Value Equities 3Q SEPARATELY MANAGED ACCOUNTS

International Value ADR

Top 5 Contributors* Top 5 Detractors*

Company % of Portfolio % Company % of Portfolio % Name as of 09/30/14 Contributed Name as of 09/30/14 Detracted

1 Astellas Pharma 1.60 0.23 1 Melco Crown Entertainment 1.27 0.36

2 Lend Lease 1.51 0.14 2 Arkema 1.20 0.31

3 JSR 1.60 0.13 3 Seadrill 0.86 0.23

4 Sumitomo Electric 1.41 0.13 4 2.31 0.23

5 Total 2.50 0.11 5 Fujitsu 1.49 0.19

Overview the European Central Bank to cut interest rates and unveil a n Geopolitical and macroeconomic concerns dominated major stimulus plan, possibly signaling more unconventional headlines in the third quarter. monetary policy action to come. n Corporate earnings and balance sheets remain strong, with Japan’s production and trade numbers continued to disappoint. equity valuations in many parts of the world still reasonable, The extended weakness suggests that more fiscal stimulus may particularly given the backdrop of extremely low interest be imminent; it also puts pressure on the Bank of Japan to rates. expand its balance sheet well into 2015.

International equities declined in the third quarter, as geopoliti- In emerging markets, is struggling to support growth cal concerns emanating from the Middle East and the Russia- while containing leverage risk in its economy. An anti-corruption Ukraine crisis, together with worries about growth in several campaign has curbed local consumption and investment, and economies, hurt investor sentiment. the sluggish housing market is having a wider impact on growth, which may ultimately provoke a policy rethink. ’s recovery stumbled. Weakness in and Italy offset improvements in Spain, while the Ukraine crisis hurt German Japan’s production and trade numbers continued to disappoint. exports. By early September, persistently low inflation prompted The extended weakness suggests that more fiscal stimulus may

*Based on a representative account as of 9/30/14. Portfolio holdings, characteristics and weightings will vary over time. Contact your financial advisor for a complete list of Portfolio holdings. You should not assume that these securities or investments we make in the future were or will be profitable or will equal the performance of the securities discussed in this document. This is not a recommendation to buy or sell any security. The calculation methodology used to select these securities, and a list showing the contribution of each holding to the representative account’s performance during the period, are available upon request.

Investment Products Offered • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed be imminent; it also puts pressure on the Bank of Japan to earnings shortfall. Arkema also cut its full-year guidance. Recent expand its balance sheet well into 2015. troubles are delaying a recovery, but our research on the development of each of Arkema’s product segments suggests Performance* that the shares remain attractively valued. n The Portfolio declined in absolute terms, but outperformed its benchmark. Shares of car-parts maker Valeo were hurt by ongoing concerns about automotive demand in Europe. n Sector selection was positive, owing to underweights in consumer-cyclicals and construction & housing, and as well Casino gaming operator Melco Crown Entertainment underper- as an overweight in technology. Security selection was formed as gross gaming revenue growth slowed considerably in negative, particularly in the technology, capital equipment the third quarter, driven by China’s anti-corruption policy and and industrial commodities sectors. sluggish growth.

The top contributors came from diverse sectors. In the medical Outlook sector, shares of Astellas Pharma benefited from momentum for n We continue to use differentiated research to develop high its prostate cancer drug, Xtandi, in the US and Europe and conviction in cheap stocks across regions and sectors. growing confidence that it may be effective as a pre-chemother- apy treatment. n In our view, this disciplined approach is the best antidote to new challenges. Japan’s Sumitomo Electric Industries recovered from a trough in June, as investors acknowledged that its earnings guidance was While markets have been unsettled during the quarter, we too pessimistic. believe the market environment continues to provide a rich field of opportunities for value investors. Today, the valuation spread Australian property developer Lend Lease reported a surge in between the cheapest and most expensive stocks remains very full-year profits, after selling a stake in a UK shopping mall. wide in historical perspective.

In contrast, Specialty chemical company Arkema declined as For more information, please contact your financial advisor or call investors reacted to its disappointing earnings results. The AllianceBernstein Investments at 800.227.4618. company’s fluorogases business segment missed its estimates, and weaker demand in the coatings business contributed to the

Past performance does not guarantee future results. There is no guarantee that any forecasts or opinions in this material will be realized. Information should not be construed as investment advice. Note to Canadian Readers: All materials are for financial representative use only and not for distribution to the general public. AllianceBernstein provides its investment management services in Canada through its affiliates Sanford C. Bernstein & Co., LLC and AllianceBernstein Canada, Inc. AllianceBernstein® and the AB logo are registered trademarks and service marks used by permission of the owner, AllianceBernstein L.P. © 2014 AllianceBernstein L.P.

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