Investments

Growth Equities

Is Growth Becoming Value?Growth stocks are extremely attractive today—how should investors position their portfolios?

> Growth stocks have grown very attractive—in some cases, they seem more like value stocks

> Value won’t outperform indefinitely, so a balanced style approach should also include growth stocks

> High-conviction growth managers have historically benefited disproportionately during growth rebounds

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• Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed

Growth Equities

Growth stocks are unusually attractive today.

The Effects of a Seven-Year Value Cycle It’s certainly no secret that equity styles come and go. Sometimes growth stocks win, and sometimes value stocks win. The most recent value cycle started in 2000, and by almost any measure, it’s been a style cycle of historic proportions.

But here’s the other side of the coin: while value stocks have been dominating, growth-stock valu-ations have grown more attractive. By historical standards, growth-stock valuations today are about as good as they get.

Growth stocks usually command a premium because of their future earnings-growth potential, but today, that premium is well below its historical average.

Valuations Have Been Turned on Their HeadsBy some measures, the market has turned growth-stock valuations almost completely on their heads, with many growth stocks priced so attractively that growth looks like it’s becoming value.

This seems to contradict the very concept of “value.” We’ve seen it happen from time to time in capital markets, but it hasn’t happened consistently since the late 1970s and early 1980s—a very different environment with high inf lation and double-digit short-term interest rates.

If history is any guide, growth stocks won’t trail value stocks indefinitely, and with valuations so attractive, this is certainly no time to give up on growth stocks. Make sure your portfolio balances growth and value stocks. Growth-stock valuations are historically attractive.

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1.0

2.0Historical average

Current period

Growth stocks less attractive

Growth stocks more attractive

79 82 85 88 91 94 97 00 03 06

Relative Valuation composite1

Russell 1000 Growth Index vs. S&P 500

(x)

Historical analysis does not guarantee future results. An investor cannot invest directly in an index. See index descriptions on back panel.Through December 31, 20061 Composite consists of one-third price-to-cash-flow ratio, one-third forward P/E ratio and one-third price-to-sales ratio.Source: Russell Investment Group, Standard & Poor’s and AllianceBernstein

By some measures, growth stocks have become cheaper than value stocks.

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Large-cap price to cash Flow

(x) S&P 500 Citigroup GrowthS&P 500 Citigroup Value

Past performance does not guarantee future results. An investor cannot invest directly in an index. See index descriptions on back panel.Through April 30, 2007Source: Citigroup

Who’s likely to benefit when growth rebounds?

Some Managers Are more “Growth” than OthersNot all growth managers are cut from the same cloth, and neither are their performance patterns. Some growth managers look for strong growth but also take a page from the value playbook by empha-sizing reasonable prices—a strategy termed “growth at a reasonable price,” or GARP.

Other growth managers follow a stricter, high-conviction growth approach. These managers are on the opposite end of the growth spectrum from GARP managers, with other managers in between. Historically, high-conviction growth managers have benefited more than other growth managers—during growth cycles.

High-Conviction Growth Better Complements ValueIn a style-balanced approach, it’s important to select a growth manager that best complements your value investments. For help, we turn to a statistical measure called correlation, which defines how closely two investment returns move together over time.

The highest correlation is 1.0, meaning that two investments move exactly in tandem, and the lowest is (1.0), when two investments are opposites. Growth managers with negative correlations are usually good complements to value managers, because they tend to outperform when value managers underperform—and vice versa.

Of all growth managers, high-conviction managers had the most negative correlation to value cycles. In other words, they underperform during value cycles but outperform during growth cycles to a greater degree than other managers. This makes them ideal complements to style-pure value managers.

High-conviction growth managers have fared well when the growth style is in favor.

Quarterly excess Return: Average of First-QuartileLarge-cap Growth Managers for each Style cohort2

(%)

Style Intensity 3

>1.00.50–1.00–0.50<0

High ConvictionGARP

Growth Qtrs. Neutral Qtrs. Value Qtrs.

(4)(3)(2)(1)012345

Past performance does not guarantee future results. An investor cannot invest directly in an index or category average. See index descriptions on back panel.2 Growth quarters are those in which the Russell 1000 Growth outperformed the Russell 1000 Value by 2% or more. Value quarters are those in which the Russell 1000 Value outperformed the Russell 1000 Growth by 2% or more. Neutral quarters are those in which neither index outperforms the other by 2% or more. There were 13 growth quarters, 7 neutral quarters, and 20 value quarters during the 10-year period ending December 31, 2006. Includes 53 large-cap growth managers with full track records over this time.3 Style intensity represents residual beta-to-growth, which measures the covariance of excess returns of the manager vs. the broad market to the excess returns of the managers’ growth style index.Source: eVestment and AllianceBernstein

High-conviction growth managers are better complements to value managers.

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Average Correlation of Excess Return to the Value Style of First-Quartile Large-Cap Growth Managers for Each Style Cohort4

>1.00.50–1.00–0.50<0

(0.23)

(0.67)(0.56)

Style Intensity 3

High ConvictionGARP

Past performance does not guarantee future results. An investor cannot invest directly in an index or category average. See index descriptions on back panel.4 Excess return for each manager is measured versus the Russell 1000. The correlation of excess return measures the correlation of the manager’s excess returns to the data series representing the quarterly excess returns of the Russell 1000 Value to the Russell 1000 Growth. Based on the 10-year period ending December 31, 2006. Includes 53 large-cap growth managers with full track records over this time. Source: eVestment, Russell Investment Group and AllianceBernstein

Better times ahead for high-conviction growth managers.

Strong Earnings Growth Should Be RewardedOur high-conviction growth philosophy emphasizes companies with earnings-growth potential that repeatedly exceeds what the market expects. In the long term, we believe that companies with these “dynamic gaps” will lead to outperformance.

But the market hasn’t rewarded strong growth recently. In 2006, for example, strong earnings growth was everywhere, making it hard for top growth companies to stand out. This was true in AllianceBernstein’s growth portfolios, too.

This may be about to change. A slower economy should make strong earnings growth less common, and when that happens investors have historically been willing to pay more for them.

In our view, the presence of so many dynamic gaps is a reason to take more growth risk, not less. Our growth portfolios have substantial dynamic gaps—we believe this positions us well for a growth comeback.

Action StepS

> Keep in mind that value stocks have outperformed for years: in our opinion, today’s valuations clearly favor growth.

> During growth cycles, high-conviction growth managers have fared the best.

> This is no time to lose your conviction— make sure your balanced approach to style includes growth stocks.

Contact your financial professional to find out how we can help.

our growth portfolios possess substantial dynamic gaps, indicating earnings-growth potential.

Companies with Positive Earnings Revisions5

Russell 1000 Growth 2006

AllianceBernsteinLarge Cap Growth 2006

AllianceBernsteinLarge Cap Growth 2005

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67%

December 31, 2006Past performance does not guarantee future results. An investor cannot invest directly in an index. See index descriptions on back panel.Based on a representative U.S. Large-Cap Growth account.5 Data for each year represents four-quarter averageSource: I/B/E/S, Russell Investment Group and AllianceBernstein

Investments

To learn more about the benefits of

AllianceBernstein’s Growth Services,

contact either your financial advisor

or AllianceBernstein Investments at

800.227.4618.

You can also visit our website at

www.alliancebernstein.com.

Growth Stocks: A Long-Term Portfolio Building Block

There are many growth-stock opportunities today, and investors shouldn’t let their conviction about growth investing fade simply because the market overlooks fundamentals. Over the long run, we believe fundamentals will prevail.

Our approach to building and preserving wealth follows the timeless principles of investing, which stress diversification as a way to reduce portfolio risk and smooth the ride for investors.

Since growth and value stocks behave differently under the same market conditions, combining them can further increase diversification. That’s why we believe that growth stocks should always play a role in a well-balanced portfolio.

Investments

Investments

1345 Avenue of the AmericasNew York, NY 10105

1.800.227.4618

www.alliancebernstein.com

11274

GRO–3375–0507

Index descriptions: The S&P 500 Index is an unmanaged index of 500 U.S. companies and is a common measure of the performance of the overall U.S. stock market. The Russell 1000® Index measures the performance of the 1,000 largest U.S. companies based on market capitalization. The Russell 1000® Growth Index measures the performance of Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000® Value Index measures the performance of Russell 1000® companies with lower price-to-book ratios and lower forecasted growth values.

The S&P 500/Citigroup Value and S&P 500/Citigroup Growth Index: Each stock of the S&P 500® Index is categorized as being either a value or growth company based on its price-to-book ratio. The S&P 500/Citigroup Value Index contains those securities with lower price-to-book ratios. The S&P 500/Citigroup Growth Index contains those securities with growth characteristics.

AllianceBernstein Investments, Inc. is an affiliate of AllianceBernstein L.P., the manager of the funds, and is a member of the NASD.AllianceBernstein® and the AB logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P.

Note to Canadian Readers: AllianceBernstein provides its investment management services in Canada through its affiliates Sanford C. Bernstein & Co., LLC and AllianceBernstein Canada, Inc.

There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.

Diversification does not guarantee a profit or protect against a loss.

Past performance does not guarantee future results. You should consider the investment objectives, risks, charges and expenses of any AllianceBernstein mutual fund care-fully before investing. To obtain a free prospectus, which contains this and other information, call your financial advisor, visit us on the web at www.alliancebernstein.com or call us at 800.227.4618. Please read the prospectus carefully before you invest.

AllianceBernstein is one of the largest and most established growth managers in the investment-management industry: We manage over $100 billion in growth assets for retail, institutional and high-net-worth clients.

We’ve received global recognition for research and investment-management excellence. We’re particularly proud of having been highly ranked in a 2005 Greenwich Associates study that polled institutional clients and consultants—among the most discriminating stakeholders in the investment industry. Our U.S. growth equity services ranked in the top 3% among peers, and our international growth services were ranked in the top 15%.1

Our growth services are an important part of a suite of diversified investment solutions that we’ve designed to help our clients build and preserve their wealth. Our investment services come in a variety of platforms to suit individual needs, including:

> Mutual Funds> Separately Managed Accounts> Subadvisory Services> Education Strategies> Retirement Services

1 Source: Greenwich Associates Survey of U.S. Institutional Clients and Consultants, 2005. Percentile ranking is calculated using the Greenwich Quality Index, which measures the business performance of investment managers, as judged by institutional consultants. The 2005 peer group included 160 domestic equity investment managers, 195 international equity investment managers and 90 bond managers.