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Brad Hintz (Senior Analyst) [email protected] +1-212-756-4590Luke Montgomery, CFA [email protected] +1-212-969-6714Vincent M. Curotto [email protected] +1-212-756-1882

See Disclosure Appendix of this publication for important disclosures and analyst certifications.

U . S .

B r o

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U.S. Securities Industry: Good but Not Great; A Slower thanExpected Start to 2010Target Price Change / Estimate Change in Bold

EPS P/E

Ticker Rating CUR

3/25/2010Closing

PriceTargetPrice

TTMRel.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 NAOLD 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 lessthan a week remaining in the quarter, we are updating our quarterly EPS estimates to reflect quarterlyoperating 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 themarket, spurring trading desk activity at institutional brokerage firms. This historical pattern once againplayed out in the first five weeks of the quarter - trading volumes increased and revenues were likelystrong. However, trading performance waned in February as rising concern about sovereign debt risk andthe sell off of Greek bonds offset steady improvement in the corporate credit sector. Treasuries andBunds initially benefited from a flight to quality, but anxiety over future US financing demand led to amodest steepening of the Treasury yield curve. We anticipate GS will book FICC net revenues of $5.1billion in Q1 '10, up from $4.0 billion in Q4 '09, and MS fixed income sales and trading revenues of $1.7billion in Q1 '10, up from $686 million in Q4 '09. Positive performance on European government desksand good domestic credit sector numbers were partially offset by weaker European credit and emergingmarket trading revenues.

Equity S&T: The trend in equity trading activity likely emulated FICC results as a rebound in activity inJanuary failed to offset weak performance in February and March, pressuring Q1 '10 commissionrevenue. Furthermore, continued normalization of equity market volatility reduced revenues on equityderivatives 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 firmsplugging capital holes last quarter present difficult compares in Q1. But sequential weakness should notbe misinterpreted as a cyclical pullback in investment banking activity. Announced M&A volumes are up27% from their 2009 low and we expect the recovery to continue through 2010. Bernstein notes thatannounced M&A volumes are correlated with GDP. Consequently, as economic trends improve, M&Avolumes will rise.

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Asset Management & Retail Brokerage: Fund flow trends were positive through February (the mostrecent data available) as assets moved out of lower-margin money market funds into higher marginequity 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 datafrom 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 toincrease 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 MorganStanley 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 MSof 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 foraccess 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'sregression analysis of Morgan Stanley's combined pro forma client assets, the pre-tax margin of combinedof Morgan Stanley retail and Smith Barney could reasonably increase 600 basis points to approximately24.7%.

However, this will take time. Approximately 700 Smith Barney FAs left Citigroup in the periodimmediately leading up to the merger with Morgan Stanley. With a leading investment bank and aprofitable asset management business, MS management argues that the firm will command a higher equityvaluation 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 Stanleyretail network will face the challenge of risk aversion among retail investors, who continue holding largeamounts of cash, and the firm's management must attempt to coordinate a complex integration of MorganStanley and Smith Barney's sales forces while cutting expenses, boosting bank earnings to fill in theperformance 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 afixed income flow trader, profiting from pattern recognition of client demand shifts. Consequently, thecompany will focus its risk taking to the liquid portions of the market and avoid the pure proprietary betsthat 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 gradecorporate bonds by providing customer financing. In addition, it is significantly expanding its headcount onselected 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 programlikely 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

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assigning new regulatory authorities has similarly hobbled Federal Reserve monetary policy. So it can beargued that the glacial recovery of the USA and the EU economies means that credit market investors willaccept ever greater risk and move further out the credit curve and down the credit quality spectrum as the2010 fixed income cycle continues into 2011.

Investment banking backlog is growing at Morgan. The firm will continue to profit from its powerfulmarket share positions in equity capital markets, M&A advisory while continuing to provide necessaryrelationship support through global debt capital markets capabilities.

In asset management, Morgan Stanley will attempt to improve its performance by streamlining itsoperations, exiting subscale operations and expanding high margin activities. Specifically, the firm recentlyexited the retail mutual fund business. In the institutional asset management segment, MS is improving thebusiness 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 andpowerful institutional equity distribution capabilities of Morgan Stanley to expand this high marginfranchise.

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 theimprovement in the retail brokerage expense run rates over the coming year, which could make investorsskeptical of the firm's "all in" bet on retail. Nevertheless, Bernstein believes that the retail strategy will besuccessful 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'spublic position that " nothing has changed " in its business strategy, the company has both the capitalstrength, global positioning and as owners the Goldman Partners have the will to deploy its resources andprofit from slowly improving economic conditions.

Goldman's FICC business is thriving. The technology investments in risk and capital management tools thatthe firm made previously saved the firm in the 2007-2008 crisis and paid off handsomely in 2009. Globalinvestor's recognize that they need Goldman's powerful equity franchise for execution and collateralfinancing.

As the credit recovery slows in 2011, we believe Goldman's leading market share positions in the highestmargin businesses of Wall Street - equity underwriting and M&A advisory - will result in growinginvestment banking revenues coincident with recovering GDP and improving corporate earnings. ForGoldman, the rebound in these businesses will provide an exit window for the Goldman's large merchantbanking portfolio.

While investors recognize that Goldman's 2010 earnings outlook is solid, longer term, there is growingconcern about the viability of Goldman's present business model. Regulatory uncertainty about risk takingand 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, andinvestment bankers are being blamed for everything from the Great Recession to the collapse of US autoindustry. As the most powerful capital markets firm, Goldman Sachs is a convenient scapegoat for policymakers and the press. This maelstrom of negative media attention and the threat of onerous regulation haseffectively frightened investors away from owning Goldman stock and pressured valuations to historicallows 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

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liquidity "reserves" will increase and non-core businesses such as commodities, real estate and privateequity will be constrained.

In an attempt to quantify the impact of regulation on fundamental performance, Bernstein has examined proforma analyses of Goldman Sachs performance over the five year period 2002-2007 onerous regulatoryscenarios. Bernstein concluded that significantly higher capital charges, the prohibition of proprietarytrading and private equity investing and much lower leverage would free equity capital, reduce the firmsrevenue 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 previouslyachieved, Bernstein continues to believe that Goldman Sachs long term returns look attractive and justifiesan outperform rating.

Details

Goldman Sachs and Morgan Stanley are expected to report first quarter 2010 results in mid-April. Withless than a week remaining in the quarter, we are updating our quarterly EPS estimates to reflect quarterlyoperating 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 estimatesdid not anticipate tepid activity in February and March. We expect institutional equity revenue to berelatively soft in the period due to declining equity volatility and volumes as weary investors feared boththe systemic implications of Greek's sovereign debt troubles and overall lack of clarity in the globaleconomic recovery. Fixed income will be up sequentially from seasonally weak Q4 numbers with positiveperformance 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 (asmanagement teams look to close deals by year end) and the tailwind of financial firm equity issuance diedin 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 bothGoldman Sachs and Morgan Stanley during the quarter as the year-end rush to close announced M&A dealsby year end and financial firms plugging capital holes last quarter present difficult compares in Q1. Butsequential 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 economictrends improve, we expect M&A volumes will improve as well.

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 ).

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Exhibit 1 Investment Banking Revenues

Exhibit 2 Q1 2010E - Investment Banking Revenue Compares

-200400600800

1,0001,2001,4001,600

1,800

GS MS

$ ,

m i l

.

Q1 '09 Q4 '09 Q1 '10E

-34% -31%

32%26%

-40%

-30%

-20%

-10%

0%

10%

20%30%

40%

GS MS

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, secondaryvolumes, 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 forsecondary underwriting volumes in 2008 and 2009 but has not emerged in 2010 (see Exhibit 4 and Exhibit3).

Exhibit 3 Global Equity Capital Market (ECM) Volumes

-50,000

100,000150,000

200,000250,000300,000350,000

Q 2 ' 0 5

Q 3 ' 0 5

Q 4 ' 0 5

Q 1 ' 0 6

Q 2 ' 0 6

Q 3 ' 0 6

Q 4 ' 0 6

Q 1 ' 0 7

Q 2 ' 0 7

Q 3 ' 0 7

Q 4 ' 0 7

Q 1 ' 0 8

Q 2 ' 0 8

Q 3 ' 0 8

Q 4 ' 0 8

Q 1 ' 0 9

Q 2 ' 0 9

Q 3 ' 0 9

Q 4 ' 0 9

Q 1 ' 1 0 E

$ , m

i l l i o n s

IPO CONV FO

Sources: Dealogic, Bernstein Analysis

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Exhibit 4 Global Equity Issuance: % from Financial Firms

Exhibit 5 Global Equity Issuance by Financial Services Firms

0%

10%

20%

30%

40%

50%

60%

Q 1 ' 0 4

Q 2 ' 0 4

Q 3 ' 0 4

Q 4 ' 0 4

Q 1 ' 0 5

Q 2 ' 0 5

Q 3 ' 0 5

Q 4 ' 0 5

Q 1 ' 0 6

Q 2 ' 0 6

Q 3 ' 0 6

Q 4 ' 0 6

Q 1 ' 0 7

Q 2 ' 0 7

Q 3 ' 0 7

Q 4 ' 0 7

Q 1 ' 0 8

Q 2 ' 0 8

Q 3 ' 0 8

Q 4 ' 0 8

Q 1 ' 0 9

Q 2 ' 0 9

Q 3 ' 0 9

Q 4 ' 0 9

Q 1 ' 1 0

-

20,000

40,000

60,000

80,000

100,000

120,000140,000

160,000

Q 1 ' 0 4

Q 2 ' 0 4

Q 3 ' 0 4

Q 4 ' 0 4

Q 1 ' 0 5

Q 2 ' 0 5

Q 3 ' 0 5

Q 4 ' 0 5

Q 1 ' 0 6

Q 2 ' 0 6

Q 3 ' 0 6

Q 4 ' 0 6

Q 1 ' 0 7

Q 2 ' 0 7

Q 3 ' 0 7

Q 4 ' 0 7

Q 1 ' 0 8

Q 2 ' 0 8

Q 3 ' 0 8

Q 4 ' 0 8

Q 1 ' 0 9

Q 2 ' 0 9

Q 3 ' 0 9

Q 4 ' 0 9

Q 1 ' 1 0

$ m

i l

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 quarterof 2009. Corporate debt (high yield and investment grade) remained strong as the bond market creditspreads 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 asequential basis. Improvement in sovereign and U.S. agency debt underwriting, which collectively accountfor 32% of total volumes, each improved versus Q4 '09 and Q1 '09, spurring improved revenue trends forGoldman Sachs and Morgan Stanley during the quarter.

Exhibit 6 Debt Underwriting Trends by Product

60%

-6%

74%

-4%

2%

-14%

19%

-27%

32% 14%32%

13%

-35% -28%-2%

195%163% 167%

-100%

0%

100%

200%

300%

I n v .

G r a

d e

P r e

f e r r e

d s

T o

t a l

S o v e r e

i g n

/

L o c a

l A B S

U S A g e n c y

M B S

S u p r a n a

t i o n a

l

H i - Y i e l d

Q-o-Q Y-o-Y

Source: Dealogic

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Exhibit 7 Investment Grade Corporate Debt Underwriting Volumes

Exhibit 8 High Yield Corporate Debt Underwriting Volumes

0

200,000

400,000

600,000

800,000

1,000,000

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ 0 0 0 s

0

20,000

40,000

60,000

80,000

100,000

120,000

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ 0 0 0 s

Source: Dealogic Source: Dealogic

M&A Advisory

Completed M&A advisory volumes declined 46% on a sequential basis and 37% year-over-year. ( Exhibit10). We believe the sequential decline is largely attributable to seasonal weakness as CEOs press executionteams 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 yearoff the depressed 2009 base. We note that announced M&A volumes have risen over 27% from their 2009low point ( Exhibit 9 ). In 2011 we expect M&A activity to grow another 23% sequentially, before levelingoff in 2012 with a growth rate of 8%. Despite this forecasted growth rate, we do not expect M&A torecover above its 2007 peak during the forecast period (2009-2013).

Exhibit 9 Announced Monthly M&A

Announced Monthly M&A

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

2 0 0 6

J a n u

a r y

2 0 0 6

M a r c

h

2 0 0 6

M a y

2 0 0 6

J u l y

2 0 0 6

S e p t e

m b e r

2 0 0 6

N o v e m

b e r

2 0 0 7

J a n u

a r y

2 0 0 7

M a r c

h

2 0 0 7

M a y

2 0 0 7

J u l y

2 0 0 7

S e p t e

m b e r

2 0 0 7

N o v e m

b e r

2 0 0 8

J a n u

a r y

2 0 0 8

M a r c

h

2 0 0 8

M a y

2 0 0 8

J u l y

2 0 0 8

S e p t e

m b e r

2 0 0 8

N o v e m

b e r

2 0 0 9

J a n u

a r y

2 0 0 9

M a r c

h

2 0 0 9

M a y

2 0 0 9

J u l y

2 0 0 9

S e p t e

m b e r

2 0 0 9

N o v e m

b e r

2 0 1 0

J a n u

a r y

2 0 1 0

M a r c

h

Global 6 Mo Trend

NadirAugust2009

PeakJuly2007 27.6%

Increase

Source: Dealogic

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Exhibit 10

Completed M&A Volumes

Exhibit 11

Announced M&A Volumes

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ B i l l i o n

0

200

400

600

800

1,000

1,200

1,400

1,600

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ B i l l i o n

Source: Dealogic Source: Dealogic

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

Exhibit 12 GS Completed M&A Volumes

Exhibit 13 MS Completed M&A Volumes

-

100,000

200,000

300,000

400,000

500,000

600,000

Q 1 ' 0 5

Q 2 ' 0 5

Q 3 ' 0 5

Q 4 ' 0 5

Q 1 ' 0 6

Q 2 ' 0 6

Q 3 ' 0 6

Q 4 ' 0 6

Q 1 ' 0 7

Q 2 ' 0 7

Q 3 ' 0 7

Q 4 ' 0 7

Q 1 ' 0 8

Q 2 ' 0 8

Q 3 ' 0 8

Q 4 ' 0 8

Q 1 ' 0 9

Q 2 ' 0 9

Q 3 ' 0 9

Q 4 ' 0 9

Q 1 ' 1 0 E

$ , m

i l

-

100,000

200,000

300,000

400,000

500,000

600,000

Q 1 ' 0 5

Q 2 ' 0 5

Q 3 ' 0 5

Q 4 ' 0 5

Q 1 ' 0 6

Q 2 ' 0 6

Q 3 ' 0 6

Q 4 ' 0 6

Q 1 ' 0 7

Q 2 ' 0 7

Q 3 ' 0 7

Q 4 ' 0 7

Q 1 ' 0 8

Q 2 ' 0 8

Q 3 ' 0 8

Q 4 ' 0 8

Q 1 ' 0 9

Q 2 ' 0 9

Q 3 ' 0 9

Q 4 ' 0 9

Q 1 ' 1 0 E

$ , m

i l

Source: Dealogic, Bernstein analysis Source: Dealogic, Bernstein analysis

Equity Sales and Trading Revenues

Since 2000, we have found a strong correlation between the quarterly aggregate level of reported equitysales 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 combinedquarterly equity sales and trading revenues of the industry and the corresponding global value of equityshares traded (see Exhibit 15 ).

Notably, while this correlation holds for the aggregate equity sales and trading revenues of these firms, thiscorrelation breaks down when we compare the value of shares traded to individual company equity salesand trading revenues.

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Exhibit 14 Equity Sales and Trading Revenues vs. Global Value ofShares Traded

Exhibit 15 Year-over-year Growth of Quarterly Equity S&TRevenues vs. Value of Shares Traded Globally

Quarterly Data ($, billions)

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Q 1 ' 0 0

Q 2 ' 0 1

Q 3 ' 0 2

Q 4 ' 0 3

Q 1 ' 0 5

Q 2 ' 0 6

Q 3 ' 0 7

Q 4 ' 0 8

Q 1 ' 1 0 E

0

5,000

10,000

15,000

20,000

25,000

30,000

Equity S&T Revenues (left axis)

Global Value of Equity Shares Traded(right axis)

R-squared = 76%

YoY Changes Q1 '01-Q1 '10E

R2 = 74%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-50% -30% -10% 10% 30% 50% 70%Global Value of Shares Traded

A g g r e g a

t e E q u

i t y

S & T R e v e n u e

( G S & M S )

Q1 '10E

Sources: World Federation of Exchanges, Corporate Reports, Bernstein

AnalysisSources: World Federation of Exchanges, Corporate Reports, BernsteinAnalysis

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

Exhibit 16 Equity Sales & Trading Revenue Forecast

-

500

1,000

1,500

2,000

2,500

GS MS

$ ,

m i l l i o n s

Q1 '09 Q4 '09 Q1 '10E

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

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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 helpcontextualize current levels versus early stages of credit market deterioration. Broadly speaking, spreadsimproved in every area of the market on a point-to-point basis.

Exhibit 17 Corporate Credit Spreads

Exhibit 18 CMBS Credit Spreads

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Aaa Baa High Yield

O A S ( b p s

)

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

-

1,000

2,000

3,000

4,000

5,000

6,000

AAA CMBS IGCMBS

HYCMBS

O

A S ( b p s

)

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

Source: Bloomberg Source: Bloomberg

Exhibit 19 ABS Credit Spreads

-

200

400

600

800

1,000

1,200

Aggregate ABS Credit CardABS

AutoABS

O A S ( b p s

)

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

Source: Bloomberg

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Exhibit 20 U.S. Treasury Bond Avg. Daily Trading Volumes

Exhibit 21 Domestic Corporate Bond Avg. Daily Trading Volumes

$0

$100

$200

$300

$400

$500

$600

$700

Q 1 ' 0 1

Q 2 ' 0 2

Q 3 ' 0 3

Q 4 ' 0 4

Q 1 ' 0 6

Q 2 ' 0 7

Q 3 ' 0 8

Q 4 ' 0 9

$ B i l l i o n

$0

$50

$100

$150

$200

$250

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ B i l l i o n

Source: New York Federal Reserve Source: New York Federal Reserve

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

Exhibit 23 Quarterly Domestic Bond Fund Net Inflows

-100-50

050

100150200250300350400

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0 Y T D

$ ,

b i l

.

(90.0)

(60.0)

(30.0)-

30.0

60.0

90.0

120.0

150.0

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ ,

b i l

.

Source: ICI Source: ICI

We forecast fixed income sales & trading revenues from historical trends in fixed income revenue returnson each firms total net asset base (RRONA). We anticipate GS and MS will generate RRONA above theirhistorical averages in Q1 '10 based on their recent RRONA 1 performance. We note, our RRONA

assumption assumes an average base driven off of an assumed gross leverage ratio of 14x for GS and 15xfor MS in Q1 '10.

Based on this forecast, we anticipate GS will generate revenues of $5.1 billion in Q1 '10, up from $4.0billion 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 domesticcredit sector numbers, partially offset by weaker European credit and emerging market trading revenues.

1 Note; Quarterly RRONA performance is serially correlated.

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Exhibit 24 GS RRONA Forecast

Exhibit 25 MS RRONA Forecast

-2.0%

-1.0%

0.0%

1.0%

2.0%3.0%

4.0%

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0 E

Q 3 ' 1 0 E

RRONA GS Avg

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0 E

Q 3 ' 1 0 E

RRONA MS Avg

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

Exhibit 26 Fixed Income Sales & Trading Revenues

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

GS MS

$ ,

b i l

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 notoffset cumulative flows during January and February, Q1' 10 would represent the fifth consecutive quarterof positive flows for bond funds and negative flows for money market funds as retail investors seek additional yield on lower risk holdings.

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 '10versus $35 billion of outflows in Q1 '09 (see Exhibit 28 ). Domestic bond fund inflows totaled $25 billionthrough February (see Exhibit 29 ).

Looking forward, Bernstein believes that positive equity market performance will ultimately spur investorconfidence and subsequent asset flow trends into higher equity margin mutual funds. This is turn willtrigger 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

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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 Domestic Equity Fund Flows

Exhibit 28 Domestic Money Market Fund Flows

(100.0)

(50.0)

-

50.0

100.0

150.0

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ ,

b i l

.

(300.0)

(200.0)

(100.0)

-

100.0

200.0

300.0

400.0

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ ,

b i l

.

Sources: ICI, Bernstein Analysis Sources: ICI, Bernstein Analysis

Exhibit 29 Monthly Domestic Bond Fund Net Inflows

(90.0)

(60.0)

(30.0)

-

30.0

60.0

90.0

120.0

150.0

Q 1 ' 0 0

Q 3 ' 0 0

Q 1 ' 0 1

Q 3 ' 0 1

Q 1 ' 0 2

Q 3 ' 0 2

Q 1 ' 0 3

Q 3 ' 0 3

Q 1 ' 0 4

Q 3 ' 0 4

Q 1 ' 0 5

Q 3 ' 0 5

Q 1 ' 0 6

Q 3 ' 0 6

Q 1 ' 0 7

Q 3 ' 0 7

Q 1 ' 0 8

Q 3 ' 0 8

Q 1 ' 0 9

Q 3 ' 0 9

Q 1 ' 1 0

$ ,

b i l

.

Sources: ICI, Bernstein Analysis

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Exhibit 30 GS Quarterly Earnings Model

Consolidated Income Statement($ Millions)

1Q 2Q 3Q 4Q2010E 2010E 2010E 2010E 2010E

RevenuesFinancial Advisory 407$ 600$ 650$ 750$ 2,407$Debt Income U/W 361 386 300 300 1,348Equity U/W 317 400 400 450 1,567Total Underwriting 679 786 700 750 2,915Investment Banking 1,086$ 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$Securities Services 487 536 590 649 2,262Asset Mgmt and Securities Services 1,389$ 1,438$ 1,681$ 1,909$ 6,416$

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

ExpensesReported Compensation 5,391$ 4,921$ 5,089$ 4,300$ 19,700$Other Operating Expenses 2,203 2,264 2,243 2,287 8,998Total Operating Expenses 7,594$ 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 10,796Preferred Dividend 161 161 161 161 644Net 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%

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

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Exhibit 31 GS Annual Earnings Model

Goldman SachsConsolidated Income Statement

($ Millions)2005 2006 2007 2008 2009E 2010E 2011E

RevenuesFinancial 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 $4,985Securities Services 1,793 2,180 2,716 3,422 2,033 2,262 2,601 Asset Mgmt and Securities Services 4,749$ 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$

ExpensesReported 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%


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Exhibit 32 MS Quarterly Earnings Model

Consolidated Income Statement($ Millions)

FYQ1 '10E Q2 '10E Q3 '10E Q4 '10E 2010E

RevenuesInvestment 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 Revenueless 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

ExpensesCompensation 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 $2.74Diluted EPS $0.54 $0.73 $0.70 $0.77 $2.74Pretax Margin 19.9% 22.6% 22.6% 23.1% 22.1%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%


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Exhibit 33 MS Annual Earnings Model

Morgan StanleyConsolidated Income Statement($ Millions)

2007 2008 2009E 2010E 2011ERevenuesInvestment Banking $6,368 $4,055 $5,019 $5,627 $6,293Principal 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

ExpensesCompensation and Benefits $16,552 $12,306 $14,438 $18,193 $19,851Occupancy 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 $10,131Losses 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 $4,892Disc Operations/Non-Recurring 646 (100) 213 - - Net Income 3,141 2,393 (960) 3,793 4,892

EPS from Continuing Ops $2.37 $2.28 ($0.90) $2.74 $2.97Diluted EPS $2.98 $2.19 ($0.74) $2.74 $2.97Pretax 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 1,648Compensation / Net Revenues 59.1% 49.3% 61.8% 52.6% 52.7%


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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 companiesreflecting the industrys mark-to-market accounting discipline and the rapid turnover of brokerage firmbalance-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 modelthat takes into account Return on Equity (ROE) versus Ke (the CAPM-based cost of equity), credit ratingand 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 K e 0.2112

Investors should note that this price-to-book valuation regression only explains 85% of the quarterly changein 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 creditmarkets. The major broker-dealers rely upon the ability to roll over their debt at reasonable interest rates inorder to fund their balance sheets at gross leverage ratios just under 20x (some of these balance sheetssupport more than a trillion dollars worth of assets). The inability to meet debt obligations will result in thefailure 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 thefunding pressures, a loss of confidence can also destroy a firm's franchise and morale. Counter-parties tendto limit exposure to firms whose credit ratings face downgrades and are perceived as being in risk. So, in acrisis of confidence, while a firm may avert a liquidity event, the firm's brand name and ongoing businesswill 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 namewould 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 theEU. 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, Asiaand North America would significantly worsen the outlook for security firms, making it unlikely that thesefirms could achieve our 12-month share price target.

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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, generatinginvestment 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 theU.S. and Canadian exchanges, versus the MSCI Pan Europe Index for stocks listed on the European exchanges (except for Russiancompanies), versus the MSCI Emerging Markets Index for Russian companies and stocks listed on emerging markets exchanges outsideof the Asia Pacific region, and versus the MSCI Asia Pacific ex-Japan Index for stocks listed on the Asian (ex-Japan) exchanges - unlessotherwise 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 parenthesesrepresent 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 StanleyGroup ESOP Trust at Mellon Bank as convertible preferred stock. These MS ESOP securities were awarded to him as compensation andare fully vested. Mr. Hintz is also an investor in Morgan Stanley Capital Partners III, LP a merchant banking fund where Morgan Stanleymaintains an equity interest as a limited partner. Mr. Hintz participates in the Morgan Stanley Pre Tax Investment Plan, which is a deferredcompensation plan structured as a note to Mr. Hintz from Morgan Stanley with the return on the note tied to one of many alternative assetclasses. In addition, as a result of the complete spin-off of Discover from Morgan Stanley on June 30, 2007, Mr. Hintz received a longposition in Discover stock as a beneficiary of the Morgan Stanley ESOP. These shares of Discover will ultimately be distributed to Mr. Hintzby 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 ofthe following companies GS / Goldman Sachs, MS / Morgan Stanley.

The following companies are or during the past twelve (12) months were cl ients 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 servicesfrom GS / Goldman Sachs, MS / Morgan Stanley.

12-Month Rating History as of 03/25/2010

Ticker Rating ChangesGS O (RC) 06/04/09 M (RC) 12/16/05MS O (RC) 08/09/07

Rating Guide: O - Outperform, M - Market-Perform, U - Underperform, N - Not RatedRating Actions: IC - Initiated Coverage, DC - Dropped Coverage, RC - Rating Change

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OTHER DISCLOSURESA price movement of a security which may be temporary will not necessarily trigger a recommendation change. Bernstein will advise as andwhen coverage of securities commences and ceases. Bernstein has no policy or standard as to the frequency of any updates or changes to itscoverage 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 arange of economic variables, which may include, but not limited to, interest rates, exchange rates, earnings, cash flows and risk factors that aresubject to uncertainty and also may change over time. Any valuation is dependent upon the subjective opinion of the analysts carrying out thisvaluation.

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 anauthorised person or exempt person within the meaning of section 19 of the UK Financial Services and Markets Act 2000 (the "Act"), or qualifiesas a person to whom the financial promotion restriction imposed by the Act does not apply by virtue of the Financial Services and Markets Act2000 (Financial Promotion) Order 2005, or is a person classified as an "professional client" for the purposes of the Conduct of Business Rules ofthe Financial Services Authority.

To our readers in the United States: Sanford C. Bernstein & Co., LLC is distributing this publication in the United States and acceptsresponsibility for its contents. Any U.S. person receiving this publication and wishing to effect securities transactions in any security discussedherein should do so only through Sanford C. Bernstein & Co., LLC.

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To our readers in the United Kingdom: This publication has been issued or approved for issue in the United Kingdom by Sanford C. BernsteinLimited, 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 isauthorised and regulated in the United Kingdom by the Financial Services Authority and holds a passport under the Investment ServicesDirective.

To our readers in Hong Kong: This publication is being issued in Hong Kong by Sanford C. Bernstein, a unit of All ianceBernstein Hong KongLimited. 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 anAustralian financial services licence under the Corporations Act 2001 in respect of the provision of the following financial services to wholesaleclients:

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, theSecurities and Exchange Commission under U.S. laws, by the Financial Services Authority under U.K. laws, and by the Hong Kong Securitiesand 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, aunit of AllianceBernstein Hong Kong Limited, and/or their affiliates may at any time hold, increase or decrease positions in securities of anycompany mentioned herein.

Bernstein or its affiliates may provide investment management or other services to the pension or profit sharing plans, or employees of anycompany mentioned herein, and may give advice to others as to investments in such companies. These entities may effect transactions that aresimilar 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 researchportals. 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 beaware that Bernstein and/or its affiliates may have a conflict of interest that could affect the objectivity of this publication. Investors shouldconsider 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, orSanford C. Bernstein, a unit of AllianceBernstein Hong Kong Limited, Director of Compliance, Suite 3401, 34th Floor, One IFC, One HarbourView 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 theAmericas ~ NY, NY 10105 ~ 212/756-4400. All rights reserved.

his 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 distvailability 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 l icensing requirement within such jurisdiction. This pubublic 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 thehis publication was prepared and issued by Bernstein for distri bution to eligible counterparties or professional clients. This publication i s not an offer to buy or sell any security, and it does not constitute invdvice. 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 circumstavestments 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 in

AB Fins

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