PART I

assets under management with our internal reporting.  As a result, we reclassified approximately $11 billion in assets under management from equity ($6 billion from growth equity and $5 billion from value equity) to fixed income.  In addition, certain fixed income assets managed for insurance company clients previously reported at cost are now being reported at market value, resulting in approximate increases in fixed income assets under management of between $2 billion and $3 billion at each year end.

The following tables summarize our client assets under management by distribution channel and associated revenues:

(1)                                   Excludes certain non-discretionary client relationships and assets managed by unconsolidated affiliates.

(2)                                   Includes the general and separate accounts of the insurance company subsidiaries of AXA Financial.

(3)                                   Includes revenues of the business we acquired in the Bernstein Transaction beginning with the fourth quarter of 2000.

(4)                                   Includes performance fees, incentive allocations or carried interests we earn for managing hedge funds and certain other investment vehicles.

(5)                                   Includes fees we receive for distributing money market deposit accounts, for which we do not provide investment management services. See “Retail Services” in this Item 1 for information about the sale of our cash management services unit.

AXA and its subsidiaries, which include AXA Equitable and MONY Life Insurance Company, represented approximately 20%, 18%, and 18% of our total assets under management at December 31, 2004, 2003, and 2002, respectively.  They also represented approximately 5% of our total revenues for each of 2004, 2003, and 2002. AXA and its subsidiaries, whose assets consist primarily of fixed income investments that are managed as part of our Institutional Investment Management Services and Retail Services, constitute our largest client.

INSTITUTIONAL INVESTMENT MAN AGEMENT SERVICES

AllianceBernstein Institutional Investment Management, our Institutional Investment Management Services division, provides active management of equity accounts (including growth accounts, value accounts, and blend accounts that combine growth and value assets), balanced accounts (including equity and fixed income assets), and fixed income accounts, as well as passive management of index and enhanced index accounts, for institutions such as corporate and public employee pension funds, endowment funds, domestic and foreign institutions, governments and affiliates (including AXA and certain of its insurance company subsidiaries, such as AXA Equitable) by means of separate accounts, sub-advisory relationships, structured products, group trusts, mutual funds and other investment vehicles.

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As of December 31, 2004, 2003, and 2002, Institutional Investment Management Services represented approximately 58%, 56%, and 54%, respectively, of our total assets under management. The fees we earn from these services represented approximately 25%, 24%, and 23% of our revenues for 2004, 2003, and 2002, respectively.

The following tables summarize our Institutional Investment Management Services assets under management and associated revenues:

(1)                                   Excludes certain non-discretionary client relationships and assets managed by unconsolidated affiliates.

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(1)                                   Includes revenues of the business acquired in the Bernstein Transaction beginning with the fourth quarter of 2000.

We earned approximately 20%, 18%, and 18% of our total firm-wide revenues for 2004, 2003, and 2002, respectively, from institutional equity accounts. We earned approximately 5%, 5%, and 4 % of our total firm-wide revenues for 2004, 2003, and 2002, respectively, from institutional fixed income accounts.

Institutional Clients

Our institutional clients include corporate employee benefit plans, public employee retirement systems, AXA and certain of its insurance company subsidiaries, endowments, foundations, foreign governments, multi-employer pension plans, and financial and other institutions, as well as certain sub-advisory relationships.  We manage approximately 3,384 separate accounts for these clients.

As of December 31, 2004, assets under management for corporate employee benefit plans represented approximately 16.3% of our total firm-wide assets under management. Assets under management for other tax-exempt accounts, including public employee benefit funds organized by government agencies and municipalities, endowments, foundations and multi-employer employee benefit plans, represented approximately 26.6% of total firm-wide assets under management as of December 31, 2004.

As part of our Institutional Investment Management Services, we manage assets for AXA and its subsidiaries, our largest client.  They accounted for approximately 20%, 19%, and 20% of our total institutional assets under management at December 31, 2004, 2003, and 2002, respectively, and approximately 8%, 10%, and 9% of our total institutional revenues at December 31, 2004, 2003, and 2002, respectively.

The institutional assets we manage for AXA and its subsidiaries, along with our nine other largest institutional clients as measured by the assets we manage for them, accounted for approximately 20% of our total firm-wide assets under management at December 31, 2004 and approximately 4% of our total firm-wide revenues for the year ended December 31, 2004. No single institutional

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client other than AXA and its subsidiaries accounted for more than approximately 1% of our total firm-wide revenues for the year ended December 31, 2004.

Since we have been in business, we have experienced periods when we gained significant numbers of new accounts or amounts of assets under management and periods when we lost significant accounts or assets under management. These shifts result from conditions of financial markets, our investment performance, changes in the investment preferences of clients that result in a shift in assets under management, changes in our reputation as an investment manager, changes in the management or control of a client, and other circumstances.

Institutional Investment Management Agreements and Fees

We manage each institutional account pursuant to a written investment management agreement between our company and our client. The agreement is usually terminable at any time or upon relatively short notice by either party. In general, our contracts may not be assigned without client consent.

We are principally compensated on the basis of management fees calculated as a percentage of assets under management.  We describe our fees in a fee schedule and attach the fee schedule to our client contracts.  The percentage we charge varies with the type of portfolio strategy, the size of the account, and the total amount of assets we manage for a particular client.

We charge performance-based fees on approximately 14% of institutional assets under management.  Performance-based fees provide for a relatively low base fee plus an additional fee based on investment performance. Performance-based fee arrangements may become more common in the investment management industry. An increase in performance-based fee arrangements with our clients could create greater fluctuations in revenues.

Institutional Marketing

Our institutional clients are serviced globally by AllianceBernstein Institutional Investment Management, which deploys two groups of professionals: first, generalist relationship managers who present the entire range of our investment products to our clients and prospects and who act as the primary point of contact with our clients; and second, specialist marketers who support the work of the relationship managers by presenting the specific investment services of our firm (growth, value, blend, fixed income, or balanced) and who work with our clients’ consultants.  This latter group is responsible for marketing our services through symposia, publications, research papers, websites, and conference calls.  Specialist marketing teams are located in New York, London, and Tokyo.  Our generalist relationship managers are based in numerous local offices around the world.

RETAIL SERVICES

We have managed mutual funds since 1971.  Our Retail Services consist of furnishing investment management and related services to individual investors by means of retail mutual funds (including variable products and cash management services) sponsored by our company, our subsidiaries and affiliated joint venture companies; sub-advisory relationships in respect of mutual funds sponsored by third parties; “separately managed account programs”; and other investment vehicles (“Retail Products”). Among our Retail Products are open-end mutual funds and closed-end mutual funds that are (i) registered as investment companies under the Investment Company Act (“AllianceBernstein Funds”), or (ii) not registered under the Investment Company Act and not publicly offered to United States persons (“ACM Funds”).  Also among these products are retail separately managed account programs, which are sponsored by various registered broker-dealers and generally provide for an all-inclusive fee covering investment management, trade execution, asset allocation, and custodial and administrative services (“Separately Managed Account Programs”).  Retail Services assets under management, which are determined by subtracting applicable liabilities from the value of assets under management (“Net Assets”), at December 31, 2004 amounted to approximately $164 billion. Retail Products are managed by the same investment professionals who manage our institutional and private client accounts. We provide distribution and/or shareholder and administrative services for Retail Products.

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The following tables summarize our Retail Services assets under management and associated revenues:

(1)                                   Excludes assets managed by unconsolidated affiliates.

(2)                                   For information about the sale of our cash management services unit, see “Retail Services – Cash Management Services” in this Item 1 .

(3)                                   Assets under management, less applicable liabilities.

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(1)                                   Excludes assets managed by unconsolidated affiliates.

(2)                                   For information about the sale of our cash management services unit, see “Retail Services—Cash Management Services” in this Item 1 .

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(1)                                   Includes fees we receive in connection with Separately Managed Account Programs.

(2)                                   Includes fees we receive for distributing money market deposit accounts in connection with which we provide no investment management services. For information about the sale of our cash management services unit, see “Retail Services—Cash Management Services” in this Item 1 .

(3)                                   Includes an approximate $70 million reduction in advisory fees charged to AllianceBernstein Funds in connection with the resolution of market timing matters.  For additional information, see “Regulation” in this Item 1 .

(4)                                   For a description of distribution revenues and shareholder servicing fees, see “Retail Services—Distribution” in this Item 1 .

Our Retail Services include sub-advising EQ Advisors Trust (“EQAT”), AXA Premier, AXA Premier VIP, and mutual funds sponsored by AXA Asia Pacific Holdings Limited and its subsidiaries (“AXA Asia Pacific”), which together with AXA and its subsidiaries constitute our largest client.  They accounted for approximately 26%, 24%, and 20% of our total retail assets under management at December 31, 2004, 2003, and 2002, respectively, and approximately 7%, 6%, and 5% of our total retail revenues at December 31, 2004, 2003, and 2002, respectively.

Variable Products

Variable products are open-end mutual funds designed to fund variable annuity contracts and variable life insurance policies offered by the separate accounts of life insurance companies.  We manage the AllianceBernstein Variable Products Series Fund, Inc. (“ABVPS”), which serves as the investment vehicle for insurance products offered by unaffiliated insurance companies, and we sub-advise EQAT and AXA Premier VIP, each of which is the investment vehicle for insurance products offered by AXA Equitable and its insurance company subsidiary.  At December 31, 2004, the net assets of the portfolios of the Variable Products totaled approximately $37 billion.

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Retail Marketing

We market a broad complement of Retail Services to individual investors worldwide through ABIRM.  The over-arching goal of these services is to provide disciplined, research-based investments that play a consistent and effective role in an investor’s well-diversified portfolio.  The marketing and sales efforts of ABIRM are designed to communicate the role of each of these services in such a well-planned investment strategy.  Retail Services provide the full range of our investment capabilities, in local and global growth equities, value equities, and fixed income asset classes, as well as style-blended services, and the AllianceBernstein Wealth Strategies series of integrated investment solutions.

Retail Distribution

We distribute our Retail Products through broker-dealers, insurance sales representatives, banks, registered investment advisers, financial planners and other financial intermediaries. ABIRM, a registered broker-dealer, serves as the principal underwriter and distributor of AllianceBernstein Funds and as a placing or distribution agent for most of ACM Funds. ABIRM employs approximately 110 sales representatives who devote their time exclusively to promoting the sale of Retail Services by financial intermediaries.

Our mutual fund distribution system (the “System”) includes a multi-class share structure that permits open-end AllianceBernstein Funds and ACM Funds to offer investors various options for the purchase of mutual fund shares, including both front-end load shares and back-end load shares. For front-end load shares, ABIRM pays sales commissions to the financial intermediaries distributing the funds from the conventional front-end sales charge it receives from investors at the time of the sale. For back-end load shares, ABIRM pays sales commissions to the financial intermediary at the time of purchase and receives higher ongoing distribution services fees from the mutual funds.  In addition, investors who redeem before the expiration of the minimum holding period (which ranges from one year to four years) pay a contingent deferred sales charge (“CDSC”) to ABIRM. We expect to recover deferred sales commissions over periods not exceeding five and one-half years from receipt of CDSC and the higher ongoing distribution services fees we receive from holders of back-end load shares. Payments of sales commissions made to financial intermediaries in connection with the sale of back-end load shares under the System, net of CDSC received of $32.9 million and $37.5 million, totaled approximately $44.6 million and $94.9 million during 2004 and 2003, respectively.

The rules of the National Association of Securities Dealers, Inc. (“NASD”) effectively cap the aggregate sales charges received by ABIRM. The cap is 6.25% of cumulative gross sales (plus interest at the prime rate plus 1% per annum) in each share class of the open-end AllianceBernstein Funds.

Most open-end AllianceBernstein 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, asset-based sales charges or distribution and service fees for the distribution and sale of its shares (“Rule 12b-1 Fees”). The open-end AllianceBernstein Funds and ACM Funds have entered into agreements with ABIRM under which ABIRM is paid a distribution services fee. ABIRM and the financial intermediaries have entered into selling and distribution agreements for the distribution of AllianceBernstein Funds and ACM Funds pursuant to which ABIRM pays sales commissions. These agreements are terminable by either party upon notice (generally not more than 60 days) and do not obligate the financial intermediary to sell any specific amount of fund shares. A small amount of mutual fund sales is made directly by ABIRM, in which case ABIRM retains the entire sales charge.

In addition to 12b-1 Fees, ABIRM, at its own expense, currently provides additional payments under Distribution Services and Educational Support agreements to firms that sell shares of our funds, a practice sometimes referred to as revenue sharing.  Although the individual components may be higher and the total amount of payments made to each qualifying firm in any given year may vary, the total amount paid to a financial intermediary will generally not exceed the sum of (i) 0.25% of the current year’s fund sales by that firm, and (ii) 0.10% of average daily net sales attributable to that firm over the course of the year.  These sums may be associated with our funds’ status on a financial intermediary’s preferred list of funds or may be otherwise associated with the financial intermediary’s marketing and other support activities, such as client education meetings and training efforts relating to our funds.

During 2004, the 10 financial intermediaries responsible for the largest volume of sales of open-end AllianceBernstein Funds and ACM Funds were responsible for 46% of such sales. AXA Advisors, LLC (“AXA Advisors”), a wholly-owned subsidiary of AXA Financial that utilizes members of AXA Equitable’s insurance sales force as its registered representatives, was responsible for approximately 4%, 3%, and 3% of total sales of shares of open-end AllianceBernstein Funds and ACM Funds in 2004, 2003, and 2002, respectively. AXA Advisors is under no obligation to sell a specific amount of fund shares and also sells shares of mutual funds sponsored by affiliates and unaffiliated organizations.

Subsidiaries of Merrill Lynch & Co., Inc. (collectively “Merrill Lynch”) were responsible for approximately 6%, 7%, and 12% of open-end AllianceBernstein Fund and ACM Fund sales in 2004, 2003, and 2002, respectively. Citigroup Inc. (and its subsidiaries,

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“Citigroup”) was responsible for approximately 7% of open-end AllianceBernstein Fund and ACM Fund sales in 2004, 9% in 2003, and 3% in 2002. Neither Merrill Lynch nor Citigroup is under any obligation to sell a specific amount of AllianceBernstein Fund and ACM Fund shares and each also sells shares of mutual funds that it sponsors and which are sponsored by unaffiliated organizations.

No dealer or agent other than AXA Advisors, Merrill Lynch, and Citigroup has in any year since 2000 accounted for more than 10% of our sales of shares of open-end AllianceBernstein Funds and ACM Funds.

Many of the financial intermediaries that sell shares of AllianceBernstein Funds and ACM Funds also offer shares of funds we do not manage and frequently offer shares of funds managed by their own affiliates.

Based on industry sales data reported by the Investment Company Institute (December 2004), our market share in the U.S. mutual fund industry is 1.16% of total industry assets and we accounted for 0.52% of total open-end industry sales in the U.S. during 2004. The investment performance of the AllianceBernstein Funds is an important factor in the sale of their shares, but there are other factors contributing to sales of mutual fund shares. These factors include the level and quality of shareholder services ( see “Shareholder and Administration Services” below ) and the amounts and types of distribution assistance and administrative services payments made to financial intermediaries. We believe that our compensation programs with financial intermediaries are competitive with others in the industry.

Under current interpretations of laws and regulations governing depository institutions, banks and certain of their affiliates generally are permitted to act as agent for their customers in connection with the purchase of mutual fund shares and to receive as compensation a portion of the sales charges paid with respect to such purchases. During 2004, banks and their affiliates accounted for approximately 17% of the sales of shares of open-end AllianceBernstein Funds and Variable Products.

Retail Investment Management Agreements and Fees

We generally base our fees for our Retail Products on a percentage of average Net Assets. We may also charge performance-based fees. As certain of the AllianceBernstein Funds have grown, we have revised our fee schedules to provide lower incremental fees above certain asset levels. Fees paid by the AllianceBernstein Funds, EQAT, AXA Premier, and AXA Premier VIP are reflected in the investment management agreement and reviewed annually by the boards of directors or trustees, including by a majority of the independent directors or trustees. Increases in fees must be approved by the shareholders. Fees paid by ACM Funds are reflected in investment management agreements that continue until they are terminated.  Increases in fees must generally be approved by the ACM Fund shareholders and/or the relevant regulatory authority depending on the domicile and structure of the fund.  In 2004, we lowered the investment management fees we charge certain ACM Funds. In general, the investment management agreements with the AllianceBernstein Funds, ACM Funds, EQAT, AXA Premier, and AXA Premier VIP provide for termination at any time upon 60 days’ notice.

Under each investment management agreement with an AllianceBernstein Fund and ACM Fund, we provide the fund with investment management services, office space and order placement facilities and pay all compensation of directors, trustees, and officers of the AllianceBernstein Fund and ACM Fund when those persons are our affiliates. Each AllianceBernstein Fund and ACM Fund pays all of its other expenses, however, we have agreed to reimburse or waive all, or a portion of, certain expenses of certain funds. We may also agree to reduce our fee or bear certain expenses to limit total fund expenses during an AllianceBernstein Fund’s or ACM Fund’s initial period of operations. During 2004, each AllianceBernstein Fund appointed an independent compliance officer reporting to the independent directors of each AllianceBernstein Fund. The expense of this officer and his staff is borne by Alliance Capital.

We reduced certain of the advisory fees we charge to AllianceBernstein Funds in connection with our resolution of market timing matters. See “Regulation” in this Item 1 .

Cash Management Services

On October 28, 2004, Alliance Capital and Federated Investors, Inc. (“Federated”) reached a definitive agreement under which Federated is to acquire our cash management services unit (“Agreement”).  Under the Agreement, up to $24 billion in assets from 22 of our third-party-distributed money market funds will be transitioned into Federated money market funds. The boards of directors at both Federated and ACMC have approved the transaction, but it is still subject to customary closing conditions. This transaction, which is expected to close in phases during the first through third quarters of 2005, includes initial cash payments to us totaling approximately $26 million due at the transaction closing dates, and additional payments consisting of annual contingent purchase price payments payable over five years and a final contingent $10 million payment. The initial closing occured on March 7, 2005. The annual contingent purchase price payments will be calculated as a percentage of revenues, less certain expenses, directly attributed to these assets and certain other assets of our former cash management clients.  Currently, we estimate these payments will total approximately $65 million over five years.  The final contingent $10 million payment is based on comparing

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applicable revenues during the fifth year following closing to the revenues generated by those assets prior to the closing.  The amount of capital gain realized upon closing the transaction depends on transaction costs we incur and the initial payments by Federated, some of which would, in certain circumstances, need to be returned to Federated.

The transaction does not include the assets of AllianceBernstein Exchange Reserves, an open-end AllianceBernstein Fund, which will continue to be available to investors in other Retail Products.  In addition, we will continue to meet the liquidity needs of clients in our Private Client Services, Separately Managed Account Programs and Institutional Investment Management Services.

During 2004, we provided cash management services to individual investors through a product line comprising 22 money market fund portfolios, including two money market portfolios domiciled in the Cayman Islands and in Dublin, Ireland. Net Assets in these products as of December 31, 2004 totaled approximately $28 billion, as set forth in the table below:

(1)                                   Assets under management, less applicable liabilities.

Shareholder and Administration Services

Alliance Global Investor Services, Inc. (“AGIS”), one of our wholly-owned subsidiaries, provides transfer agency and related services for each open-end AllianceBernstein Fund and provides servicing for each open-end AllianceBernstein Fund’s shareholder accounts. As of December 31, 2004, AGIS employed 258 people. AGIS operates in Secaucus, New Jersey, and San Antonio, Texas. AGIS receives a monthly fee under each of its servicing agreements with the AllianceBernstein Funds. Each servicing agreement must be approved annually by the relevant AllianceBernstein Fund’s board of directors or trustees, including a majority of the independent directors or trustees, and may be terminated by either party without penalty upon 60 days’ notice.

Most AllianceBernstein Funds utilize Alliance Capital and AGIS personnel to perform legal, clerical, and accounting services not required to be provided by Alliance Capital. Payments by an AllianceBernstein Fund for these services must be specifically approved in advance by the fund’s board of directors or trustees. Currently, Alliance Capital and AGIS are accruing revenues for providing these services to the AllianceBernstein Funds at the rate of approximately $8.8 million per year.

ACM Global Investor Services S.A. (“ACMGIS”), another of our wholly-owned subsidiaries, is the transfer agent of substantially all of the ACM Funds. As of December 31, 2004, ACMGIS employed 57 people. ACMGIS operates in Luxembourg and Singapore and receives a monthly fee for its transfer agency services under services agreements, which may be terminated by either party upon 60 days’ notice.

PRIVATE CLIENT SERVICES

We provide investment management services to private clients, consisting of high-net-worth individuals, trusts and estates, charitable foundations, partnerships, private and family corporations and other similar entities, by means of separately managed accounts, hedge funds and other investment vehicles. Private clients have been a core client group of Bernstein for over 35 years. The former private client services group of Bernstein, together with the former private client group of Alliance Capital, is now known as the Bernstein Investment Research and Management unit of Alliance Capital (“BIRM”).  BIRM targets households with financial assets of $1 million or more and has a minimum opening account size of $400,000. BIRM’s services consist of customized, tax-sensitive investment planning making available a broad range of investment options.

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BIRM’s private client activities are built on a direct sales effort that involves 193 advisors. These financial advisors work with private clients and their tax, legal and other advisors to tailor long-range investment plans to meet each client’s needs. The portfolio created for each private client is intended to maximize after-tax investment returns given a client’s individual investment goals, income requirements, risk tolerance, tax considerations, and any other factors relevant for that client.

Revenues from Private Client Services, which represented approximately 21%, 18%, and 16% of our total revenues for the years ended December 31, 2004, 2003, and 2002, respectively, consist primarily of investment management fees earned from managing client assets, generally measured as a percentage of assets under management and, in the case of clients of BIRM, include transaction charges earned by SCB LLC, a registered broker-dealer, for executing trades relating to equity securities under management.  Effective January 1, 2005, we eliminated transaction charges on U.S. equity services for many clients and increased asset-based fees.   The change reduced overall costs for these clients as a group and is expected to reduce our revenues in 2005 by approximately $10 million.

As of December 31, 2004, 2003, 2002, Private Client Services represented approximately 12%, 11%, and 10%, respectively, of our total assets under management.

The following tables summarize private client assets under management and associated revenues:

(1)                                   The increase in 2003 is due primarily to our classification of approximately $3 billion in international blend portfolios from international value to international growth.

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