Thank you for standing-by and welcome to the AllianceBernstein's Second Quarter 2018 earnings review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for one week. I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Ms. Andrea Prochniak. Please go ahead.

Thank you, Holly. Good morning everyone and welcome to our second quarter 2018 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the investor relations section of our website, www.alliancebernstein.com. Seth Bernstein, our President and CEO, John Weisenseel, our CFO and Jim Gingrich, our COO, will present our results and take questions after our prepared remarks. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I would like to point out the Safe Harbor language on slide one of our presentation. You can also find our Safe Harbor language in the MD&A of our second quarter 10-Q, which we filed this morning. Under Regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call. We are also live tweeting today's earnings call. You can follow us on Twitter using our handle @AB_insights. Now I’ll turn it over to Seth.

Thanks, Andrea good morning. I am pleased with how we managed to maintain strong client momentum in many areas of our business this quarter, despite the volatility in global equity and fixed income markets. Our net flows were negative due to one large termination and the slowdown in Asia ex Japan retail fixed income or organic phase B [ph] growth was essentially flat in the quarter, as we saw significant net inflows, the higher feed strategies including 3.4 billion into active equities. As a result, our average fee rate continued to improve by 1% sequentially and 2% year-to-date. Let’s turn to the results, starting with a firmwide overview on slide three. Gross sales of $19 billion in the second quarter were down modestly year-over-year as weakness in Asia ex Japan retail fixed income more than offset gains in other retail markets and in private wealth. As expected, gross sales came down sharply from the first quarter when we had a $10 billion in institutional CRS fundings. Net outflows spiked to $7.7 billion almost entirely due to the April CRS redemption we mentioned on our last earnings call. Both quarter end and average assets under management were down sequentially in the second quarter due to the combination of net outflows and market performance and up significantly year-on-year. Slide four is our channel view of flows. You could see the CRS fundings and redemptions I just described on the firmwide and institutional charts on the left. The topright chart shows the year-over-year and sequential decline and retail growth sales caused by the slowdown in Asia ex Japan. Retail net flows were negative, as Asia ex Japan outflows more than offset net inflows in our other regions. Private Wealth growth sales were up year-over-year but down sequentially. Sales of our Option Advantage product…

Thank you Seth. Let's start with the GAAP income statement on slide 14. Second quarter GAAP net revenues of $845 million increased 5% from the prior-year period. Operating income of $190 million increased 17% and the 22.4% operating margin increased by 430 basis points. GAAP EPU of $0.59 compared to $0.43 in the second quarter of 2017. As always, I will focus our remarks from here on our adjusted results which remove the effect of certain items that are not considered part of our core operating business. We’ve based our distribution to unit holders upon our adjusted results, which we provide in addition to and not as substitutes for our GAAP results. Our standard GAAP reporting and a reconciliation of GAAP to adjusted results are in our presentation's appendix, press release and 10-Q. Our adjusted financial highlights are included on slide 15. Second quarter revenues of $720 million, operating income of $197 million and our margin of 27.3%, all increased year-on-year. We earned and will distribute to our unitholders $0.62 per unit compared to $0.49 for last year's second quarter. Higher base and performance fees combined with nearly flat non compensation expenses primarily drove the improvement. Revenues operating income and margin all decreased from the first quarter primarily due to the $78 million of performance fees for the real estate equity fund we recorded in the first quarter. We delved into these items in more detail on our adjusted income statement on slide 16. Beginning with revenues. Second quarter net revenues of $720 million increased 10% year-on-year. Second quarter base fees increased 9% from the same prior period due to higher average AUM across all three distribution channels and a higher fee rate realization reflecting a mix shift from lower to higher fee products Compared to the second quarter of…

Please limit your initial questions to two in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask follow-up questions. Our first question will come from the line of Craig Siegenthaler, Credit Suisse.

Thanks. Good morning, Seth.

Good morning.

So, first one just a follow-up for John on the headquarter relocation, Nashville. It sounded like all those savings target you just laid out were really coming comp and occupancy? I'm just wondering did that include the job grants and also tax credits too or is that additional?

It's all included. So those would be the net numbers.

Okay. And is there a benefit to the tax rate there to which was included?

Tax rate from what perspective?

Okay. Just from the headquarter movement and I also thought there could be some tax credits that will reduce your tax rate down the road?

We don't expect the tax rate for us to change materially from where it is today.

Okay. Got it. And can you just give us a quick update on the new real estate private equity fund group as we will be forming a joint venture there. I know you have a pretty developed business there on that debt side, but on the equity side what is your plan in terms of fund raising?

Craig, we're in the process of as you just pointed out setting up the joint venture with the current team. I don't really think in terms of operationally much is going to change. They're going to continue to be involved with both the equity and the debt business. Without going into a lot of detail we just think with this structure we have the opportunity to accelerate our overall fund raising effort in terms of accessing new starts with the capital.

Got it. Thanks for taking my questions.

Our next question will come from the line of Michael Carrier, Bank of America Merrill Lynch.

Hi. Thanks guys. John, just on the national move, I think you mentioned the $0.04 impact, I don't know if you can just provide us little color on if its all on occupancy, if there's some in comp, because – you said, the revenue backdrop is kind of maintain in the comp ratio, you may be heading to the slightly low in the second half, so any color on kind of nuances there?

Sure. Mike, its John. So over the course of the transition period the cost will fall between both occupancy and compensation, so G&A and compensation would be affected those line items. In the short term that was going to be more comp-related particularly in the first year. And so I did talk about that we may lower the comp ratio in the second half of the year down to 48. And I think that probably would've been lower if it had not been for these transitional costs.

Okay. That's helpful. And then I know these are hard to predict, but on the performance fees on the financial services fund given that you're monetizing that funds. I'm just trying to understand maybe like how much that contributed this quarter and may be what's left in that fund that could potentially kick-off additional fees in the second half?

Sure. It was $14 million of the $35 million in performance fees we had for the quarter. Under the old revenue recognition that was in place prior to this year, we wouldn't have been able to recognize these fees until the fund was completely liquidated. But what's happened now with the new revenue recognition that went in place at the beginning of this year. As long as this probable that those fees will not be caught back you can recognize them. So what's happened here is it just accelerated the recognition and that's 14 million actually is cash sitting in the fund that represents performance fees earned on the liquidation or the realization -- realized gains in the portfolio. We're still liquidating the portfolio and it will continue through the balance of the year. And so I would expect that we will be able to realize or recognize additional performance fees if markets hold up where they are now through the balance of the year.

Mike, I would just also add, I mean, look, we've talked about the fact that we've building the alternatives business. It is becoming a bigger piece of our overall assets, things like Arya Partners raised. I think it's over $700 million year to-date. As we see us continue to move in that direction performance fees are likely to become a bigger piece of the overall revenue mix, obviously dependent on the capital market's backdrop though as well.

Okay. Thanks a lot.

Our next question will come from the line of Alex Blostein, Goldman Sachs.

Hey, good morning everyone. Just hoping to touch on the institutional business for a second, so the active pipeline continues to grow really nicely on year-over-year basis and obviously the consistency of it is gutsy. Can you guys help us with timing on when you think some of these will fund? And I guess more broadly what you guys see on institutional front in the middle there, kind of trade concerns and geopolitical concerns. Are you starting to see any slowdown potentially on the funding on some of those pipelines?

We haven't seen – I've read about it. We haven't seen slowdown in the funding yet, but we do know that activity levels more broadly in the industry seem to have been declining. In our own case, our pipeline has in fact been pretty stable and indeed we've seen some fixed income come back into the pipeline which is encouraging to us because our outflows really have been concentrated in investment rate fixed income where we loss a couple of lumpy mandates in the second quarter. But in terms of utilization of the pipeline it's typically sort of over six to 18 months periods where we see most of that come to pass, but its very hard as you know, Alex, to predict it.

Great. And since you mentioned fixed income that was actually my second question, I guess as you look at the near-term performance on slip to bid, obviously there's been concerns around higher interest rates for little while now. Given your guidance just presence in the market and particularly with respect to kind of global retail within fixed income, how should we think about the activity rates there and potential risks to flows within fixed income on the back of slightly choppy or one year numbers?

In our own case because we have such a large business in Asia, that has been what has been driving the larger portion of our flows both ways; and we've seen volatility there before. What I can tell you is we don't think it's performance-related there and we continue to see gross sales albeit smaller and the level of redemptions have slowed a bit actually in the second quarter versus the first. But I think generally concerned about rates rising, concern about volatility in emerging markets which impacted us from a performance perspective and I think others. And finally the level of spreads which remain fairly tight by historic standards probably we would anticipate that will continue to see lower levels of activity there than we have in prior years.

Got it. Thank you.

[Operator Instructions] Our next question will come from the line of Bill Katz, Citigroup.

Okay. Good morning. Thank you very much for taking the question. Just I want to come back and I apologize for staying on with them and still on the opportunity for the cost savings. Can you sort of walk through; I thought you heard 125 million to 135 million of sort of aggregate; I'm sorry, 150 million to 160 million of total savings. But then I sort of heard you saying the exit savings could be 70 million per year into 2025 is it something sort of reconcile those numbers, please?

Sure. So, Bill, its John. The 70 million is the ongoing annual savings starting in 2025 going forward from that point. The savings during the transition period, so as we talked about the transition period is from now to 2024, so that transition period we talked about transition costs of 125 to 135, but over that same having transition savings of – I think we said 155 to 165.

So what happens there is that we're going to start to generate savings rate will build. And then there is a step up in 2025 once the double rents here in New York rolls off.

Okay. That's right. So I just want to just confirm. Okay. Just coming back to performance fees more generally, and A, can you sort of quantify in terms of the financial services liquidation, what we might expect with those performance fees. And then stepping away from that and sort of appreciate the color sort of building more alternative, is there way think about the water flow impact our performance fees as we look down into the second half of this year maybe more important into 2019?

Sure. Bill, it's John, I'll just say on the financial services opportunity fund, one, that we're in the process of liquidating. Very hard to predict because obviously it depends on what happens during the market as we continue to liquidate. I do think though that the liquidation proceeds as the way I think it will. We'll have heavier liquidations in the third quarter. So the performance fees relating to that could potentially be higher in the third quarter than the fourth quarter, but we just have to wait and see. And just, I think just in terms of general, now, when you think about the performance fees with the new revenue recognition, just as we saw this quarter, there is a potential for things to be accelerated vis-à-vis over how they were recognized in the past, particular with the fund like this and I don't see another one out there like this right now, but this funds been out there for five years I think. But all of the other types of strategies that we have on annual base fees we do look at them now each quarter to see whether or not some of those performance should be recognize earlier. And we could end up in a situation where things that – we're on a calendar year basis before, if we get into the third quarter there could be potentially a piece of that that may get recognized depending upon if it's --- if we deem that its probably that it cannot be called back. So I think when you look at performance fees and the new revenue recognition standard what you'll see as the performance fees going forward will continue to be lumpy, but I think I don't think there'll be as lumpy as what they've been in the past.

Okay. If I can just take maybe one more question on asking three. Just coming back into some pipeline, it does seem like your momentum is a bit there than some of your peers those reported. I sort of appreciate the macro there. It's been a little bit of a pregnant pause on industry dynamics. But it is your sense that you're gaining share versus other active managers. Is it shift from different buckets, I'm so curious of where your momentum maybe coming from or what the incremental drivers beyond just performance?

Bill, its Seth, and I just want to thank everybody, because I know it’s a hectic day in a busy earnings week. But it's very hard for us to know for taking share from other people because we really don't know what the denominator is in terms of the total amount of search activity out there. That being said what's interesting and I think inspiring for us is the mix is really changing in the favorable manner for us as we get more recognition from consultants. And so I would say we probably -- I can't say definitively but we probably have more most balanced set of mandates in our backlog than I think we probably ever had before across multi assets, all fixed income and equity. So I think consultants advocacy has certainly helped us there.

I would add as Seth just said, Bill, this is an some sense a reflection of what we've been talking about with respect to consultants support for our equity strategies. There are not a lot of our peers that are seeing positive flows into their equity businesses in both institutional and retail for that matter. And then the other piece of it is that I think is change is what we're seeing in terms of flows into our newer alternative services albeit as I mentioned earlier Arya Partners, our commercial real estate debt fund, we've just raised $3.1 billion fund. There was 500 million that's funded over the first half. So, I think its a combination of those two as well as the ongoing strength of the fixed-income franchise that has helped fuel some of what you're saying.

Okay. Thank you very much.

And at this time, we have no further questions.

Thank you, Holly, and thanks everyone for joining the call today. Investor Relations is available for any follow-up questions you may have. Thanks and have a great day.