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This presentation is provided by AllianceBernstein L.P.
May 3, 2007
US Economic and Capital Markets Outlook
Eric FrancoSenior Portfolio Manager
Global Value Equities
NFSA 2007 Annual Seminar
3AllianceBernsteinUS Economic and CMO
3.7%
0.8%
1.6%
2.7%
4.2%
3.6%3.4%
2.3%
2000 2001 2002 2003 2004 2005 2006 2007E
US GDP Growth
As of December 31, 2006Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, World Bank, and Bernstein
4AllianceBernsteinUS Economic and CMO
400
600
800
1,000
1,200
1,400
95 98 01 04
US Housing Demand Turning Down
New Home SalesExisting Home Sales
06
-25%
3,000
4,000
5,000
6,000
7,000
8,000
95 98 01 04 06
-16%
(000)(000)
Through August 31, 2006Source: National Association of Realtors and US Census Bureau
5AllianceBernsteinUS Economic and CMO
US Home Price Boom Comes to an End
(4)
(2)
0
2
4
6
8
10
12
14
95 96 97 98 99 00 01 02 03 04 05 06
(%)
Through September 30, 20061995–2005: trailing 12-month average; 2006: year-over-yearSource: National Association of Realtors
Percent Increase in Median Home Price
6AllianceBernsteinUS Economic and CMO
Housing Boom Has Accounted for20% of Total Employment Gains
Job Growth3 Years Ending August 2006
Total Housing-Related
Source: Bureau of Labor Statistics and AllianceBernstein estimates
5.5 Mil.
1.1 Mil.
7AllianceBernsteinUS Economic and CMO
Equity Extraction from Housing Was Huge in the US in 2005
($ Billions)
NewHousing
Investment
NetIncrease in
Mortgage Debt
$664
$1,080 $416
Equity Extracted
Source: Bureau of Labor Statistics and AllianceBernstein estimates
8AllianceBernsteinUS Economic and CMO
Office Vacancies
As of December 31, 2006Source: CB Richard Ellis and Haver Analytics
National Office Vacancy Rate: Metropolitan Area
7
9
11
13
15
17
19
21
23
86 87 89 90 92 93 95 96 98 99 01 02 04 05 07E
9AllianceBernsteinUS Economic and CMO
Nonresidential Construction
As of February 28, 2007Source: Census Bureau and Haver Analytics
Private Construction: Nonresidential
120
170
220
270
320
370
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
($ Billions)
E
10AllianceBernsteinUS Economic and CMO
Total Domestic Sprinklers Shipped 1980–2006
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
80 82 84 86 88 90 92 94 96 98 00 02 04 06
Through December 31, 2006Source: National Fire Sprinkler Association
11AllianceBernsteinUS Economic and CMO
US Employment Growth Solid
Change in Private Sector Employment thousands, 3 month moving average
(400)
(300)
(200)
(100)
0
100
200
300
400
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Through December 31, 2006Source: Bloomberg
12AllianceBernsteinUS Economic and CMO
Consumer Spending Rebounds
As of February 2, 2007*Annualized percent change from preceding periodSource: US Department of Commerce-Bureau of Economics Analysis
0
1
2
3
4
5
6%
2005 2006 2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
Real Consumer Spending Growth (%)*
13AllianceBernsteinUS Economic and CMO
As US Economic Growth Moderates, Other Regions Are Holding Up
Real GDP Growth (%)
Through September 30, 2006Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank and Bernstein
0
1
2
3
4
5
6
7%
US Europe Japan Emerging
2005 2006E 2007E
14AllianceBernsteinUS Economic and CMO
IFO Business Climate Survey*
Through December 15, 2006*Pan-Germany, seasonally adjusted, 2000=100Source: Consensus Economics, Datastream, EIU, IFO Institute, IMF, MSCI, S&P, World Bank and Bernstein
80
90
100
110
120
91 94 97 00 03 06
Ind
ex
15AllianceBernsteinUS Economic and CMO
Profitability Above Average in Every Region…
Based on trailing 12-month ROE. Regional numbers are from 1976 through December 2006, except Emerging Markets which is September 1996 through December 2006. Sectoral numbers are from 1970 through December 2006. Source: FactSet, MSCI and Bernstein
-5
0
5
10
15
20
25%
US Europe EmergingMarkets
Japan
Average
Current
Highest
Return on Equity by Region (%)
Lowest
16AllianceBernsteinUS Economic and CMO
… and Nearly Every Sector
Based on trailing 12-month ROE. Regional numbers are from 1976 through December 2006, except Emerging Markets which is September 1996 through December 2006. Sectoral numbers are from 1970 through December 2006. Source: FactSet, MSCI and Bernstein
Return on Equity by Sector (%)
(10)
(5)
0
5
10
15
20
25
30
Ca
pit
al
Eq
uip
me
nt
Co
ns
tru
cti
on
&
Ho
us
ing
Co
ns
um
er
Cy
clic
als
Co
ns
um
er
Sta
ple
s
En
erg
y
Fin
an
ce
Ind
us
tria
l C
om
mo
dit
ies
He
alt
hc
are
Te
ch
no
log
y/
Ele
ctr
on
ics
Te
lec
om
mu
nic
ati
on
s
Tra
ns
po
rta
tio
n
Uti
litie
s
%
Average
Current
Lowest
Highest
17AllianceBernsteinUS Economic and CMO
Interest Rates Remain Low
Euro Area
As of December 31, 2006Source: Compustat
10-Year Bond Yields
0
2
4
6
8
10
12
90 91 93 94 96 97 99 00 02 03 05 06
Per
cent
US
Japan
%
18AllianceBernsteinUS Economic and CMO
Energy Prices Pose A Risk
As of December 31, 2006*West Texas int. Cushing $/BBLSource: Datastream
Oil Prices*
0
10
20
30
40
50
60
70
80
86 88 90 92 94 96 98 00 02 04 06
($/BBL)
19AllianceBernsteinUS Economic and CMO
Demand Growth Surged in Recent Years…
Source: International Energy Agency (IEA)
World Oil Consumption Growth(Year over Year)
0.9%
2.2%
0.9% 1.0% 1.0%
1.9%
4.0%
1.2%
98 99 00 01 02 03 04 05
CAGR = 2.4%
20AllianceBernsteinUS Economic and CMO
...and Producers Are Struggling to Keep Up
Sources: Deutsche Bank, IEA, Organization of Petroleum Exporting Countries (OPEC) and Bernstein
Spare OPEC Capacity as % of Demand
0
2
4
6
8
10
95 97 99 01 03 05
(%)
21AllianceBernsteinUS Economic and CMO
Supply Will Come from Diverse Geographies…
Next12 Months
+1.9
Through2010E
Non-OPEC Output Accelerating(Million Barrels per Day)
+6.5
Europe
NGLs*
AsiaBrazilCanada
AfricaOther Former Soviet UnionRussia
*OPEC natural gas liquidsSource: Russian Energy Ministry, IEA, and AllianceBernstein estimates
US
22AllianceBernsteinUS Economic and CMO
Source: IEA, OPEC and AllianceBernstein estimates
…So the Need for OPEC Crude Oil Will Level Off
Demand for OPEC Output(Million Barrels per Day)
26.4 26.7
28.328.9 28.9 29.0 29.1
02 03 04 05 06E 07E 08E
23AllianceBernsteinUS Economic and CMO
Spare Capacity Set to Recover to Normal by 2008/2009
Sources: Deutsche Bank, IEA, OPEC and Bernstein
Spare OPEC Capacity as % of Demand
0
2
4
6
8
10
95 97 99 01 03 05 07E 09E
(%)
24AllianceBernsteinUS Economic and CMO
Transportation Fuels Drive Oil Demand
Share of Oil Consumption Growth
Source: Environmental Protection Agency and AllianceBernstein estimates
65%
9%
24%
3%1%
RoadTransport
AirTransport
Rail Transport
IndustrialProduction/
Process
Other
<
25AllianceBernsteinUS Economic and CMO
Electric Power Far More Efficient than Mechanical Power
14%Energyto Wheels
0%
Loss toIdle
Loss toResistance
14%
Loss toDriveline
6%
Energyto Wheels
Loss toDriveline
6%
Loss toAtmosphere
63%
17%
Loss toIdle
80%
Electric Power6× More Efficient
Loss toAtmosphere
0%
EnergyInput 100%
100%
Excludes accessories which consume 2% of power inputSource: EPA and AllianceBernstein estimates
EnergyInput
26AllianceBernsteinUS Economic and CMO
Accelerate with motor
Cruise with engine
Shut down at idle
Motor Generator
during deceleration
Sources of Hybrid Power Efficiency
Current Hybrid
High-energy density battery
Access electric power grid off peak
Extend electric-mode range
from 2 miles to 30 miles
Shift 2/3 of miles driven
to electricity
Plug-In Hybrid
+
Source: AllianceBernstein estimates
27AllianceBernsteinUS Economic and CMO
6,200
4,700
1,850
AverageVehicle
CurrentHybrids
Plug-InHybrids
Energy Consumed per Mile*(BTUs)
*Energy consumed within the vehicleSource: AllianceBernstein estimates
Fuel Efficiency of Hybrids Has Potential to Be Transformational
Miles per Gallon 20 26 ~80
This presentation is provided by AllianceBernstein L.P.
Opportunity in International Stocks
29AllianceBernsteinUS Economic and CMO
Trends Toward Global Investing
Net Stock Fund Cash Flows (Net Fund Flows — $ Billions)
2003%
of Total
International $3 7%
Total Equity $44 100%
Current analysis does not guarantee future results.Net fund flows includes: proprietary, non-proprietary and open-end fundsSource: Strategic Insight
30AllianceBernsteinUS Economic and CMO
Trends Toward Global Investing
Net Stock Fund Cash Flows (Net Fund Flows — $ Billions)
2003%
of Total 2004%
of Total
International $3 7% $24 31%
Total Equity $44 100% $76 100%
Current analysis does not guarantee future results.Net fund flows includes: proprietary, non-proprietary and open-end fundsSource: Strategic Insight
31AllianceBernsteinUS Economic and CMO
Trends Toward Global Investing
2003%
of Total 2004%
of Total 2005%
of Total
International $3 7% $24 31% $42 54%
Total Equity $44 100% $76 100% $77 100%
Net Stock Fund Cash Flows (Net Fund Flows — $ Billions)
Current analysis does not guarantee future results.Net fund flows includes: proprietary, non-proprietary and open-end fundsSource: Strategic Insight
32AllianceBernsteinUS Economic and CMO
International Returns Have Rebounded
Past performance does not guarantee future results.US stocks are represented by the S&P 500 Index; developed foreign markets by the MSCI EAFE Index; and Emerging Markets stocks by the MSCI EM Index Source: MSCI and Standard and Poor's
Annualized Returns2002–2006
6.2
15.0
26.6
US EAFE EmergingMarkets
33AllianceBernsteinUS Economic and CMO
Long-Term Returns Are Similar
Past performance does not guarantee future results.US stocks are represented by the S&P 500 Index; developed foreign markets by the MSCI EAFE IndexSource: MSCI and Standard and Poor's
Annualized Returns
8.5
12.4
1971-1980
16.4
13.9
81-90
17.5
8.2
91-00
2.9
7.9
01-06
11.4 11.6
71-06
US Developed Foreign Markets
34AllianceBernsteinUS Economic and CMO
Correlation: U.S. to EAFE*
Past performance does not guarantee future results. Investors cannot invest directly in an index and its results are not indicative of any AllianceBernstein mutual fund.Through December 31, 2006*36-month rolling correlation of monthly returns; EAFE returns are cap-weighted and hedged into the US dollar. US returns = S&P 500 TRISource: MSCI and Bernstein
Correlation Has Risen
0.0
0.2
0.4
0.6
0.8
1.0
95 96 98 99 01 02 04 06
(×)
35AllianceBernsteinUS Economic and CMO
0.0
0.2
0.4
0.6
0.8
1.0
72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06
Global Events Produce Correlation Spikes
Correlation of U.S. to EAFE*
Oil CrisisGulf War
Bursting of Japan Bubble
Internet
SecondGulf War
(×)
Past performance does not guarantee future results. Investors cannot invest directly in an index and its results are not indicative of any AllianceBernstein mutual fund.Through December 31, 2006*36-month rolling correlation of monthly returns; EAFE returns are cap-weighted and hedged into the US dollar. US returns = S&P 500 TRISource: MSCI and Bernstein
36AllianceBernsteinUS Economic and CMO
13
14
15
16
17
0 10 20 30 40 50 60 70 80 90 100
% in International
Volatility (%)
Volatility of U.S./Foreign Stock Mixes
Historical analysis does not guarantee future results. Based on historic annualized volatilities of the S&P 500 and MSCI EAFE (unhedged) from January 1970 to December 2006, assuming a correlation of 80%Source: MSCI, Standard & Poor’s and Bernstein
37AllianceBernsteinUS Economic and CMO
40%
37%
37%
33%
32%
General Motors
IBM
CALPERS
General Electric
Wisconsin Investment Board
How Much Do Large Retirement Plans Invest Overseas?
International Equity Allocation asPercent of Total Equity Holdings
Source: Pensions & Investments; January 2006
38AllianceBernsteinUS Economic and CMO
Markets Have Grown Faster Overseas
Historical analysis does not guarantee future results. Market cap percentage as of January 31, 1970 and December 31, 2006, respectively Source: MSCI
34%
66% 45% 55%
1970: MSCI World 2006: MSCI ACWI
US
International
US International
39AllianceBernsteinUS Economic and CMO
Many Leading Companies Outside the U.S.
HSBC (UK)
Mitsubishi Tokyo (Japan)
UBS (Switzerland)
Toyota (Japan)
DaimlerChrysler (Germany)
Honda (Japan)
Sony (Japan)
Matsushita (Japan)
Electrolux (Sweden)
Industry Share by Market Value
As of December 31, 2006 Source: MSCI
33% 67% Non-USUS
Banking
89%
11%
Autos
80%
20%
Household Durables
This presentation is provided by AllianceBernstein L.P.
Is Now a Good Time?
41AllianceBernsteinUS Economic and CMO
International Returns
Local Market
Return=
Currency
Effect
Returns
in Dollars+
42AllianceBernsteinUS Economic and CMO
9.9×
11.1×
MSCI EAFE S&P 500
Current valuations do not guarantee future results.As of December 31 , 2006The unmanaged Standard & Poor’s (S&P) 500 Stock Index includes 500 US stocks and is a common measure of the performance of the overall US stock marketThe unmanaged MSCI EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted market-capitalization index that is designed to measure developed-marketequity performance, excluding the US and CanadaSource: MSCI and Standard & Poor's
Price/BookPrice/Cash Flow
2.5×2.9×
MSCI EAFE S&P 500
International Stocks Are Attractively Priced Today
43AllianceBernsteinUS Economic and CMO
Currency Moves Often Large and Sustained
U.S. Dollar vs. Major CurrenciesU.S. Dollar vs. Major Currencies
Historical analysis does not guarantee future results.US trade-weighted index through October 31, 2006Source: Datastream and IMF
40
60
80
100
120
140
160
180
80 82 85 88 90 93 96 98 05 05 06
Index
(44)%
(28)%
+56%
+40%
44AllianceBernsteinUS Economic and CMO
Historical analysis does not guarantee future results.Source: Datastream, MSCI and Bernstein
Currency: A Major Impact on Stock Returns
212%
125%86%
53%58%
424%
10%
111%
Nov 78–Feb 85
Strong Dollar
Mar 85–Apr 95
Weak Dollar
May 95–Jan 02
Strong Dollar
Feb 02–Dec 06
Weak Dollar
EAFEHedged
EAFEUnhedged
Cumulative ReturnsCumulative Returns
45AllianceBernsteinUS Economic and CMO
US Current Account Deficit Largest Financial Imbalance in the World
US Current Account as % of GDP(4 Quarter Moving Average)
Through September 30, 2006Source: Bureau of Economic Analysis, US Department of Commerce and Bernstein
(%)
(8)(7)(6)(5)(4)(3)(2)(1)012
70 75 79 84 88 93 97 05 06
46AllianceBernsteinUS Economic and CMO
Conclusion
Global economic landscape healthy
Energy prices pose risk, but help is on the way
Opportunities remain in international stocks
AllianceBernstein1345 Avenue of the Americas
New York, NY 10105212.823.2722 Direct212.848.2390 Fax
Eric FrancoSenior Portfolio Manager
Global Value Equities
Thank You!