March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Luke Montgomery, CFA • lucas.montgomery@bernstein.com • +1-212-969-6714
Vincent M. Curotto • vincent.curotto@bernstein.com • +1-212-756-1882

U.S. Securities Industry: Good but Not Great; A Slower than

Expected Start to 2010
Target Price Change / Estimate Change in Bold
3/25/2010 TTM EPS P/E
Closing Target Rel.
Ticker Rating CUR Price Price Perf. 2009A 2010E 2011E 2009A 2010E 2011E Yield
GS O USD 174.90 210.00 11.6% 22.13 17.18 17.73 7.9 10.2 9.9 0.9%
OLD 225.00 20.28 19.31
MS O USD 28.91 36.00 -31.7% -0.90 2.74 2.97 NM 10.5 9.7 NA
OLD 2.81 3.14
SPX 1165.73 61.49 79.19 95.66 19.0 14.7 12.2 1.8%

O – Outperform, M – Market-Perform, U – Underperform, N – Not Rated

Highlights

Goldman Sachs and Morgan Stanley will likely report first quarter 2010 results in mid-April. With less
than a week remaining in the quarter, we are updating our quarterly EPS estimates to reflect quarterly
operating trends to date. The first quarter of the year is typically strong for trading desks as investors re-
embrace risk in a new year. Though we believe this historical pattern indeed played out in January, our
previous estimates did not anticipate tepid activity in February and March.
• FICC: Historically, the first quarter of the year is seasonally strong as clients and investors return to the
market, spurring trading desk activity at institutional brokerage firms. This historical pattern once again
played out in the first five weeks of the quarter - trading volumes increased and revenues were likely
strong. However, trading performance waned in February as rising concern about sovereign debt risk and
the sell off of Greek bonds offset steady improvement in the corporate credit sector. Treasuries and
Bunds initially benefited from a flight to quality, but anxiety over future US financing demand led to a
modest steepening of the Treasury yield curve. We anticipate GS will book FICC net revenues of $5.1
billion in Q1 '10, up from $4.0 billion in Q4 '09, and MS fixed income sales and trading revenues of $1.7
billion in Q1 '10, up from $686 million in Q4 '09. Positive performance on European government desks
and good domestic credit sector numbers were partially offset by weaker European credit and emerging
market trading revenues.
• Equity S&T: The trend in equity trading activity likely emulated FICC results as a rebound in activity in
January failed to offset weak performance in February and March, pressuring Q1 '10 commission
revenue. Furthermore, continued normalization of equity market volatility reduced revenues on equity
U.S. Brokerage

derivatives desks. We anticipate total industry equity trading volumes declined by 11% year over year in
the quarter. Prime brokerage revenues are expected to be soft as demand for securities lending was weak.
• Investment Banking: M&A and equity underwriting revenues declined for both Goldman Sachs and
Morgan Stanley during the quarter as the rush to close M&A deals by year end and financial firms
plugging capital holes last quarter present difficult compares in Q1. But sequential weakness should not
be misinterpreted as a cyclical pullback in investment banking activity. Announced M&A volumes are up
27% from their 2009 low and we expect the recovery to continue through 2010. Bernstein notes that
announced M&A volumes are correlated with GDP. Consequently, as economic trends improve, M&A
volumes will rise.

See Disclosure Appendix of this publication for important disclosures and analyst certifications.
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

• Asset Management & Retail Brokerage: Fund flow trends were positive through February (the most
recent data available) as assets moved out of lower-margin money market funds into higher margin
equity and bond funds. Flows into bond funds were positive for the fifth consecutive quarter as fears of
rising rates did not seem to stem a surge of client money in fixed income funds. As volatility continues to
decline, retail trading activity, and thus client engagement, has suffered. Most recently, monthly data
from Schwab and Ameritrade show weak client activity in February. This is not good news for a new
"wire house" such as Morgan Stanley. Partially offsetting this, we expect revenues from bank activity to
increase during the quarter at MS.
• We raise our Q1'10 EPS est. at MS from $0.50 to $0.54 but cut full year 2010 estimate from $2.81 to
$2.74. We lower our Q1 '10 EPS estimate at GS from $5.11 to $4.38 and our full year 2010 estimate from
$20.28 to $17.18. We lower our price target for GS from $225 to $210 and maintain our target at MS.
We and maintain our Outperform rating for both firms.
Investment Conclusion
MS: A Work In Progress.

MS's consolidation of the 'Smith Barney' retail business with the 'Dean Witter' network will give Morgan
Stanley control of the largest domestic retail brokerage platform, as measured by brokers and client assets.
Ideally, the new Morgan Stanley will ultimately be a less capital intensive, lower risk company than the MS
of 2006- 2007 and be well positioned to thrive in the more tightly-regulated, less "swashbuckling"
environment of the future.
As a leading retail channel distributor of financial products, MS should command premium pricing for
access to its channel and profit from the scale economics of its larger retail business. Nearly one half of
Morgan Stanley's normalized revenues will be generated by Wealth Management. Based on Bernstein's
regression analysis of Morgan Stanley's combined pro forma client assets, the pre-tax margin of combined
of Morgan Stanley retail and Smith Barney could reasonably increase 600 basis points to approximately
24.7%.
However, this will take time. Approximately 700 Smith Barney FAs left Citigroup in the period
immediately leading up to the merger with Morgan Stanley. With a leading investment bank and a
profitable asset management business, MS management argues that the firm will command a higher equity
valuation than a trading house. But this goal should not bear fruit until 2012 and beyond.
And unfortunately 2010 will be a difficult environment for MS' retail brokers. The new Morgan Stanley
retail network will face the challenge of risk aversion among retail investors, who continue holding large
amounts of cash, and the firm's management must attempt to coordinate a complex integration of Morgan
Stanley and Smith Barney's sales forces while cutting expenses, boosting bank earnings to fill in the
performance gap, discouraging client turnover and retaining client assets from departing brokers.
But in the interim period, MS is not turning its back on its roots. The New Morgan Stanley will also be a
fixed income flow trader, profiting from pattern recognition of client demand shifts. Consequently, the
U.S. Brokerage

company will focus its risk taking to the liquid portions of the market and avoid the pure proprietary bets
that nearly led to the firm's demise in 2008.
To achieve this, the firm is expanding its trading volume market share in governments and investment grade
corporate bonds by providing customer financing. In addition, it is significantly expanding its headcount on
selected desks such as governments, sovereigns, Agency MBS and in related sales support groups.
Unfortunately, fixed income remains a work in progress and its surprisingly large FICC hiring program
likely means that performance will not rebound until late this year.
Perhaps MS FICC will still have time to profit from a prolonged fixed income cycle. The fiscal problems of
Italy, Spain and Portugal have made it difficult for the ECB to raise rates soon and Congressional focus on

2
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

assigning new regulatory authorities has similarly hobbled Federal Reserve monetary policy. So it can be
argued that the glacial recovery of the USA and the EU economies means that credit market investors will
accept ever greater risk and move further out the credit curve and down the credit quality spectrum as the
2010 fixed income cycle continues into 2011.
Investment banking backlog is growing at Morgan. The firm will continue to profit from its powerful
market share positions in equity capital markets, M&A advisory while continuing to provide necessary
relationship support through global debt capital markets capabilities.
In asset management, Morgan Stanley will attempt to improve its performance by streamlining its
operations, exiting subscale operations and expanding high margin activities. Specifically, the firm recently
exited the retail mutual fund business. In the institutional asset management segment, MS is improving the
business by outsourcing some activities to State Street and re-staffing several other institutional products.
The firm's fund of funds platforms have been consolidated and will use the larger high net worth and
powerful institutional equity distribution capabilities of Morgan Stanley to expand this high margin
franchise.
We acknowledge the risks to MS common stock in 2010 inherent to any "turnaround" story, specifically
that the stock stalls and investors become impatient for bottom line improvements at Morgan Stanley retail.
We note that large one time expenses associated with the MSSB merger will mask much of the
improvement in the retail brokerage expense run rates over the coming year, which could make investors
skeptical of the firm's "all in" bet on retail. Nevertheless, Bernstein believes that the retail strategy will be
successful over the long term. We rate MS Outperform.
Goldman Sachs – Nothing Has Changed, Still Holding All the Cards

Goldman Sachs is the largest, most successful institutional trading firm on Wall Street, and given the firm's
public position that "nothing has changed" in its business strategy, the company has both the capital
strength, global positioning and as owners the Goldman Partners have the will to deploy its resources and
profit from slowly improving economic conditions.
Goldman's FICC business is thriving. The technology investments in risk and capital management tools that
the firm made previously saved the firm in the 2007-2008 crisis and paid off handsomely in 2009. Global
investor's recognize that they need Goldman's powerful equity franchise for execution and collateral
financing.
As the credit recovery slows in 2011, we believe Goldman's leading market share positions in the highest
margin businesses of Wall Street - equity underwriting and M&A advisory - will result in growing
investment banking revenues coincident with recovering GDP and improving corporate earnings. For
Goldman, the rebound in these businesses will provide an exit window for the Goldman's large merchant
banking portfolio.
While investors recognize that Goldman's 2010 earnings outlook is solid, longer term, there is growing
concern about the viability of Goldman's present business model. Regulatory uncertainty about risk taking
U.S. Brokerage

and new capital charges is threatening the economics for over half of Goldman's revenue base. There is
rising public appetite for punishment of the guilty parties that caused the 2007-2009 credit crisis, and
investment bankers are being blamed for everything from the Great Recession to the collapse of US auto
industry. As the most powerful capital markets firm, Goldman Sachs is a convenient scapegoat for policy
makers and the press. This maelstrom of negative media attention and the threat of onerous regulation has
effectively frightened investors away from owning Goldman stock and pressured valuations to historical
lows despite the expectation for strong earnings in the current year.
Admittedly, the outcome of regulatory reform being considered in the U.S. and Europe is highly uncertain.
However, it is likely that capital charges on trading will increase, leverage will be limited, balance sheet

3
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

liquidity "reserves" will increase and non-core businesses such as commodities, real estate and private
equity will be constrained.
In an attempt to quantify the impact of regulation on fundamental performance, Bernstein has examined pro
forma analyses of Goldman Sachs performance over the five year period 2002-2007 onerous regulatory
scenarios. Bernstein concluded that significantly higher capital charges, the prohibition of proprietary
trading and private equity investing and much lower leverage would free equity capital, reduce the firms
revenue growth rate by one third and depress the average full cycle ROE of the firm to approximately 16%
to17%. (See Bernstein Research published March 10 2010; Goldman Sachs: Regulation and Its Discontents
- Evaluating Fundamentals Under a New Regime)
While a 16%-17% ROE falls short of the long term >20% ROE that Goldman Sachs has previously
achieved, Bernstein continues to believe that Goldman Sachs long term returns look attractive and justifies
an outperform rating.
Details

Goldman Sachs and Morgan Stanley are expected to report first quarter 2010 results in mid-April. With
less than a week remaining in the quarter, we are updating our quarterly EPS estimates to reflect quarterly
operating trends to date.
The first quarter of the year is typically strong for trading desks as investors re-embrace risk in a new year.
Though believe we this historical pattern indeed played out in the month January, our previous estimates
did not anticipate tepid activity in February and March. We expect institutional equity revenue to be
relatively soft in the period due to declining equity volatility and volumes as weary investors feared both
the systemic implications of Greek's sovereign debt troubles and overall lack of clarity in the global
economic recovery. Fixed income will be up sequentially from seasonally weak Q4 numbers with positive
performance attributable to European government desks and good domestic credit sector numbers.
Investment banking trends appear weaker on a sequential basis as the spike in completed deals in Q4 (as
management teams look to close deals by year end) and the tailwind of financial firm equity issuance died
in the quarter. Looming sovereign debt default did not derail progress in debt underwriting trends,
especially in the high yield sector. This trend, in combination with further tightening of bid-offer spreads,
suggests the minor hiccups in the fixed income market have not upset progress in recovery.
Investment Banking

As mentioned above, we anticipate a sequential decline in M&A and equity underwriting revenues for both
Goldman Sachs and Morgan Stanley during the quarter as the year-end rush to close announced M&A deals
by year end and financial firms plugging capital holes last quarter present difficult compares in Q1. But
sequential weakness should not be misinterpreted as a cyclical pullback in investment banking activity.
Announced M&A volumes are correlated with macroeconomic data. Consequently, as broad economic
trends improve, we expect M&A volumes will improve as well.
U.S. Brokerage

Based on data provided by Dealogic, Bernstein is forecasting that investment banking revenues for both
Goldman and Morgan Stanley will be down 30% from Q4 2009 levels, though up ~30% from depressed Q1
'09 levels (see Exhibit 1 and Exhibit 2).

4
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 1 Exhibit 2
Investment Banking Revenues Q1 2010E - Investment Banking Revenue Compares

1,800 40% 32%

1,600 30% 26%
1,400 20%
1,200
10%
$, mil.

1,000
0%
800
600 -10%
400 -20%
200 -30%
- -40% -34% -31%
GS MS GS MS
Q1 '09 Q4 '09 Q1 '10E QoQ YoY

Sources: Dealogic, Corporate Reports, Bernstein Analysis Sources: Dealogic, Corporate Reports, Bernstein Analysis

Global Equity Capital Markets – Weaker Performance

Global IPO volumes declined 38% sequentially in Q1 '10 off a strong Q4 '09. Similarly, secondary
volumes, which account for ~50%-60% of total equity underwriting volumes historically, declined 58%
versus Q4 '09 (see Exhibit 3). The need for financial firms to plug capital holes provided a tailwind for
secondary underwriting volumes in 2008 and 2009 but has not emerged in 2010 (see Exhibit 4 and Exhibit
3).

Exhibit 3
Global Equity Capital Market (ECM) Volumes

350,000
300,000
250,000
$, millions

200,000
150,000
100,000
50,000
-
Q2 '05

Q3 '05

Q4 '05

Q1 '06

Q2 '06

Q3 '06

Q4 '06

Q1 '07

Q2 '07

Q3 '07

Q4 '07

Q1 '08

Q2 '08

Q3 '08

Q4 '08

Q1 '09

Q2 '09

Q3 '09

Q4 '09

Q1 '10E
IPO CONV FO

Sources: Dealogic, Bernstein Analysis

U.S. Brokerage

5
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 4 Exhibit 5
Global Equity Issuance: % from Financial Firms Global Equity Issuance by Financial Services Firms

60% 160,000

50% 140,000
120,000
40%
100,000

$mil
30%
80,000
20% 60,000

10% 40,000
20,000
0%
-
Q1 '04
Q2 '04
Q3 '04
Q4 '04
Q1 '05
Q2 '05
Q3 '05
Q4 '05
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Q4 '08
Q1 '09
Q2 '09
Q3 '09
Q4 '09
Q1 '10

Q1 '04
Q2 '04
Q3 '04
Q4 '04
Q1 '05
Q2 '05
Q3 '05
Q4 '05
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Q4 '08
Q1 '09
Q2 '09
Q3 '09
Q4 '09
Q1 '10
Sources: Dealogic, Bernstein Analysis Sources: Dealogic, Bernstein Analysis

Global Debt Capital Markets

Debt underwriting volumes improved 32% sequentially but were down 2% compared with the first quarter
of 2009. Corporate debt (high yield and investment grade) remained strong as the bond market credit
spreads continued to slowly improve and demand for credit remained strong. Securitization volumes (ABS
& MBS) were both up from the grim volumes underwritten in Q1 '09 but were down slightly on a
sequential basis. Improvement in sovereign and U.S. agency debt underwriting, which collectively account
for 32% of total volumes, each improved versus Q4 '09 and Q1 '09, spurring improved revenue trends for
Goldman Sachs and Morgan Stanley during the quarter.

Exhibit 6
Debt Underwriting Trends by Product

300%
Q-o-Q Y-o-Y 195%
200% 163% 167%

100% 60% 74%

32% 32%
19% 14% 2%
13%
0%
-2% -6% -4%
-35% -27% -28% -14%
-100%
US Agency
Inv. Grade

Hi-Yield
MBS
Sovereign/
Preferreds

Supranational
ABS
Total

Local
U.S. Brokerage

Source: Dealogic

6
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 7 Exhibit 8
Investment Grade Corporate Debt Underwriting Volumes High Yield Corporate Debt Underwriting Volumes

1,000,000 120,000

800,000 100,000

80,000
600,000
$000s

$000s
60,000
400,000
40,000
200,000 20,000

0 0
Q1 '04

Q3 '04
Q1 '05

Q3 '05
Q1 '06

Q3 '06
Q1 '07
Q3 '07

Q1 '08

Q3 '08

Q1 '09
Q3 '09

Q1 '10

Q1 '04

Q3 '04

Q1 '05

Q3 '05

Q1 '06

Q3 '06

Q1 '07

Q3 '07

Q1 '08

Q3 '08

Q1 '09

Q3 '09

Q1 '10
Source: Dealogic Source: Dealogic

M&A Advisory

Completed M&A advisory volumes declined 46% on a sequential basis and 37% year-over-year. (Exhibit
10). We believe the sequential decline is largely attributable to seasonal weakness as CEOs press execution
teams to complete M&A deals by year end. Announced deals are down 9% sequentially but up 14%
compared with Q1 '09.
Despite a soft Q1, we are not revising our estimate calling for global M&A activity to rise by 35% next year
off the depressed 2009 base. We note that announced M&A volumes have risen over 27% from their 2009
low point (Exhibit 9). In 2011 we expect M&A activity to grow another 23% sequentially, before leveling
off in 2012 with a growth rate of ≈8%. Despite this forecasted growth rate, we do not expect M&A to
recover above its 2007 peak during the forecast period (2009-2013).

Exhibit 9
Announced Monthly M&A

Announced Monthly M&A

Peak
$600,000 July
Nadir 27.6%
2007
August Increase
$500,000
2009
$400,000

$300,000

$200,000
U.S. Brokerage

$100,000

$-
06 0 ay

07 00 ay

08 0 ay

09 00 ay
06 h

07 h

08 h

09 h

ch
M y

20 ove er

20 anu r

20 ove er

20 anu r

20 ove er

20 anu r
06 te ly

M y

20 ove er

20 anu r
07 te ly

M y

08 te ly

M y

09 te ly

M y
J be

J be

J be

J be
06 ar

07 ar

08 ar

09 ar

10 ar
20 arc

20 arc

20 arc

20 arc
20 Sep Ju

20 Sep Ju

20 Sep Ju

20 Sep Ju
N mb

N mb

N mb

N mb

ar
20 2 M

20 2 M

20 2 M

20 2 M
20 anu

07 m

08 m

09 m

10 m
6

9
J

0
06
20

Global 6 Mo Trend

Source: Dealogic

7
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 10 Exhibit 11
Completed M&A Volumes Announced M&A Volumes

$1,600 1,600
$1,400 1,400
$1,200 1,200
$1,000 1,000

$Billion
$ Billion

$800 800

$600 600

$400 400

$200 200

$0 0

Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10
Source: Dealogic Source: Dealogic

According to Dealogic data, the volume of advisory mandates completed at Morgan Stanley in Q1 '10 was
down 68% from Q4 '09 and down 53% on a year-over-year basis. Goldman Sachs' completed M&A
volumes were down 53% sequentially and 40% year-over-year (see Exhibit 12 and Exhibit 13).

Exhibit 12 Exhibit 13
GS Completed M&A Volumes MS Completed M&A Volumes

600,000 600,000

500,000 500,000

400,000 400,000
$, mil

$, mil

300,000 300,000

200,000 200,000

100,000 100,000

- -
Q1 '05
Q2 '05
Q3 '05
Q4 '05
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Q4 '08
Q1 '09
Q2 '09
Q3 '09
Q4 '09

Q1 '05
Q2 '05
Q3 '05
Q4 '05
Q1 '06
Q2 '06
Q3 '06
Q4 '06
Q1 '07
Q2 '07
Q3 '07
Q4 '07
Q1 '08
Q2 '08
Q3 '08
Q4 '08
Q1 '09
Q2 '09
Q3 '09
Q4 '09
Q1 '10E

Q1 '10E
Source: Dealogic, Bernstein analysis Source: Dealogic, Bernstein analysis

Equity Sales and Trading Revenues

U.S. Brokerage

Since 2000, we have found a strong correlation between the quarterly aggregate level of reported equity
sales and trading revenues of the securities industry and the total value of shares traded globally
(denominated in US$), with an R-squared of 76% (see Exhibit 14).
Similarly, there is a strong correlation (R-squared of 74%) between the year-over-year growth in combined
quarterly equity sales and trading revenues of the industry and the corresponding global value of equity
shares traded (see Exhibit 15).
Notably, while this correlation holds for the aggregate equity sales and trading revenues of these firms, this
correlation breaks down when we compare the value of shares traded to individual company equity sales
and trading revenues.

8
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 14 Exhibit 15
Equity Sales and Trading Revenues vs. Global Value of Year-over-year Growth of Quarterly Equity S&T
Shares Traded Revenues vs. Value of Shares Traded Globally

7.0 Quarterly Data ($, billions) 30,000 YoY Changes Q1 '01-Q1 '10E
100%
R2 = 74%
6.0
25,000 80%

Aggregate Equity S&T Revenue

5.0 60%
20,000
R-squared = 76%
4.0 40%

(GS & MS)

15,000
20%
3.0

10,000 0%
2.0
-20%
Equity S&T Revenues (left axis) 5,000 Q1 '10E
1.0
Global Value of Equity Shares Traded -40%
- (right axis) 0
-60%
Q1 '00

Q2 '01

Q3 '02

Q4 '03

Q1 '05

Q2 '06

Q3 '07

Q4 '08

Q1 '10E

-50% -30% -10% 10% 30% 50% 70%

Global Value of Shares Traded

Sources: World Federation of Exchanges, Corporate Reports, Bernstein Sources: World Federation of Exchanges, Corporate Reports, Bernstein
Analysis Analysis

During the first two months of Q1 '10, the combined US$ value of shares traded globally increased 4%
from last year’s levels. We anticipate March volumes were not markedly different than these trends. Based
on our historical regression, we forecast growth of the global value of equity shares will be down 11% this
quarter from last year's levels, before DVA (see Exhibit 16).

Exhibit 16
Equity Sales & Trading Revenue Forecast

2,500
Q1 '09 Q4 '09 Q1 '10E

2,000
$, millions

1,500

1,000
U.S. Brokerage

500

-
GS MS

Sources: Corporate Reports, Bernstein Analysis. Q1 '09 results at MS include

DVA writedowns.

9
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Fixed Income Sales & Trading Revenues

Credit spreads continued to decline in Q1 '10, albeit at a decelerating rate as spreads reached "more normal"
levels, with momentary spates of widening as fear of a potential Greek sovereign debt failure rattled the €
bond markets and caused Treasuries and Bunds to rally.
Exhibit 17 - Exhibit 19 show the sequential change in spreads, as well as year-end 2008 levels to help
contextualize current levels versus early stages of credit market deterioration. Broadly speaking, spreads
improved in every area of the market on a point-to-point basis.

Exhibit 17 Exhibit 18
Corporate Credit Spreads CMBS Credit Spreads

1,800 6,000

1,600 12/31/08 12/31/09 3/22/10

5,000 12/31/08 12/31/09 3/22/10
1,400

1,200 4,000

OAS (bps)
OAS (bps)

1,000
3,000
800
2,000
600

400 1,000
200
-
-
AAA CMBS IG HY
Aaa Baa High Yield CMBS CMBS

Source: Bloomberg Source: Bloomberg

Exhibit 19
ABS Credit Spreads

1,200

1,000

800
OAS (bps)

600

400

200

-
Aggregate ABS Credit Card Auto
ABS ABS

12/31/08 12/31/09 3/22/10

U.S. Brokerage

Source: Bloomberg

10
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 20 Exhibit 21
U.S. Treasury Bond Avg. Daily Trading Volumes Domestic Corporate Bond Avg. Daily Trading Volumes

$700 $250
$600
$200
$500

$ Billion
$ Billion

$400 $150

$300 $100
$200
$50
$100
$0 $0
Q1 '01

Q2 '02

Q3 '03

Q4 '04

Q1 '06

Q2 '07

Q3 '08

Q4 '09

Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10
Source: New York Federal Reserve Source: New York Federal Reserve

Exhibit 22 Exhibit 23
Annual Domestic Bond Fund Net Inflows (1990 – 2009 Quarterly Domestic Bond Fund Net Inflows
YTD)

400 150.0
350 120.0
300
250 90.0
200 60.0
$, bil.

$, bil.

150
30.0
100
50 -
0 (30.0)
-50
-100 (60.0)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010YTD

(90.0)
Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10
Source: ICI Source: ICI

We forecast fixed income sales & trading revenues from historical trends in fixed income revenue returns
on each firms total net asset base (RRONA). We anticipate GS and MS will generate RRONA above their
U.S. Brokerage

historical averages in Q1 '10 based on their recent RRONA1 performance. We note, our RRONA
assumption assumes an average base driven off of an assumed gross leverage ratio of 14x for GS and 15x
for MS in Q1 '10.
Based on this forecast, we anticipate GS will generate revenues of $5.1 billion in Q1 '10, up from $4.0
billion in Q4 '09. We expect MS fixed income sales and trading revenues of $1.7 billion in Q1 '10, up from
$686 million in Q4 '09. We expect positive performance on European government desks and good domestic
credit sector numbers, partially offset by weaker European credit and emerging market trading revenues.

1
Note; Quarterly RRONA performance is serially correlated.

11
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 24 Exhibit 25
GS – RRONA Forecast MS – RRONA Forecast

4.0% 2.0%
3.0% 1.0%
2.0% 0.0%
1.0%
-1.0%
0.0%
-2.0%
-1.0%
-3.0%
-2.0%
Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10E
Q3 '10E
-4.0%

Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10E
Q3 '10E
RRONA GS Avg RRONA MS Avg

Source: Company Disclosures, Bernstein Analysis Source: Company Disclosures, Bernstein Analysis

Exhibit 26
Fixed Income Sales & Trading Revenues

7,000
6,000
5,000
4,000
$, bil

3,000
2,000
1,000
-
GS MS
Q1 '09 Q4 '09 Q1 '10E

Sources: Corporate Reports, Bernstein Analysis

Wealth Management (Asset Management & Retail Brokerage)

Fund flow trends through February (the most recent data available) showed funds continuing to move out of
lower yielding money market funds and into equity and equity bond funds. Assuming March data does not
offset cumulative flows during January and February, Q1' 10 would represent the fifth consecutive quarter
of positive flows for bond funds and negative flows for money market funds as retail investors seek
additional yield on lower risk holdings.
U.S. Brokerage

Equity mutual fund inflows were $17 billion through the first two months of Q1 '10, versus $7.2 billion of
outflows in Q4 '09. This compares with money market mutual fund outflows of $99.6 billion in Q1 '10
versus $35 billion of outflows in Q1 '09 (see Exhibit 28). Domestic bond fund inflows totaled $25 billion
through February (see Exhibit 29).
Looking forward, Bernstein believes that positive equity market performance will ultimately spur investor
confidence and subsequent asset flow trends into higher equity margin mutual funds. This is turn will
trigger rising fee based revenues from growing client asset balances.
This said, the retail recovery will not be quick or sharp. We note that as volatility declined this quarter,
retail trading activity waned. We believe this signals a softening of retail performance, driven by the

12
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

continued malaise of retail investors faces higher taxes high unemployment and a slow economic recovery.
This is not good news for firms heavily levered to retail brokerage, such as Morgan Stanley.

Exhibit 27 Exhibit 28
Domestic Equity Fund Flows Domestic Money Market Fund Flows

150.0 400.0
300.0
100.0
200.0
50.0 100.0
$, bil.

$, bil.
- -
(100.0)
(50.0)
(200.0)
(100.0) (300.0)
Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10

Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10
Sources: ICI, Bernstein Analysis Sources: ICI, Bernstein Analysis

Exhibit 29
Monthly Domestic Bond Fund Net Inflows

150.0
120.0
90.0
60.0
$, bil.

30.0
-
(30.0)
(60.0)
(90.0)
Q1 '00
Q3 '00
Q1 '01
Q3 '01
Q1 '02
Q3 '02
Q1 '03
Q3 '03
Q1 '04
Q3 '04
Q1 '05
Q3 '05
Q1 '06
Q3 '06
Q1 '07
Q3 '07
Q1 '08
Q3 '08
Q1 '09
Q3 '09
Q1 '10

Sources: ICI, Bernstein Analysis

U.S. Brokerage

13
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 30
GS – Quarterly Earnings Model
Consolidated Income Statement
($ Millions)
1Q 2Q 3Q 4Q
2010E 2010E 2010E 2010E 2010E
Revenues
Financial Advisory $ 407 $ 600 $ 650 $ 750 $ 2,407
Debt Income U/W 361 386 300 300 1,348
Equity U/W 317 400 400 450 1,567
Total Underwriting 679 786 700 750 2,915
Investment Banking $ 1,086 $ 1,386 $ 1,350 $ 1,500 $ 5,322

Fixed Income $ 6,713 $ 5,150 $ 5,250 $ 5,300 $ 22,413

Total Equities 1,781 2,174 2,232 2,056 8,243
Equities Trading 914 1,051 1,209 1,068 4,242
Equities Commissions 867 1,123 1,023 988 4,001
Principal Investments 750 550 550 550 2,400
Trading and Principal Investments $ 9,244 $ 7,874 $ 8,032 $ 7,906 $ 33,056

Asset Management $ 902 $ 902 $ 1,091 $ 1,260 $ 4,154

Securities Services 487 536 590 649 2,262
Asset Mgmt and Securities Services $ 1,389 $ 1,438 $ 1,681 $ 1,909 $ 6,416

Net Revenues $ 11,719 $ 10,698 $ 11,062 $ 11,315 $ 44,794

Expenses
Reported Compensation $ 5,391 $ 4,921 $ 5,089 $ 4,300 $ 19,700
Other Operating Expenses 2,203 2,264 2,243 2,287 8,998
Total Operating Expenses $ 7,594 $ 7,186 $ 7,331 $ 6,587 $ 28,698

Pretax Income $ 4,125 $ 3,513 $ 3,731 $ 4,728 $ 16,096

Taxes 1,358 1,157 1,229 1,557 5,300
tax rate 33% 33% 33% 33% 33%
Net Income 2,767 2,356 2,503 3,171 10,796
Preferred Dividend 161 161 161 161 644
Net Income Available to Common $ 2,606 $ 2,195 $ 2,342 $ 3,010 $ 10,152

Diluted EPS $ 4.38 $ 3.70 $ 3.99 $ 5.11 $ 17.18

Pretax Margin 35.2% 32.8% 33.7% 41.8% 35.9%
Return on Equity 15.4% 12.2% 12.3% 15.4% 13.8%

Dividend Payout 8% 9% 9% 7% 8%
U.S. Brokerage

Average Diluted Shares Outstanding (mil.) 594.8 593.0 586.7 589.1 590.9
Compensation / Net Revenues 46.0% 46.0% 46.0% 38.0% 20.2%
Source: Bernstein Estimates

14
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 31
GS – Annual Earnings Model
Goldman Sachs
Consolidated Income Statement
($ Millions)
2005 2006 2007 2008 2009E 2010E 2011E
Revenues
Financial Advisory $ 1,905 $ 2,580 $ 4,222 $ 2,656 $ 1,893 $ 2,407 $ 2,900
Debt Income U/W 1,062 1,684 1,951 1,176 1,133 1,348 1,479
Equity U/W 704 1,365 1,382 1,353 1,771 1,567 2,116
Total Underwriting 1,766 3,049 3,333 2,529 2,904 2,915 3,595
Investment Banking $ 3,671 $ 5,629 $ 7,555 $ 5,185 $ 4,797 $ 5,322 $ 6,495

Fixed Income $ 8,484 $ 13,778 $ 16,165 $ 3,713 $ 23,316 $ 22,413 $ 20,172

Total Equities 5,650 8,483 11,304 9,206 9,886 8,243 9,692
Principal Investments 2,228 2,817 3,757 (3,856) 1,171 2,400 3,000
Trading and Principal Investments $ 16,362 $ 25,078 $ 31,226 $ 9,063 $ 34,373 $ 33,056 $ 32,863

Asset Management $2,956 $4,294 $4,490 $4,552 $3,970 $4,154 $4,985

Securities Services 1,793 2,180 2,716 3,422 2,033 2,262 2,601
Asset Mgmt and Securities Services $ 4,749 $ 6,474 $ 7,206 $ 7,974 $ 6,003 $ 6,416 $ 7,586

Net Revenues $ 24,782 $ 37,181 $ 45,987 $ 22,222 $ 45,173 $ 44,794 $ 46,944

Expenses
Reported Compensation $ 11,672 $ 16,379 $ 20,190 $ 10,934 $ 16,193 $ 19,700 $ 20,634
Impact of Compensation Awarded in Stock - - - - - - -
Discretionary Employee IPO Awards 16 - - - - - -
Other Operating Expenses 4,821 6,242 8,193 8,952 9,151 8,998 9,803
Total Operating Expenses $ 16,509 $ 22,621 $ 28,383 $ 19,886 $ 25,344 $ 28,698 $ 30,437

Pretax Income $ 8,273 $ 14,560 $ 17,604 $ 2,336 $ 19,829 $ 16,096 $ 16,506

Taxes 2,647 5,023 6,005 14 6,444 5,300 5,435
Net Income 5,626 9,537 11,599 2,322 13,385 10,796 11,071
Preferred Dividend 17 139 192 281 1,193 644 644
Net Income Available to Common $ 5,609 $ 9,398 $ 11,407 $ 2,041 $ 12,192 $ 10,152 $ 10,427

Diluted EPS $ 11.21 $ 19.69 $ 24.73 $ 4.47 $ 22.13 $ 17.18 $ 17.73

Pretax Margin 33.4% 39.2% 38.3% 10.5% 43.9% 35.9% 35.2%
Return on Equity 21.7% 32.8% 32.7% 4.9% 22.5% 13.8% 12.1%

Dividend Payout 8.9% 6.6% 5.7% 34.3% 4.9% 8.1% 10.8%

Average Diluted Shares Outstanding (mil.) 500.2 477.4 461.3 456.2 550.9 590.9 588.2
Compensation / Net Revenues 47.1% 44.1% 43.9% 49.2% 35.8% 20.2% 44.0%

Source: Bernstein Estimates

U.S. Brokerage

15
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 32
MS Quarterly Earnings Model
Consolidated Income Statement
($ Millions)
FY
Q1 '10E Q2 '10E Q3 '10E Q4 '10E 2010E
Revenues
Investment Banking 1,232 1,416 1,416 1,563 5,627
Principal Transactions:
Trading 2,061 2,534 2,466 2,433 9,494
Investments 335 400 415 430 1,580
Commissions 1,496 1,516 1,580 1,605 6,197
Fees:
Asset Management 2,007 2,083 2,160 2,235 8,484
Interest and Dividend Revenue
less Interest Expense
Interest Income 608 613 618 623 2,462
Other Revenue 188 189 190 191 758
Net Revenues $ 7,927 $ 8,750 $ 8,844 $ 9,080 34,601

Expenses
Compensation and Benefits 4,183 4,591 4,650 4,770 18,193
Occupancy and Equipment 424 429 434 439 1,726
Brokerage, Exchange and Clearing 255 275 294 402 1,226
Information Processing and Communications 428 435 442 449 1,754
Marketing and Business Development 115 125 124 159 523
Professional Services 533 533 533 533 2,132
Other 414 387 373 233 1,407
Restructuring Charge/Acct Change - - - - -
Total Non-Interest Expenses 6,352 6,775 6,849 6,985 26,961

Unconsolidated Subs and Sales - - - - -

Pretax Income 1,575 1,975 1,995 2,095 7,640
Taxes 504 632 638 671 2,445
tax rate 32.0% 32.0% 32.0% 32.0% 32.0%

Net Income $976 $1,237 $1,240 $1,304 $5,195

Preferred Dividends 241 241 241 241 964

Extraordinary Items/Minority Interests 95 106 117 121 439
Net Income from Continuing Ops $735 $996 $999 $1,063 3,793
Disc Operations/Non-Recurring - - - - -
Net Income 735 996 999 1,063 3,786

EPS from Continuing Ops $0.54 $0.73 $0.70 $0.77 $2.74

Diluted EPS $0.54 $0.73 $0.70 $0.77 $2.74
Pretax Margin 19.9% 22.6% 22.6% 23.1% 22.1%
U.S. Brokerage

Return on Equity 7.3% 9.7% 9.1% 9.3% 8.9%

Average Diluted Shares Outstanding (mil.) 1,369 1,359 1,426 1,376 1,383
Compensation / Net Revenues 52.8% 52.5% 52.6% 52.5% 52.6%
Source: Bernstein Estimates

16
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Exhibit 33
MS Annual Earnings Model

Morgan Stanley
Consolidated Income Statement
($ Millions)

2007 2008 2009E 2010E 2011E

Revenues
Investment Banking $6,368 $4,055 $5,019 $5,627 $6,293
Principal Transactions:
Trading 3,206 5,125 7,447 9,494 9,876
Investments 3,262 (3,960) (1,054) 1,580 1,870
Commissions 4,682 4,450 4,234 6,197 6,616
Fees:
Asset Management 6,519 5,660 5,884 8,484 9,651
Merchant and Cardmember - - - - -
Servicing - - - - -
Interest and Dividend Revenue 60,083
less Interest Expense 57,302
Net Interest Income 2,781 3,581 990 2,462 2,542
less Provision for Consumer Loan Losses - - - - -
Other Revenue 1,208 6,033 838 758 830
Net Revenues $28,026 $24,944 $23,358 $34,601 $37,677

Expenses
Compensation and Benefits $16,552 $12,306 $14,438 $18,193 $19,851
Occupancy and Equipment 1,130 1,359 1,551 1,726 1,806
Brokerage, Exchange and Clearing 1,656 1,659 1,190 1,226 1,655
Information Processing and Communications 1,192 1,241 1,372 1,754 1,866
Marketing and Business Development 814 776 503 523 543
Professional Services 2,112 1,837 1,603 2,132 2,182
Other 1,129 2,703 1,844 1,407 (357)
One-Time Items - - - - -
Total Non-Interest Expenses $24,585 $21,881 $22,501 $26,961 $27,546

Pretax Income $3,441 $3,063 $857 $7,640 $10,131

Losses from Unconsolidated Investees (47) 29 - - -
Taxes 831 480 (336) 2,445 3,242
Div. Mandatory Redeemable Preferred Stock - - - - -
Cummulative effect of sfas 133 - - - - -
Net Income $2,563 $2,612 $1,193 $5,195 $6,889

Preferred Dividends 68 112 2,306 964 964

Extraordinary Items/Minority Interests - - 60 439 1,033
Net Income from Continuting Operations $2,495 $2,500 ($1,173) $3,793 $4,892
Disc Operations/Non-Recurring 646 (100) 213 - -
Net Income 3,141 2,393 (960) 3,793 4,892
U.S. Brokerage

EPS from Continuing Ops $2.37 $2.28 ($0.90) $2.74 $2.97

Diluted EPS $2.98 $2.19 ($0.74) $2.74 $2.97
Pretax Margin 12.3% 12.3% 3.7% 22.1% 26.9%
Return on Equity (Operating) 7.1% 7.6% -3.2% 8.9% 9.3%

Average Diluted Shares Outstanding (mil.) 1,054 1,096 1,301 1,383 1,648
Compensation / Net Revenues 59.1% 49.3% 61.8% 52.6% 52.7%
Source: Bernstein Estimates

17
 March 26, 2010

U.S. Brokerage Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

18
 March 26, 2010

Brad Hintz (Senior Analyst) • brad.hintz@bernstein.com • +1-212-756-4590

Disclosure Appendix
Valuation Methodology

Bernstein has found that the major brokerage firms’ common stocks trade on a price-to-tangible book basis.
Bernstein believes that the tangible book value of a securities firm is a “hard number” for these companies
reflecting the industry’s mark-to-market accounting discipline and the rapid turnover of brokerage firm
balance-sheets. By comparison, forecasting the highly cyclical earnings is problematic and therefore price-
to-earnings valuation ratios are not accurate or stable. The price targets are based upon a valuation model
that takes into account Return on Equity (ROE) versus Ke (the CAPM-based cost of equity), credit rating
and a variable that differentiates between the 1999-2000 internet bubble period and all other periods of
history. The formula is:
• P/TB (Banks) = 1.35 x Forecasted Tangible ROE NTM / Bank Industry Ke – 0.2112
Investors should note that this price-to-book valuation regression only explains 85% of the quarterly change
in price-to-book of a bank or securities firm.
Risks

The biggest risk to any major broker-dealer is a loss of confidence in its name, especially in the credit
markets. The major broker-dealers rely upon the ability to roll over their debt at reasonable interest rates in
order to fund their balance sheets at gross leverage ratios just under 20x (some of these balance sheets
support more than a trillion dollars worth of assets). The inability to meet debt obligations will result in the
failure of a broker-dealer. In order to prevent a liquidity issue, a broker-dealer can sell assets to raise cash,
but in a market like this, would likely result in losses, adding more pressure to a firm's equity base.
While the liquidity facilities the Federal Reserve established this year should help relieve some of the
funding pressures, a loss of confidence can also destroy a firm's franchise and morale. Counter-parties tend
to limit exposure to firms whose credit ratings face downgrades and are perceived as being in risk. So, in a
crisis of confidence, while a firm may avert a liquidity event, the firm's brand name and ongoing business
will also come under threat. The one-two punch of funding pressures and the inability to earn one's way out
of a crisis can result in the failure of a major broker-dealer. A prolonged loss of confidence in a firm's name
would significantly reduce the ability of its stock to achieve our share price target.
In addition, the industry is also facing the cyclical decline of an economic slowdown in the USA and in the
EU. Bernstein is forecasting a relatively modest decline, with recovery in the USA beginning in mid-
2009and in the EU in late-2009. A more significant downturn or a simultaneous downturn in Europe, Asia
and North America would significantly worsen the outlook for security firms, making it unlikely that these
firms could achieve our 12-month share price target.
U.S. Brokerage

19
 SRO REQUIRED DISCLOSURES
• References to "Bernstein" relate to Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, and Sanford C. Bernstein, a unit of
AllianceBernstein Hong Kong Limited, collectively.
• Bernstein analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration,
productivity and proactivity of investment ideas. No analysts are compensated based on performance in, or contributions to, generating
investment banking revenues.
• Bernstein rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for stocks listed on the
U.S. and Canadian exchanges, versus the MSCI Pan Europe Index for stocks listed on the European exchanges (except for Russian
companies), versus the MSCI Emerging Markets Index for Russian companies and stocks listed on emerging markets exchanges outside
of the Asia Pacific region, and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unless
otherwise specified. We have three categories of ratings:
Outperform: Stock will outpace the market index by more than 15 pp in the year ahead.
Market-Perform: Stock will perform in line with the market index to within +/-15 pp in the year ahead.
Underperform: Stock will trail the performance of the market index by more than 15 pp in the year ahead.
Not Rated: The stock Rating, Target Price and estimates (if any) have been suspended temporarily.
• As of 03/18/2010, Bernstein's ratings were distributed as follows: Outperform - 48.9% (0.9% banking clients) ; Market-Perform - 45.0%
(1.0% banking clients); Underperform - 6.1% (0.0% banking clients); Not Rated - 0.0% (0.0% banking clients). The numbers in parentheses
represent the percentage of companies in each category to whom Bernstein provided investment banking services within the last twelve
(12) months.
• Brad Hintz, as a former Managing Director at Morgan Stanley Group (MS), owns an equity position in MS that is held in a Morgan Stanley
Group ESOP Trust at Mellon Bank as convertible preferred stock. These MS ESOP securities were awarded to him as compensation and
are fully vested. Mr. Hintz is also an investor in Morgan Stanley Capital Partners III, LP — a merchant banking fund where Morgan Stanley
maintains an equity interest as a limited partner. Mr. Hintz participates in the Morgan Stanley Pre Tax Investment Plan, which is a deferred
compensation plan structured as a note to Mr. Hintz from Morgan Stanley with the return on the note tied to one of many alternative asset
classes. In addition, as a result of the complete spin-off of Discover from Morgan Stanley on June 30, 2007, Mr. Hintz received a long
position in Discover stock as a beneficiary of the Morgan Stanley ESOP. These shares of Discover will ultimately be distributed to Mr. Hintz
by the ESOP trustee.
• Mr. Hintz maintains a long position in Chicago Mercantile Exchange Holdings Inc. (CME).
• Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of
the following companies GS / Goldman Sachs, MS / Morgan Stanley.
• The following companies are or during the past twelve (12) months were clients of Bernstein, which provided non-investment banking-
securities related services and received compensation for such services GS / Goldman Sachs, MS / Morgan Stanley.
• An affiliate of Bernstein received compensation for non-investment banking-securities related services from the following companies GS /
Goldman Sachs, MS / Morgan Stanley.
• In the next three (3) months, Bernstein or an affiliate expects to receive or intends to seek compensation for investment banking services
from GS / Goldman Sachs, MS / Morgan Stanley.
12-Month Rating History as of 03/25/2010
Ticker Rating Changes
GS O (RC) 06/04/09 M (RC) 12/16/05
MS O (RC) 08/09/07

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not Rated

Rating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change
 OTHER DISCLOSURES
A price movement of a security which may be temporary will not necessarily trigger a recommendation change. Bernstein will advise as and
when coverage of securities commences and ceases. Bernstein has no policy or standard as to the frequency of any updates or changes to its
coverage policies. Although the definition and application of these methods are based on generally accepted industry practices and models,
please note that there is a range of reasonable variations within these models. The application of models typically depends on forecasts of a
range of economic variables, which may include, but not limited to, interest rates, exchange rates, earnings, cash flows and risk factors that are
subject to uncertainty and also may change over time. Any valuation is dependent upon the subjective opinion of the analysts carrying out this
valuation.
This document may not be passed on to any person in the United Kingdom (i) who is a retail client (ii) unless that person or entity qualifies as an
authorised person or exempt person within the meaning of section 19 of the UK Financial Services and Markets Act 2000 (the "Act"), or qualifies
as a person to whom the financial promotion restriction imposed by the Act does not apply by virtue of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, or is a person classified as an "professional client" for the purposes of the Conduct of Business Rules of
the Financial Services Authority.

To our readers in the United States: Sanford C. Bernstein & Co., LLC is distributing this publication in the United States and accepts
responsibility for its contents. Any U.S. person receiving this publication and wishing to effect securities transactions in any security discussed
herein should do so only through Sanford C. Bernstein & Co., LLC.
 To our readers in the United Kingdom: This publication has been issued or approved for issue in the United Kingdom by Sanford C. Bernstein
Limited, authorised and regulated by the Financial Services Authority and located at Devonshire House, 1 Mayfair Place, London W1J 8SB, +44
(0)20-7170-5000.
To our readers in member states of the EEA: This publication is being distributed in the EEA by Sanford C. Bernstein Limited, which is
authorised and regulated in the United Kingdom by the Financial Services Authority and holds a passport under the Investment Services
Directive.
To our readers in Hong Kong: This publication is being issued in Hong Kong by Sanford C. Bernstein, a unit of AllianceBernstein Hong Kong
Limited. AllianceBernstein Hong Kong Limited is regulated by the Hong Kong Securities and Futures Commission.
To our readers in Australia: Sanford C. Bernstein & Co., LLC and Sanford C. Bernstein Limited are exempt from the requirement to hold an
Australian financial services licence under the Corporations Act 2001 in respect of the provision of the following financial services to wholesale
clients:
• providing financial product advice;
• dealing in a financial product;
• making a market for a financial product; and
• providing a custodial or depository service.

Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited and AllianceBernstein Hong Kong Limited are regulated by, respectively, the
Securities and Exchange Commission under U.S. laws, by the Financial Services Authority under U.K. laws, and by the Hong Kong Securities
and Futures Commission under Hong Kong laws, all of which differ from Australian laws.
One or more of the officers, directors, or employees of Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, Sanford C. Bernstein, a
unit of AllianceBernstein Hong Kong Limited, and/or their affiliates may at any time hold, increase or decrease positions in securities of any
company mentioned herein.
Bernstein or its affiliates may provide investment management or other services to the pension or profit sharing plans, or employees of any
company mentioned herein, and may give advice to others as to investments in such companies. These entities may effect transactions that are
similar to or different from those recommended herein.
Bernstein Research Publications are disseminated to our customers through posting on the firm's password protected website,
www.bernsteinresearch.com. Additionally, Bernstein Research Publications are available through email, postal mail and commercial research
portals. If you wish to alter your current distribution method, please contact your salesperson for details.
Bernstein and/or its affiliates do and seek to do business with companies covered in its research publications. As a result, investors should be
aware that Bernstein and/or its affiliates may have a conflict of interest that could affect the objectivity of this publication. Investors should
consider this publication as only a single factor in making their investment decisions.
This publication has been published and distributed in accordance with Bernstein's policy for management of conflicts of interest in investment
research, a copy of which is available from Sanford C. Bernstein & Co., LLC, Director of Compliance, 1345 Avenue of the Americas, New York,
N.Y. 10105, Sanford C. Bernstein Limited, Director of Compliance, Devonshire House, One Mayfair Place, LondonW1J 8SB, United Kingdom, or
Sanford C. Bernstein, a unit of AllianceBernstein Hong Kong Limited, Director of Compliance, Suite 3401, 34th Floor, One IFC, One Harbour
View Street, Central, Hong Kong.

CERTIFICATIONS
• I/(we), Brad Hintz, Senior Analyst(s), certify that all of the views expressed in this publication accurately reflect my/(our) personal views
about any and all of the subject securities or issuers and that no part of my/(our) compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views in this publication.

Approved By: NK

Copyright 2010, Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein Limited, and AllianceBernstein Hong Kong Limited, subsidiaries of AllianceBernstein L.P. ~ 1345 Avenue of the
Americas ~ NY, NY 10105 ~ 212/756-4400. All rights reserved.

This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in any locality, state, country or other jurisdiction where such distribution, publication,
availability or use would be contrary to law or regulation or which would subject Bernstein or any of their subsidiaries or affiliates to any registration or licensing requirement within such jurisdiction. This publication is based upon
public sources we believe to be reliable, but no representation is made by us that the publication is accurate or complete. We do not undertake to advise you of any change in the reported information or in the opinions herein.
This publication was prepared and issued by Bernstein for distribution to eligible counterparties or professional clients. This publication is not an offer to buy or sell any security, and it does not constitute investment, legal or tax
advice. The investments referred to herein may not be suitable for you. Investors must make their own investment decisions in consultation with their professional advisors in light of their specific circumstances. The value of
investments may fluctuate, and investments that are denominated in foreign currencies may fluctuate in value as a result of exposure to exchange rate movements. Information about past performance of an investment is not
necessarily a guide to, indicator of, or assurance of, future performance.