment management agreements or other arrange- ments, which generally are terminable at any time or upon relatively short notice by either party. In general, our written investment management agreements may not be assigned without the client’s consent. For information about our institutional investment advi- sory and services fees, including performance-based fees, see “Risk Factors” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7. EQH and its subsidiaries constitute our largest institutional client. EQH and its subsidiaries combined AUM accounted for approx- imately 28%, 26% and 24% of our institutional AUM as of December 31, 2019, 2018 and 2017, respectively, and approximately 17%, 16% and 15% of our institutional revenues for 2019, 2018 and 2017, respectively. Also, AXA and its subsidiaries combined AUM accounted for approximately 10%, 11% and 10% of our institutional AUM as of December 31, 2019, 2018 and 2017, respectively, and approximately 11%, 11% and 10% of our institutional revenues for 2019, 2018 and 2017, respectively. No single institutional client other than EQH, AXA and their respective subsidiaries accounted for more than approximately 1% of our net revenues for the year ended December 31, 2019. Annual Report 2019 3


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    As of December 31, 2019, 2018 and 2017, Institutional Services represented approximately 45%, 48% and 48%, respectively, of our AUM, and the fees we earned from providing these services represented approximately 14% of our net revenues for each of those years. Our AUM and revenues are as follows: Institutional Services Assets Under Management (by Investment Service) December 31, % Change 2019 2018 2017 2019-18 2018-17 (in millions) Equity Actively Managed: U.S. $ 13,861 $ 9,629 $ 10,521 44.0% (8.5)% Global & Non-US 30,767 23,335 22,577 31.8 3.4 Total 44,628 32,964 33,098 35.4 (0.4) Equity Passively Managed(1): U.S. 21,349 17,481 18,515 22.1 (5.6) Global & Non-US 3,951 3,174 3,521 24.5 (9.9) Total 25,300 20,655 22,036 22.5 (6.3) Total Equity 69,928 53,619 55,134 30.4 (2.7) Fixed Income Taxable: U.S. 107,436 96,913 103,073 10.9 (6.0) Global & Non-US 50,281 51,156 60,233 (1.7) (15.1) Total 157,717 148,069 163,306 6.5 (9.3) Fixed Income Tax-Exempt: U.S. 1,209 1,046 1,051 15.6 (0.5) Global & Non-US — — — — — Total 1,209 1,046 1,051 15.6 (0.5) Fixed Income Passively Managed(1): U.S. 69 73 66 (5.5) 10.6 Global & Non-US 20 15 20 33.3 (25.0) Total 89 88 86 1.1 2.3 Total Fixed Income 159,015 149,203 164,443 6.6 (9.3) Other(2): U.S. 5,568 5,024 5,258 10.8 (4.5) Global & Non-US 48,179 38,433 44,442 25.4 (13.5) Total 53,747 43,457 49,700 23.7 (12.6) Total: U.S. 149,492 130,166 138,484 14.8 (6.0) Global & Non-US 133,198 116,113 130,793 14.7 (11.2) Total $282,690 $246,279 $269,277 14.8 (8.5) Affiliated — EQH $ 78,506 $ 64,447 $ 65,384 21.8 (1.4) AXA 27,136 25,948 26,519 4.6 (2.2) Non-affiliated 177,048 155,884 177,374 13.6 (12.1) Total $282,690 $246,279 $269,277 14.8 (8.5) (1) Includes index and enhanced index services. (2) Includes certain multi-asset solutions and services and certain alternative investments. 4 AB


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    Revenues from Institutional Services (by Investment Service) Years Ended December 31, % Change 2019 2018 2017 2019-18 2018-17 (in thousands) Equity Actively Managed: U.S. $ 62,252 $ 60,465 $ 53,352 3.0% 13.3% Global & Non-US 98,169 103,763 88,676 (5.4) 17.0 Total 160,421 164,228 142,028 (2.3) 15.6 Equity Passively Managed(1): U.S. 3,846 3,713 3,721 3.6 (0.2) Global & Non-US 1,992 1,880 1,882 6.0 (0.1) Total 5,838 5,593 5,603 4.4 (0.2) Total Equity 166,259 169,821 147,631 (2.1) 15.0 Fixed Income Taxable: U.S. 103,735 102,356 107,262 1.3 (4.6) Global & Non-US 100,352 106,314 112,294 (5.6) (5.3) Total 204,087 208,670 219,556 (2.2) (5.0) Fixed Income Tax-Exempt: U.S. 1,309 1,217 1,989 7.6 (38.8) Global & Non-US — — — — — Total 1,309 1,217 1,989 7.6 (38.8) Fixed Income Passively Managed(1): U.S. 86 49 202 75.5 (75.7) Global & Non-US 21 28 16 (25.0) 75.0 Total 107 77 218 39.0 (64.7) Fixed Income Servicing(2): U.S. 13,215 12,708 13,597 4.0 (6.5) Global & Non-US — — (14) n/m 100.0 Total 13,215 12,708 13,583 4.0 (6.4) Total Fixed Income 218,718 222,672 235,346 (1.8) (5.4) Other(3): U.S. 54,582 52,131 63,192 4.7 (17.5) Global & Non-US 39,405 33,530 38,153 17.5 (12.1) Total 93,987 85,661 101,345 9.7 (15.5) Total Investment Advisory and Services Fees: U.S. 239,025 232,639 243,315 2.7 (4.4) Global & Non-US 239,939 245,515 241,007 (2.3) 1.9 Consolidated company-sponsored investment funds — (372) (8,717) 100.0 n/m Total 478,964 477,782 475,605 0.2 0.5 Distribution Revenues 704 757 1,047 (7.0) (27.7) Shareholder Servicing Fees 476 529 488 (10.0) 8.4 Total $480,144 $479,068 $477,140 0.2 0.4 Affiliated — EQH $ 81,605 $ 77,021 $ 72,082 6.0 6.9 AXA 55,135 53,745 48,843 2.6 10.0 Non-affiliated 343,404 348,302 356,215 (1.4) (2.2) Total $480,144 $479,068 $477,140 0.2 0.4 (1) Includes index and enhanced index services. (2) Fixed Income Servicing includes advisory-related services fees that are not based on AUM, including derivative transaction fees, capital purchase program-related advisory services and other fixed income advisory services. (3) Includes certain multi-asset solutions and services and certain alternative services. Annual Report 2019 5


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    Retail We provide investment management and related services to a wide variety of individual retail investors, both in the U.S. and inter- nationally, through retail mutual funds we sponsor, mutual fund sub-advisory relationships, separately-managed account programs (see below), and other investment vehicles (“Retail Products and Services”). We distribute our Retail Products and Services through financial intermediaries, including broker-dealers, insurance sales representa- tives, banks, registered investment advisers and financial planners. These products and services include open-end and closed-end funds that are either (i) registered as investment companies under the Investment Company Act (“U.S. Funds”), or (ii) not regis- tered under the Investment Company Act and generally not offered to U.S. persons (“Non-U.S. Funds” and, collectively with the U.S. Funds, “AB Funds”). They also include separately-managed account programs, which are sponsored by financial inter- mediaries and generally charge an all-inclusive fee covering investment management, trade execution, asset allocation, and custodial and administrative services. In addition, we provide distribution, shareholder servicing, transfer agency services and administrative services for our Retail Products and Services. See “Net Revenues – Investment Advisory and Services Fees” in Item 7 for information about our retail investment advisory and services fees. See Note 2 to AB’s consolidated financial statements in Item 8 for a discussion of the commissions we pay to financial intermediaries in connection with the sale of open-end AB Funds. Fees paid by the U.S. Funds are reflected in the applicable investment management agreement, which generally must be approved annually by the board of directors or trustees of those funds, by a majority vote of the independent directors or trustees. Increases in these fees must be approved by fund shareholders; decreases need not be, including any decreases implemented by a fund’s directors or trustees. In general, each investment management agreement with the U.S. Funds provides for termination by either party, at any time, upon 60 days’ notice. Fees paid by Non-U.S. Funds are reflected in management agreements that continue until they are terminated. Increases in these fees generally must be approved by the relevant regulatory authority, depending on the domicile and structure of the fund, and Non-U.S. Fund shareholders must be given advance notice of any fee increases. The mutual funds we sub-advise for EQH, AXA and their respective subsidiaries constitute our largest retail clients. EQH and its subsidiaries accounted for approximately 14%, 16% and 16% of our retail AUM as of December 31, 2019, 2018 and 2017, respectively, and approximately 2% of our retail net revenues in each of those years. AXA and its subsidiaries accounted for approx- imately 2%, 3% and 3% of our retail AUM as of December 31, 2019, 2018 and 2017, respectively, and approximately 1%, 2% and 2% of our retail net revenues for the years ended December 31, 2019, 2018 and 2017, respectively. HSBC was responsible for approximately 14%, 7% and 9% of our open-end mutual fund sales in 2019, 2018 and 2017, respectively. HSBC is not under any obligation to sell a specific amount of AB Fund shares and is not our affiliate. Most open-end U.S. Funds have adopted a plan under Rule 12b-1 of the Investment Company Act that allows the fund to pay, out of assets of the fund, distribution and service fees for the distribution and sale of its shares (“Rule 12b-1 Fees”). The open-end U.S. Funds have entered into such agreements with us, and we have entered into selling and distribution agreements pursuant to which we pay sales commissions to the financial intermediaries that distribute our open-end U.S. Funds. These agreements are terminable by either party upon notice (generally 30 days) and do not obligate the financial intermediary to sell any specific amount of fund shares. As of December 31, 2019, retail U.S. Fund AUM were approximately $55 billion, or 23% of retail AUM, as compared to $43 billion, or 24%, as of December 31, 2018, and $47 billion, or 25%, as of December 31, 2017. Non-U.S. Fund AUM, as of December 31, 2019, totaled $103 billion, or 43% of retail AUM, as compared to $71 billion, or 39%, as of December 31, 2018, and $76 billion, or 40%, as of December 31, 2017. 6 AB


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    Our Retail Services represented approximately 39%, 35% and 35% of our AUM as of December 31, 2019, 2018 and 2017, respectively, and the fees we earned from providing these services represented approximately 46%, 44% and 43% of our net rev- enues for the years ended December 31, 2019, 2018 and 2017, respectively. Our AUM and revenues are as follows: Retail Services Assets Under Management (by Investment Service) December 31, % Change 2019 2018 2017 2019-18 2018-17 (in millions) Equity Actively Managed: U.S. $ 57,125 $ 41,450 $ 37,720 37.8% 9.9% Global & Non-US 24,497 19,475 20,274 25.8 (3.9) Total 81,622 60,925 57,994 34.0 5.1 Equity Passively Managed(1): U.S. 27,153 22,658 23,294 19.8 (2.7) Global & Non-US 7,530 6,697 8,758 12.4 (23.5) Total 34,683 29,355 32,052 18.2 (8.4) Total Equity 116,305 90,280 90,046 28.8 0.3 Fixed Income Taxable: U.S. 9,093 7,029 7,699 29.4 (8.7) Global & Non-US 79,315 53,413 65,963 48.5 (19.0) Total 88,408 60,442 73,662 46.3 (17.9) Fixed Income Tax-Exempt: U.S. 20,706 16,403 15,654 26.2 4.8 Global & Non-US 44 42 53 4.8 (20.8) Total 20,750 16,445 15,707 26.2 4.7 Fixed Income Passively Managed(1): U.S. 5,031 4,965 5,173 1.3 (4.0) Global & Non-US 3,794 3,964 4,250 (4.3) (6.7) Total 8,825 8,929 9,423 (1.2) (5.2) Total Fixed Income 117,983 85,816 98,792 37.5 (13.1) Other(2): U.S. 2,470 2,476 2,799 (0.2) (11.5) Global & Non-US 2,408 2,197 1,311 9.6 67.6 Total 4,878 4,673 4,110 4.4 13.7 Total: U.S. 121,578 94,981 92,339 28.0 2.9 Global & Non-US 117,588 85,788 100,609 37.1 (14.7) Total $239,166 $180,769 $192,948 32.3 (6.3) Affiliated — EQH $ 34,448 $ 29,206 $ 30,720 17.9 (4.9) AXA 5,680 5,471 6,245 3.8 (12.4) Non-affiliated 199,038 146,092 155,983 36.2 (6.3) Total $239,166 $180,769 $192,948 32.3 (6.3) (1) Includes index and enhanced index services. (2) Includes certain multi-asset solutions and services and certain alternative investments. Annual Report 2019 7


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    Revenues from Retail Services (by Investment Service) Years Ended December 31, % Change 2019 2018 2017 2019-18 2018-17 (in thousands) Equity Actively Managed: U.S. $ 283,461 $ 235,611 $ 204,363 20.3% 15.3% Global & Non-US 153,156 149,995 114,277 2.1 31.3 Total 436,617 385,606 318,640 13.2 21.0 Equity Passively Managed(1): U.S. 9,179 8,901 8,508 3.1 4.6 Global & Non-US 6,994 7,861 6,636 (11.0) 18.5 Total 16,173 16,762 15,144 (3.5) 10.7 Total Equity 452,790 402,368 333,784 12.5 20.5 Fixed Income Taxable: U.S. 26,963 25,194 23,142 7.0 8.9 Global & Non-US 479,886 438,048 454,613 9.6 (3.6) Total 506,849 463,242 477,755 9.4 (3.0) Fixed Income Tax-Exempt: U.S. 65,375 58,824 54,106 11.1 8.7 Global & Non-US 99 132 120 (25.0) 10.0 Total 65,474 58,956 54,226 11.1 8.7 Fixed Income Passively Managed(1): U.S. 5,972 6,086 6,055 (1.9) 0.5 Global & Non-US 6,133 6,809 7,567 (9.9) (10.0) Total 12,105 12,895 13,622 (6.1) (5.3) Total Fixed Income 584,428 535,093 545,603 9.2 (1.9) Other(2): U.S. 51,958 63,232 59,751 (17.8) 5.8 Global & Non-US 8,946 8,575 6,583 4.3 30.3 Total 60,904 71,807 66,334 (15.2) 8.3 Total Investment Advisory and Services Fees: U.S. 442,908 397,848 355,925 11.3 11.8 Global & Non-US 655,214 611,420 589,796 7.2 3.7 Consolidated company-sponsored investment funds 883 1,047 1,005 (15.7) 4.2 Total 1,099,005 1,010,315 946,726 8.8 6.7 Distribution Revenues 447,050 411,996 405,939 8.5 1.5 Shareholder Servicing Fees 73,777 72,134 71,225 2.3 1.3 Total $1,619,832 $1,494,445 $1,423,890 8.4 5.0 Affiliated — EQH $ 27,737 $ 27,814 $ 26,393 (0.3) 5.4 AXA 23,293 24,946 23,769 (6.6) 5.0 Non-affiliated 1,568,802 1,441,685 1,373,728 8.8 4.9 Total $1,619,832 $1,494,445 $1,423,890 8.4 5.0 (1) Includes index and enhanced index services. (2) Includes certain multi-asset solutions and services and certain alternative investments. 8 AB


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    Private Wealth Management We offer to our private wealth clients, which include high-net-worth individuals and families, trusts and estates, charitable founda- tions, partnerships, private and family corporations, and other entities, separately-managed accounts, hedge funds, mutual funds and other investment vehicles (“Private Wealth Services”). We manage these accounts pursuant to written investment advisory agreements, which generally are terminable at any time or upon relatively short notice by any party, and may not be assigned without the client’s consent. For information about our investment advisory and services fees, including performance-based fees, see “Risk Factors” in Item 1A and “Net Revenues – Investment Advisory and Services Fees” in Item 7. Our Private Wealth Services represented approximately 16%, 17% and 17% of our AUM as of December 31, 2019, 2018 and 2017, respectively. The fees we earned from providing these services represented approximately 26%, 26% and 24% of our net revenues for 2019, 2018 and 2017, respectively. Our AUM and revenues are as follows: Private Wealth Services Assets Under Management (by Investment Service) December 31, % Change 2019 2018 2017 2019-18 2018-17 (in millions) Equity Actively Managed: U.S. $ 26,840 $ 22,504 $ 26,492 19.3% (15.1)% Global & Non-US 24,094 19,809 21,880 21.6 (9.5) Total 50,934 42,313 48,372 20.4 (12.5) Equity Passively Managed(1): U.S. 142 113 130 25.7 (13.1) Global & Non-US 32 42 51 (23.8) (17.6) Total 174 155 181 12.3 (14.4) Total Equity 51,108 42,468 48,553 20.3 (12.5) Fixed Income Taxable: U.S. 7,583 7,022 6,772 8.0 3.7 Global & Non-US 4,587 4,154 4,141 10.4 0.3 Total 12,170 11,176 10,913 8.9 2.4 Fixed Income Tax-Exempt: U.S. 25,102 24,129 23,636 4.0 2.1 Global & Non-US 15 15 18 — (16.7) Total 25,117 24,144 23,654 4.0 2.1 Fixed Income Passively Managed(1): U.S. — 11 — (100.0) n/m Global & Non-US 372 404 401 (7.9) 0.7 Total 372 415 401 (10.4) 3.5 Total Fixed Income 37,659 35,735 34,968 5.4 2.2 Other(2): U.S. 6,808 5,762 3,606 18.2 59.8 Global & Non-US 5,484 5,340 5,139 2.7 3.9 Total 12,292 11,102 8,745 10.7 27.0 Total: U.S. 66,475 59,541 60,636 11.6 (1.8) Global & Non-US 34,584 29,764 31,630 16.2 (5.9) Total $101,059 $89,305 $92,266 13.2 (3.2) (1) Includes index and enhanced index services. (2) Includes certain multi-asset solutions and services and certain alternative investments. Annual Report 2019 9


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    Revenues From Private Wealth Services (by Investment Service) Years Ended December 31, % Change 2019 2018 2017 2019-18 2018-17 (in thousands) Equity Actively Managed: U.S. $ 267,671 $ 274,320 $ 272,577 (2.4)% 0.6% Global & Non-US 246,930 240,332 212,021 2.7 13.4 Total 514,601 514,652 484,598 — 6.2 Equity Passively Managed(1): U.S. 144 117 206 23.1 (43.2) Global & Non-US 190 254 510 (25.2) (50.2) Total 334 371 716 (10.0) (48.2) Total Equity 514,935 515,023 485,314 — 6.1 Fixed Income Taxable: U.S. 34,546 33,034 34,173 4.6 (3.3) Global & Non-US 29,418 28,358 26,425 3.7 7.3 Total 63,964 61,392 60,598 4.2 1.3 Fixed Income Tax-Exempt: U.S. 122,350 118,811 114,974 3.0 3.3 Global & Non-US 97 109 88 (11.0) 23.9 Total 122,447 118,920 115,062 3.0 3.4 Fixed Income Passively Managed(1): U.S. 13 156 58 (91.7) 169.0 Global & Non-US 3,663 5,312 4,059 (31.0) 30.9 Total 3,676 5,468 4,117 (32.8) 32.8 Total Fixed Income 190,087 185,780 179,777 2.3 3.3 Other(2): U.S. 123,216 122,686 67,019 0.4 83.1 Global & Non-US 65,837 51,839 49,365 27.0 5.0 Total 189,053 174,525 116,384 8.3 50.0 Total Investment Advisory and Services Fees: U.S. 547,940 549,124 489,007 (0.2) 12.3 Global & Non-US 346,135 326,204 292,468 6.1 11.5 Consolidated company-sponsored investment funds — (1,214) (2,501) 100.0 51.5 Total 894,075 874,114 778,974 2.3 12.2 Distribution Revenues 7,289 5,809 5,077 25.5 14.4 Shareholder Servicing Fees 3,141 3,311 3,311 (5.1) — Total $904,505 $883,234 $787,362 2.4 12.2 (1) Includes index and enhanced index services. (2) Includes certain multi-asset solutions and services and certain alternative investments. 10 AB


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    Bernstein Research Services We offer high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options to institutional investors, such as pension fund, hedge fund and mutual fund managers, and other institutional investors (“Bernstein Research Services”). We serve our clients, which are based in the United States and in other major markets around the world, through our trading professionals, who are primarily based in New York, London and Hong Kong, and our sell-side analysts, who provide fundamental company and industry research along with quantitative research into securities valuation and factors affecting stock-price movements. We earn revenues for providing investment research to, and executing brokerage transactions for, institutional clients. These clients compensate us principally by directing us to execute brokerage transactions on their behalf, for which we earn commissions, and to a lesser but increasing extent, by paying us directly for research through commission sharing agreements or cash payments. Bernstein Research Services accounted for approximately 12%, 13% and 14% of our net revenues as of December 31, 2019, 2018 and 2017, respectively. For information regarding trends in fee rates charged for brokerage transactions, see “Risk Factors” in Item 1A. Our Bernstein Research Services revenues are as follows: Revenues From Bernstein Research Services Years Ended December 31, % Change 2019 2018 2017 2019-18 2018-17 (in thousands) Bernstein Research Services $407,911 $439,432 $449,919 (7.2)% (2.3)% Custody Our U.S. based broker-dealer subsidiary acts as custodian for the majority of our Private Wealth Management AUM and some of our Institutional AUM. Other custodial arrangements are maintained by client-designated banks, trust companies, brokerage firms or custodians. Employees As of December 31, 2019, our firm had 3,811 full-time employees, representing a 4.7% increase compared to the end of 2018. New York state law requires that private sector businesses with 50 or more full-time employees in the state give early warning of plant closings, layoffs, relocations and other covered reductions in work hours. This notification, known as the Worker Adjustment and Retraining Notification (“WARN”) notice, must be provided to affected employees and their representatives, the New York State Department of Labor and the Local Workforce Investment Board, for relocations that affect 25 or more employees. In con- nection with our establishing 1,250 roles in Nashville, Tennessee (most of which are being relocated from our White Plains and New York City locations), we are required to file a series of WARN notices throughout the process, which began in the second half of 2018. We will continue to file these notices as qualifying events occur. Information about our Executive Officers Please refer to “Item 10. Directors, Executive Officers and Corporate Governance” below for information relating to our firm’s executive officers. Annual Report 2019 11


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    Service Marks We have registered a number of service marks with the U.S. Patent and Trademark Office and various foreign trademark offices, including the mark “AllianceBernstein.” The logo set forth below and “Ahead of Tomorrow” are service marks of AB: In 2015, we established a new brand identity by prominently incorporating “AB” into our brand architecture, while maintaining the legal names of our corporate entities. With this and other related refinements, our company, and our Institutional and Retail businesses, are referred to as “AllianceBernstein (AB)” or simply “AB.” Private Wealth Management and Bernstein Research Services are referred to as “AB Bernstein.” Also, we adopted the logo and “Ahead of Tomorrow” service marks described above. In connection with the Bernstein Transaction, we acquired all of the rights in, and title to, the Bernstein service marks, including the mark “Bernstein.” In connection with an acquisition we completed in 2013, we acquired all of the rights in, and title to, the W.P. Stewart & Co. serv- ice marks, including the logo “WPSTEWART.” Regulation Virtually all aspects of our business are subject to various federal and state laws and regulations, rules of various securities regulators and exchanges, and laws in the foreign countries in which our subsidiaries conduct business. These laws and regulations primarily are intended to protect clients and fund shareholders and generally grant supervisory agencies broad administrative powers, includ- ing the power to limit or restrict the carrying on of business for failure to comply with such laws and regulations. Possible sanctions that may be imposed on us include the suspension of individual employees, limitations on engaging in business for specific periods, the revocation of the registration as an investment adviser or broker-dealer, censures and fines. AB, AB Holding, the General Partner and four of our subsidiaries (Sanford C. Bernstein & Co., LLC (“SCB LLC”), AB Custom Alternative Solutions LLC, AB Private Credit Investors LLC and W.P. Stewart Asset Management LLC) are registered with the SEC as investment advisers under the Investment Advisers Act. Additionally, AB Holding is an NYSE-listed company and, accord- ingly, is subject to applicable regulations promulgated by the NYSE. Also, AB, SCB LLC and AB Custom Alternative Solutions LLC are registered with the Commodity Futures Trading Commission (“CFTC”) as commodity pool operators and commodity trading advisers; SCB LLC also is registered with the CFTC as a commodities introducing broker. Each U.S. Fund is registered with the SEC under the Investment Company Act and each Non-U.S. Fund is subject to the laws in the jurisdiction in which the fund is registered. For example, our platform of Luxembourg-based funds operates pursuant to Luxembourg laws and regulations, including Undertakings for the Collective Investment in Transferable Securities Directives, and is authorized and supervised by the Commission de Surveillance du Secteur Financier (“CSSF”), the primary regulator in Luxembourg. AllianceBernstein Investor Services, Inc., one of our subsidiaries, is registered with the SEC as a transfer and servicing agent. SCB LLC and another of our subsidiaries, AllianceBernstein Investments, Inc., are registered with the SEC as broker-dealers, and both are members of the Financial Industry Regulatory Authority. In addition, SCB LLC is a member of the NYSE and other principal U.S. exchanges. Many of our subsidiaries are subject to the oversight of regulatory authorities in the jurisdictions outside the United States in which they operate, including the Ontario Securities Commission, the Investment Industry Regulatory Organization of Canada, the European Securities and Markets Authority, the Financial Conduct Authority in the U.K., the CSSF in Luxembourg, the Financial Services Agency in Japan, the Securities & Futures Commission in Hong Kong, the Monetary Authority of Singapore, the Financial Services Commission in South Korea, the Financial Supervisory Commission in Taiwan and The Securities and Exchange Board of India. While these regulatory requirements often may be comparable to the requirements of the SEC and other U.S. regulators, they are sometimes more restrictive and may cause us to incur substantial expenditures of time and money related to our com- pliance efforts. For additional information relating to the regulations that impact our business, please refer to “Risk Factors” in Item 1A. 12 AB


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    Iran Threat Reduction and Syria Human Rights Act AB, AB Holding and their global subsidiaries had no transactions or activities requiring disclosure under the Iran Threat Reduction and Syria Human Rights Act, nor were they involved in the AXA Group matters described immediately below. We have provided the information below as AXA and its subsidiaries remained our affiliates through early December 2019. The non-U.S. based subsidiaries of AXA operate in compliance with applicable laws and regulations of the various jurisdictions in which they operate, including applicable international (United Nations and European Union) laws and regulations. While AXA Group compa- nies based and operating outside the United States generally are not subject to U.S. law, as an international group, AXA has in place poli- cies and standards (including the AXA Group International Sanctions Policy) that apply to all AXA Group companies worldwide and often impose requirements that go well beyond local law. AXA has informed us that AXA Konzern AG, an AXA insurance subsidiary organized under the laws of Germany, provides acci- dent and health insurance to diplomats based at the Iranian Embassy in Berlin, Germany. The total annual premium of these policies is approximately $109,150 and the annual net profit arising from these policies, which is difficult to calculate with precision, is esti- mated to be $18,385. AXA also has informed us that AXA Belgium, an AXA insurance subsidiary organized under the laws of Belgium, has two policies providing for car insurance for Global Trading NV, which was designated on May 17, 2018 under (E.O.) 13224 and subsequently changed its name to Energy Engineers & Construction on August 20, 2018. The total annual premium of these policies is approx- imately $6,559 before tax and the annual net profit arising from these policies, which is difficult to calculate with precision, is esti- mated to be $983. These policies were cancelled during 2019. In addition, AXA has informed us that AXA Insurance Ireland, an AXA insurance subsidiary, provides statutorily required car insurance under four separate policies to the Iranian Embassy in Dublin, Ireland. AXA has informed us that compliance with the Declined Cases Agreement of the Irish Government prohibits the cancellation of these policies unless another insurer is willing to assume the coverage. The total annual premium for these policies is approximately $7,115 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $853. Also, AXA has informed us that AXA Sigorta, a subsidiary of AXA organized under the laws of the Republic of Turkey, provides car insurance coverage for vehicle pools and compulsory earthquake coverage of the Iranian General Consulate and the Iranian Embassy in Istanbul, Turkey. Motor liability insurance coverage is compulsory in Turkey and cannot be canceled unilaterally. The total annual premium in respect of these policies is approximately $3,150 and the annual net profit, which is difficult to calculate with precision, is estimated to be $473. Additionally, AXA has informed us that AXA Winterthur, an AXA insurance subsidiary organized under the laws of Switzerland, provides Naftiran Intertrade, a wholly-owned subsidiary of the Iranian state-owned National Iranian Oil Company, with life, disability and accident coverage for its employees. In addition, AXA Winterthur also provides car and property insurance coverage for the Iranian Embassy in Bern. The provision of these forms of coverage is mandatory in Switzerland. The total annual premium of these policies is approximately $396,597 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $59,489. Also, AXA has informed us that AXA Egypt, an AXA insurance subsidiary organized under the laws of Egypt, provides the Iranian state-owned Iran Development Bank, two life insurance contracts, covering individuals who have loans with the bank. The total annual premium of these policies is approximately $20,650 and annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $2,000. In addition, AXA has informed us that AXA Hong Kong, an AXA insurance subsidiary organized under the laws of Hong Kong, provided the Iranian state-owned Hong Kong Branch of Melli Bank PLC, which was re-designated on November 5, 2018 pursuant to E.O. 13224, with group health insurance for its employees. This business has now been canceled. The total annual premium of these policies is approx- imately $27,122 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $4,339. Lastly, AXA has informed us that AXA XL, which AXA acquired during the third quarter of 2018, through various non-U.S. sub- sidiaries, provides insurance to marine policyholders located outside of the U.S. or reinsurance coverage to non-U.S. insurers of marine risks as well as mutual associations of ship owners that provide their members with protection and liability coverage. The Annual Report 2019 13


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    provision of these coverages may involve entities or activities related to Iran, including transporting crude oil, petrochemicals and refined petroleum products. AXA XL’s non-U.S. subsidiaries insure or reinsure multiple voyages and fleets containing multiple ships, so they are unable to attribute gross revenues and net profits from such marine policies to activities with Iran. As the activities of these insureds and re-insureds are permitted under applicable laws and regulations, AXA XL intends for its non-U.S. subsidiaries to continue providing such coverage to its insureds and re-insureds to the extent permitted by applicable law. The aggregate annual premium for the above-referenced insurance policies is approximately $570,343, representing approximately 0.0006% of AXA’s 2019 consolidated revenues, which are expected to exceed $100 billion. The related net profit, which is difficult to calculate with precision, is estimated to be $86,522, representing approximately 0.002% of AXA’s estimated 2019 aggregate net profit. History and Structure We have been in the investment research and management business for more than 50 years. Bernstein was founded in 1967. Alliance Capital was founded in 1971 when the investment management department of Donaldson, Lufkin & Jenrette, Inc. (since November 2000, a part of Credit Suisse Group) merged with the investment advisory business of Moody’s Investors Service, Inc. In April 1988, AB Holding “went public” as a master limited partnership. AB Holding Units, which trade under the ticker symbol “AB,” have been listed on the NYSE since that time. In October 1999, AB Holding reorganized by transferring its business and assets to AB, a newly-formed operating partnership, in exchange for all of the AB Units (“Reorganization”). Since the date of the Reorganization, AB has conducted the business for- merly conducted by AB Holding and AB Holding’s activities have consisted of owning AB Units and engaging in related activities. Unlike AB Holding Units, AB Units do not trade publicly and are subject to significant restrictions on transfer. The General Partner is the general partner of both AB and AB Holding. In October 2000, our two legacy firms, Alliance Capital and Bernstein, combined, bringing together Alliance Capital’s expertise in growth equity and corporate fixed income investing and its family of retail mutual funds, with Bernstein’s expertise in value equity investing, tax-exempt fixed income management, and its Private Wealth Management and Bernstein Research Services businesses. As of December 31, 2019, the condensed ownership structure of AB is as follows (for a more complete description of our owner- ship structure, see “Principal Security Holders” in Item 12): Directors, Public Officers, EQH Employees 64.9% 30.9% 4.1% 100% 95.8% 62.3% General Unaffiliated AB Holding Partner Holders 0.1% 36.0% 1.0% 0.7% AB The General Partner owns 100,000 general partnership units in AB Holding and a 1% general partnership interest in AB. Including these general partnership interests, EQH, directly and through certain of its subsidiaries (see “Principal Security Holders” in Item 12), had an approximate 64.8% economic interest in AB as of December 31, 2019. 14 AB


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    Competition We compete in all aspects of our business with numerous investment management firms, mutual fund sponsors, brokerage and investment banking firms, insurance companies, banks, savings and loan associations, and other financial institutions that often pro- vide investment products with similar features and objectives as those we offer. Our competitors offer a wide range of financial serv- ices to the same customers that we seek to serve. Some of our competitors are larger, have a broader range of product choices and investment capabilities, conduct business in more markets, and have substantially greater resources than we do. These factors may place us at a competitive disadvantage, and we can give no assurance that our strategies and efforts to maintain and enhance our current client relationships, and create new ones, will be successful. In addition, EQH and its subsidiaries provide financial services, some of which compete with those we offer. The AB Partnership Agreement specifically allows EQH and its subsidiaries (other than the General Partner) to compete with AB and to pursue oppor- tunities that may be available to us. EQH and certain of its subsidiaries have substantially greater financial resources than we do and are not obligated to provide resources to us. To grow our business, we believe we must be able to compete effectively for AUM. Key competitive factors include: • our investment performance for clients; • our commitment to place the interests of our clients first; • the quality of our research; • our ability to attract, motivate and retain highly skilled, and often highly specialized, personnel; • the array of investment products we offer; • the fees we charge; • Morningstar/Lipper rankings for the AB Funds; • our ability to sell our actively-managed investment services despite the fact that many investors favor passive services; • our operational effectiveness; • our ability to further develop and market our brand; and • our global presence. Competition is an important risk that our business faces and should be considered along with the other factors we discuss in “Risk Factors” in Item 1A. Available Information AB and AB Holding file or furnish annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to such reports, and other reports (and amendments thereto) required to comply with federal securities laws, including Section 16 beneficial ownership reports on Forms 3, 4 and 5, registration statements and proxy statements. We maintain an Internet site (http://www.alliancebernstein.com) where the public can view these reports, free of charge, as soon as reasonably practicable after each report is filed with, or furnished to, the SEC. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Annual Report 2019 15


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    Item 1A. Risk Factors Please consider this section along with the description of our business in Item 1, the competition section immediately above and AB’s financial information contained in Items 6, 7 and 8. The majority of the risk factors discussed below directly affect AB. These risk factors also affect AB Holding because AB Holding’s principal source of income and cash flow is attributable to its investment in AB. See also “Cautions Regarding Forward-Looking Statements” in Item 7. Business-related Risks Our revenues and results of operations depend on the market value and composition of our AUM, which can fluctuate significantly based on various factors, including many factors outside of our control. We derive most of our revenues from investment advisory and services fees, which typically are calculated as a percentage of the value of AUM as of a specified date, or as a percentage of the value of average AUM for the applicable billing period, and vary with the type of investment service, the size of the account and the total amount of assets we manage for a particular client. The value and composition of our AUM can be adversely affected by several factors, including: • Market Factors. Global financial markets performed very well in 2019, supported by three 25 basis point interest rate cuts from the U.S. Federal Reserve, which were designed to prevent negative impacts from global risks that emerged during the year. Other central banks around the world also provided additional monetary accommodation, boosting global financial mar- kets broadly even as aggregate growth slowed in 2019 relative to 2018. Investor optimism about the eventual resolution of the trade dispute between the United States and China provided a significant boost to global equities in the fourth quarter of 2019. In addition, the Federal Reserve resumed expansion of its balance sheet late in the year, which has been viewed by many financial market participants as indicative of the central bank’s willingness to keep liquidity ample. Subdued inflation kept inter- est rates generally low, which supported both economic growth and strong financial market performance. Some key risks to market performance in 2020 we are considering include a resumption (or heightening) of U.S./China trade tensions, geo- political conflict and the U.S. election. These factors, and the market volatility they may cause, may adversely affect our AUM and revenues. • Client Preferences. Generally, our clients may withdraw their assets at any time and on short notice. Also, changing market dynamics and investment trends, particularly with respect to sponsors of defined benefit plans choosing to invest in less risky investments and the ongoing shift to lower-fee passive services described below, may continue to reduce interest in some of the investment products we offer, and/or clients and prospects may continue to seek investment products that we may not cur- rently offer. Loss of, or decreases in, AUM reduces our investment advisory and services fees and revenues. • Our Investment Performance. Our ability to achieve investment returns for clients that meet or exceed investment returns for comparable asset classes and competing investment services is a key consideration when clients decide to keep their assets with us or invest additional assets, and when a prospective client is deciding whether to invest with us. Poor investment performance, both in absolute terms and/or relative to peers and stated benchmarks, may result in clients withdrawing assets and prospective clients choosing to invest with competitors. • Investing Trends. Our fee rates can vary significantly among the various investment products and services we offer to our clients (see “Net Revenues” in Item 7 for additional information regarding our fee rates); our fee realization rate fluctuates as clients shift assets between accounts or products with different fee structures. • Service Changes. We may be required to reduce our fee levels, restructure the fees we charge and/or adjust the services we offer to our clients because of, among other things, regulatory initiatives (whether industry-wide or specifically targeted), changing technology in the asset management business (including algorithmic strategies and emerging financial technology), court decisions and competitive considerations. A reduction in fee levels would reduce our revenues. A decrease in the value of our AUM, a decrease in the amount of AUM we manage, an adverse mix shift in our AUM and/or a reduction in the level of fees we charge would adversely affect our investment advisory fees and revenues. A reduction in revenues, without a commensurate reduction in expenses, adversely affects our results of operations. 16 AB


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    The industry-wide shift from actively-managed investment services to passive services has adversely affected our invest- ment advisory and services fees, revenues and results of operations, and this trend may continue. Our competitive environment has become increasingly difficult over the past decade, as active managers, which invest based on individual security selection, have, on average, consistently underperformed passive services, which invest based on market indices. For the 12-month period ended June 30, 2019, active equity fund managers, although they improved their relative performance compared to prior periods, generally continued to lag their key benchmarks, with 48% of active managers outperforming. Results varied among growth, value and core managers. Demand for passive strategies persisted, and while active equity managers continued to struggle to attract new assets, flows to active fixed income managers turned positive. In the U.S., total industry-wide active mutual fund outflows of $286 billion in 2018 improved to net outflows of $34 billion in 2019. Active equity U.S. mutual fund outflows of $289 billion in 2019 increased by 16% year-over-year as the pace of outflows steadily accelerated during the year. Active fixed income U.S. mutual funds recovered following significant outflows during the fourth quarter of 2018, as inflows during 2019 of $272 billion, reflecting positive flows in each quarter of 2019, improved by $258 billion compared to 2018. Meanwhile, total industry-wide passive mutual fund inflows of $453 billion were up slightly from last year’s inflows of $450 billion. The most recent data available for U.S. institutions (through September 30, 2019) is more negative. Total industry active equity and fixed income net outflows for the nine months ended September 30, 2019 were $481 billion, approximately 117% more than the same period a year ago. In this environment, organic growth through positive net inflows is difficult to achieve for active managers, such as AB, and requires taking market share from other active managers. The significant shift from active services to passive services adversely affects Bernstein Research Services revenues as well. Global market volumes have declined in recent years, and we expect this to continue, fueled by persistent active equity outflows and pas- sive equity inflows. As a result, portfolio turnover has declined and investors hold fewer shares that are actively traded by managers. Our reputation could suffer if we are unable to deliver consistent, competitive investment performance. Our business is based on the trust and confidence of our clients. Damage to our reputation, resulting from poor or inconsistent invest- ment performance, among other factors, can reduce substantially our AUM and impair our ability to maintain or grow our business. EQH and its subsidiaries, as well as AXA and its subsidiaries, provide a significant amount of our AUM and fund a sig- nificant portion of our seed investments, and if our agreements with them terminate or they withdraw capital support, whether as a result of EQH’s public offerings since 2018 or another factor, it could have a material adverse effect on our business, results of operations and/or financial condition. EQH (our parent company), AXA and their respective subsidiaries constitute our largest clients. Our EQH affiliates represented approximately 18%, of our AUM as of December 31, 2019, and we earned approximately 3% of our net revenues from services we provided to them in 2019. AXA and its subsidiaries represented approximately 5% of our AUM as of December 31, 2019, and we earned approximately 2% of our net revenues from services we provided to them in 2019. Our related investment management agreements are terminable at any time or on short notice by either party, and neither EQH nor AXA is under any obligation to maintain any level of AUM with us. A material adverse effect on our business, results of operations and/or financial condition could result if EQH or AXA were to terminate their investment management agreements with us. Further, while we currently cannot predict the eventual impact on us of AXA’s sale of its interest in EQH, such impact could include a reduction in the support AXA has provided to us in the past with respect to our investment management business, result- ing in a decrease to our revenues and ability to initiate new investment services. Also, we rely on AXA, including its subsidiary AXA Business Services, for a number of significant services and we benefit from our affiliation with AXA in certain common ven- dor relationships. These arrangements may change with possible negative financial implications for us. Our business is dependent on investment advisory agreements with clients, and selling and distribution agreements with various financial intermediaries and consultants, which generally are subject to termination or non-renewal on short notice. We derive most of our revenues pursuant to written investment management agreements (or other arrangements) with institutional investors, mutual funds and private wealth clients, and selling and distribution agreements with financial intermediaries that distrib- ute AB Funds. Generally, the investment management agreements (and other arrangements), including our agreements with AXA, Annual Report 2019 17


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    EQH and their respective subsidiaries, are terminable at any time or upon relatively short notice by either party. The investment management agreements pursuant to which we manage the U.S. Funds must be renewed and approved by the Funds’ boards of directors annually. A significant majority of the directors are independent. Consequently, there can be no assurance that the board of directors of each fund will approve the fund’s investment management agreement each year, or will not condition its approval on revised terms that may be adverse to us. In addition, investors in AB Funds can redeem their investments without notice. Any termination of, or failure to renew, a significant number of these agreements, or a significant increase in redemption rates, could have a material adverse effect on our results of operations and business prospects. Similarly, the selling and distribution agreements with securities firms, brokers, banks and other financial intermediaries are termi- nable by either party upon notice (generally 30 days) and do not obligate the financial intermediary to sell any specific amount of fund shares. These intermediaries generally offer their clients investment products that compete with our products. In addition, cer- tain institutional investors rely on consultants to advise them about choosing an investment adviser and some of our services may not be considered among the best choices by these consultants. As a result, investment consultants may advise their clients to move their assets invested with us to other investment advisers, which could result in significant net outflows. Lastly, our Private Wealth Services rely on referrals from financial planners, registered investment advisers and other professionals. We cannot be certain that we will continue to have access to, or receive referrals from, these third parties. Loss of such access or referrals could have a material adverse effect on our results of operations and business prospects. Performance-based fee arrangements with our clients may cause greater fluctuations in our net revenues. We sometimes charge our clients performance-based fees, whereby we charge a base advisory fee and are eligible to earn an addi- tional performance-based fee or incentive allocation that is calculated as either a percentage of absolute investment results or a per- centage of investment results in excess of a stated benchmark over a specified period of time. Some performance-based fees include a high-watermark provision, which generally provides that if a client account under-performs relative to its performance target (whether in absolute terms or relative to a specified benchmark), it must gain back such under-performance before we can collect future performance-based fees. Therefore, if we fail to achieve the performance target for a particular period, we will not earn a performance-based fee for that period and, for accounts with a high-watermark provision, our ability to earn future performance- based fees will be impaired. We are eligible to earn performance-based fees on 7.9%, 9.1% and 0.7% of the assets we manage for institutional clients, private wealth clients and retail clients, respectively (in total, 5.3% of our AUM). If the percentage of our AUM subject to performance- based fees increases, seasonality and volatility of revenue and earnings are likely to become more significant. Our performance-based fees were $99.6 million, $118.1 million and $94.8 million in 2019, 2018 and 2017, respectively. The revenues generated by Bernstein Research Services may be adversely affected by circumstances beyond our control, including declines in brokerage transaction rates, declines in global market volumes, failure to settle our trades by sig- nificant counterparties and the effects of MiFID II. Electronic, or “low-touch,” trading represents a significant percentage of buy-side trading activity and typically produces transaction fees that are significantly lower than the price of traditional full service fee rates. As a result, blended pricing throughout our industry is lower now than it was historically, and price declines may continue. In addition, fee rates we charge and charged by other brokers for brokerage services have historically experienced price pressure, and we expect these trends to continue. Also, while increases in transaction volume and market share often can offset decreases in rates, this may not continue. In addition, the failure or inability of any of our broker-dealer’s significant counterparties to perform could expose us to substantial expenditures and adversely affect our revenues. For example, SCB LLC, as a member of clearing and settlement organizations, would be required to settle open trades of any non-performing counterparty. This exposes us to the mark-to-market adjustment on the trades between trade date and settlement date, which could be significant, especially during periods of severe market volatility. Also, our ability to access liquidity in such situations may be limited by what our funding relationships are able to offer us at such times. 18 AB


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    We discuss the risks associated with the second installment of the Markets in Financial Instruments Directive II (“MiFID II”) below in “Legal and Regulatory-related Risks” in this Item 1A. Fluctuations in the exchange rates between the U.S. dollar and various other currencies can adversely affect our AUM, revenues and results of operations. Although significant portions of our net revenues and expenses, as well as our AUM, presently are denominated in U.S. dollars, we have subsidiaries and clients outside of the United States with functional currencies other than the U.S. dollar. Weakening of these currencies relative to the U.S. dollar adversely affects the value in U.S. dollar terms of our revenues and our AUM denominated in these other currencies. Accordingly, fluctuations in U.S. dollar exchange rates affect our AUM, revenues and reported financial results from one period to the next. We may not be successful in our efforts to hedge our exposure to such fluctuations, which could negatively impact our revenues and reported financial results. Our seed capital investments are subject to market risk. While we enter into various futures, forwards, swap and option contracts to economically hedge many of these investments, we also may be exposed to market risk and credit-related losses in the event of non-performance by counterparties to these derivative instruments. We have a seed investment program for the purpose of building track records and assisting with the marketing initiatives pertaining to our firm’s new products. These seed capital investments are subject to market risk. Our risk management team oversees a seed hedging program that attempts to minimize this risk, subject to practical and cost considerations. Also, not all seed investments are deemed appropriate to hedge, and in those cases we are exposed to market risk. In addition, we may be subject to basis risk in that we cannot always hedge with precision our market exposure and, as a result, we may be subject to relative spreads between market sectors. As a result, volatility in the capital markets may cause significant changes in our period-to-period financial and operating results. We use various derivative instruments, including futures, forwards, swap and option contracts, in conjunction with our seed hedg- ing program. While in most cases broad market risks are hedged, our hedges are imperfect and some market risk remains. In addi- tion, our use of derivatives results in counterparty risk (i.e., the risk that we may be exposed to credit-related losses in the event of non-performance by counterparties to these derivative instruments), regulatory risk (e.g., short selling restrictions) and cash/synthetic basis risk (i.e., the risk that the underlying positions do not move identically to the related derivative instruments). We may engage in strategic transactions that could pose risks. As part of our business strategy, we consider potential strategic transactions, including acquisitions, dispositions, mergers, con- solidations, joint ventures and similar transactions, some of which may be material. These transactions, if undertaken, may involve various risks and present financial, managerial and operational challenges, including:. • adverse effects on our earnings if acquired intangible assets or goodwill become impaired; • existence of unknown liabilities or contingencies that arise after closing; • potential disputes with counterparties; and • potential dilution to our existing unitholders, if we fund the purchase price of a transaction with AB Units or AB Holding Units. Acquisitions also pose the risk that any business we acquire may lose customers or employees or could under-perform relative to expectations. Additionally, the loss of investment personnel poses the risk that we may lose the AUM we expected to manage, which could adversely affect our results of operations. Furthermore, strategic transactions may require us to increase our leverage or, if we issue AB Units or AB Holding Units to fund an acquisition, would dilute the holdings of our existing Unitholders. We may not accurately value the securities we hold on behalf of our clients or our company investments. In accordance with applicable regulatory requirements, contractual obligations or client direction, we employ procedures for the pricing and valuation of securities and other positions held in client accounts or for company investments. We have established a Annual Report 2019 19


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    Valuation Committee, consisting of senior officers and employees, which oversees pricing controls and valuation processes. If mar- ket quotations for a security are not readily available, the Valuation Committee determines a fair value for the security. Extraordinary volatility in financial markets, significant liquidity constraints or our failure to adequately consider one or more factors when determining the fair value of a security based on information with limited market observability could result in our failing to properly value securities we hold for our clients or investments accounted for on our balance sheet. Improper valuation likely would result in our basing fee calculations on inaccurate AUM figures, our striking incorrect net asset values for company- sponsored mutual funds or hedge funds or, in the case of company investments, our inaccurately calculating and reporting our financial condition and operating results. Although the overall percentage of our AUM that we fair value based on information with limited market observability is not significant, inaccurate fair value determinations can harm our clients, create regulatory issues and damage our reputation. We may not have sufficient information to confirm or review the accuracy of valuations provided to us by underlying external managers for the funds in which certain of our alternative investment products invest. Certain of our alternative investment services invest in funds managed by external managers (“External Managers”) rather than investing directly in securities and other instruments. As a result, our abilities will be limited with regard to (i) monitoring such investments, (ii) regularly obtaining complete, accurate and current information with respect to such investments and (iii) exercising control over such investments. Accordingly, we may not have sufficient information to confirm or review the accuracy of valuations provided to us by External Managers. In addition, we will be required to rely on External Managers’ compliance with any appli- cable investment guidelines and restrictions. Any failure of an External Manager to operate within such guidelines or to provide accurate information with respect to the investment could subject our alternative investment products to losses and cause damage to our reputation. The quantitative models we use in certain of our investment services may contain errors, resulting in imprecise risk assess- ments and unintended output. We use quantitative models in a variety of our investment services, generally in combination with fundamental research. These models are developed by senior quantitative professionals and typically are implemented by IT professionals. Our Model Risk Oversight Committee oversees the model governance framework and associated model review activities, which are then executed by our Model Risk Team. However, due to the complexity and large data dependency of such models, it is possible that errors in the models could exist and our controls could fail to detect such errors. Failure to detect errors could result in client losses and repu- tational damage. The financial services industry is intensely competitive. We compete on the basis of a number of factors, including our investment performance for our clients, our array of investment services, innovation, reputation and price. By having a global presence, we often face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our ability to expand. Furthermore, if we are unable to maintain and/or continue to improve our investment performance, our client flows may be adversely affected, which may make it more difficult for us to compete effectively. Also, increased competition could reduce the demand for our products and services, which could have a material adverse effect on our financial condition, results of operations and business prospects. For additional information regarding competitive factors, see “Competition” in Item 1. Human Capital-related Risks We may be unable to continue to attract, motivate and retain key personnel, and the cost to retain key personnel could put pressure on our adjusted operating margin. Our business depends on our ability to attract, motivate and retain highly skilled, and often highly specialized, technical, investment, managerial and executive personnel, and there is no assurance that we will be able to do so. 20 AB


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    The market for these professionals is extremely competitive. They often maintain strong, personal relationships with investors in our products and other members of the business community so their departure may cause us to lose client accounts or result in fewer opportunities to win new business, either of which factors could have a material adverse effect on our results of operations and business prospects. Additionally, a decline in revenues may limit our ability to pay our employees at competitive levels, and maintaining (or increasing) compensation without a revenue increase, in order to retain key personnel, may adversely affect our adjusted operating margin. As a result, we remain vigilant about aligning our cost structure (including headcount) with our revenue base. For additional information regarding our compensation practices, see “Compensation Discussion and Analysis” in Item 11. Our process of relocating our headquarters may not be executed as we envision. We have announced that we will establish our corporate headquarters in and relocate approximately 1,250 jobs located in the New York metropolitan area to Nashville, Tennessee (for additional information, see “Relocation Strategy” in Item 7). Although the eventual impact on AB from this process is not yet known, the uncertainty created by these circumstances could have a significant adverse effect on AB’s ability to motivate and retain current employees. Further significant managerial and operational challenges could arise, such as ineffective transfer of institutional knowledge from current employees to newly-hired employees, if AB experi- ences significantly greater attrition among current employees than the firm anticipates in connection with the relocation and/or if the firm encounters more difficulty than expected in hiring qualified employees to help staff our Nashville headquarters. Additionally, our estimates for both the transition costs and the corresponding expense savings relating to our headquarters relocation, which we discuss in more detail in “Relocation Strategy” in Item 7, are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs. If our assumptions turn out to be inaccurate, our adjusted net revenues and adjusted operating income could be adversely affected. Operational, Technology and Cyber-related Risks Technology failures and disruptions, including failures to properly safeguard confidential information, can significantly constrain our operations and result in significant time and expense to remediate, which could result in a material adverse effect on our results of operations and business prospects. We are highly dependent on software and related technologies throughout our business, including both proprietary systems and those provided by third-party vendors. We use our technology to, among other things, obtain securities pricing information, proc- ess client transactions, store and maintain data, and provide reports and other services to our clients. Despite our protective meas- ures, including measures designed to effectively secure information through system security technology and established and tested business continuity plans, we may still experience system delays and interruptions as a result of natural disasters, hardware failures, software defects, power outages, acts of war and third-party failures. We cannot predict with certainty all of the adverse effects that could result from our failure, or the failure of a third party, to efficiently address and resolve these delays and interruptions. These adverse effects could include the inability to perform critical business functions or failure to comply with financial reporting and other regulatory requirements, which could lead to loss of client confidence, reputational damage, exposure to disciplinary action and liability to our clients. Many of the software applications that we use in our business are licensed from, and supported, upgraded and maintained by, third- party vendors. A suspension or termination of certain of these licenses or the related support, upgrades and maintenance could cause temporary system delays or interruption. Additionally, technology rapidly evolves and we cannot guarantee that our competitors may not implement more advanced technology platforms for their products and services, which may place us at a competitive dis- advantage and adversely affect our results of operations and business prospects. Also, we could be subject to losses if we fail to properly safeguard sensitive and confidential information. As part of our normal operations, we maintain and transmit confidential information about our clients as well as proprietary information relating to our business operations. Although we take protective measures, our systems still could be vulnerable to cyber attack or other forms of Annual Report 2019 21


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    unauthorized access (including computer viruses) that have a security impact, such as an authorized employee or vendor inadvertently or intentionally causing us to release confidential or proprietary information. Such disclosure could, among other things, allow competitors access to our proprietary business information and require significant time and expense to investigate and remediate the breach. Moreover, loss of confidential client information could harm our reputation and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Any significant security breach of our information and cyber security infrastructure, as well as our failure to properly esca- late and respond to such an incident, may significantly harm our operations and reputation. It is critical that we ensure the continuity and effectiveness of our information and cyber security infrastructure, policies, procedures and capabilities to protect our computer and telecommunications systems and the data that reside on or are transmitted through them and contracted third-party systems. Although we take protective measures, including measures to effectively secure information through system security technology, our technology systems may still be vulnerable to unauthorized access, computer viruses or other events that have a security impact, such as an external attack by one or more cyber criminals (including phishing attacks attempting to obtain confidential information and ransomware attacks attempting to block access to a computer system until a sum of money is paid), which could materially harm our operations and reputation. Additionally, while we take precautions to password protect and encrypt our laptops and sensitive information on our other mobile electronic devices, if such devices are sto- len, misplaced or left unattended, they may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us. Furthermore, although we maintain a robust cyber security infrastructure and incident preparedness strategy, which we test periodi- cally, we may be unable to respond, both internally and externally, to a cyber incident in a sufficiently expeditious manner. Any such failure could cause significant harm to our reputation and result in litigation, regulatory scrutiny and/or significant remediation costs. Unpredictable events, including climate change, natural disaster, dangerous weather conditions, technology failure, terro- rist attack and political unrest, may adversely affect our ability to conduct business. War, terrorist attack, political unrest, power failure, climate change, natural disaster and rapid spread of infectious disease (such as the recent impact caused by the 2019 novel coronavirus) could interrupt our operations by: • causing disruptions in global economic conditions, thereby decreasing investor confidence and making investment products generally less attractive; • inflicting loss of life; • triggering large-scale technology failures or delays; • breaching our information and cyber security infrastructure; and • requiring substantial capital expenditures and operating expenses to remediate damage and restore operations. Despite the contingency plans and facilities we have in place, including system security measures, information back-up and disaster recovery processes, our ability to conduct business, including in key business centers where we have significant operations, such as New York City, London, England, and Nashville, Tennessee, may be adversely affected by a disruption in the infrastructure that supports our operations and the communities in which they are located. This may include a disruption involving electrical, communications, transportation or other services we may use or third parties with which we conduct business. If a disruption occurs in one location and our employees in that location are unable to occupy our offices or communicate with or travel to other loca- tions, our ability to conduct business with and on behalf of our clients may suffer, and we may not be able to successfully implement contingency plans that depend on communication or travel. Furthermore, unauthorized access to our systems as a result of a security breach, the failure of our systems, or the loss of data could give rise to legal proceedings or regulatory penalties under laws protect- ing the privacy of personal information, disrupt operations, and damage our reputation. 22 AB


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    Our operations require experienced, professional staff. Loss of a substantial number of such persons or an inability to provide prop- erly equipped places for them to work may, by disrupting our operations, adversely affect our financial condition, results of oper- ations and business prospects. In addition, our property and business interruption insurance may not be adequate to compensate us for all losses, failures or breaches that may occur. Our own operational failures or those of third parties on which we rely, including failures arising out of human error, could disrupt our business, damage our reputation and reduce our revenues. Weaknesses or failures in our internal processes or systems could lead to disruption of our operations, liability to clients, exposure to disciplinary action or harm to our reputation. Our business is highly dependent on our ability to process, on a daily basis, large numbers of transactions, many of which are highly complex, across numerous and diverse markets. These transactions generally must comply with client investment guidelines, as well as stringent legal and regulatory standards. Our obligations to clients require us to exercise skill, care and prudence in performing our services. Despite our employees being highly trained and skilled, the large number of transactions we process makes it highly likely that errors will occasionally occur. If we make a mistake in performing our services that causes financial harm to a client, we have a duty to act promptly to put the client in the position the client would have been in had we not made the error. The occurrence of mistakes, particularly significant ones, can have a material adverse effect on our reputation, results of operations and business prospects. The individuals, third-party vendors or issuers on whom we rely to perform services for us or our clients may be unable or unwilling to honor their contractual obligations to us. We rely on various counterparties and other third-party vendors to augment our existing investment, operational, financial and technological capabilities, but the use of a third-party vendor does not diminish AB’s responsibility to ensure that client and regu- latory obligations are met. Default rates, credit downgrades and disputes with counterparties as to the valuation of collateral increase significantly in times of market stress. Disruptions in the financial markets and other economic challenges may cause our counter- parties and other third-party vendors to experience significant cash flow problems or even render them insolvent, which may expose us to significant costs and impair our ability to conduct business. Weaknesses or failures within a third-party vendor’s internal processes or systems, or inadequate business continuity plans, can mate- rially disrupt our business operations. Also, third-party vendors may lack the necessary infrastructure or resources to effectively safe- guard our confidential data. If we are unable to effectively manage the risks associated with such third-party relationships, we may suffer fines, disciplinary action and reputational damage. We may not always successfully manage actual and potential conflicts of interest that arise in our business. Increasingly, we must manage actual and potential conflicts of interest, including situations where our services to a particular client conflict, or are perceived to conflict, with the interests of another client. Failure to adequately address potential conflicts of interest could adversely affect our reputation, results of operations and business prospects. We have procedures and controls that are designed to identify and mitigate conflicts of interest, including those designed to prevent the improper sharing of information. However, appropriately managing conflicts of interest is complex. Our reputation could be damaged and the willingness of clients to enter into transactions in which such a conflict might arise may be affected if we fail, or appear to fail, to deal appropriately with actual or perceived conflicts of interest. In addition, potential or perceived conflicts could give rise to litigation or regulatory enforcement actions. Maintaining adequate liquidity for our general business needs depends on certain factors, including operating cash flows and our access to credit on reasonable terms. Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow AUM and other factors beyond our control. Our ability to issue public or private debt on reason- able terms may be limited by adverse market conditions, our profitability, our creditworthiness as perceived by lenders and changes in government regulations, including tax rates and interest rates. Furthermore, our access to credit on reasonable terms is partially dependent on our firm’s credit ratings. Annual Report 2019 23


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    Both Moody’s Investors Service, Inc. and Standard & Poor’s Rating Service affirmed AB’s long-term and short-term credit ratings and indicated a stable outlook in 2019. Future changes in our credit ratings are possible and any downgrade to our ratings is likely to increase our borrowing costs and limit our access to the capital markets. If this occurs, we may be forced to incur unanticipated costs or revise our strategic plans, which could have a material adverse effect on our financial condition, results of operations and business prospects. An impairment of goodwill may occur. Determining whether an impairment of the goodwill asset exists requires management to exercise a substantial amount of judgment. In addition, to the extent that securities valuations are depressed for prolonged periods of time and/or market conditions deterio- rate, or if we experience significant net redemptions, our AUM, revenues, profitability and unit price will be adversely affected. Although the price of an AB Holding Unit is just one factor in the calculation of fair value, if AB Holding Unit price levels decline significantly, reaching the conclusion that fair value exceeds carrying value will, over time, become more difficult. In addition, con- trol premiums, industry earnings multiples and discount rates are impacted by economic conditions. As a result, subsequent impair- ment tests may occur more frequently and be based on more negative assumptions and future cash flow projections, and may result in an impairment of goodwill. An impairment may result in a material charge to our earnings. For additional information about our impairment testing, see Item 7. The insurance that we maintain may not fully cover all potential exposures. We maintain professional liability, fidelity, cyber, property, casualty, business interruption and other types of insurance, but such insurance may not cover all risks associated with the operation of our business. Our coverage is subject to exclusions and limitations, including high self-insured retentions or deductibles and maximum limits and liabilities covered. In addition, from time to time, various types of insurance may not be available on commercially acceptable terms or, in some cases, at all. We can make no assur- ance that a claim or claims will be covered by our insurance policies or, if covered, will not exceed our available insurance cover- age, or that our insurers will remain solvent and meet their obligations. In the future, we may not be able to obtain coverage at current levels, if at all, and our premiums may increase significantly on coverage that we maintain. Also, we currently are party to certain joint insurance arrangements with subsidiaries of EQH. If our affiliates choose not to include us as insured parties under any such policies, we may need to obtain stand-alone insurance coverage, which could have coverage terms that are less beneficial to us and/or cost more. Legal and Regulatory-related Risks Our business is subject to pervasive, complex and continuously evolving global regulation, compliance with which involves substantial expenditures of time and money, and violation of which may result in material adverse consequences. Virtually all aspects of our business are subject to federal and state laws and regulations, rules of securities regulators and exchanges, and laws and regulations in the foreign jurisdictions in which our subsidiaries conduct business. If we violate these laws or regu- lations, we could be subject to civil liability, criminal liability or sanction, including restriction or revocation of our and our sub- sidiaries’ professional licenses or registrations, revocation of the licenses of our employees, censures, fines, or temporary suspension or permanent bar from conducting business. Any such liability or sanction could have a material adverse effect on our financial condition, results of operations and business prospects. A regulatory proceeding, even if it does not result in a finding of wrong- doing or sanction, could require substantial expenditures of time and money and could potentially damage our reputation. In recent years, global regulators have substantially increased their oversight of financial services. Some of the newly-adopted and proposed regulations are focused on investment management services. Others, while more broadly focused, nonetheless impact our business. Moreover, the adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business, including making our efforts to com- ply more expensive and time-consuming. 24 AB


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    For example, in 2015 the Financial Supervisory Commission in Taiwan (“FSC”) implemented new limits on the degree to which local investors can own an offshore investment product. While certain exemptions have been available to us, should we not con- tinue to qualify, the FSC’s rules could force some of our local resident investors to redeem their investments in our funds sold in Taiwan (and/or prevent further sales of those funds in Taiwan), some of which funds have local ownership levels substantially above the FSC limits. This could lead to significant declines in our investment advisory and services fees and revenues earned from these funds. In Europe, MiFID II, which became effective in January 2018, makes significant modifications to the manner in which European broker-dealers can be compensated for research. These modifications have reduced, and are believed to have significantly reduced, the overall research spend by European buy-side firms, which has decreased the revenues we derive from our European clients. Our European clients may continue to reduce their research budgets, which could result in a significant decline in our sell-side revenues. Also, while MiFID II is not applicable to firms operating outside of Europe, competitive and client pressures may force buy-side firms operating outside of Europe to pay for research from their own resources instead of through bundled trading commissions. If that occurs, we would expect that research budgets from those clients will decrease further, which could result in an additional sig- nificant decline in our sell-side revenues. Additionally, these competitive and client pressures may result in our buy-side operation paying for research out of our own resources instead of through bundled trading commissions, which could increase our firm’s expenses and decrease our operating income. Additionally, in July 2017 the Chief Executive of the U.K. Financial Conduct Authority (“FCA”), which regulates the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. Although financial regulators and industry working groups have suggested alternative reference rates, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates may adversely affect the amount of interest payable or interest receivable on certain of our firm’s portfolio invest- ments. These changes may also impact the market liquidity and market value of these portfolio investments. We are finalizing our global assessment of exposure in relation to funds utilizing LIBOR based instruments and benchmarks. Further, we are prioritizing the mitigation of risks associated with the forecast changes to financial instruments and performance benchmarks referencing existing LIBOR rates, and concurrently any impact on AB portfolios and investment strategies. Lastly, it also is uncertain how regulatory trends will evolve under the current U.S. President’s administration and abroad. For example, in June 2016, a narrow majority of voters in a U.K. referendum voted to exit the European Union (“Brexit”) and, as of January 31, 2020, the U.K. did just that. However, it remains unclear exactly how the U.K.’s status in relation to the European Union (“EU”) will change now that is has left. Accordingly, our U.K.-based buy-side and sell-side subsidiaries are implementing alternative arrangements in EU jurisdictions in order to ensure continued operations in the Eurozone, including our continued abil- ity to market and sell various investment products in the Eurozone. In addition, any other changes in the composition of the EU’s member states may add further complexity to our global risks and operations. We are involved in various legal proceedings and regulatory matters and may be involved in such proceedings in the future, any one or combination of which could have a material adverse effect on our reputation, financial condition, results of operations and business prospects. We may be involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which allege significant damages, and we may be involved in additional matters in the future. Litigation is subject to significant uncertainties, particularly when plaintiffs allege substantial or indeterminate damages, the litigation is in its early stages, or when the litigation is highly complex or broad in scope. Annual Report 2019 25


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    Structure-related Risks The partnership structure of AB Holding and AB limits Unitholders’ abilities to influence the management and operation of AB’s business and is highly likely to prevent a change in control of AB Holding and AB. The General Partner, as general partner of both AB Holding and AB, generally has the exclusive right and full authority and responsi- bility to manage, conduct, control and operate their respective businesses, except as otherwise expressly stated in their respective Amended and Restated Agreements of Limited Partnership. AB Holding and AB Unitholders have more limited voting rights on matters affecting AB than do holders of common stock in a corporation. Both Amended and Restated Agreements of Limited Partner- ship provide that Unitholders do not have any right to vote for directors of the General Partner and that Unitholders only can vote on certain extraordinary matters (including removal of the General Partner under certain extraordinary circumstances). Additionally, the AB Partnership Agreement includes significant restrictions on the transfer of AB Units and provisions that have the practical effect of preventing the removal of the General Partner, which provisions are highly likely to prevent a change in control of AB’s management. AB Units are illiquid and subject to significant transfer restrictions. There is no public trading market for AB Units and we do not anticipate that a public trading market will develop. The AB Partner- ship Agreement restricts our ability to participate in a public trading market or anything substantially equivalent to one by providing that any transfer that may cause AB to be classified as a “publicly traded partnership” (“PTP”) as defined in Section 7704 of the Internal Revenue Code of 1986, as amended (“Code”), shall be deemed void and shall not be recognized by AB. In addition, AB Units are subject to significant restrictions on transfer, such as obtaining the written consent of EQH and the General Partner pur- suant to the AB Partnership Agreement. Generally, neither EQH nor the General Partner will permit any transfer that it believes would create a risk that AB would be treated as a corporation for tax purposes. EQH and the General Partner have implemented a transfer program that requires a seller to locate a purchaser and imposes annual volume restrictions on transfers. You may request a copy of the transfer program from our Corporate Secretary (corporate_secretary@alliancebernstein.com). Also, we have filed the transfer program as Exhibit 10.07 to this Form 10-K. Changes in the partnership structure of AB Holding and AB and/or changes in the tax law governing partnerships would have significant tax ramifications. AB Holding, having elected under Section 7704(g) of the Code to be subject to a 3.5% federal tax on partnership gross income from the active conduct of a trade or business, is a “grandfathered” PTP for federal income tax purposes. AB Holding is also subject to the 4.0% New York City unincorporated business tax (“UBT”), net of credits for UBT paid by AB. In order to preserve AB Holding’s status as a “grandfathered” PTP for federal income tax purposes, management seeks to ensure that AB Holding does not directly or indirectly (through AB) enter into a substantial new line of business. A “new line of business” includes any business that is not closely related to AB’s historical business of providing research and diversified investment management and related services to its clients. A new line of business is “substantial” when a partnership derives more than 15% of its gross income from, or uses more than 15% of its total assets in, the new line of business. AB is a private partnership for federal income tax purposes and, accordingly, is not subject to federal and state corporate income taxes. However, AB is subject to the 4.0% UBT. Domestic corporate subsidiaries of AB, which are subject to federal, state and local income taxes, generally are included in the filing of a consolidated federal income tax return with separate state and local income tax returns being filed. Each of AB’s non-U.S. corporate subsidiaries generally is subject to taxes in the foreign jurisdiction where it is located. If our business increasingly operates in countries other than the U.S., AB’s effective tax rate will increase as our interna- tional subsidiaries are subject to corporate taxes in the jurisdictions where they are located. In order to preserve AB’s status as a private partnership for federal income tax purposes, AB Units must not be considered publicly traded. If such units were to be considered readily tradable, AB would be subject to federal and state corporate income tax on its net income. Furthermore, as noted above, should AB enter into a substantial new line of business, AB Holding, by virtue of its ownership of AB, would lose its status as a grandfathered PTP and would become subject to corporate income tax as set forth above. If AB and AB Holding were to become subject to corporate income tax as set forth above, their net income and quarterly distributions to Unitholders would be materially reduced. For information about the significant restrictions on transfer of AB Units, see the risk factor immediately above. 26 AB


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    If, pursuant to the Bipartisan Budget Act of 2015 (“2015 Act”), any audit by the Internal Revenue Service (“IRS”) of our income tax returns for any of our taxable years beginning after December 31, 2017 results in any adjustments, the IRS may collect any resulting taxes, including any applicable penalties and interest, directly from us, in which case our net income and the cash available for quarterly Unitholder distributions may be substantially reduced. Although the IRS, under current law, generally determines tax adjustments at the partnership level when it audits the income tax return of a partnership, the IRS, with respect to taxable years beginning on or before December 31, 2017, is required to collect any additional taxes, interest and penalties from the partnership’s individual partners. The 2015 Act modifies this procedure for audits of a partnership’s taxable years beginning after December 31, 2017 and, if a partnership meets certain requirements and makes a proper election, for audits of a partnership’s taxable years beginning before January 1, 2018. We may choose to make such an election if we receive a written notice of selection for examination for an eligible taxable year or if we file, on or after January 1, 2018, an admin- istrative adjustment request for an eligible taxable year and otherwise qualify to make such an election. Generally, we will have the ability to collect tax liability from our Unitholders in accordance with their percentage interests during the year under audit, but there can be no assurance that we will elect to do so or be able to do so under all circumstances. If we do not collect such tax liability from our Unitholders in accordance with their percentage interests in the tax year under audit, our net income and the available cash for quarterly distributions to current Unitholders may be substantially reduced. Accordingly, our current Unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such Unitholders did not own Units during the tax year under audit. In particular, as a publicly traded partnership, our Partnership Representative (as defined below) may, in certain instances, request that any “imputed underpayment” resulting from an audit be adjusted by amounts of cer- tain of our passive losses. If we successfully make such a request, we would have to reduce suspended passive loss carryovers in a manner which is binding on the partners. In August and December, 2018, the IRS issued final regulations providing rules relating to the operation of the partnership audit rules (the “Final Regulations”). Pursuant to the 2015 Act and the Final Regulations, for taxable years beginning after December 31, 2017, we will be required to designate a partner, or other person, with a substantial presence in the United States as the partnership representative (“Partnership Representative”) and we will no longer have a “tax matters partner.” The Partnership Representative will have the sole authority to act on our behalf for purposes of, among other things, U.S. federal income tax audits and judicial review of administrative adjustments by the IRS. If we do not make such a designation, the IRS can select any person as the Partnership Representative. Any actions taken by us or by the Partnership Representative on our behalf with respect to, among other things, U.S. federal income tax audits and judicial review of administrative adjustments by the IRS, will be binding on us and our unitholders. In addition, the Final Regulations clarified the procedure under which a partnership may elect to require its unitholders to take into account on their income tax returns an audit adjustment made to the partnership’s income tax items. We may, but are not required to, make such a “push-out” election. In addition, a partnership that is a partner of another partnership may elect to have its unitholders take an audit adjustment of the lower-tier partnership into account (i.e., the upper-tier partnership may push adjust- ments received from the lower-tier partnership through to the partners of the upper-tier partnership). The upper-tier partnership must timely complete the “push-out” of the adjustment in order for it to be effective. Under the Final Regulations, such election must be made by the extended due date for the return for the adjustment year of the audited partnership, regardless of whether the audited partnership is required to file a return for the adjustment year or timely files a request for an extension for its return. The Final Regulations set forth a number of requirements to make a “push-out” election and we may be unable or unwilling to comply with such requirements. If we do not make a “push-out” election, we would be required to pay any tax resulting from the adjust- ments to our income tax items, and the cash available for distribution to unitholders would be substantially reduced. Non-U.S. unitholders may be subject to a 10% withholding tax on the sale of their AB Units or AB Holding Units, which could reduce the value of such Units. Gain or loss from the sale or exchange of partnership units after November 27, 2017 by a non-U.S. unitholder are treated as effectively connected with a U.S. trade or business to the extent that the non-U.S. unitholder would have had effectively connected gain or loss on a hypothetical sale by the partnership of all of its assets at fair market value as of the date of the sale or exchange of the partnership units. The Tax Cuts and Jobs Act also imposed certain withholding requirements for the sale of partnership units by Annual Report 2019 27


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    a non-U.S. unitholder and authorized the IRS to issue regulations to carry out the withholding rules in the case of publicly traded partnerships. In December 2017, the IRS issued a notice suspending the application of these new withholding rules to the disposition of publicly traded partnership units until the IRS issued related guidance. In May 2019, the IRS issued proposed regulations (“Proposed Regulations”) that would, if enacted, end the suspension of withholding rules with respect to the disposition of units in publicly traded partnerships by non-U.S. unitholders. Taxpayers are permitted to rely on the suspension provided by the earlier notice until finalized regulations are enacted, which the IRS intends to be 60 days after the date that any such regulations are finalized. We cannot predict when or if the IRS will finalize the Proposed Regulations or release other guidance or what the finalized regulations or other guidance will indicate. If the Proposed Regulations are finalized and enacted in their current form, they generally would subject publicly traded partnerships to the same rules as other partnerships, in which case we would be subject to two different withholding regimes. Under the first regime, the recipient of the units being transferred, or the broker through which such transfer is effected, generally will be required to withhold 10% of the amount realized by the transferring unitholder, unless the transferring unitholder provides the recipient unitholder (or the broker, as applicable) with either proper documentation proving that the transferring unitholder is not a nonresident alien individual or foreign corporation, or with certain other statements or certifications described in the Proposed Regulations that limit or relieve the recipient unitholder’s (or the broker’s, as applicable) withholding obligation. Under the second regime, if the recipient unitholder (or the broker, as applicable) fails to properly withhold, then we generally would be obligated to deduct and withhold from distributions to the recipient unitholder a tax in an amount equal to the amount the transferring unitholder (or the broker, as applicable) failed to withhold (plus interest). Whether or not these withholding rules apply does not affect the characterization of gain or loss from the sale or exchange of partnership units by a non-U.S. unitholder as effectively connected with a U.S. trade or business. 28 AB


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    Item 1B. Unresolved Staff Comments Neither AB nor AB Holding has unresolved comments from the staff of the SEC to report. Annual Report 2019 29


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    Item 2. Properties Our principal executive offices located at 1345 Avenue of the Americas, New York, New York are occupied pursuant to a lease expiring in 2024. At this location, we currently lease 999,963 square feet of space, within which we currently occupy approximately 523,373 square feet of space and have sub-let (or are seeking to sub-let) approximately 476,590 square feet of space. We also leased space at one other location in New York City, which expired on December 31, 2019. In addition, we lease approximately 229,147 square feet of space at One North Lexington, White Plains, New York under a lease expiring in 2021. At this location, we currently occupy approximately 55,921 square feet of space and have sub-let (or are seeking to sub-let) approximately 173,226 square feet of space. We entered into a 20-year lease agreement in New York, New York, at 66 Hudson Boulevard, for 190,000 square feet that is expected to commence in 2024. We entered into short-term leases for office space in Nashville, Tennessee during the construction of our new corporate head- quarters at 501 Commerce Street, which we will vacate upon completion of 501 Commerce Street. We entered into a 15-year lease agreement in Nashville, Tennessee, at 501 Commerce Street, for 218,976 square feet that is expected to commence in July 2020. We also lease 50,792 square feet of space in San Antonio, Texas under a lease expiring April 30, 2029 with options to extend through 2039. In addition, we lease less significant amounts of space in 23 other cities in the United States. Our subsidiaries lease space in 28 cities outside the United States, the most significant of which are in London, England, under a lease expiring in 2022, and in Hong Kong, China, under a lease expiring in 2027. In London, we currently lease 65,488 square feet of space, within which we currently occupy approximately 54,746 square feet of space and have sub-let approximately 10,742 square feet of space. In Hong Kong, we currently lease and occupy 35,878 square feet of space. 30 AB


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    Item 3. Legal Proceedings With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable and the amount of the loss can be reasonably estimated, we record an estimated loss for the expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we are able to determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss. AB may be involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which may allege significant damages. It is reasonably possible that we could incur losses pertaining to these matters, but we cannot cur- rently estimate any such losses. Management, after consultation with legal counsel, currently believes that the outcome of any individual matter that is pending or threatened, or all of them combined, will not have a material adverse effect on our results of operations, financial condition or liquidity. However, any inquiry, proceeding or litigation has an element of uncertainty; management cannot determine whether further developments relating to any individual matter that is pending or threatened, or all of them combined, will have a material adverse effect on our results of operation, financial condition or liquidity in any future reporting period. Annual Report 2019 31


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    Item 4. Mine Safety Disclosures Not applicable. 32 AB


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    PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for AB Holding Units and AB Units; Cash Distributions AB Holding Units are listed on the NYSE and trade publicly under the ticker symbol “AB.” There is no established public trading market for AB Units, which are subject to significant restrictions on transfer. For information about these transfer restrictions, see “Structure-related Risks” in Item 1A. AB Holding’s principal source of income and cash flow is attributable to its limited partnership interests in AB. Each of AB Holding and AB distributes on a quarterly basis all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement and the AB Partnership Agreement, respectively, to its Unitholders and the General Partner. For additional information concerning distribution of Available Cash Flow by AB Holding, see Note 2 to AB Holding’s financial statements in Item 8. For addi- tional information concerning distribution of Available Cash Flow by AB, see Note 2 to AB’s consolidated financial statements in Item 8. On December 31, 2019, the last trading day during 2019, the closing price of an AB Holding Unit on the NYSE was $30.26 per Unit. On December 31, 2019, there were (i) 941 AB Holding Unitholders of record for approximately 82,000 beneficial owners, and (ii) 375 AB Unitholders of record (we do not believe there are substantial additional beneficial owners). Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities We did not engage in any unregistered sales of our securities during the years ended December 31, 2019, 2018 and 2017. Purchases of Equity Securities by the Issuer and Affiliated Purchasers Each quarter since the third quarter of 2011, AB has implemented plans to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. The plan adopted during the fourth quarter of 2019 expired at the close of business on Febru- ary 11, 2020. AB may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under the firm’s incentive compensation award program and for other corporate purposes. For additional information about Rule 10b5-1 plans, see “Units Outstanding” in Item 7. AB Holding Units bought by us or one of our affiliates during the fourth quarter of 2019 are as follows: Issuer Purchases of Equity Securities Maximum Number (or Approximate Total Number of Dollar Value) of Average Price AB Holding Units AB Holding Units that Paid Purchased as Part May Yet Be Total Number Per AB Holding of Publicly Purchased Under of AB Holding Units Unit, net of Announced Plans the Plans or Purchased Commissions or Programs Programs Period 10/1/19-10/31/19(1)(2) 264,663 $ 28.34 — — 11/1/19-11/30/19(1)(2) 42,800 29.00 — — 12/1/19-12/31/19(1)(2) 2,821,051 28.98 — — Total 3,128,514 $28.93 — — (1) During the fourth quarter of 2019, we purchased 2,648,758 AB Holding Units from employees to allow them to fulfill statutory withholding tax requirements at the time of distribution of long-term incentive compensation awards. (2) During the fourth quarter of 2019, we purchased 479,756 AB Holding Units on the open market pursuant to a Rule 10b5-1 plan to help fund anticipated obliga- tions under our incentive compensation award program. Annual Report 2019 33


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    AB Units bought by us or one of our affiliates during the fourth quarter of 2019 are as follows: Issuer Purchases of Equity Securities Maximum Number (or Approximate Total Number of Dollar Value) of AB Units AB Units that Average Price Purchased as Part May Yet Be Total Number of Paid Per AB of Publicly Purchased Under AB Units Unit, net of Announced Plans the Plans or Purchased Commissions or Programs Programs Period 10/1/19-10/31/19 — — — — 11/1/19-11/30/19 — — — — 12/1/19-12/31/19(1) 2,800 28.85 — — Total 2,800 $28.85 — — (1) During December 2019, we purchased 2,800 AB Units in a private transaction. 34 AB


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    Item 6. Selected Financial Data AllianceBernstein Holding L.P. The follow selected financial data is derived from the consolidated financial statements of AllianceBernstein Holding L.P. and pro- vides summary historical financial information for the periods ended and as of the dates indicated: Years Ended December 31, 2019 2018 2017 2016 2015 (in thousands, except per unit amounts) Income statement data: Equity in net income attributable to AB Unitholders $ 266,292 $ 270,647 $ 232,393 $ 239,389 $ 210,084 Income taxes 27,729 28,250 24,971 22,803 24,320 Net income $ 238,563 $ 242,397 $ 207,422 $ 216,586 $ 185,764 Basic net income per unit $ 2.49 $ 2.50 $ 2.19 $ 2.24 $ 1.87 Diluted net income per unit $ 2.49 $ 2.50 $ 2.19 $ 2.23 $ 1.86 Cash distributions per unit(1) $ 2.53 $ 2.68 $ 2.30 $ 1.92 $ 1.86 Balance sheet data at period end: Total assets $1,554,264 $1,490,701 $1,544,704 $1,540,508 $1,576,120 Partners’ capital $1,552,538 $1,490,057 $1,543,550 $1,539,889 $1,575,846 (1) AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to its Unitholders; for all years presented, the cash distributions per unit reflect the impact of AB’s non-GAAP adjustments. Annual Report 2019 35


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    AllianceBernstein L.P. Selected Consolidated Financial Data Years Ended December 31, 2019 2018 2017 2016 2015 (in thousands, except per unit amounts and unless otherwise indicated) INCOME STATEMENT DATA: Revenues: Investment advisory and services fees $2,472,044 $2,362,211 $2,201,305 $1,933,471 $1,973,837 Bernstein research services 407,911 439,432 449,919 479,875 493,463 Distribution revenues 455,043 418,562 412,063 384,405 427,156 Dividend and interest income 104,421 98,226 71,162 46,939 24,872 Investment gains (losses) 38,659 2,653 92,102 93,353 3,551 Other revenues 97,559 98,676 97,135 99,859 101,169 Total revenues 3,575,637 3,419,760 3,323,686 3,037,902 3,024,048 Less: interest expense 57,205 52,399 25,165 9,123 3,321 Net revenues 3,518,432 3,367,361 3,298,521 3,028,779 3,020,727 Expenses: Employee compensation and benefits: Employee compensation and benefits 1,442,783 1,378,811 1,313,469 1,229,721 1,267,926 Promotion and servicing: Distribution-related payments 487,965 427,186 411,467 363,603 384,425 Amortization of deferred sales commissions 15,029 21,343 31,886 41,066 49,145 Trade execution, marketing, T&E and other 219,860 222,630 213,275 216,542 232,023 General and administrative: General and administrative 484,750 448,996 481,488 426,147 431,635 Real estate charges 3,324 7,160 36,669 17,704 998 Contingent payment arrangements (510) (2,219) 267 (20,245) (5,441) Interest on borrowings 13,035 10,359 8,194 4,765 3,119 Amortization of intangible assets 28,759 27,781 27,896 26,311 25,798 Total expenses 2,694,995 2,542,047 2,524,611 2,305,614 2,389,628 Operating income 823,437 825,314 773,910 723,165 631,099 Income taxes 41,754 45,816 53,110 28,319 44,797 Net income 781,683 779,498 720,800 694,846 586,302 Net income of consolidated entities attributable to non-controlling interests 29,641 21,910 58,397 21,488 6,375 Net income attributable to AB Unitholders $ 752,042 $ 757,588 $ 662,403 $ 673,358 $ 579,927 Basic net income per AB Unit $ 2.78 $ 2.79 $ 2.46 $ 2.48 $ 2.11 Diluted net income per AB Unit $ 2.78 $ 2.78 $ 2.45 $ 2.47 $ 2.10 Operating margin(1) 22.6% 23.9% 21.7% 23.2% 20.7% CASH DISTRIBUTIONS PER AB UNIT(2) $ 2.82 $ 2.96 $ 2.57 $ 2.15 $ 2.11 BALANCE SHEET DATA AT PERIOD END: Total assets $8,706,092 $8,789,098 $9,282,734 $8,741,158 $7,433,721 Debt $ 560,000 $ 546,267 $ 565,745 $ 512,970 $ 581,700 Total capital $4,017,101 $3,916,209 $4,063,304 $4,068,189 $4,017,221 ASSETS UNDER MANAGEMENT AT PERIOD END (in millions) $ 622,915 $ 516,353 $ 554,491 $ 480,201 $ 467,440 (1) Operating income excluding net income (loss) attributable to non-controlling interests as a percentage of net revenues. (2) Cash distributions per AB Unit reflect the impact of AB’s non-GAAP adjustments. Refer to Item 7 for additional information concerning our non-GAAP adjustments. 36 AB


  • Page 49

    Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Percentage change figures are calculated using assets under management rounded to the nearest million and financial statement amounts rounded to the nearest thousand. Executive Overview Our total assets under management (“AUM”) as of December 31, 2019 were $622.9 billion, up $106.5 billion, or 20.6%, during 2019. The increase was driven primarily by market appreciation of $82.2 billion and net inflows of $25.2 billion (mainly due to Retail net inflows of $23.8 billion). Institutional AUM increased $36.4 billion, or 14.8%, to $282.7 billion during 2019, due to market appreciation of $34.0 billion and net inflows of $2.4 billion. Gross sales decreased $9.0 billion from $26.1 billion in 2018 to $17.1 billion in 2019. Redemptions and terminations decreased $18.1 billion from $30.1 billion in 2018 to $12.0 billion in 2019. The declines in both sales and redemptions in 2019 were primarily driven by significant one-time fundings and terminations related to low-fee Customized Retirement Strat- egies, which occurred in 2018. Retail AUM increased $58.4 billion, or 32.3%, to $239.2 billion during 2019, primarily due to market appreciation of $34.5 billion and net inflows of $23.8 billion. Gross sales increased $21.1 billion from $54.2 billion in 2018 to $75.3 billion in 2019. Redemptions and terminations decreased $2.5 billion from $46.5 billion in 2018 to $44.0 billion in 2019. Private Wealth Management AUM increased $11.7 billion, or 13.2%, to $101.0 billion during 2019, primarily due to market appre- ciation of $13.7 billion, offset by net outflows of $1.0 billion. Gross sales decreased $2.2 billion from $13.5 billion in 2018 to $11.3 billion in 2019. Redemptions and terminations increased $1.4 billion from $11.0 billion in 2018 to $12.4 billion in 2019. Bernstein Research Services revenue decreased $31.5 million, or 7.2%, in 2019. The decrease was due to lower global customer activity and trading commissions, partially offset by the inclusion of revenues from our acquisition of Autonomous Research LLP (“Autonomous”). Our acquisition of Autonomous closed on April 1, 2019. Our 2019 net revenues of $3.5 billion increased $151.1 million, or 4.5%, compared to the prior year’s net revenues. The most sig- nificant contributors to the increase were higher base advisory fees of $128.4 million, higher distribution revenues of $36.5 million and higher investment gains revenue of $36.0 million, offset by lower Bernstein Research Services revenue of $31.5 million and lower performance-based fees of $18.5 million. Our operating expenses of $2.7 billion increased $152.9 million, or 6.0%, compared to the prior year’s expenses. The increase primarily was due to higher employee compensation and benefits of $64.0 million, higher promotion and servicing expenses of $51.7 million and higher general and administrative expenses (including real estate charges) of $31.9 million. Our operating income decreased $1.9 million, or 0.2%, to $823.4 million from $825.3 million in 2018 and our oper- ating margin decreased from 23.9% in 2018 to 22.6% in 2019. Market Environment Equity markets finished positive in 2019, keyed by reduction of trade tensions between the U.S. and China, ongoing stimulus from Central Bank fiscal policies and the resilient U.S. economy. Specifically, the S&P 500, the Dow Jones Industrial Average and the Nasdaq each rallied to finish the year with record high point gains. Despite a downturn in manufacturing and businesses generally being reluctant to invest, consumer spending has remained at a healthy level and the labor market has remained strong, with the unemployment rate at a 50-year low. Three rate cuts by the Federal Reserve during the year and new repurchase programs helped reduce stresses in short term funding markets and unwind the inverted yield curve. Inflation continues to approximate the Federal Reserve’s target and, barring a material deterioration in the U.S. economy, the Federal Reserve has indicated a pause in rate cuts. Also, the improved global economic data and alleviated trade tensions sparked a rally in international equities and a weakening of the U.S. dollar. In the U.K., while the economic consequences of Brexit are still to be determined, the results of the special election held in December 2019 boosted the U.K. pound and the U.K. equity market. The era of negative rates in some European juris- dictions may be ending, and different approaches to improving liquidity, which may inure to the benefit of the banking system, are being considered. In Asia, markets remained relatively weak, and uncertainty surrounds the continued demonstrations in Hong Kong. China is balancing the short-term need for economic stimulus against the medium-term need to reduce debt levels in the Chinese economy. This analysis by the Chinese will likely result in modest stimulus to boost the Chinese economy. Annual Report 2019 37


  • Page 50

    MiFID II In Europe, MiFID II, which became effective on January 3, 2018, has made significant modifications to the manner in which Euro- pean broker-dealers can be compensated for research. These modifications are believed to have significantly reduced the overall research spend by European buy-side firms, which has decreased the revenues we derive from our European clients. Our European clients may continue to reduce their research budgets, which could result in a significant decline in our sell-side revenues. Also, while MiFID II is not applicable to firms operating outside of Europe, competitive and client pressures may force buy-side firms operating outside of Europe to pay for research from their own resources instead of through bundled trading commissions. If that occurs, we would expect that research budgets from those clients will decrease further, which could result in an additional sig- nificant decline in our sell-side revenues. Additionally, these competitive and client pressures may result in our buy-side operation paying for research out of our own resources instead of through bundled trading commissions, which could increase our firm’s expenses and decrease our operating income. The ultimate impact of MiFID II on payments for research globally remains uncertain. Equitable Holdings IPO During the second quarter of 2018, AXA S.A. (“AXA”) completed the sale of a minority stake in Equitable Holdings, Inc. (“EQH”) through an initial public offering (“IPO”). Since then, AXA has completed additional offerings and taken other steps, most recently during the fourth quarter of 2019. As a result, AXA owned less than 10% of the outstanding common stock of EQH as of December 31, 2019. While we cannot at this time predict the eventual impact on AB of this transaction, such impact could include a reduction in the support AXA has provided to AB in the past with respect to AB’s investment management business, resulting in a decrease in our revenues and ability to initiate new investment services. Also, AB relies on AXA, including its subsidiary, AXA Business Services, for a number of significant services and AB has benefited from its affiliation with AXA in certain common vendor relationships. Some of these arrangements are expected to change with possible negative financial implications for AB. AXA has notified us of their intent to terminate approximately $14 billion of fixed income investment mandates during the first half of 2020. The revenue we earn from the management of these assets is not significant. Relocation Strategy On May 2, 2018, we announced that we would establish our corporate headquarters in, and relocate approximately 1,050 jobs located in the New York metro area to, Nashville, TN. Subsequently, on January 14, 2020, we announced our plans to relocate an additional 200 jobs to Nashville thereby increasing the total relocated jobs to 1,250. The decision to add the additional jobs was the result of the growth in our business, select investments we are making, and the insourcing of roles typically performed by con- sultants. Our Nashville headquarters will house Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing. We have been actively relocating jobs and expect this transition to take several years. We will continue to maintain a principal location in New York City, which will house our Portfolio Management, Sell-Side Research and Trading, and New York-based Private Wealth Management businesses. We believe relocating our corporate headquarters to Nashville will afford us the opportunity to provide an improved quality of life alternative for our employees and enable us to attract and recruit new talented employees to a highly desirable location while improving the long-term cost structure of the firm. During the transition period, which began in 2018 and is expected to continue through 2024, we currently estimate that we will incur transition costs of approximately $155 million to $165 million. These costs include employee relocation, severance, recruit- ment, and overlapping compensation and occupancy costs. Over this same period, we expect to realize total expense savings of approximately $180 million to $190 million, an amount greater than the total transition costs. However, we will incur some tran- sition costs before we begin to realize expense savings. We incurred $10 million of transition costs in 2018 and approximately $33 million in 2019. With regard to 2019, this compares to estimated expense savings of approximately $16 million, resulting in a $0.06 reduction in net income per unit (“EPU”) in 2019. We currently anticipate a similar EPU reduction in 2020 of approx- imately $0.06. We also expect to achieve breakeven or a slight accretion in EPU in 2021 and then achieve EPU accretion in each year thereafter. Beginning in 2025, once the transition period has been completed, we estimate ongoing annual expense savings of approximately $75 million to $80 million, which will result from a combination of occupancy and compensation-related savings. 38 AB

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