Portfolio Performance

Japan Style Blend Portfolio Performance

Portfolios Struggle as Volatility Returns Display 1 Our portfolios underperformed the TOPIX benchmark as the European debt Japanese Stocks Fell in 2Q crisis rekindled investor anxiety. Still, both our growth and value managers Global Market Returns Percent have managed to keep the impact of increased volatility relatively contained and are confident that their respective sleeves are capturing attractive opportunities that could drive their long-term performance.

(6.3) Weathering the Storm and Mitsubishi Corp., which fell on Japanese equities fell sharply in the concerns about a commodities tax in (11.4) second quarter as the European Australia and a tighter economic policy (12.7) (13.9) sovereign-debt crisis rekindled investor in China. Mitsui & Co. also suffered anxiety and the global economy showed from worries that it might have to bear Japan World US Europe signs of deceleration. The yen’s rise, some costs related to the Gulf of Mexico As of June 30, 2010 Japan is represented by TOPIX (in JPY), world by MSCI World (in notably against the euro, weighed on oil spill due to a 10% stake that its USD), US by S&P 500 (in USD) and Europe by MSCI Europe (in EUR). Japanese exporters, while the political subsidiary has in the leaking oil field. Source: MSCI, S&P and Tokyo Stock Exchange quagmire that had led to the fifth change in the nation’s prime minister in Contributors were led by a number of as many years dampened hopes of defensive stocks. These included unique market positions. These included sustained economic growth. Mitsubishi Tanabe Pharma, which also sanitary-goods maker Unicharm, which drew strength from prospects of a has been a major beneficiary of the The TOPIX fell 13.9% and the MSCI near-term regulatory approval for its growing purchasing power of the Japan Index dropped 14.8% during the new multiple-sclerosis treatment. middle-class population in China and quarter in yen terms, compared with a other emerging markets. 12.7% fall in the MSCI World Index in Our value sleeve, in particular, was dollar terms (Display 1). Cyclical supported by the defensive holdings, There is no knowing when the turmoil in sectors, such as financials and materials, which it had acquired at compelling the market might subside or erupt were the biggest decliners, while utilities valuations during the market’s yearlong again. But both our growth and value fared better. By style, value marginally recovery through April. Applying the managers are confident that their outpaced growth, with the MSCI Japan same disciplined value-investing rigorous research to identify the most Value Index sliding 14.6%, compared approach, the sleeve increased its attractive opportunities from their with a 15.0% drop in the growth index. exposure to a broad range of attractive respective style perspectives will help opportunities during the quarter, taking them identify and exploit mispricings in Our portfolios underperformed the advantage of the rich discount in their the market that have resulted from the TOPIX during the quarter, although they valuations. renewed investor anxiety. slightly outperformed the MSCI Japan Index. Our industrial holdings and our On the other hand, a lack of utilities Furthermore, by combining the equal- underweight in utilities detracted from holdings was the biggest drag on weighted style sleeves, our blended relative returns, while our healthcare relative performance for our growth portfolios can capture the best ideas of holdings contributed. sleeve. But the sleeve was supported by both teams, while also avoiding the secular-growth names—companies that undesirable impact of the potentially At the stock level, the biggest detractors can generate solid, sustained earnings volatile style-cycle swings. included trading houses Mitsui & Co. growth from their strong products or

These statements reflect the performance of the majority of accounts. Individual account performance may vary due to a variety of factors, including benchmark, account guidelines, investment vehicle implementation (if any), fees charged and timing of cash flows.

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2 2Q 2010 QUARTERLY REPORT Blend Strategies Market Overview

Despite Headwinds, Global Recovery Is Not Likely to Be Derailed Display 1 Volatility returned to financial markets in the second quarter as investors Interbank Rates Below Crisis Levels grew increasingly concerned about unsustainable levels of government debt. Interbank Lending: Cash Spreads While risk aversion has risen, it remains well below the levels of the recent Basis Points crisis. We think it is unlikely that recent market volatility will derail a global 400 economic recovery led by strong demand in emerging-market economies. US

200 Volatility Returns sheets are in great shape and banks are Euro Area Volatility returned to global financial rebuilding their capital. markets in the second quarter as 0 investors began to worry that sovereign- Leading economic indicators continue to 05 06 07 08 09 10 debt problems in Europe might spread show significant improvement in global Through June 30, 2010 and undermine economic growth in economic conditions (Display 2). US data are three-month USD LIBOR versus three-month US Treasury bills; euro-area data are three-month LIBOR in euros other economies. Markets whipsawed as Emerging-market economies are leading versus overnight index swap. investors reacted to these concerns and the recovery, thanks to booming Source: Bloomberg and AllianceBernstein to a host of other new uncertainties, domestic demand. Within the developed Display 2 from the oil spill in the Gulf of Mexico to world, the euro-area recovery is lagging Economic Activity Is Rebounding signs of a softening in US consumer as fiscal austerity measures in Greece OECD Leading Indicators confidence. Stocks fell in both devel- and other high-deficit nations challenge Index oped and emerging markets, and credit economic growth. But not all Europe is 105 spreads widened. But while risk aversion in the same boat (Display 3); core Neutral increased, it remains far below the levels euro-area countries such as Germany are 100 seen during the recent financial crisis. recovering steadily thanks to a weaker For example, interbank lending rates are euro and historically low interest rates. 95 still within precrisis historical norms (Display 1). Fiscal Issues at the Fore 90 Worries about the fiscal position of 00 01 02 03 04 05 06 07 08 09 10 The return of risk aversion and the Greece intensified throughout the Through April 30, 2010 Source: Organisation for Economic Co-operation and recent spate of negative headlines have quarter, causing Greek sovereign bond Development (OECD) sparked concerns regarding the spreads to sharply widen. These worries sustainability of the global economic spread to other peripheral countries Display 3 Not All Europe Is in the Same Boat recovery and, for many observers, have such as Spain and Portugal, while shares revived memories of the dramatic 2008 of French, German and Spanish banks Real GDP Year-over-Year Percent Change crisis. came under pressure as concerns grew 6 about their exposure to troubled Greece 4 But there are several important differ- government debt. Downgrades of 2 ences to note between the recent crisis Greece, Portugal and Spain by the rating Core 0 and the state of the world economy agencies added to the anxiety. (2) today. In late 2008, major industrialized (4) Periphery ex Greece economies were contracting, corporate To be sure, several euro-area countries (6) earnings were weakening and the will face significant challenges in 05 06 07 08 09 10

banking system was in crisis. Today, the refinancing their debt in coming years Through March 31, 2010 Core is weighted average of Germany, France, the Netherlands, global economy appears to be on the (Display 4, next page). But aggressive Belgium, Austria and Finland. Periphery ex Greece is weighted mend, nonfinancial corporate balance policy actions can help buy these average of Italy, Spain, Ireland and Portugal. Source: Haver Analytics, Markit and AllianceBernstein

2Q 2010 QUARTERLY REPORT 3 countries some time to get their fiscal consumption has come from emerging Display 4 houses in order. In early May, euro-area markets—more than double their share Refinancings Will Challenge Euro Area governments and the International in the 1990s. Economies such as China Monetary Fund unveiled a €110 billion and Brazil have become key sources of Government Financing Requirements July 2010–December 2012 support package for Greece and, just demand for a wide range of raw EUR Billions

days later, a €750 billion rescue fund to materials and finished goods, from iron 782 aid other troubled euro-area countries. ore to televisions to passenger jets.

Retail sales and industrial production in Budget Deficit In addition, the European Central Bank developing economies are booming Redemptions 398 pledged to purchase euro-area public today, supporting the global recovery and private securities in the secondary (Display 5). 120 markets to help preserve market 59 61 liquidity. So far, policy actions have The US has been a major beneficiary of helped stem the threat of contagion to this global rebalancing, as demand from Ireland Portugal Greece Spain Italy global financial markets. Although Italy, developing economies has boosted US Financing requirements are estimated as of May 31, 2010. Source: Bloomberg and AllianceBernstein Portugal, Ireland and Spain all faced exports. The weaker dollar and rising higher borrowing costs at government productivity have made the US a more Display 5 bond auctions in late May, the debt competitive base for production. Emerging-Market Economies Booming offerings attracted solid demand. Year-over-Year Percent Change Another positive sign is that the balance Retail Sales Industrial Production Ultimately, however, governments sheets of nonfinancial corporations are 35 20 China China around the world will need to address in solid shape. After cutting costs and 30 their structural deficits—a persistent capital expenditures throughout the 25 10 20 shortfall of tax revenues relative to the downturn, companies are generating 0 level of government spending. Difficult significant free cash flow. Increased 15 10 political decisions such as to cut business confidence and attractive (10) 5 Eastern Brazil Europe* spending and raise taxes will be valuations have led to a pickup in stock 0 (20) required. buybacks and mergers and acquisitions. 08 09 10 07 08 09 10

Brazil retail sales and eastern Europe industrial production Some governments have already started We expect the global economic recovery through April 30, 2010; China retail sales and China industrial production through May 31, 2010 to act. The UK coalition government to continue at a measured pace in 2010 *Weighted average of Russia, Turkey, Poland, Czech Republic and Hungary recently unveiled an emergency budget (Display 6). Nevertheless, investors face Source: Haver Analytics, Instituto Brasileiro de Geografia e that includes significant cuts to public considerable uncertainties as policymak- Estatística spending and increases in taxes. ers around the world attempt the Sustainable economic growth, too, delicate balancing act of reining in fiscal Display 6 would greatly alleviate the pressures on deficits while sustaining economic Continued Moderate Economic Growth

government finances by boosting tax growth. These issues are unlikely to be AllianceBernstein Real GDP Forecasts revenues. And, on this front, we believe resolved for some time. Percent that there are grounds for optimism. 3.9 Global 3.5 Accordingly, we expect financial-market Euro Area 1.3 1.8 2010F New Drivers of Recovery volatility to remain elevated. While we 1.3 UK 2.3 2011F Unlike past global economic recoveries, continue to see attractive opportunities 3.1 Japan 1.9 which were usually led by rising US across the capital markets and we 3.3 Australia 4.5 domestic demand, the recovery today is remain positioned for an economic 3.5 US 3.2 being driven by emerging-market recovery, we have taken steps to 3.7 Canada 3.2 economies. In fact, thanks to rapid moderate the volatility of our portfolios 7.6 Emerging Countries 6.0 consumption growth in emerging-mar- where we believe we are not being ket economies, the global economy appropriately compensated for the risks As of July 1, 2010 Source: AllianceBernstein today is far less dependent on the US entailed. consumer than it once was. In recent years, almost half the growth in global

4 2Q 2010 QUARTERLY REPORT Japan Style Blend Portfolio Positioning

Market Turmoil and Underlying Growth Create Diverse Opportunities Display 1 Heightened investor anxiety has created rich opportunities for disciplined Investor Anxiety Surged Again value investors. At the same time, continued development of emerging Global Risk-Aversion Indicator markets and evolutions in many industries have created companies poised for 6 secular earnings growth. Our blended portfolios are well positioned to 5 benefit from solid potentials that both our value and growth sleeves offer. 4

3 Index The Blend Opportunity lingly priced during the past year’s 2 Volatility in global financial markets has market rally. This helped counterbalance 1 soared again as investors fret over the the growth sleeve’s lack of utilities 0 European debt crisis and the risk of a holdings. By the end of the quarter, (1) 90 94 98 02 06 10 stalled global economic recovery. Even however, the value team also became Through June 30, 2010 so, the level of anxiety is not quite as slightly underweight in utilities, as they Measures the degree of risk aversion by combining the implied extreme as it was during the height of had gotten pricier and the team’s volatility of equities, currencies, commodities and bonds with credit spreads and mutual fund flows the credit crisis of 2008 (Display 1). discipline called for adjustments. Source: Bloomberg, Investment Company Institute and AllianceBernstein

In this environment, both our growth All told, the blended portfolios capture Display 2 and value managers have remained the stock picks of both the value and Blend Moderates Style Risk focused on rigorously implementing growth teams, while mitigating the style Active Weights their respective investment principles to risks. None of the sector weighting in Percent capture the most attractive opportuni- the blended portfolios is drastically ValueGrowth Blend

ties from each sleeve’s style perspective. different from that of the broad-market Industrials (3.8) 10.3 3.3 Doing so, based on their extensive index. The biggest overweight in the Consumer* 3.3 0.5 1.9 Telecom 4.2 (1.1) 1.6 bottom-up research, has helped them growth sleeve is industrials, but it is Consumer** (0.4) 3.1 1.3 weather the latest bout of market partially offset by an underweight in Energy 0.4 0.0 0.2 (4.5) 4.0 (0.3) volatility and should contribute to value. The value sleeve’s overweight in Technology Materials 6.3 (7.3) (0.5) generating solid returns over the long materials is offset by an underweight in Healthcare (0.7) (0.4) (0.6) term, in our view. growth. Even in sectors where both Utilities (0.4) (5.5) (3.0) Financials (4.3) (3.6) (3.9) sleeves are overweight or underweight, The value team seeks stocks that are the overall weighting in the blended As of June 30, 2010 Active weight is the difference between the weight in a Japan unduly depressed by concerns about portfolios is moderate (Display 2). Style Blend account and in TOPIX. *Consumer Discretionary short-term issues that mask their **Consumer Staples long-term earnings power, while the Overlapping holdings accounted for Source: FactSet, Tokyo Stock Exchange and AllianceBernstein growth team seeks to identify compa- 36% of the total at the end of the nies whose earnings growth can second quarter, little changed from 37% outpace expectations. The two sleeves three months earlier. This is higher than Over the past decade, the value style has largely counterbalance each other, a typical level that we expect over time, outperformed slightly more often than helping to stabilize the relative perfor- but investors’ acute risk aversion in growth. But this has made growth mance of our blended portfolios. recent years has made many stocks available at relatively inexpensive prices. compelling to both teams. This overlap The difficulty of forecasting a style-cycle For instance, at the beginning of the also reflects both a single-market change with any precision underscores second quarter, the value sleeve was opportunity set and our risk control, the benefits of combining equal-weight- slightly overweight in utilities, as many given the need for each sleeve to hold ed style sleeves—as we do in our Japan defensive stocks had become compel- stocks with high benchmark weights. Style Blend portfolios.

2Q 2010 QUARTERLY REPORT 5 The Value Opportunity plant that will not be directly affected by The Growth Opportunity In the transport sector, the growth team Display 3 During the second quarter, our value the ethylene competition. The steadier Our growth managers have built their added package-delivery firm Yamato Display 6 Rubber Demand Set to Recover Don Quijote's Margins Are Improving managers trimmed their exposure to input should help its competitiveness, in core position around secular-growth Holdings. Parcel traffic has been on the outperforming defensive stocks, such as the value team’s view. Global Synthetic Rubber Demand companies—globally competitive rise due to an economic recovery and Gross Margin Improvement 15 From Previous Year Tokyo Electric Power. It was partly to businesses that are well placed to growth in e-commerce—consumers are 1.0 take profit, but also to keep the active Denki Kagaku Kogyo, which produces benefit from strong long-term growth in buying a broader range of goods online 14 weights in line with the value opportuni- synthetic rubber from carbide, will be emerging economies and evolutions in and doing so more frequently. At the 0.5

ty. As a result, the value sleeve is now even less affected by the anticipated 13 various industries or consumer markets. same time, the biggest players, including underweight in the utilities sector. Still, butadiene shortage. It owns a decades- Yamato, have been increasing their 0.0 Million TonsMillion its weighting in technology, typically a old, fully depreciated hydroelectric 12 Despite the market volatility during the dominance amid an industry consolida- Percentage Point cyclical sector, is also down, reflecting power plant and a limestone mine, from quarter, the managers also maintained a tion. Our growth managers believe that (0.5) the fact that these weight changes are a which it produces carbide. 11 relatively large exposure to cyclical Yamato can build on its strong position FY04 06 08 13E (1.0) result of bottom-up stock selection and companies, but with some bias toward as its markets continue to improve. 3Q:08 1Q:09 3Q:09 1Q:10 not top-down decisions. In other sectors, the value sleeve As of June 30, 2010 domestic ones. In their view, the market Source: International Rubber Study Group and Bernstein As of June 30, 2010 initiated a position in logistics company has priced in a greater proportion of In the core secular-growth names, the Source: Company reports and Alliance At the same time, the value sleeve Nippon Express. The company and the growth in export-driven businesses, sleeve increased its weighting in Display 4 topped up its existing holdings in a semiprivatized Japan Post Service were while it does not appear to have fully sanitary-goods maker Unicharm. Feedstock Dynamics May Constrain Display 7 number of recent underperformers, such to set up a package-delivery joint Rubber Supply appreciated the beneficiaries of the Unicharm to Expand Low-End in China as automaker Nissan Motor, to reflect venture, but the deal disintegrated. The broadening economic recovery at home. For the past several years, Unicharm has Petrochemical Competition: Chinese Diaper Market Segments their increased valuation edge. It also package-delivery business has been Naphtha vs. Natural Gas benefited from surging demand in 20 added some intriguing value opportuni- taken over by Japan Post, but Nippon For instance, in technology names and China for high-quality paper diapers and

ties, including synthetic-rubber makers Express will likely have to take hundreds, related industrial- or material-sector other sanitary goods. The company is 15

required, the biggest players have 60 goods retailer Don Quijote, popularly industry. Our growth managers believe Butadiene is a by-product of the become increasingly dominant in recent Sagawa known as “Donki” among the younger FANUC, a leading maker of industrial 40 Express Total ethylene-production process from years. Second-tier companies, including shoppers who are its main target. Easing robots, will be a beneficiary of a shift 24 Japan Post naphtha. Its supply outlook is dimmed Nippon Express, have steadily lost 20 downward pressure on tag prices and toward automation. Nippon 2009 2020E 2020E by production curbs at naphtha plants, market share (Display 5). Express increased pricing power vis-à-vis its (Bear Case) (Bull Case) 0 Other which face competition in the ethylene 2004 2009 suppliers have been improving Don The mix of growth drivers in these Toiletries Cat Food Dog Food market from low-cost natural gas By contrast, prospects for the firm’s Quijote’s margins (Display 6). In holdings should contribute to solid As of June 30, 2010 As of June 30, 2010 refineries in the Middle East (Display 4). main air- and marine-forwarding Source: Company reports and Bernstein addition, the conversion of recently returns over time, particularly as the Source: Company reports and Alliance business are much brighter as the global acquired Nagasakiya supermarkets into market gradually normalizes and While many rubber producers are likely economy recovers. Even with conserva- a new style of general merchandise investors focus on earnings fundamen- to be affected by a butadiene shortage, tive estimates, we believe that Nippon stores named “Mega Donki,” has been tals, in our growth team’s view. Zeon‘s plant in western Japan sources its Express is attractively priced from a a major success, turning loss-making feedstock from an adjacent naphtha long-term perspective. stores into an earnings-growth driver.

6 2Q 2010 QUARTERLY REPORT The Value Opportunity plant that will not be directly affected by The Growth Opportunity In the transport sector, the growth team Display 3 During the second quarter, our value the ethylene competition. The steadier Our growth managers have built their added package-delivery firm Yamato Display 6 Rubber Demand Set to Recover Don Quijote's Margins Are Improving managers trimmed their exposure to input should help its competitiveness, in core position around secular-growth Holdings. Parcel traffic has been on the outperforming defensive stocks, such as the value team’s view. Global Synthetic Rubber Demand companies—globally competitive rise due to an economic recovery and Gross Margin Improvement 15 From Previous Year Tokyo Electric Power. It was partly to businesses that are well placed to growth in e-commerce—consumers are 1.0 take profit, but also to keep the active Denki Kagaku Kogyo, which produces benefit from strong long-term growth in buying a broader range of goods online 14 weights in line with the value opportuni- synthetic rubber from carbide, will be emerging economies and evolutions in and doing so more frequently. At the 0.5 ty. As a result, the value sleeve is now even less affected by the anticipated 13 various industries or consumer markets. same time, the biggest players, including underweight in the utilities sector. Still, butadiene shortage. It owns a decades- Yamato, have been increasing their 0.0 Million TonsMillion its weighting in technology, typically a old, fully depreciated hydroelectric 12 Despite the market volatility during the dominance amid an industry consolida- Percentage Point cyclical sector, is also down, reflecting power plant and a limestone mine, from quarter, the managers also maintained a tion. Our growth managers believe that (0.5) the fact that these weight changes are a which it produces carbide. 11 relatively large exposure to cyclical Yamato can build on its strong position FY04 06 08 13E (1.0) result of bottom-up stock selection and companies, but with some bias toward as its markets continue to improve. 3Q:08 1Q:09 3Q:09 1Q:10 not top-down decisions. In other sectors, the value sleeve As of June 30, 2010 domestic ones. In their view, the market Source: International Rubber Study Group and Bernstein As of June 30, 2010 initiated a position in logistics company has priced in a greater proportion of In the core secular-growth names, the Source: Company reports and Alliance At the same time, the value sleeve Nippon Express. The company and the growth in export-driven businesses, sleeve increased its weighting in Display 4 topped up its existing holdings in a semiprivatized Japan Post Service were while it does not appear to have fully sanitary-goods maker Unicharm. Feedstock Dynamics May Constrain Display 7 number of recent underperformers, such to set up a package-delivery joint Rubber Supply appreciated the beneficiaries of the Unicharm to Expand Low-End in China as automaker Nissan Motor, to reflect venture, but the deal disintegrated. The broadening economic recovery at home. For the past several years, Unicharm has Petrochemical Competition: Chinese Diaper Market Segments their increased valuation edge. It also package-delivery business has been Naphtha vs. Natural Gas benefited from surging demand in 20 added some intriguing value opportuni- taken over by Japan Post, but Nippon For instance, in technology names and China for high-quality paper diapers and ties, including synthetic-rubber makers Express will likely have to take hundreds, related industrial- or material-sector other sanitary goods. The company is 15

Zeon and Denki Kagaku Kogyo. if not thousands, of staff from the joint Natural Gas C2 (Ethylene) companies, the growth managers now venturing into the low-price 10 venture back on its own payroll. rotated out of production-related segment for such products, which is RMB Billions These companies suffered from weaker companies, such as optical-equipment expanding at a higher rate and is almost 5 Unicharm rubber markets during the recent global The value managers believe that firm HOYA and technology-materials equally profitable (Display 7). Further- Target Segment C4 recession, but the value team’s research investors’ wariness about the messy Naphtha Rubber makers Hitachi Chemical and JSR. more, Unicharm has recently acquired a 0 (Butadiene) 2007 2010E suggests that they are uniquely posi- breakup is overdone. In their view, the Instead, they focused on late-cycle full stake in its affiliate, Unicharm High/Mid-End Low-End tioned to benefit from a recovery in the excess personnel can be folded into companies, such as technology-service PetCare, and is entering the Chinese As of June 30, 2010 rubber market. Global demand for Nippon Express’s workforce within a Source: Bernstein firms Otsuka and Fujitsu, as well as market for pet food and pet toiletries. Source: Company reports and Alliance synthetic rubber is set to grow in the reasonable time frame as the company office-equipment maker Konica Minolta. This market is expected to expand at a coming years, driven by a recovery in the has tended to have hundreds of job These companies are well positioned to substantial rate due to accelerating Display 5 Display 8 global markets for tires, automobiles openings each year. Moreover, pulling benefit from pent-up capital spending as urbanization and the growing purchas- Big Players Dominate Package Delivery Chinese Pet Market Set to Grow and other end applications (Display 3). out of the parcel-delivery business was Japanese companies regroup after ing power of the middle-class popula- Chinese Pet-Care Market At the same time, the global supply of a positive move, in their view. Market Share several years of spending restraint to tion (Display 8). Percent Yen Billions synthetic rubber is likely to be subdued ride out a recession. 100 890 by constraints in the supply of feedstock Since scale is crucial in package delivery, Rising wages in China can cause other Yamato 80 butadiene. given the extensive distribution network Transport The growth team also bought variety- seismic changes in the manufacturing 200 required, the biggest players have 60 goods retailer Don Quijote, popularly industry. Our growth managers believe Butadiene is a by-product of the become increasingly dominant in recent Sagawa known as “Donki” among the younger FANUC, a leading maker of industrial 40 Express Total ethylene-production process from years. Second-tier companies, including shoppers who are its main target. Easing robots, will be a beneficiary of a shift 24 Japan Post naphtha. Its supply outlook is dimmed Nippon Express, have steadily lost 20 downward pressure on tag prices and toward automation. Nippon 2009 2020E 2020E by production curbs at naphtha plants, market share (Display 5). Express increased pricing power vis-à-vis its (Bear Case) (Bull Case) 0 Other which face competition in the ethylene 2004 2009 suppliers have been improving Don The mix of growth drivers in these Toiletries Cat Food Dog Food market from low-cost natural gas By contrast, prospects for the firm’s Quijote’s margins (Display 6). In holdings should contribute to solid As of June 30, 2010 As of June 30, 2010 refineries in the Middle East (Display 4). main air- and marine-forwarding Source: Company reports and Bernstein addition, the conversion of recently returns over time, particularly as the Source: Company reports and Alliance business are much brighter as the global acquired Nagasakiya supermarkets into market gradually normalizes and While many rubber producers are likely economy recovers. Even with conserva- a new style of general merchandise investors focus on earnings fundamen- to be affected by a butadiene shortage, tive estimates, we believe that Nippon stores named “Mega Donki,” has been tals, in our growth team’s view. Zeon‘s plant in western Japan sources its Express is attractively priced from a a major success, turning loss-making feedstock from an adjacent naphtha long-term perspective. stores into an earnings-growth driver.

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Note to All Readers: The information contained herein reflects, as of the date hereof, the views of AllianceBernstein L.P. (or its applicable affiliate providing this publication) (“AllianceBernstein”) and sources believed by AllianceBernstein to be reliable. No representation or warranty is made concerning the accuracy of any data compiled herein. In addition, there can be no guarantee that any projection, forecast or opinion in these materials will be realized. Past performance is neither indicative of, nor a guarantee of, future results. Accounts that permit investment practices such as leverage, short sales and derivatives are subject to an increased risk of investment loss and potentially higher performance volatility. The value of investments can fall as well as rise and you may not get back the original amount invested.

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10 2Q 2010 QUARTERLY REPORT