Transcript Document

AllianceBernstein: Investment Capabilities in Japan
International Investment – Italian Forum 2007
November 2007
Stephen Tong
President and CEO, AllianceBernstein Japan
Team Leader, Japan Growth Equities
The sale of shares in AllianceBernstein funds may be restricted in certain jurisdictions. In particular, no shares may be acquired by persons in the U.K. except in certain
circumstances and shares may not be offered or sold, directly or indirectly, in the United States or to U.S. Persons, as described in the Fund’s prospectus. Further details may be
obtained from the Distributor.
AllianceBernstein investment portfolios are part of ACMBernstein, a mutual investment fund (fonds commun de placement) or ACMBernstein SICAV (société d'investissement à
capital variable), an open-ended investment company organized under the laws of Luxembourg, which conducts business outside of Germany, Austria and Switzerland under the
name AllianceBernstein.
There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein: Unwavering Focus on Investment Excellence
Number of Buy-Side Analysts
 Research-Driven Culture: One of the industry’s
largest commitments to superior and innovative
research
Growth
Value
Fixed
Income
MultiAsset*
Total
Fundamental
73
66
43
19
201
Quantitative
8
22
10
27
67
Economists
0
0
8
0
8
81
88
61
46
276
Total Analysts
 Proven Investment Processes: Highly
experienced teams with distinct investment
philosophies and consistently applied processes
Global Orientation
Service
US
41%
Client Domicile
Non-US
59%
US
62%
Non-US
38%
 Global Scope: Expertise with both global and local
mandates in markets around the world
Assets Under Management ($ Billions)**
 Ongoing Investment: Diversification that allows
continuous investment across the firm, even when
a particular asset or style may be out of favor
By Client Group
Institutional
Retail
Private Client
Total
$501
185
107
$793
By Investment Discipline
Growth
$114
Value
312
Blend/Alternative Strategies 184
Fixed Income
183
Total
$793
As of 30 June 2007
*Includes 3 Blend Strategies, 3 Product Development, 9 Portfolio Analytics, 12 Wealth Management, 3 Strategic Change, 6 China Research and 10 Early Stage Growth analysts
**Total assets under management by AllianceBernstein L.P.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
1
AllianceBernstein in Japan
 Long-standing commitment to Japan, with an
office opened in Tokyo in 1987
 Full-service office with research, portfolio
management, legal and administration capabilities
 Growing business profile:

¥4,593 billion for 153 domestic contracts

¥1,072 billion for public pension

¥1,084 billion for private pension

¥738 billion for pension commingled funds

¥609 billion for mutual funds
Representative Clients in Japan
Aioi Insurance Pension Fund
All Japan Surveying Enterprises Multi Employers Pension Fund
Aozora Bank Pension Fund
Asahi Glass Pension Fund
East Japan Stationery Sales Pension Fund
Hitachi Investment Management, Ltd.
Japan Airlines Pension Fund
Kyushu Electric Power
Mitsubishi Electric Pension Fund
Mitsui Chemicals Inc.
Mitsui Sumitomo Insurance
National Bakery Pension Fund
National Construction Pension Fund
Pension Fund Association for Local Government Officials
Pfizer Pension Fund
Publication Pension Fund
Sanwa Shutter Pension Fund
Shin-Daiwa Pension Fund
Sumitomo Trust & Banking
Teijin Group Pension Fund
The Pension Fund of Mizuho
The Promotion and Mutual Aid Corp. for Private Schools of Japan
Tokyo Architect Society Pension Fund
Tokyoto Densetsu Kogyo Pension Fund
Tokyo Taxi Companies Employees Pension Fund
Tokyo Truck Pension Fund
Tyco Electrics AMP
As of 30 June 2007
The clients identified in the list set forth herein were selected based on a variety of factors, including name recognition, industry, geographic region and investment mandate. The investment
performance of the accounts managed by AllianceBernstein, including those identified on this list, was not considered. The list is neither a statement of a client’s experience with, nor an
endorsement of, AllianceBernstein by the clients identified in the list. It is not known whether the clients identified in the list approve or disapprove of AllianceBernstein’s advisory services.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
2
AllianceBernstein─Japan Equity Portfolios
Alliance
Bernstein─J
apan
Strategic
Value
50%
Japan Strategic Value
50%
AllianceBernstein─
Japan Equity Blend
Japan Equity Blend
Alliance
Bernstein─
Japan
Growth
Japan Growth
 High-alpha Value strategy
 High-alpha Core strategy
 High-alpha Growth strategy
 Invests in companies that are
valued at a discount relative to
their long-term earnings power
 Initial combination of 50% Growth
and 50% Value strategies
 Invests in the “Dynamic Gap”:
Growth companies that are set to
deliver earning growth that is
higher than market expectations
 High-conviction portfolio of 30-50
stocks
 Maintains high-conviction stockpicking of style-based strategies
 High information ratio as premium
of the Value strategy is not
correlated with that of the Growth
strategy, and therefore mitigates
style risk
 High-conviction portfolio of 40-50
stocks
 Systematic rebalancing when mix
reaches 55%/45%
As of 30 September 2007
 High-conviction portfolio of 55-85
stocks
Investment policies apply under normal market conditions.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
3
AllianceBernstein: Two Clear Investment Philosophies
Growth Investing
Goal: Find
underappreciated
growth potential
Long-Term
Earnings
Power
Research question:
Will growth outpace
expectations?
Earnings
Growth
Accelerates
Earnings
Growth
Decelerates
Corrective
Strategies
Profits &
Stock Decline
Value Investing
Goal: Buy out of favor
bargains
Research question:
Will depressed
earnings recover?
Investment policies apply under normal market conditions.
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
4
Independent Growth and Value Research
Buy-Side Fundamental Research Analysts
Bernstein Value Equities
Research Teams
Commodities
Consumer
Financials
Industrials
Multi-Industry
Technology/Telecom
Total
14
14
10
14
6
8
66
Consumer
Energy/Natural Resources
Finance
Healthcare
Infrastructure
Mid-Cap Generalists
Technology/Telecom
Total
15
10
12
6
7
5
18
73
London
Minneapolis
Chicago
Alliance Growth Equities
Research Teams
New York
Tokyo
Madrid
Hong Kong
Shanghai
Taipei
Mumbai
Singapore
São Paulo
Sydney
Cape Town
AllianceBernstein locations
Wellington
Joint-venture locations
As of 30 June 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
5
Japan Growth: Investment Process Overview
Investable Universe
Approximately 600 Stocks
Fundamental Research
Alliance Growth Research
Recommended Stocks
Investment Review
Portfolio Candidates
Portfolio Construction
Japan Growth Portfolio
40 to 50 Stocks
Investment policies apply under normal market conditions.
As of 30 September 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
6
Japan Growth: Nickel Price Forecasts
Nickel Price (Left Scale)
2,500 LME Inventories
2,000 (Right Scale)
1,500
1,000
500
0
89
92
95
160
120
80
40
1,000 Tonnes
 Nickel prices have surged to record highs on
supply constraints, falling inventories and strong
demand for stainless steel, which consumes some
65% of the world’s nickel
USc/lb
Nickel Price vs. LME Inventory
0
98
01
04
07 08
China’s Role in World Nickel Demand
2004
Others
27%
 While there are concerns that de-stocking of
stainless steel inventories in the US may start
pressuring nickel prices, we believe growing nickel
demand from China continue to underpin the
market
2007
North America
11%
China
12%
Europe
36%
North America
11%
Others
24%
China
21%
Japan
14%
Europe
32%
Japan
12%
Nickel Price Forecast
 Longer-term, sustained difficulties in developing
greenfield nickel projects are likely to keep prices
supported for longer than widely assumed
US$/lb
Nickel LME
2,650
2,150
1,650
1,150
650
150
Spot/Forward Curve
Alliance Growth
Equities Estimates
Consensus
Current analysis and estimates do not guarantee future results.
88
90
92
94
96
98
00
02
04
06
For illustrative purposes; the stock example above is intended only to illustrate the application of our investment philosophy, and this particular security may or may not be held in the current Japan
Growth portfolio. The reader should not assume that this was, or will be, a profitable investment. Please read Disclosure on Stock Examples.
As of March 2007
Source: Bloomberg, LME, Morgan Stanley and AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
7
Japan Growth: Investment Opportunity
Pacific Metals, Sumitomo Metal Mining
Our EPS Estimates vs. Consensus: Pacific Metals
 Pacific Metals, Japan’s largest ferronickel
producer, is likely to benefit most from strong
nickel prices and sustained revisions in consensus
expectations
207
175
151
153
Mar 07E
Alliance Forecasts
Mar 08E
Consensus Forecasts
World Nickel Reserve Potential by Ore Type
120
100
Mt
 Sumitomo Metal Mining’s innovative technologies*
in processing nickel from low-grade laterite ore will
enable aggressive production growth; The firm
aims to double annual nickel production to 100,000
tonnes by 2013, with more upside potential
80
Laterite Ore
(Low grade)
60
40
Sulfide Ore
(High grade)
20
0
Existing Mines
Undeveloped Mines
Current analysis and estimates do not guarantee future results.
For illustrative purposes; the stock example above is intended only to illustrate the application of our investment philosophy, and this particular security may or may not be held in the current Japan
Growth portfolio. The reader should not assume that this was, or will be, a profitable investment. Please read Disclosure on Stock Examples.
*Some of those technologies include the Matte Chlorine Leach Electrowinning (MCLE) method, which enables more efficient leaching of nickel using less energy, and the High Pressure Acid
Leach (HPAL) technology, which facilitates nickel extraction from low-grade laterite ore
As of March 2007
Source: Commonwealth Scientific Industrial Research Organization, BEST, JOGMEC and AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
8
Japan Strategic Value: Philosophy
Long-Term
Earnings Power
Investment
Controversy
Profits &
Stock Price
Decline
Which?
Research
Conclusion
 Based on enduring patterns of human behavior...

Loss aversion

Overreaction to short-term events
 …and economic behavior

Mean reversion of returns

Cash flow ultimately determines value
Investment policies apply under normal market conditions.
As of 30 September 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
9
Japan Strategic Value: Investment Process Overview
Explicit Marriage of Fundamental and Quantitative Research
Fundamental
Research
Quantitative
Research
Investment Universe
Identify Value Opportunities
Select Best Ideas
Build
Portfolio
Investment policies apply under normal market conditions.
As of 30 September 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
10
Japan Strategic Value: Quantitative Return Model Helps Identify Attractive Opportunities
Sharp Corporation's Expected Return Calculation
Industry Approach
Global Sector vs. Globe
Price/Forward Earnings
Price Momentum
Global Ind. vs. Global Sector
Price/Book
Price/Earnings
Price/Forward Earnings
Price Momentum
Regional Ind. vs. Global Ind.
Price/Cash Earnings
Price/Forward Cash Earnings
10-Year Bond Yield
Return on Equity
Price Momentum
Price/Sales
Company vs. Regional Ind.
Price/Book
Price/Forward Cash Earnings
Return on Equity
Price Momentum
Balance Sheet Accruals
Return on Assets
Price/Sales
Total
Country Approach
Market vs. Globe
Price/Book
Price/Earnings
Price/Forward Cash Earnings
10-Year Bond Yield
Currency Momentum
Price Momentum
Market Sector vs. Market
Price/Earnings
Price/Forward Earnings
Price Momentum
Balance Sheet Accruals
Market Ind. vs. Market Sector
Price/Book
Price/Cash Earnings
Price/Forward Cash Earnings
Price Momentum
Balance Sheet Accruals
Company vs. Market Ind.
Price/Book
Price/Forward Cash Earnings
Return on Equity
Price Momentum
Balance Sheet Accruals
Return on Assets
Price/Sales
Total
Comparison Data
Global Sector
19.5
18.6%
Global Ind.
3.2
26.5
19.6
13.5%
Regional Ind.
14.6
12.1
1.8%
9.5%
27.9%
1.9
Company
2.1
7.7
8.1%
27.5%
0.0%
3.5%
0.8
Globe
15.6
23.3%
Global Sector
4.2
26.4
19.5
18.6%
Global Ind.
14.5
12.1
4.0%
14.9%
13.5%
2.5
Regional Ind.
2.6
12.1
9.5%
27.9%
0.0%
6.5%
1.9
Comparison Data
Market
2.2
23.1
11.1
1.8%
-0.2%
27.5%
Market Sector
32.0
23.0
31.9%
0.0%
Market Ind.
2.6
14.6
12.1
27.9%
0.0%
Company
2.1
7.7
8.1%
27.5%
0.0%
3.5%
0.8
Globe
3.0
18.8
11.2
4.3%
-0.3%
23.3%
Market
23.1
19.0
27.5%
0.0%
Market Sector
2.8
13.9
12.0
31.9%
0.0%
Market Ind.
2.6
12.1
9.5%
27.9%
0.0%
6.5%
1.9
Contribution to
Excess Return
-0.67%
-0.14%
0.52%
0.00%
0.00%
-0.11%
Most Attractive
-0.01%
0.00%
0.56%
-0.60%
0.17%
0.39%
0.36%
0.51%
-0.04%
-0.01%
0.00%
-0.39%
0.88%
1.43%
Highest
Expected
Return
Sharp
Corporation
Research
Focus
60%
Contribution to
Excess Return
0.18%
-0.21%
0.03%
0.25%
0.00%
0.10%
40%
-0.17%
-0.18%
0.03%
0.00%
0.06%
-0.02%
0.00%
-0.05%
0.00%
0.22%
0.29%
-0.03%
0.00%
0.00%
-0.25%
0.54%
0.77%
Lowest
Expected
Return
Least Attractive
For illustrative purposes only.
Source: Compustat, Factset, I/B/E/S, MSCI, Worldscope and Bernstein; see Disclosure on Stock Examples.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
11
Japan Strategic Value: Investment Opportunity
Sharp Corporation
LCD TV Penetration Driving Market Growth
60
Total LCD Demand (Left Scale)
600
40
400
LCD TV Penetration
(Right Scale)
200
20
0
Percent
 Penetration of LCD TVs is likely to surge as prices
drop to mass-market affordability levels
Millions*
800
0
01
02
03
04
05
06
07E
08E
09E
Utilization Rate** (Left Scale)
100
98
96
94
92
90
70
YoY Capacity Growth
(Right Scale)
60
50
40
Percent
 Rising industry capacity is a worry but capital
spending is likely to slow, raising the utilization rate.
Sharp also has a competitive edge in the high-end
market
Percent
Overcapacity Concerns Should Recede
30
02
03
04
05
06E
07E
Valuation Is Attractive
 Valuation is at 23% discount to other Japanese
technology stocks
Current analysis and estimates do not guarantee future results.
Through September 2006
*15-inch panel equivalents
**Average demand-to-capacity ratio
Source: Display Search, I/B/E/S, MSCI, company reports and Bernstein; see Disclosure on Stock Examples
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
Price to 2009 Earnings
24.3×
18.6×
Sharp
Japanese Technology
AllianceBernstein
12
AllianceBernstein Japan Equity Blend: Active Core Strategy
Alliance
Bernstein
Japan
Strategic
Value
50%
30 to 50 Stocks
50%
AllianceBernstein
Japan Equity Blend
Alliance
Bernstein
Japan
Growth
55 to 85 Stocks
40 to 50 Stocks
 Objective: 3% premium to benchmark, before fees
 Combines two portfolios with strong records
 Mitigates style risk through uncorrelated premiums
Investment policies apply under normal market conditions.
As of 30 September 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
13
Japan Equity Blend: Combining Two Outstanding Track Records
In Japanese Yen
Alliance
Japan Growth
Oct 1991–Jun 2007
Correlation of
Japan Strategic Value*
and Japan Growth
Premiums
(Jul 1992–Jun 2007)
5.0%
Bernstein
Japan Strategic Value
Apr 2002–Jun 2007
20.2%
Perfect
Correlation
1.0
11.3%
0.0
0.05
No
Correlation
0.7%
(1.0)
Composite
TOPIX
Perfect
Inverse
Correlation
Composite
TOPIX
*Based on simulated Japan Strategic Value returns.
Inception dates: Japan Growth—October 1, 1992; Japan Strategic Value—April 1, 2002
Periods of more than one year are annualized. Past performance is no guarantee of future results. The returns presented above are gross of fees. The results do not reflect the deduction of
investment-management fees; the client’s return will be reduced by the management fees and any other expenses incurred in the management of its account.
Source: Tokyo Stock Exchange and AllianceBernstein; see Performance Disclosures and Notes on Japan Strategic Value Simulation.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
14
Japan Equity Blend: Future Style Leadership Not Clear
Relative Style Index Valuation
Ratio of MSCI Japan Growth P/B to
MSCI Japan Value P/B
3.0
2.5
2.0
1.5
1.0
89
91
94
97
00
03
06
Current analysis, estimates and valuations do not guarantee future results.
As of August 2007
Source: FactSet, I/B/E/S and MSCI
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
15
Japan Equity Blend: Value Opportunity Is at a Low
Discount to Fair Value*
60
50
Percent
40
30
20
10
0
71
73
76
79
82
85
88
91
94
97
00
03
06
Current analysis, estimates and valuations do not guarantee future results.
Discount to Fair Value = As of 1 January 2007; P/E, P/B = As of 31 May 2007
*Chart represents the amount by which the most attractively priced quintiles of Japanese stocks sell below overall market valuations. The proportion of AllianceBernstein investments in stocks
from this group will vary over time but will typically be high. Bernstein’s estimates of fair value of these stocks may not be realized for variety of reasons.
Source: Compustat, DataStream, DRI, FactSet, I/B/E/S, MSCI and AllianceBernstein estimates
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
16
Japan Equity Blend: Market Valuations Have Normalized
P/E
80
MSCI Japan
MSCI North America
MSCI Europe
MSCI Pacific ex JP
Percent
60
40
20
0
87
90
93
96
99
02
05
Current analysis does not guarantee future results.
As of August 2007
P/E is based on I/B/E/S 12-month forecast.
Source: I/B/E/S, MSCI and Morgan Stanley Research
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
17
Japan Equity Blend: Style Index Composition Constantly Changing
MSCI Growth Index
MSCI Value Index
100%
100%
90%
80%
80%
70%
60%
60%
50%
40%
40%
30%
20%
20%
10%
0%
0%
97 98 99 00 01 02 03 04 05 06 07
Consumer Discretionary
Health Care
Telecommunication Services
Consumer Staples
Industrials
Utilities
97 98 99 00 01 02 03 04 05 06 07
Energy
Information Technology
Financials
Materials
Current analysis does not guarantee future results.
As of April 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
18
Japan Equity Blend: Complementary Sector Exposure
Active Weights*
Percent
Value
Industrials
Growth
(4.2)
5.6
Materials
Energy
Healthcare
(2.4)
Utilities
Consumer Staples
(0.0)
0.4
1.3
(0.2)
0.6
(0.5)
(1.3)
(1.7)
(4.1)
(2.7)
(3.1)
1.3
(1.3)
(0.4)
(2.3)
1.8
(0.5)
3.7
Information Technology
1.8
(2.1)
4.1
Telecommunication Services
1.9
8.2
Consumer Discretionary
Financials
Blend
(0.9)
(2.2)
(1.8)
(2.6)
Sector allocations will vary over time.
As of 30 June 2007
Based on a representative Japan Style Blend account; excludes cash; columns may not sum due to rounding.
*Versus TOPIX
Source: Tokyo Stock Exchange and AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
19
Japan Equity Blend: Disciplined Rebalancing to Control Risk
As value/growth
outperforms,
trim investment
Sell
Upper Trigger +5%
Outperform
Rebalance Halfway
50/50
Strategic Target
Rebalance Halfway
Underperform
Lower Trigger -5%
Buy
As value/growth
underperforms,
add to investment
Investment policies apply under normal market conditions.
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
20
Japan Equity Blend: High Premiums with Moderate Risk
Performance Relative to TOPIX
July 1992–June 2007
Premium
Tracking Error
Bernstein
Japan Strategic Value
(Simulated)
Alliance
Japan Growth
AllianceBernstein
Japan Style Blend
(Simulated)
+3.9%
+3.2%
+3.9%
6.8%
8.0%
5.4%
Information Ratio
0.72
0.57
0.41
In Japanese Yen
Periods of more than one year are annualized. Past performance is no guarantee of future results. The returns presented above are gross of fees. The results do not reflect the deduction of
investment-management fees; the client’s return will be reduced by the management fees and any other expenses incurred in the management of its account. For example, a USD 100 million
account, paying a 0.50% annual fee, with a given rate of 10% compounded over a 10-year period would result in a net-of-fee return of 9.5%. Investment advisory fees are described in Part II of
AllianceBernstein’s Form ADV.
Source: Tokyo Stock Exchange and AllianceBernstein; see Performance Disclosures and Notes on Japan Style Blend Simulation.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
21
AllianceBernstein: Investment Capabilities in a Changing Japan
Through their fundamental research, the AllianceBernstein Japan Growth investment team and
the AllianceBernstein Japan Strategic Value investment team are both finding compelling
investment opportunities.
Japan Equity Blend is an “active core” strategy that combines two successful style strategies
and manages style risk from the bottom up.
Current analysis does not guarantee future results.
As of October 2007
Source: AllianceBernstein
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
22
Appendix
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
23
Japan Equity Blend: Disciplined Rebalancing Process
$
 The benefit of rebalancing rises geometrically...
Rebalancing
Benefit
=
Tracking Error2× 2
2K
4×
1×
$
 ...while the costs are linear
1×
2×
1×
2×
% off
Target 
% off
Target 
1×
2×
Rebalancing
Cost
= C ×
Net Benefit
= Benefit – Costs
$
 When a style component exceeds a 55% weight
or more, we trim it back to 52.5%
Trigger Point
5%
Rebalance
to 2.5%
Slope = 0,
so Marginal Benefit =
Marginal Cost
For illustrative purposes only.
Source: Seth J. Masters, “Is There a Better Way to Rebalance?”, AllianceBernstein 2003
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
% off
Target 
Zone Where Marginal
Rebalancing Benefit
Exceeds Costs
AllianceBernstein
24
Japan Equity Blend: Rebalancing Can Add Value
Rebalancing Requires Discipline (Simulated)
Return Premium to TOPIX* (Simulated):
July 1992–June 2007
60
+3.85%
Percent in Value Style
Added to Growth
55
+3.57%
Rebalance
+28 b.p.
50
45
Added to Value
40
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Unrebalanced Blend
Our Rebalancing Method
*Simulated 50/50 blends of Japan Strategic Value and Japan Growth before fees
Rebalancing method assumes transactions cost of 100 basis points.
Periods of more than one year are annualized. Numbers may not sum due to rounding. Past performance is no guarantee of future results. The returns presented above are gross of fees. The
results do not reflect the deduction of investment-management fees; the client’s return will be reduced by the management fees and any other expenses incurred in the management of its account.
For example, a USD 100 million account, paying a 0.50% annual fee, with a given rate of 10% compounded over a 10-year period would result in a net-of-fee return of 9.5%. Investment advisory
fees are described in Part II of AllianceBernstein’s Form ADV.
Source: Tokyo Stock Exchange and AllianceBernstein; see Notes on Japan Style Blend Simulation.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
25
Disclosure on Stock Examples
References to specific securities are presented to illustrate the application of
our investment philosophy only and are not to be considered recommendations
by AllianceBernstein. The specific securities identified and described in this
presentation do not represent all of the securities purchased, sold or
recommended for the portfolio, and it should not be assumed that investments
in the securities identified were or will be profitable. Upon request, we will
furnish a listing of all investments made during the prior one-year period.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
26
Notes on Japan Equity Blend Simulation
The Japan Style Blend Simulation reflects simulated performance results that were calculated by value-weighting the composite
returns of Alliance Japan Growth and the simulated returns of Bernstein Japan Strategic Value (see Notes on Japan Strategic Value
Simulation), starting at a 50/50 percentage ratio. Both the Japan Strategic Value and Japan Growth portions were then allowed to
compound until either portion made up more than 55% of the combined total. At this point, the portions were rebalanced so that the
larger part represented 52.5% of the combined total and the smaller portion represented 47.5%. Upon rebalancing, transaction costs
of 75 basis points were applied to the rebalanced portions of the portfolio and this total transaction cost was deducted from the total
return. The results portrayed reflect hypothetical rather than actual results, based on investment criteria used in their present form.
The results do not represent actual trading and do not reflect the impact that material economic and market factors might have had
on AllianceBernstein’s decision making if AllianceBernstein were actually managing client money. The results assume a continuous
investment for the entire period and that the investor reinvested dividends and other earnings. Past performance is no guarantee of
future results. Accounts managed in this style may incur losses as well as gains.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
27
Notes on Japan Strategic Value Simulation
The following standards were used in compiling the performance data for the Japan Strategic Value Simulation used in this presentation:
1) Performance Statistics Are Not Financial Statements—There are various methods of compiling or reporting performance statistics. The standards of
performance measurement used by AllianceBernstein in compiling these data and model results are in accordance with the methods set forth by the Notes
below. Past performance statistics may not be indicative of future results and may differ for different time periods.
2) Total Return—Performance results of the accounts and comparisons in the simulated portfolio are made on a total-return basis which includes all dividends
and accrued dividends, interest and accrued interest, and realized and unrealized gains or losses. Securities are included in accounts on a trade date basis.
Performance results are after the deduction of all transaction charges and before fees.
3) Rate of Return—Investment results of the simulation are computed on a daily “time-weighted” rate-of-return basis. Assuming dividends and interest are
reinvested, the growth in dollars of an investment in a period can be computed using these rates of return.
4) Preparation of Data—The simulation performance results are the combination of returns from two distinct periods: July 1992–March 2002 and April 2002
to June 2007.
4.a) For the first period (July 1992–March 2002), the simulation performance is based on the actual results of the Japan only equity portion of the Tax-Managed
International Value Portfolio of the Sanford C. Bernstein Fund, Inc. The equity-only returns are then combined with 3-month JPY LIBOR rates, with a constant
2% allocation to cash throughout the period. Ways in which the simulation conditions may differ from actual practice include the facts that: (i) simulation results
are based on a portfolio that has a constant 2% allocation to cash; actual cash balances would fluctuate over time; (ii) simulation results represent a Japan
portion of a portfolio invested in multiple countries; actual performance would reflect a portfolio not invested in any country but Japan, with more securities than
those offered in the model portfolio; (iii) actual portfolios may have actively managed currency; (iv) actual returns would be time-weighted on a monthly basis
instead of computed on a daily basis; (v) product offerings to clients are typically tailored to their individual specifications and may differ from the product
definition of the model portfolio.
4.b) For the second period (April 2002–June 2007), actual Japan Strategic Value composite performance data is used. Please see Performance Disclosure–
Bernstein Japan Strategic Value.
Simulated results do not represent any predicted or actual results, returns or performances.
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
28
Performance Disclosures
Bernstein Japan Strategic Value (In Japanese Yen)
Composite
Assets (JPY
Millions)
470,148.1
141,113.1
14,255.1
8,524.1
224.4
Composite
Accounts at End
ofPeriod
25
7
3
2
1
Gross Return
Composite
Firm Assets
Period
(%)
Net Return (%) Dispersion (%) (USD Billions)
2006
10.78
10.06
0.35
622.0
2005
55.83
54.82
0.07
494.5
2004
24.84
23.91
NM
465.8
2003
27.84
26.88
NM
420.0
3/31–12/31/02
(12.06)
(12.55)
NM
346.9
3 Years*
29.17
28.29
Since
Inception*
(3/31/02)
20.47
19.62
NM = not meaningful, fewer than five accounts were included in the composite for this full period
Alliance Japan Growth (In Japanese Yen)
TOPIX Index
Return (%)
3.02
45.23
11.34
25.19
(20.09)
18.54
11.35
*Annualized through most recent year-end
1) PRESENTATION OF THE FIRM—AllianceBernstein L.P. (“ABLP”) is a registered investment advisor. AllianceBernstein
Institutional Investments and AllianceBernstein Investments (collectively, the “Firm”) is the institutional and retail sales,
marketing and client service unit of ABLP. The Firm has prepared and presented this report in compliance with the Global
®
Investment Performance Standards (GIPS ). Prior to the merger of Alliance Capital Management L.P. (“ACMLP”) and Sanford
C. Bernstein & Co., Inc. (“Bernstein”) in October 2000, the firms were reporting under their respective names. In February
2006, ACMLP changed its name to ABLP.
2) COMPOSITE STRUCTURE—The performance results displayed herein represent the investment performance record for
the institutional Japan Strategic Value Composite (the “Composite”). The Composite includes all fee-paying institutional
discretionary accounts. The composite consists of accounts which invest in 35 to 45 Japanese value stocks and seeks a longterm premium relative to their benchmark with moderate sensitivity to risk. The Composite was created in December 2002
with an inception date of March 31, 2002.
3) A complete list of all composites with descriptions managed by the firm and/or additional information regarding policies for
calculating and reporting returns is available upon request via email to: [email protected].
4) TOTAL RETURN METHODOLOGY AND FEE STRUCTURE—Performance figures in this report have been presented
gross and net of investment-management fees. Net performance figures have been calculated by deducting the highest fee
payable by an account of this type; 0.75% of assets, annually, through 2004, 0.65% of assets, annually, thereafter. Net -of-fee
performance figures reflect the compounding effect of such fees. The investment advisory fee schedule is disclosed in Part II
of ABLP’s Form ADV.
5) RATE OF RETURN—No representation is made that the performance shown in this presentation is indicative of future
performance. An account could incur losses as well as gains. Performance returns for each account are calculated monthly
using trade-date accounting. Performance results are reported on a total-return basis, which includes all income from
dividends and interest, and realized and unrealized gains or losses. All cash flows are daily weighted using the Modified Dietz
Method. The monthly Composite returns are calculated by weighting each account’s monthly return by its beginning market
value as a percent of the total Composite’s beginning market value. These monthly performance figures are geometrically
linked to calculate cumulative and/or annualized “time-weighted” rates of return for various time periods. The Composite
contains accounts of clients denominated in foreign currencies. To calculate Composite performance, each account’s monthly
returns are converted to Japanese yen using WM Reuters month-end exchange rates.
6) DISPERSION—The dispersion of annual returns is calculated based on the asset-weighted standard deviation.
7) The benchmark, which is not covered by the report of independent accountants, is the TOPIX index. The TOPIX, also
known as the Tokyo Price Index, is a capitalization-weighted index of all the companies listed on the First Section of the
Tokyo Stock Exchange.
Period
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
3 Years*
5 Years*
10 Years*
Composite
Assets (JPY
Millions)
186,392.8
116,494.3
76,286.8
126,179.4
94,412.3
88,874.0
70,653.7
52,618.1
2,565.2
9,256.9
# of Accounts
11
7
7
15
15
13
11
8
1
1
MSCI Japan
Gross Return
Composite
Firm Assets Index Return
(%)
Net Return (%) Dispersion (%) (USD Billions)
(%)
5.49
5.15
0.22
622.0
7.26
52.47
51.95
0.16
494.5
44.58
5.35
4.96
0.44
465.8
10.78
21.11
20.65
1.37
420.0
22.74
(17.37)
(17.70)
0.63
346.9
(18.76)
(17.63)
(17.99)
0.57
412.2
(18.98)
(23.93)
(24.51)
1.87
450.0
(19.85)
66.96
65.78
NM
368.3
46.58
3.95
3.19
NM
286.7
(8.87)
8.58
7.77
NM
218.7
(14.50)
19.22
18.80
19.77
11.14
10.73
11.36
7.19
6.63
2.42
TOPIX Price
Return Index
(%)
1.90
43.50
10.15
23.76
(18.30)
(19.60)
(25.46)
58.44
(7.49)
(20.12)
17.22
10.25
1.34
*Annualized through most recent year-end
NM = not meaningful, fewer than five accounts were included in the composite for the full period
1) PRESENTATION OF THE FIRM—AllianceBernstein L.P. (“ABLP”) is a registered investment advisor. AllianceBernstein
Institutional Investments and AllianceBernstein Investments (collectively, the “Firm”) are the institutional and retail sales,
marketing and client service unit of ABLP. The Firm has prepared and presented this report in compliance with the Global
®
Investment Performance Standards (GIPS ). Prior to the merger of Alliance Capital Management L.P. (“ACMLP”) and Sanford
C. Bernstein & Co., Inc. (“Bernstein”) in October 2000, the firms were reporting under their respective names. In February
2006, ACMLP changed its name to ABLP.
2) COMPOSITE STRUCTURE—The Japan Growth Composite (the “Composite”) includes all fee-paying discretionary taxexempt accounts with assets over $10 million in US dollars. The Japan Growth investment team seeks to generate a premium
through research-driven stock selection. The investment team uses our locally-based growth analysts' research to build a
concentrated portfolio of approximately 40 to 50 companies whose growth potential appears likely to outpace market
expectations. Typically, purchase candidates are industry leaders and have mid-to-large market capitalizations. The creation
date of this Composite is prior to December 1994.
3) A complete list of all composites with descriptions managed by the Firm and/or additional information regarding policies for
calculating and reporting returns is available upon request via email to: [email protected].
4) TOTAL RETURN METHODOLOGY AND FEE STRUCTURE—Performance figures in this presentation have been
presented gross and net of investment-management fees. Prior to January 2001, the Composite’s net-of-fee return was
calculated by deducting the highest fee charged to an account in the Composite. From January 2001 forward, the
Composite’s net-of-fee return is calculated by deducting a weighted average of the actual fee rates charged to each account
in the Composite. Net-of-fee performance figures reflect the compounding effect of such fees. The highest fee payable for a
Japan Growth portfolio is 0.65% of assets, annually. The investment advisory fee schedule is disclosed in Part II of ABLP’s
Form ADV.
5) RATE OF RETURN—No representation is made that the performance shown in this presentation is indicative of future
performance. A portfolio could incur losses as well as gains. Performance figures for each account are calculated monthly on
a trade-date basis using a total rate-of-return calculation. Monthly market values include income accruals, realized and
unrealized gains and losses and reflect the daily weighting of cash flows. The Composite results are asset-weighted on a
monthly basis. Performance results include the reinvestment of dividends and other earnings. Returns for the accounts in the
Composite are calculated in US dollars. The US dollar composite returns are then converted to Japanese yen using WM
Reuters month-end exchange rates.
6) DISPERSION—The dispersion of annual returns is calculated based on the asset-weighted standard deviation.
7) The benchmark, which is not covered by the report of independent accountants, is the TOPIX Index. The TOPIX, also
known as the Tokyo Price Index, is a capitalization-weighted index of all the companies listed on the first section of the Tokyo
Stock Exchange.
As of December 31, 2006
For financial representative use only. Not for inspection by, distribution or quotation to, the general public.
AllianceBernstein
29