UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-02383
AB BOND FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: October 31, 2020
Date of reporting period: October 31, 2020
ITEM 1. REPORTS TO STOCKHOLDERS.
OCT 10.31.20
ANNUAL REPORT
AB ALL MARKET REAL RETURN PORTFOLIO
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB All Market Real Return Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
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ANNUAL REPORT
December 15, 2020
This report provides management’s discussion of fund performance for AB All Market Real Return Portfolio for the annual reporting period ended October 31, 2020.
The Fund’s investment objective is to maximize real return over inflation.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB ALL MARKET REAL RETURN PORTFOLIO1 | ||||||||
| Class 1 Shares2 | 9.30% | -9.94% | ||||||
| Class 2 Shares2 | 9.37% | -9.70% | ||||||
| Class A Shares | 9.27% | -10.11% | ||||||
| Class C Shares3 | 8.81% | -10.85% | ||||||
| Advisor Class Shares4 | 9.46% | -9.79% | ||||||
| Class R Shares4 | 8.96% | -10.32% | ||||||
| Class K Shares4 | 9.25% | -10.10% | ||||||
| Class I Shares4 | 9.38% | -9.76% | ||||||
| Class Z Shares4 | 9.38% | -9.75% | ||||||
| MSCI AC World Commodity Producers Index (net) | -4.02% | -27.45% | ||||||
| 1 | Includes the impact of proceeds received and credited to the Fund resulting from class-action settlements, which enhanced the performance of all share classes of the Fund for the six- and 12-month periods ended October 31, 2020, by 0.00% and 0.02%, respectively. |
| 2 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to the Adviser’s institutional clients or through other limited arrangements. |
| 3 | The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the Financial Highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
| 4 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Morgan Stanley Capital International All Country (“MSCI AC”) World Commodity Producers Index (net), for the six- and 12-month periods ended October 31, 2020.
During both periods, all share classes of the Fund outperformed the benchmark, before sales charges. For the 12-month period, strategic allo-
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cation contributed overall, relative to the benchmark, as real estate, commodity futures and inflation-sensitive equities contributed to returns. Security selection within real estate investment trusts (“REITs”) and currency selection contributed, while selection in commodity equities detracted. The Fund’s tactical allocations to commodity equities and commodity futures contributed. There were no other noteworthy detractors over the period.
For the six-month period, strategic allocation was an overall contributor, primarily due to commodity futures and inflation-sensitive equities. Security selection within REITs and currency selection contributed, while selection in commodity futures detracted. Similar to the 12-month period, tactical allocations to commodity equities and commodity futures contributed. There were no other noteworthy detractors over the period.
The Fund utilized derivatives for hedging and investment purposes in the form of futures, currency forwards, inflation swaps and total return swaps, which added to absolute returns for both periods; variance swaps and purchased options detracted for the six-month period and added for the 12-month period, while written options added for the six-month period and detracted for the 12-month period.
MARKET REVIEW AND INVESTMENT STRATEGY
US, international and emerging-market equities recorded strong returns for the six-month period ended October 31, 2020, as global economies rebounded from record GDP contractions amid early stages of economic recovery from the novel coronavirus pandemic. Investor optimism was supported by expanded monetary and fiscal stimulus, signs of encouraging economic data, and news that several potential vaccines had reached advanced trials. At the end of the period, equity markets lost ground and volatility increased as investors weighed a slew of mostly better-than-expected corporate earnings against rapidly increasing COVID-19 cases in the US and abroad, the possibility of a contested US presidential election, and the inability of congressional leaders to agree on a fiscal stimulus package. Markets were also pressured, as many mega-cap US technology companies that had led the recovery reported earnings that beat expectations but still underwhelmed investors, reflecting an increasingly negative market sentiment. In the US, small-caps outperformed large-cap stocks, and growth stocks outperformed their value-style peers.
Global fixed-income market returns were positive yet volatile over the six-month period. Government bonds advanced modestly. Emerging- and developed-market high-yield corporate bonds led gains, followed by emerging- and developed-market investment-grade corporates, as investors searched for higher yields in a period of falling interest rates. Corporate bonds in the US outperformed their European counterparts. Emerging-market local bonds also rebounded, and securitized assets provided
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positive, yet muted, results. The US dollar fell against all major developed-market currencies and a majority of emerging-market currencies.
Inflation assets were mostly positive over the six-month period, with commodities, REITs and inflation breakevens all posting positive returns, while natural resource equities declined modestly, led by energy stocks. As economies globally started to ease lockdown restrictions and encouraging vaccine news emerged, the prospect of a recovery in demand, combined with a weaker US dollar, helped buoy commodity-related assets. REITs, although posting a positive return, continued to lag the broader equity market as the longer-term demand impact of COVID-19 weighed on sectors such as lodging, retail and office. Inflation breakevens also recovered meaningfully as unprecedented support from central banks and governments globally helped buoy inflation expectations.
The Fund’s Senior Investment Management Team continues to look for sources of value via asset allocation shifts, active security selection, risk overlay strategies and currency management. The Fund uses a blend of quantitative and fundamental research in order to determine overall portfolio risk, allocate risk across major real asset classes and identify idiosyncratic opportunities.
INVESTMENT POLICIES
The Fund seeks to maximize real return. Real return is the rate of return after adjusting for inflation. The Fund pursues an aggressive investment strategy involving a variety of asset classes. The Fund invests primarily in instruments that the Adviser expects to outperform broad equity indices during periods of rising inflation. Under normal circumstances, the Fund expects to invest its assets principally in the following instruments that, in the judgment of the Adviser, are affected directly or indirectly by the level and change in rate of inflation: inflation-indexed fixed-income securities, such as Treasury inflation-protected securities (“TIPS”) and similar bonds issued by governments outside of the United States; commodities; commodity-related equity securities; real estate equity securities; inflation-sensitive equity securities, which the Fund defines as equity securities of companies that the Adviser believes have the ability to pass along increasing costs to consumers and maintain or grow margins in rising inflation environments, including equity securities of utilities and infrastructure-related companies (“inflation-sensitive equities”); securities and derivatives linked to the price of other assets (such as commodities, stock indices and real estate); and currencies. The Fund expects its investments in fixed-income securities to have a broad range of maturities and quality levels.
(continued on next page)
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The Fund seeks inflation protection from investments around the globe, both in developed- and emerging-market countries. In selecting securities for purchase and sale, the Adviser utilizes its qualitative and quantitative resources to determine overall inflation sensitivity, asset allocation and security selection. The Adviser assesses the securities’ risks and inflation sensitivity as well as the securities’ impact on the overall risks and inflation sensitivity of the Fund. When its analysis indicates that changes are necessary, the Adviser intends to implement them through a combination of changes to underlying positions and the use of inflation swaps and other types of derivatives, such as interest rate swaps.
The Fund anticipates that its targeted investment mix, other than its investments in inflation-indexed fixed-income securities, will focus on commodity-related equity securities, commodities and commodity derivatives, real estate equity securities and inflation-sensitive equities to provide a balance between expected return and inflation protection. The Fund may vary its investment allocations among these asset classes, at times significantly. Its commodities investments will include significant exposure to energy commodities, but will also include agricultural products, and industrial and precious metals, such as gold. The Fund’s investments in real estate equity securities will include real estate investment trusts (“REITs”) and other real estate-related securities.
The Fund invests in both US and non-US dollar-denominated equity or fixed-income securities. The Fund may invest in currencies for hedging or investment purposes, both in the spot market and through long or short positions in currency-related derivatives. The Fund does not ordinarily expect to hedge its foreign currency exposure because it will be balanced by investments in US dollar-denominated securities, although it may hedge the exposure under certain circumstances.
The Fund may invest significantly to the extent permitted by applicable law in derivatives, such as options, futures contracts, forwards, swaps or structured notes. The Fund intends to use leverage for investment purposes through the use of cash made available by derivatives transactions to make other investments in accordance with its investment policies. In determining when and to what extent to employ leverage or enter into derivatives transactions, the Adviser considers factors such as the relative risks and returns expected of potential investments and the cost of such transactions. The Adviser considers the impact of derivatives in making its assessments of the Fund’s risks. The resulting exposures to markets, sectors, issuers or specific securities will be continuously monitored by the Adviser.
(continued on next page)
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The Fund may seek to gain exposure to physical commodities traded in the commodities markets through investments in a variety of derivative instruments, including investments in commodity index-linked notes. The Adviser expects that the Fund will seek to gain exposure to commodities and commodity-related instruments and derivatives primarily through investments in AllianceBernstein Cayman Inflation Strategy, Ltd., a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”). The Subsidiary is advised by the Adviser and has the same investment objective and substantially similar investment policies and restrictions as the Fund except that the Subsidiary, unlike the Fund, may invest, without limitation, in commodities and commodity-related instruments. The Fund is subject to the risks associated with the commodities, derivatives and other instruments in which the Subsidiary invests, to the extent of its investment in the Subsidiary. The Fund limits its investment in the Subsidiary to no more than 25% of its net assets. Investment in the Subsidiary is expected to provide the Fund with commodity exposure within the limitations of federal tax requirements that apply to the Fund.
The Fund is “non-diversified”, which means that it may concentrate its assets in a smaller number of issuers than a diversified fund.
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DISCLOSURES AND RISKS
Benchmark Disclosure
The MSCI AC World Commodity Producers Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI AC World Commodity Producers Index is a free float-adjusted, market capitalization index designed to track the performance of global listed commodity producers, including emerging markets. Commodities sectors include: energy, grains, industrial metals, petroleum, precious metals and softs. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. Net returns include the reinvestment of dividends after deduction of non-US withholding tax. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the stock, commodity and bond markets fluctuate. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Commodity Risk: Investing in commodities and commodity-linked derivative instruments, either directly or through the Subsidiary, may sub-
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DISCLOSURES AND RISKS (continued)
ject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally go down.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Subsidiary Risk: By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. The derivatives and other investments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and, unless otherwise noted in the Fund’s prospectus, is not subject to all of the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are managed by the Adviser, making it
8 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
DISCLOSURES AND RISKS (continued)
unlikely the Subsidiary will take actions contrary to the interests of the Fund or its shareholders.
Real Estate Risk: The Fund’s investments in real estate securities have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in REITs may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in taxes.
Non-Diversification Risk: The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s NAV.
Active Trading Risk: The Fund expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate may greatly exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Fund’s return. In addition, a high rate of portfolio turnover may result in substantial short-term gains, which may have adverse tax consequences for Fund shareholders.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com. For Class 1 shares, go to www.bernstein.com and click on “Investments”, then “Mutual Fund and Money Market Information—Mutual Fund Performance at a Glance.”
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DISCLOSURES AND RISKS (continued)
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com. For Class 1 shares, go to www.bernstein.com, click on “Investments”, then “Mutual Fund and Money Market Information—Prospectuses, SAIs, and Shareholder Reports”. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
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HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
10/31/2010 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB All Market Real Return Portfolio Class A shares (from 10/31/2010 to 10/31/2020) as compared to the performance of its benchmark. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
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HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
| CLASS 1 SHARES1 | ||||||||
| 1 Year | -9.94% | -9.94% | ||||||
| 5 Years | 0.96% | 0.96% | ||||||
| 10 Years | -1.78% | -1.78% | ||||||
| CLASS 2 SHARES1 | ||||||||
| 1 Year | -9.70% | -9.70% | ||||||
| 5 Years | 1.20% | 1.20% | ||||||
| 10 Years | -1.53% | -1.53% | ||||||
| CLASS A SHARES | ||||||||
| 1 Year | -10.11% | -13.89% | ||||||
| 5 Years | 0.77% | -0.10% | ||||||
| 10 Years | -1.89% | -2.32% | ||||||
| CLASS C SHARES | ||||||||
| 1 Year | -10.85% | -11.73% | ||||||
| 5 Years | 0.01% | 0.01% | ||||||
| 10 Years | -2.61% | -2.61% | ||||||
| ADVISOR CLASS SHARES2 | ||||||||
| 1 Year | -9.79% | -9.79% | ||||||
| 5 Years | 1.03% | 1.03% | ||||||
| 10 Years | -1.62% | -1.62% | ||||||
| CLASS R SHARES2 | ||||||||
| 1 Year | -10.32% | -10.32% | ||||||
| 5 Years | 0.50% | 0.50% | ||||||
| 10 Years | -2.13% | -2.13% | ||||||
| CLASS K SHARES2 | ||||||||
| 1 Year | -10.10% | -10.10% | ||||||
| 5 Years | 0.78% | 0.78% | ||||||
| 10 Years | -1.87% | -1.87% | ||||||
| CLASS I SHARES2 | ||||||||
| 1 Year | -9.76% | -9.76% | ||||||
| 5 Years | 1.19% | 1.19% | ||||||
| 10 Years | -1.55% | -1.55% | ||||||
| CLASS Z SHARES2 | ||||||||
| 1 Year | -9.75% | -9.75% | ||||||
| 5 Years | 1.17% | 1.17% | ||||||
| Since Inception3 | -2.55% | -2.55% | ||||||
(footnotes continued on next page)
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HISTORICAL PERFORMANCE (continued)
The Fund’s prospectus fee table shows the Fund’s total annual operating expense ratios as 1.12%, 0.83%, 1.34%, 2.09%, 1.09%, 1.59%, 1.30%, 0.88% and 0.87% for Class 1, Class 2, Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of extraordinary expenses, interest expense, and acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, brokerage commissions and other transaction costs to 1.30%, 2.05%, 1.05%, 1.55%, 1.30%, 1.05% and 1.05% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated before January 31, 2021 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to the Adviser’s institutional clients or through other limited arrangements. |
| 2 | These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 1/31/2014. |
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HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS 1 SHARES1 | ||||
| 1 Year | -6.29% | |||
| 5 Years | 2.40% | |||
| 10 Years | -1.08% | |||
| CLASS 2 SHARES1 | ||||
| 1 Year | -5.90% | |||
| 5 Years | 2.66% | |||
| 10 Years | -0.82% | |||
| CLASS A SHARES | ||||
| 1 Year | -10.33% | |||
| 5 Years | 1.36% | |||
| 10 Years | -1.62% | |||
| CLASS C SHARES | ||||
| 1 Year | -7.98% | |||
| 5 Years | 1.46% | |||
| 10 Years | -1.91% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | -6.19% | |||
| 5 Years | 2.48% | |||
| 10 Years | -0.94% | |||
| CLASS R SHARES2 | ||||
| 1 Year | -6.58% | |||
| 5 Years | 1.96% | |||
| 10 Years | -1.43% | |||
| CLASS K SHARES2 | ||||
| 1 Year | -6.47% | |||
| 5 Years | 2.21% | |||
| 10 Years | -1.17% | |||
| CLASS I SHARES2 | ||||
| 1 Year | -5.89% | |||
| 5 Years | 2.65% | |||
| 10 Years | -0.83% | |||
| CLASS Z SHARES2 | ||||
| 1 Year | -5.89% | |||
| 5 Years | 2.66% | |||
| Since Inception3 | -2.32% | |||
(footnotes continued on next page)
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HISTORICAL PERFORMANCE (continued)
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to the Adviser’s institutional clients or through other limited arrangements. |
| 2 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 1/31/2014. |
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EXPENSE EXAMPLE
(unaudited)
As a shareholder of a mutual fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
16 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,092.70 | $ | 6.73 | 1.28 | % | $ | 6.94 | 1.32 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,018.70 | $ | 6.50 | 1.28 | % | $ | 6.70 | 1.32 | % | ||||||||||||
| Class C | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,088.10 | $ | 10.66 | 2.03 | % | $ | 10.86 | 2.07 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,014.93 | $ | 10.28 | 2.03 | % | $ | 10.48 | 2.07 | % | ||||||||||||
| Advisor Class | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,094.60 | $ | 5.42 | 1.03 | % | $ | 5.63 | 1.07 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.96 | $ | 5.23 | 1.03 | % | $ | 5.43 | 1.07 | % | ||||||||||||
| Class R | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,089.60 | $ | 8.04 | 1.53 | % | $ | 8.25 | 1.57 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.44 | $ | 7.76 | 1.53 | % | $ | 7.96 | 1.57 | % | ||||||||||||
| Class K | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,092.50 | $ | 6.73 | 1.28 | % | $ | 6.94 | 1.32 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,018.70 | $ | 6.50 | 1.28 | % | $ | 6.70 | 1.32 | % | ||||||||||||
| Class I | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,093.80 | $ | 4.47 | 0.85 | % | $ | 4.68 | 0.89 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.86 | $ | 4.32 | 0.85 | % | $ | 4.52 | 0.89 | % | ||||||||||||
| Class 1 | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,093.00 | $ | 5.84 | 1.11 | % | $ | 6.05 | 1.15 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.56 | $ | 5.63 | 1.11 | % | $ | 5.84 | 1.15 | % | ||||||||||||
| Class 2 | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,093.70 | $ | 4.32 | 0.82 | % | $ | 4.53 | 0.86 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.01 | $ | 4.17 | 0.82 | % | $ | 4.37 | 0.86 | % | ||||||||||||
| Class Z | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,093.80 | $ | 4.47 | 0.85 | % | $ | 4.68 | 0.89 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.86 | $ | 4.32 | 0.85 | % | $ | 4.52 | 0.89 | % | ||||||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| + | In connection with the Fund’s investments in affiliated/unaffiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Fund’s total expenses are equal to the classes’ annualized expense ratio plus the Fund’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 17 | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $929.1
| 1 | All data are as of October 31, 2020. The portfolio breakdown is expressed as an approximate percentage of the Fund’s net assets inclusive of derivative exposure, based on the Adviser’s internal classification guidelines. |
| 2 | The Fund’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Consolidated Portfolio of Investments” section of the report for additional details). |
18 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
PORTFOLIO SUMMARY (continued)
October 31, 2020 (unaudited)
TEN LARGEST HOLDINGS2
| Security | U.S. $ Value | Percent of Net Assets | ||||||
| Japanese Government CPI Linked Bond Series 21 | $ | 37,979,829 | 4.1 | % | ||||
| Prologis, Inc. | 15,717,347 | 1.7 | ||||||
| Royal Dutch Shell PLC – Class B | 13,253,580 | 1.4 | ||||||
| Digital Realty Trust, Inc. | 10,692,630 | 1.2 | ||||||
| iShares MSCI Global Metals & Mining Producers ETF | 10,174,949 | 1.1 | ||||||
| Chevron Corp. | 9,268,103 | 1.0 | ||||||
| Welltower, Inc. | 8,805,375 | 0.9 | ||||||
| Vonovia SE | 8,266,042 | 0.9 | ||||||
| VanEck Vectors Gold Miners ETF | 7,989,681 | 0.9 | ||||||
| Mitsui Fudosan Co., Ltd. | 7,919,516 | 0.9 | ||||||
| $ | 130,067,052 | 14.1 | % | |||||
| 1 | All data are as of October 31, 2020. The Fund’s country breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Consolidated Portfolio of Investments” section of the report for additional details). “Other” country weightings represent 0.6% or less in the following: Austria, Belgium, Chile, Denmark, Finland, Greece, Ireland, Israel, Italy, Luxembourg, Mexico, Netherlands, New Zealand, Philippines, Russia, Singapore, South Korea, Spain, Switzerland, Thailand and United Arab Emirates. |
| 2 | Long-term investments. |
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 19 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS
October 31, 2020
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
COMMON STOCKS – 62.8% | ||||||||||||
Real Estate – 34.3% | ||||||||||||
Diversified Real Estate Activities – 2.6% | ||||||||||||
City Developments Ltd. | 249,700 | $ | 1,159,574 | |||||||||
Mitsubishi Estate Co., Ltd. | 150,600 | 2,246,331 | ||||||||||
Mitsui Fudosan Co., Ltd. | 465,100 | 7,919,516 | ||||||||||
New World Development Co., Ltd. | 717,750 | 3,426,816 | ||||||||||
Sumitomo Realty & Development Co., Ltd. | 50,600 | 1,354,022 | ||||||||||
Sun Hung Kai Properties Ltd. | 486,000 | 6,255,701 | ||||||||||
UOL Group Ltd. | 329,700 | 1,502,836 | ||||||||||
|
| |||||||||||
| 23,864,796 | ||||||||||||
|
| |||||||||||
Diversified REITs – 2.4% | ||||||||||||
Activia Properties, Inc. | 390 | 1,409,077 | ||||||||||
Alexander & Baldwin, Inc. | 139,340 | 1,790,519 | ||||||||||
Armada Hoffler Properties, Inc. | 164,533 | 1,482,442 | ||||||||||
Daiwa House REIT Investment Corp. | 636 | 1,471,234 | ||||||||||
Essential Properties Realty Trust, Inc. | 171,840 | 2,838,797 | ||||||||||
Fibra Uno Administracion SA de CV | 991,230 | 753,768 | ||||||||||
Gecina SA | 13,730 | 1,704,483 | ||||||||||
Growthpoint Properties Ltd. | 1,440,142 | 942,152 | ||||||||||
Hulic Reit, Inc. | 2,033 | 2,672,662 | ||||||||||
NIPPON REIT Investment Corp. | 277 | 889,395 | ||||||||||
Nomura Real Estate Master Fund, Inc. | 1,297 | 1,548,815 | ||||||||||
Stockland | 1,714,523 | 4,636,211 | ||||||||||
|
| |||||||||||
| 22,139,555 | ||||||||||||
|
| |||||||||||
Health Care REITs – 3.0% | ||||||||||||
Assura PLC | 4,648,560 | 4,588,922 | ||||||||||
Medical Properties Trust, Inc. | 328,390 | 5,851,910 | ||||||||||
Omega Healthcare Investors, Inc. | 170,626 | 4,915,735 | ||||||||||
Physicians Realty Trust | 210,056 | 3,541,544 | ||||||||||
Welltower, Inc. | 163,760 | 8,805,375 | ||||||||||
|
| |||||||||||
| 27,703,486 | ||||||||||||
|
| |||||||||||
Hotel & Resort REITs – 0.2% | ||||||||||||
RLJ Lodging Trust | 210,450 | 1,721,481 | ||||||||||
|
| |||||||||||
Industrial REITs – 4.2% | ||||||||||||
Americold Realty Trust | 129,740 | 4,700,480 | ||||||||||
Dream Industrial Real Estate Investment Trust | 194,124 | 1,723,701 | ||||||||||
GLP J-Reit(a) | 1,457 | 2,246,181 | ||||||||||
Industrial & Infrastructure Fund Investment Corp. | 1,353 | 2,303,194 | ||||||||||
Nippon Prologis REIT, Inc.(a) | 255 | 839,317 | ||||||||||
Plymouth Industrial REIT, Inc. | 54,286 | 689,975 | ||||||||||
Prologis, Inc. | 158,441 | 15,717,347 | ||||||||||
Rexford Industrial Realty, Inc. | 87,030 | 4,043,414 | ||||||||||
20 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Segro PLC | 285,842 | $ | 3,339,976 | |||||||||
STAG Industrial, Inc. | 109,670 | 3,412,930 | ||||||||||
|
| |||||||||||
| 39,016,515 | ||||||||||||
|
| |||||||||||
Office REITs – 3.0% | ||||||||||||
Alexandria Real Estate Equities, Inc. | 43,581 | 6,603,393 | ||||||||||
Allied Properties Real Estate Investment Trust | 77,560 | 1,880,930 | ||||||||||
Boston Properties, Inc. | 57,910 | 4,193,263 | ||||||||||
Cousins Properties, Inc. | 133,735 | 3,407,568 | ||||||||||
Daiwa Office Investment Corp. | 441 | 2,393,141 | ||||||||||
Derwent London PLC | 43,060 | 1,482,835 | ||||||||||
Japan Real Estate Investment Corp. | 295 | 1,445,708 | ||||||||||
Kilroy Realty Corp. | 61,240 | 2,883,179 | ||||||||||
Nippon Building Fund, Inc. | 220 | 1,111,176 | ||||||||||
SL Green Realty Corp.(b) | 52,130 | 2,231,685 | ||||||||||
True North Commercial Real Estate Investment Trust | 146,620 | 603,076 | ||||||||||
|
| |||||||||||
| 28,235,954 | ||||||||||||
|
| |||||||||||
Real Estate Development – 2.9% | ||||||||||||
Broadstone Net Lease, Inc. – Class A | 80,450 | 1,327,425 | ||||||||||
China Resources Land Ltd. | 1,110,000 | 4,539,529 | ||||||||||
CIFI Holdings Group Co., Ltd. | 6,620,000 | 4,586,210 | ||||||||||
CK Asset Holdings Ltd. | 317,000 | 1,471,986 | ||||||||||
Emaar Properties PJSC(a) | 2,367,470 | 1,696,548 | ||||||||||
Instone Real Estate Group AG(a)(c) | 102,789 | 2,127,074 | ||||||||||
Megaworld Corp.(a) | 17,716,000 | 1,108,310 | ||||||||||
Midea Real Estate Holding Ltd.(b)(c) | 2,236,400 | 5,057,232 | ||||||||||
Times China Holdings Ltd. | 3,822,000 | 5,105,865 | ||||||||||
|
| |||||||||||
| 27,020,179 | ||||||||||||
|
| |||||||||||
Real Estate Operating Companies – 4.5% | ||||||||||||
ADLER Group SA(a)(b)(c) | 55,900 | 1,405,307 | ||||||||||
Azrieli Group Ltd. | 31,800 | 1,492,562 | ||||||||||
CA Immobilien Anlagen AG | 80,379 | 2,207,894 | ||||||||||
Central Pattana PCL | 421,300 | 520,416 | ||||||||||
Deutsche Wohnen SE | 147,900 | 7,464,944 | ||||||||||
Entra ASA(c) | 158,208 | 2,068,253 | ||||||||||
Fabege AB | 105,575 | 1,333,084 | ||||||||||
Grainger PLC | 791,800 | 2,868,549 | ||||||||||
Kojamo Oyj | 94,380 | 1,945,428 | ||||||||||
Kungsleden AB | 170,600 | 1,447,677 | ||||||||||
LEG Immobilien AG | 24,410 | 3,299,081 | ||||||||||
Samhallsbyggnadsbolaget i Norden AB(b) | 810,980 | 2,231,931 | ||||||||||
SM Prime Holdings, Inc. | 1,497,400 | 1,042,623 | ||||||||||
Swire Properties Ltd. | 661,000 | 1,773,784 | ||||||||||
Vonovia SE | 129,433 | 8,266,042 | ||||||||||
Wharf Real Estate Investment Co., Ltd. | 308,000 | 1,185,424 | ||||||||||
Wihlborgs Fastigheter AB | 79,120 | 1,426,093 | ||||||||||
|
| |||||||||||
| 41,979,092 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 21 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Real Estate Services – 0.1% | ||||||||||||
Unibail-Rodamco-Westfield(b) | 21,490 | $ | 871,064 | |||||||||
|
| |||||||||||
Residential REITs – 5.4% | ||||||||||||
American Campus Communities, Inc. | 112,580 | 4,217,247 | ||||||||||
American Homes 4 Rent—Class A | 188,450 | 5,327,481 | ||||||||||
Bluerock Residential Growth REIT, Inc. | 80,910 | 700,681 | ||||||||||
Camden Property Trust | 58,140 | 5,362,833 | ||||||||||
Daiwa Securities Living Investments Corp. | 2,530 | 2,471,362 | ||||||||||
Essex Property Trust, Inc. | 24,850 | 5,084,061 | ||||||||||
Independence Realty Trust, Inc. | 399,940 | 4,859,271 | ||||||||||
Invitation Homes, Inc. | 157,410 | 4,290,997 | ||||||||||
Killam Apartment Real Estate Investment Trust | 296,860 | 3,567,311 | ||||||||||
Mid-America Apartment Communities, Inc. | 53,440 | 6,232,707 | ||||||||||
Minto Apartment Real Estate Investment Trust | 135,080 | 1,655,675 | ||||||||||
Sun Communities, Inc. | 45,087 | 6,205,324 | ||||||||||
|
| |||||||||||
| 49,974,950 | ||||||||||||
|
| |||||||||||
Retail REITs – 3.4% | ||||||||||||
AEON REIT Investment Corp. | 1,201 | 1,358,351 | ||||||||||
Brixmor Property Group, Inc. | 427,850 | 4,689,236 | ||||||||||
CapitaLand Mall Trust | 2,290,660 | 2,903,543 | ||||||||||
Eurocommercial Properties NV | 143,900 | 1,570,822 | ||||||||||
Kenedix Retail REIT Corp. | 349 | 667,953 | ||||||||||
Link REIT | 552,901 | 4,219,662 | ||||||||||
National Retail Properties, Inc. | 76,250 | 2,440,763 | ||||||||||
NETSTREIT Corp.(a) | 80,766 | 1,416,636 | ||||||||||
Realty Income Corp. | 83,270 | 4,818,002 | ||||||||||
Scentre Group | 35,040 | 51,709 | ||||||||||
Simon Property Group, Inc. | 21,242 | 1,334,210 | ||||||||||
SITE Centers Corp. | 336,640 | 2,292,518 | ||||||||||
Vicinity Centres(b) | 4,133,140 | 3,512,372 | ||||||||||
|
| |||||||||||
| 31,275,777 | ||||||||||||
|
| |||||||||||
Specialized REITs – 2.6% | ||||||||||||
American Tower Corp. | 266 | 61,087 | ||||||||||
CubeSmart | 142,530 | 4,836,043 | ||||||||||
Digital Realty Trust, Inc. | 74,100 | 10,692,630 | ||||||||||
MGM Growth Properties LLC – Class A | 103,196 | 2,729,534 | ||||||||||
National Storage Affiliates Trust | 111,200 | 3,768,568 | ||||||||||
Safestore Holdings PLC | 157,000 | 1,634,366 | ||||||||||
VICI Properties, Inc. | 25,631 | 588,232 | ||||||||||
Weyerhaeuser Co. | 10,735 | 292,958 | ||||||||||
|
| |||||||||||
| 24,603,418 | ||||||||||||
|
| |||||||||||
| 318,406,267 | ||||||||||||
|
| |||||||||||
Materials – 7.2% | ||||||||||||
Aluminum – 0.1% | ||||||||||||
Alcoa Corp.(a) | 94,210 | 1,217,193 | ||||||||||
|
| |||||||||||
22 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Commodity Chemicals – 0.3% | ||||||||||||
Corteva, Inc. | 3,247 | $ | 107,086 | |||||||||
Mitsubishi Chemical Holdings Corp. | 95,300 | 536,363 | ||||||||||
Mitsui Chemicals, Inc. | 22,200 | 568,594 | ||||||||||
Orbia Advance Corp. SAB de CV | 820,137 | 1,457,274 | ||||||||||
|
| |||||||||||
| 2,669,317 | ||||||||||||
|
| |||||||||||
Construction Materials – 0.4% | ||||||||||||
Fletcher Building Ltd.(a) | 741,800 | 2,008,886 | ||||||||||
Grupo Cementos de Chihuahua SAB de CV | 258,307 | 1,302,769 | ||||||||||
|
| |||||||||||
| 3,311,655 | ||||||||||||
|
| |||||||||||
Copper – 0.6% | ||||||||||||
Antofagasta PLC | 148,718 | 1,983,033 | ||||||||||
First Quantum Minerals Ltd. | 151,735 | 1,743,649 | ||||||||||
Lundin Mining Corp. | 153,021 | 924,581 | ||||||||||
OZ Minerals Ltd. | 76,876 | 803,076 | ||||||||||
|
| |||||||||||
| 5,454,339 | ||||||||||||
|
| |||||||||||
Diversified Chemicals – 0.1% | ||||||||||||
LANXESS AG | 8,638 | 438,100 | ||||||||||
Sumitomo Chemical Co., Ltd. | 107,500 | 351,652 | ||||||||||
|
| |||||||||||
| 789,752 | ||||||||||||
|
| |||||||||||
Diversified Metals & Mining – 2.0% |
| |||||||||||
Anglo American PLC | 96,931 | 2,274,309 | ||||||||||
BHP Group Ltd. | 4,118 | 98,715 | ||||||||||
Boliden AB | 62,472 | 1,703,555 | ||||||||||
Glencore PLC(a) | 2,001,723 | 4,037,947 | ||||||||||
Korea Zinc Co., Ltd. | 3,856 | 1,304,127 | ||||||||||
MMC Norilsk Nickel PJSC (ADR)(b) | 50,427 | 1,197,641 | ||||||||||
Orocobre Ltd.(a)(b) | 139,226 | 251,032 | ||||||||||
Rio Tinto PLC | 118,498 | 6,702,408 | ||||||||||
Sumitomo Metal Mining Co., Ltd. | 33,500 | 1,041,305 | ||||||||||
|
| |||||||||||
| 18,611,039 | ||||||||||||
|
| |||||||||||
Fertilizers & Agricultural Chemicals – 0.3% | ||||||||||||
FMC Corp. | 620 | 63,699 | ||||||||||
Yara International ASA(b) | 66,920 | 2,341,896 | ||||||||||
|
| |||||||||||
| 2,405,595 | ||||||||||||
|
| |||||||||||
Gold – 1.7% |
| |||||||||||
Agnico Eagle Mines Ltd. | 89,051 | 7,049,620 | ||||||||||
AngloGold Ashanti Ltd. | 140,188 | 3,230,696 | ||||||||||
Northern Star Resources Ltd. | 128,610 | 1,358,624 | ||||||||||
Polyus PJSC (GDR)(c) | 16,782 | 1,643,794 | ||||||||||
Regis Resources Ltd. | 331,590 | 973,258 | ||||||||||
St. Barbara Ltd. | 565,140 | 1,062,720 | ||||||||||
Wheaton Precious Metals Corp. | 1,509 | 69,249 | ||||||||||
Yamana Gold, Inc. | 81,020 | 450,618 | ||||||||||
|
| |||||||||||
| 15,838,579 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 23 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Paper Packaging – 0.1% | ||||||||||||
International Paper Co. | 22,591 | $ | 988,357 | |||||||||
Smurfit Kappa Group PLC | 10,267 | 386,851 | ||||||||||
|
| |||||||||||
| 1,375,208 | ||||||||||||
|
| |||||||||||
Paper Products – 0.2% | ||||||||||||
Suzano SA(a) | 217,400 | 1,896,299 | ||||||||||
|
| |||||||||||
Precious Metals & Minerals – 0.1% | ||||||||||||
Industrias Penoles SAB de CV | 61,448 | 981,476 | ||||||||||
Pan American Silver Corp. | 10,378 | 329,809 | ||||||||||
|
| |||||||||||
| 1,311,285 | ||||||||||||
|
| |||||||||||
Specialty Chemicals – 0.5% | ||||||||||||
Chr Hansen Holding A/S | 3,037 | 306,463 | ||||||||||
Clariant AG | 9,869 | 169,310 | ||||||||||
Evonik Industries AG | 51,374 | 1,236,926 | ||||||||||
RPM International, Inc. | 14,892 | 1,260,906 | ||||||||||
Sika AG | 2,651 | 652,158 | ||||||||||
Teijin Ltd. | 32,100 | 491,706 | ||||||||||
Umicore SA | 12,360 | 476,494 | ||||||||||
|
| |||||||||||
| 4,593,963 | ||||||||||||
|
| |||||||||||
Steel – 0.8% | ||||||||||||
APERAM SA | 62,500 | 1,677,291 | ||||||||||
ArcelorMittal SA(a) | 145,738 | 1,976,211 | ||||||||||
Fortescue Metals Group Ltd. | 6,420 | 78,539 | ||||||||||
Steel Dynamics, Inc. | 2,118 | 66,675 | ||||||||||
Vale SA (Sponsored ADR) – Class B | 328,285 | 3,469,972 | ||||||||||
|
| |||||||||||
| 7,268,688 | ||||||||||||
|
| |||||||||||
| 66,742,912 | ||||||||||||
|
| |||||||||||
Energy – 5.7% | ||||||||||||
Integrated Oil & Gas – 5.1% | ||||||||||||
BP PLC | 1,752,598 | 4,470,322 | ||||||||||
Cenovus Energy, Inc.(b) | 15,809 | 51,736 | ||||||||||
Chevron Corp. | 133,354 | 9,268,103 | ||||||||||
Exxon Mobil Corp. | 103,900 | 3,389,218 | ||||||||||
LUKOIL PJSC (Sponsored ADR) | 20,260 | 1,035,083 | ||||||||||
PetroChina Co., Ltd. – Class H | 10,028,000 | 2,816,236 | ||||||||||
Petroleo Brasileiro SA (Preference Shares) | 864,400 | 2,853,238 | ||||||||||
Repsol SA | 508,713 | 3,193,734 | ||||||||||
Royal Dutch Shell PLC – Class B | 1,099,031 | 13,253,580 | ||||||||||
TOTAL SE | 220,682 | 6,685,938 | ||||||||||
|
| |||||||||||
| 47,017,188 | ||||||||||||
|
| |||||||||||
Oil & Gas Equipment & Services – 0.0% | ||||||||||||
Baker Hughes Co. – Class A | 5,720 | 84,484 | ||||||||||
|
| |||||||||||
24 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Oil & Gas Exploration & Production – 0.3% | ||||||||||||
Aker BP ASA(b) | 72,823 | $ | 1,134,098 | |||||||||
EOG Resources, Inc. | 63,068 | 2,159,448 | ||||||||||
|
| |||||||||||
| 3,293,546 | ||||||||||||
|
| |||||||||||
Oil & Gas Refining & Marketing – 0.2% | ||||||||||||
ENEOS Holdings, Inc. | 355,200 | 1,198,546 | ||||||||||
HollyFrontier Corp. | 2,772 | 51,310 | ||||||||||
Motor Oil Hellas Corinth Refineries SA | 81,278 | 759,932 | ||||||||||
|
| |||||||||||
| 2,009,788 | ||||||||||||
|
| |||||||||||
Oil & Gas Storage & Transportation – 0.1% | ||||||||||||
Cheniere Energy, Inc.(a) | 11,180 | 535,187 | ||||||||||
|
| |||||||||||
| 52,940,193 | ||||||||||||
|
| |||||||||||
Software & Services – 2.0% | ||||||||||||
Application Software – 0.5% | ||||||||||||
Adobe, Inc.(a) | 952 | 425,639 | ||||||||||
Cadence Design Systems, Inc.(a) | 12,126 | 1,326,221 | ||||||||||
Constellation Software, Inc./Canada | 476 | 499,684 | ||||||||||
Dropbox, Inc. – Class A(a) | 31,881 | 582,147 | ||||||||||
Fair Isaac Corp.(a) | 1,129 | 441,948 | ||||||||||
Intuit, Inc. | 4,568 | 1,437,458 | ||||||||||
salesforce.com, Inc.(a) | 181 | 42,041 | ||||||||||
WiseTech Global Ltd. | 2,574 | 52,498 | ||||||||||
Zoom Video Communications, Inc. – Class A(a) | 159 | 73,285 | ||||||||||
|
| |||||||||||
| 4,880,921 | ||||||||||||
|
| |||||||||||
Data Processing & Outsourced Services – 0.1% | ||||||||||||
Afterpay Ltd.(a) | 1,877 | 127,803 | ||||||||||
Mastercard, Inc. – Class A | 2,817 | 813,099 | ||||||||||
Visa, Inc. – Class A | 2,472 | 449,187 | ||||||||||
|
| |||||||||||
| 1,390,089 | ||||||||||||
|
| |||||||||||
Internet Services & Infrastructure – 0.3% | ||||||||||||
GDS Holdings Ltd. (ADR)(a) | 17,220 | 1,447,169 | ||||||||||
Shopify, Inc. – Class A(a) | 861 | 793,745 | ||||||||||
VeriSign, Inc.(a) | 1,629 | 310,650 | ||||||||||
|
| |||||||||||
| 2,551,564 | ||||||||||||
|
| |||||||||||
IT Consulting & Other Services – 0.2% | ||||||||||||
Atos SE(a) | 7,837 | 535,391 | ||||||||||
EPAM Systems, Inc.(a) | 1,218 | 376,301 | ||||||||||
Fujitsu Ltd. | 5,000 | 591,573 | ||||||||||
International Business Machines Corp. | 2,865 | 319,906 | ||||||||||
|
| |||||||||||
| 1,823,171 | ||||||||||||
|
| |||||||||||
Systems Software – 0.9% | ||||||||||||
Fortinet, Inc.(a) | 3,170 | 349,873 | ||||||||||
Microsoft Corp. | 17,291 | 3,500,909 | ||||||||||
NortonLifeLock, Inc. | 48,646 | 1,000,648 | ||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 25 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Oracle Corp. | 9,430 | $ | 529,117 | |||||||||
ServiceNow, Inc.(a) | 3,204 | 1,594,214 | ||||||||||
Trend Micro, Inc./Japan | 9,800 | 548,948 | ||||||||||
VMware, Inc. – Class A(a) | 6,509 | 837,904 | ||||||||||
|
| |||||||||||
| 8,361,613 | ||||||||||||
|
| |||||||||||
| 19,007,358 | ||||||||||||
|
| |||||||||||
Capital Goods – 1.5% | ||||||||||||
Aerospace & Defense – 0.0% | ||||||||||||
BAE Systems PLC | 58,296 | 299,664 | ||||||||||
|
| |||||||||||
Agricultural & Farm Machinery – 0.2% | ||||||||||||
Deere & Co. | 6,180 | 1,396,124 | ||||||||||
|
| |||||||||||
Building Products – 0.3% | ||||||||||||
Carrier Global Corp. | 22,716 | 758,487 | ||||||||||
Cie de Saint-Gobain(a) | 11,773 | 458,600 | ||||||||||
Masco Corp. | 14,079 | 754,634 | ||||||||||
Otis Worldwide Corp. | 11,345 | 695,222 | ||||||||||
|
| |||||||||||
| 2,666,943 | ||||||||||||
|
| |||||||||||
Construction & Engineering – 0.1% | ||||||||||||
ACS Actividades de Construccion y Servicios SA | 4,353 | 103,474 | ||||||||||
Kajima Corp. | 28,200 | 301,329 | ||||||||||
Shimizu Corp. | 60,600 | 420,767 | ||||||||||
|
| |||||||||||
| 825,570 | ||||||||||||
|
| |||||||||||
Construction & Farm Machinery & Heavy Trucks – 0.2% | ||||||||||||
Cummins, Inc. | 4,281 | 941,349 | ||||||||||
Volvo AB – Class B(a) | 20,946 | 407,131 | ||||||||||
|
| |||||||||||
| 1,348,480 | ||||||||||||
|
| |||||||||||
Electrical Components & Equipment – 0.2% | ||||||||||||
Acuity Brands, Inc. | 11,373 | 1,013,789 | ||||||||||
Legrand SA | 5,783 | 428,054 | ||||||||||
Prysmian SpA | 22,445 | 610,782 | ||||||||||
|
| |||||||||||
| 2,052,625 | ||||||||||||
|
| |||||||||||
Heavy Electrical Equipment – 0.1% | ||||||||||||
Vestas Wind Systems A/S | 4,819 | 826,767 | ||||||||||
|
| |||||||||||
Industrial Conglomerates – 0.0% | ||||||||||||
Toshiba Corp. | 14,000 | 354,142 | ||||||||||
|
| |||||||||||
Industrial Machinery – 0.3% | ||||||||||||
Alfa Laval AB(a) | 10,015 | 203,422 | ||||||||||
Atlas Copco AB – Class B | 12,517 | 479,599 | ||||||||||
Mitsubishi Heavy Industries Ltd. | 22,600 | 485,566 | ||||||||||
26 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Snap-on, Inc. | 6,828 | $ | 1,075,615 | |||||||||
Techtronic Industries Co., Ltd. | 31,000 | 417,550 | ||||||||||
|
| |||||||||||
| 2,661,752 | ||||||||||||
|
| |||||||||||
Trading Companies & Distributors – 0.1% | ||||||||||||
WW Grainger, Inc. | 3,524 | 1,233,471 | ||||||||||
|
| |||||||||||
| 13,665,538 | ||||||||||||
|
| |||||||||||
Pharmaceuticals & Biotechnology – 1.3% | ||||||||||||
Biotechnology – 0.2% | ||||||||||||
AbbVie, Inc. | 8,141 | 692,799 | ||||||||||
BeiGene Ltd. (Sponsored ADR)(a) | 446 | 132,248 | ||||||||||
Gilead Sciences, Inc. | 5,075 | 295,111 | ||||||||||
Sarepta Therapeutics, Inc.(a) | 1,049 | 142,570 | ||||||||||
Vertex Pharmaceuticals, Inc.(a) | 2,298 | 478,811 | ||||||||||
|
| |||||||||||
| 1,741,539 | ||||||||||||
|
| |||||||||||
Life Sciences Tools & Services – 0.5% | ||||||||||||
Bio-Rad Laboratories, Inc. – Class A(a) | 2,309 | 1,354,044 | ||||||||||
Eurofins Scientific SE(a) | 543 | 432,402 | ||||||||||
Lonza Group AG | 1,275 | 772,535 | ||||||||||
Mettler-Toledo International, Inc.(a) | 613 | 611,719 | ||||||||||
Sartorius Stedim Biotech | 1,973 | 748,181 | ||||||||||
Waters Corp.(a) | 1,549 | 345,148 | ||||||||||
|
| |||||||||||
| 4,264,029 | ||||||||||||
|
| |||||||||||
Pharmaceuticals – 0.6% | ||||||||||||
AstraZeneca PLC | 4,970 | 499,015 | ||||||||||
Eli Lilly & Co. | 9,188 | 1,198,667 | ||||||||||
Johnson & Johnson | 556 | 76,233 | ||||||||||
Merck & Co., Inc. | 13,240 | 995,781 | ||||||||||
Novartis AG | 635 | 49,481 | ||||||||||
Novo Nordisk A/S – Class B | 13,769 | 877,989 | ||||||||||
Pfizer, Inc. | 14,630 | 519,072 | ||||||||||
Roche Holding AG | 3,797 | 1,220,095 | ||||||||||
Takeda Pharmaceutical Co., Ltd. | 7,100 | 219,408 | ||||||||||
Zoetis, Inc. | 2,271 | 360,067 | ||||||||||
|
| |||||||||||
| 6,015,808 | ||||||||||||
|
| |||||||||||
| 12,021,376 | ||||||||||||
|
| |||||||||||
Food Beverage & Tobacco – 1.2% | ||||||||||||
Brewers – 0.0% | ||||||||||||
Heineken Holding NV | 1,063 | 81,917 | ||||||||||
Kirin Holdings Co., Ltd. | 14,500 | 261,411 | ||||||||||
|
| |||||||||||
| 343,328 | ||||||||||||
|
| |||||||||||
Packaged Foods & Meats – 0.9% | ||||||||||||
a2 Milk Co., Ltd. (The)(a) | 37,297 | 361,153 | ||||||||||
Ajinomoto Co., Inc. | 11,800 | 237,071 | ||||||||||
Hershey Co. (The) | 7,390 | 1,015,829 | ||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 27 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Kellogg Co. | 11,235 | $ | 706,569 | |||||||||
Mowi ASA(b) | 136,535 | 2,156,974 | ||||||||||
Nestle SA | 8,623 | 969,897 | ||||||||||
Tyson Foods, Inc. – Class A | 41,850 | 2,395,076 | ||||||||||
WH Group Ltd.(c) | 329,500 | 259,523 | ||||||||||
|
| |||||||||||
| 8,102,092 | ||||||||||||
|
| |||||||||||
Soft Drinks – 0.0% | ||||||||||||
Monster Beverage Corp.(a) | 1,553 | 118,913 | ||||||||||
| �� |
|
| ||||||||||
Tobacco – 0.3% | ||||||||||||
Altria Group, Inc. | 28,946 | 1,044,372 | ||||||||||
Philip Morris International, Inc. | 17,662 | 1,254,355 | ||||||||||
Swedish Match AB | 6,410 | 481,920 | ||||||||||
|
| |||||||||||
| 2,780,647 | ||||||||||||
|
| |||||||||||
| 11,344,980 | ||||||||||||
|
| |||||||||||
Retailing – 1.2% | ||||||||||||
Automotive Retail – 0.1% | ||||||||||||
O’Reilly Automotive, Inc.(a) | 2,734 | 1,193,664 | ||||||||||
|
| |||||||||||
Computer & Electronics Retail – 0.1% | ||||||||||||
Best Buy Co., Inc. | 3,621 | 403,923 | ||||||||||
Hikari Tsushin, Inc. | 900 | 211,090 | ||||||||||
|
| |||||||||||
| 615,013 | ||||||||||||
|
| |||||||||||
Department Stores – 0.1% | ||||||||||||
Next PLC | 10,362 | 782,606 | ||||||||||
|
| |||||||||||
General Merchandise Stores – 0.0% | ||||||||||||
Dollar General Corp. | 1,415 | 295,325 | ||||||||||
|
| |||||||||||
Home Improvement Retail – 0.3% | ||||||||||||
Home Depot, Inc. (The) | 3,729 | 994,562 | ||||||||||
Lowe’s Cos., Inc. | 9,585 | 1,515,388 | ||||||||||
|
| |||||||||||
| 2,509,950 | ||||||||||||
|
| |||||||||||
Internet & Direct Marketing Retail – 0.6% | ||||||||||||
Amazon.com, Inc.(a) | 1,140 | 3,461,211 | ||||||||||
Booking Holdings, Inc.(a) | 76 | 123,310 | ||||||||||
eBay, Inc. | 21,905 | 1,043,335 | ||||||||||
Zalando SE(a)(c) | 7,743 | 721,062 | ||||||||||
|
| |||||||||||
| 5,348,918 | ||||||||||||
|
| |||||||||||
| 10,745,476 | ||||||||||||
|
| |||||||||||
Media & Entertainment – 1.0% | ||||||||||||
Advertising – 0.0% | ||||||||||||
Omnicom Group, Inc. | 4,539 | 214,241 | ||||||||||
|
| |||||||||||
28 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Cable & Satellite – 0.1% | ||||||||||||
Liberty Broadband Corp.(a) | 3,873 | $ | 548,843 | |||||||||
|
| |||||||||||
Interactive Home Entertainment – 0.2% | ||||||||||||
Activision Blizzard, Inc. | 6,344 | 480,431 | ||||||||||
Electronic Arts, Inc.(a) | 9,590 | 1,149,170 | ||||||||||
Nintendo Co., Ltd. | 1,400 | 756,964 | ||||||||||
|
| |||||||||||
| 2,386,565 | ||||||||||||
|
| |||||||||||
Interactive Media & Services – 0.6% | ||||||||||||
Alphabet, Inc. – Class A(a) | 607 | 980,979 | ||||||||||
Alphabet, Inc. – Class C(a) | 478 | 774,843 | ||||||||||
Facebook, Inc. – Class A(a) | 11,941 | 3,141,796 | ||||||||||
Z Holdings Corp. | 98,400 | 686,149 | ||||||||||
|
| |||||||||||
| 5,583,767 | ||||||||||||
|
| |||||||||||
Movies & Entertainment – 0.1% | ||||||||||||
Netflix, Inc.(a) | 2,062 | 980,976 | ||||||||||
|
| |||||||||||
| 9,714,392 | ||||||||||||
|
| |||||||||||
Technology Hardware & Equipment – 0.9% | ||||||||||||
Communications Equipment – 0.1% | ||||||||||||
Nokia Oyj(a) | 93,833 | 316,329 | ||||||||||
Telefonaktiebolaget LM Ericsson – Class B | 26,791 | 299,109 | ||||||||||
|
| |||||||||||
| 615,438 | ||||||||||||
|
| |||||||||||
Electronic Components – 0.0% | ||||||||||||
TDK Corp. | 2,000 | 235,201 | ||||||||||
|
| |||||||||||
Electronic Equipment & Instruments – 0.1% | ||||||||||||
Hitachi Ltd. | 18,800 | 633,641 | ||||||||||
|
| |||||||||||
Technology Distributors – 0.1% | ||||||||||||
Arrow Electronics, Inc.(a) | 15,106 | 1,176,606 | ||||||||||
|
| |||||||||||
Technology Hardware, Storage & Peripherals – 0.6% | ||||||||||||
Apple, Inc. | 48,752 | 5,307,143 | ||||||||||
|
| |||||||||||
| 7,968,029 | ||||||||||||
|
| |||||||||||
Utilities – 0.9% | ||||||||||||
Electric Utilities – 0.5% | ||||||||||||
Endesa SA | 13,936 | 373,892 | ||||||||||
Enel SpA | 385,780 | 3,067,145 | ||||||||||
Red Electrica Corp. SA | 29,704 | 523,221 | ||||||||||
Terna Rete Elettrica Nazionale SpA | 87,902 | 593,495 | ||||||||||
|
| |||||||||||
| 4,557,753 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 29 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Gas Utilities – 0.2% | ||||||||||||
Snam SpA | 116,903 | $ | 570,029 | |||||||||
UGI Corp. | 37,342 | 1,207,640 | ||||||||||
|
| |||||||||||
| 1,777,669 | ||||||||||||
|
| |||||||||||
Independent Power Producers & Energy Traders – 0.1% | ||||||||||||
AES Corp. (The) | 26,746 | 521,547 | ||||||||||
|
| |||||||||||
Multi-Utilities – 0.1% | ||||||||||||
Sempra Energy | 8,349 | 1,046,631 | ||||||||||
|
| |||||||||||
| 7,903,600 | ||||||||||||
|
| |||||||||||
Semiconductors & Semiconductor Equipment – 0.7% | ||||||||||||
Semiconductor Equipment – 0.3% | ||||||||||||
Applied Materials, Inc. | 20,622 | 1,221,441 | ||||||||||
ASML Holding NV | 2,301 | 832,508 | ||||||||||
Lam Research Corp. | 1,497 | 512,094 | ||||||||||
|
| |||||||||||
| 2,566,043 | ||||||||||||
|
| |||||||||||
Semiconductors – 0.4% | ||||||||||||
Intel Corp. | 30,530 | 1,351,868 | ||||||||||
QUALCOMM, Inc. | 14,035 | 1,731,358 | ||||||||||
STMicroelectronics NV | 22,296 | 680,122 | ||||||||||
Texas Instruments, Inc. | 1,040 | 150,374 | ||||||||||
|
| |||||||||||
| 3,913,722 | ||||||||||||
|
| |||||||||||
| 6,479,765 | ||||||||||||
|
| |||||||||||
Diversified Financials – 0.7% | ||||||||||||
Asset Management & Custody Banks – 0.1% | ||||||||||||
Ameriprise Financial, Inc. | 1,908 | 306,864 | ||||||||||
Magellan Financial Group Ltd. | 6,334 | 245,496 | ||||||||||
|
| |||||||||||
| 552,360 | ||||||||||||
|
| |||||||||||
Financial Exchanges & Data – 0.3% | ||||||||||||
FactSet Research Systems, Inc. | 3,437 | 1,053,441 | ||||||||||
Moody’s Corp. | 3,077 | 808,943 | ||||||||||
S&P Global, Inc. | 2,644 | 853,298 | ||||||||||
|
| |||||||||||
| 2,715,682 | ||||||||||||
|
| |||||||||||
Investment Banking & Brokerage – 0.1% | ||||||||||||
Goldman Sachs Group, Inc. (The) | 5,884 | 1,112,311 | ||||||||||
Nomura Holdings, Inc. | 122,500 | 548,609 | ||||||||||
|
| |||||||||||
| 1,660,920 | ||||||||||||
|
| |||||||||||
Multi-Sector Holdings – 0.1% | ||||||||||||
Kinnevik AB – Class B(a) | 18,439 | 755,057 | ||||||||||
|
| |||||||||||
30 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Other Diversified Financial Services – 0.1% | ||||||||||||
M&G PLC | 406,685 | $ | 773,582 | |||||||||
|
| |||||||||||
| 6,457,601 | ||||||||||||
|
| |||||||||||
Health Care Equipment & Services – 0.7% | ||||||||||||
Health Care Distributors – 0.1% | ||||||||||||
AmerisourceBergen Corp. – Class A | 11,608 | 1,115,181 | ||||||||||
|
| |||||||||||
Health Care Equipment – 0.2% | ||||||||||||
Edwards Lifesciences Corp.(a) | 14,950 | 1,071,765 | ||||||||||
Fisher & Paykel Healthcare Corp., Ltd. | 21,308 | 492,947 | ||||||||||
Insulet Corp.(a) | 870 | 193,358 | ||||||||||
|
| |||||||||||
| 1,758,070 | ||||||||||||
|
| |||||||||||
Health Care Supplies – 0.1% | ||||||||||||
Coloplast A/S – Class B | 3,896 | 569,763 | ||||||||||
|
| |||||||||||
Health Care Technology – 0.1% | ||||||||||||
Cerner Corp. | 17,195 | 1,205,197 | ||||||||||
|
| |||||||||||
Managed Health Care – 0.2% | ||||||||||||
Humana, Inc. | 2,079 | 830,103 | ||||||||||
Molina Healthcare, Inc.(a) | 4,782 | 891,700 | ||||||||||
|
| |||||||||||
| 1,721,803 | ||||||||||||
|
| |||||||||||
| 6,370,014 | ||||||||||||
|
| |||||||||||
Consumer Durables & Apparel – 0.7% | ||||||||||||
Apparel, Accessories & Luxury Goods – 0.1% | ||||||||||||
Pandora A/S | 7,725 | 612,820 | ||||||||||
Ralph Lauren Corp. | 1,545 | 103,283 | ||||||||||
|
| |||||||||||
| 716,103 | ||||||||||||
|
| |||||||||||
Homebuilding – 0.5% | ||||||||||||
Construtora Tenda SA | 187,200 | 876,305 | ||||||||||
Corp. GEO SAB de CV Series B(a)(d)(e) | 1,321 | – 0 | – | |||||||||
Desarrolladora Homex SAB de CV(a) | 1,590 | 3 | ||||||||||
MRV Engenharia e Participacoes SA | 203,700 | 598,183 | ||||||||||
Persimmon PLC | 42,440 | 1,284,935 | ||||||||||
PulteGroup, Inc. | 40,190 | 1,638,144 | ||||||||||
Urbi Desarrollos Urbanos SAB de CV(a) | 9 | 6 | ||||||||||
|
| |||||||||||
| 4,397,576 | ||||||||||||
|
| |||||||||||
Household Appliances – 0.1% | ||||||||||||
Electrolux AB – Class B(b) | 24,486 | 552,119 | ||||||||||
SEB SA | 687 | 111,647 | ||||||||||
Whirlpool Corp. | 3,077 | 569,122 | ||||||||||
|
| |||||||||||
| 1,232,888 | ||||||||||||
|
| |||||||||||
| 6,346,567 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 31 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Transportation – 0.6% | ||||||||||||
Air Freight & Logistics – 0.1% | ||||||||||||
United Parcel Service, Inc. – Class B | 4,216 | $ | 662,376 | |||||||||
Yamato Holdings Co., Ltd. | 18,900 | 500,292 | ||||||||||
|
| |||||||||||
| 1,162,668 | ||||||||||||
|
| |||||||||||
Highways & Railtracks – 0.4% | ||||||||||||
Transurban Group(b) | 406,135 | 3,845,966 | ||||||||||
|
| |||||||||||
Railroads – 0.0% | ||||||||||||
Canadian Pacific Railway Ltd. | 1,285 | 384,005 | ||||||||||
|
| |||||||||||
Trucking – 0.1% | ||||||||||||
Nippon Express Co., Ltd. | 9,700 | 543,971 | ||||||||||
|
| |||||||||||
| 5,936,610 | ||||||||||||
|
| |||||||||||
Insurance – 0.5% | ||||||||||||
Life & Health Insurance – 0.4% | ||||||||||||
AIA Group Ltd. | 6,400 | 60,910 | ||||||||||
CNP Assurances(a) | 46,989 | 529,972 | ||||||||||
iA Financial Corp., Inc. | 9,277 | 323,229 | ||||||||||
Japan Post Holdings Co., Ltd. | 22,100 | 151,638 | ||||||||||
Legal & General Group PLC | 53,589 | 128,485 | ||||||||||
Manulife Financial Corp.(b) | 11,835 | 160,429 | ||||||||||
MetLife, Inc. | 25,179 | 953,025 | ||||||||||
Prudential Financial, Inc. | 18,388 | 1,177,200 | ||||||||||
Sun Life Financial, Inc. | 11,728 | 466,638 | ||||||||||
|
| |||||||||||
| 3,951,526 | ||||||||||||
|
| |||||||||||
Multi-line Insurance – 0.1% | ||||||||||||
Ageas SA/NV | 1,174 | 47,276 | ||||||||||
Aviva PLC | 114,736 | 382,710 | ||||||||||
|
| |||||||||||
| 429,986 | ||||||||||||
|
| |||||||||||
| 4,381,512 | ||||||||||||
|
| |||||||||||
Consumer Services – 0.4% | ||||||||||||
Casinos & Gaming – 0.1% | ||||||||||||
Aristocrat Leisure Ltd. | 22,379 | 450,640 | ||||||||||
La Francaise des Jeux SAEM(c) | 14,741 | 552,967 | ||||||||||
|
| |||||||||||
| 1,003,607 | ||||||||||||
|
| |||||||||||
Hotels, Resorts & Cruise Lines – 0.1% | ||||||||||||
Hilton Grand Vacations, Inc.(a) | 81,790 | 1,684,874 | ||||||||||
|
| |||||||||||
Leisure Facilities – 0.1% | ||||||||||||
Planet Fitness, Inc.(a) | 13,700 | 811,999 | ||||||||||
|
| |||||||||||
Restaurants – 0.1% | ||||||||||||
Domino’s Pizza, Inc. | 1,267 | 479,332 | ||||||||||
|
| |||||||||||
| 3,979,812 | ||||||||||||
|
| |||||||||||
32 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Banks – 0.4% | ||||||||||||
Diversified Banks – 0.2% | ||||||||||||
BNP Paribas SA(a) | 11,709 | $ | 408,348 | |||||||||
FinecoBank Banca Fineco SpA(a) | 42,915 | 589,217 | ||||||||||
JPMorgan Chase & Co. | 4,066 | 398,631 | ||||||||||
Societe Generale SA(a) | 20,719 | 281,528 | ||||||||||
|
| |||||||||||
| 1,677,724 | ||||||||||||
|
| |||||||||||
Regional Banks – 0.2% | ||||||||||||
Mebuki Financial Group, Inc. | 228,900 | 459,904 | ||||||||||
Signature Bank/New York NY | 5,669 | 457,715 | ||||||||||
SVB Financial Group(a) | 3,549 | 1,031,694 | ||||||||||
|
| |||||||||||
| 1,949,313 | ||||||||||||
|
| |||||||||||
| 3,627,037 | ||||||||||||
|
| |||||||||||
Automobiles & Components – 0.2% | ||||||||||||
Auto Parts & Equipment – 0.1% | ||||||||||||
Aisin Seiki Co., Ltd. | 17,200 | 521,127 | ||||||||||
JTEKT Corp. | 44,500 | 354,609 | ||||||||||
Lear Corp. | 1,412 | 170,584 | ||||||||||
Magna International, Inc. – Class A (Canada) | 9,043 | 461,754 | ||||||||||
|
| |||||||||||
| 1,508,074 | ||||||||||||
|
| |||||||||||
Automobile Manufacturers – 0.1% | ||||||||||||
General Motors Co. | 15,475 | 534,352 | ||||||||||
Tesla, Inc.(a) | 385 | 149,395 | ||||||||||
|
| |||||||||||
| 683,747 | ||||||||||||
|
| |||||||||||
Tires & Rubber – 0.0% | ||||||||||||
Sumitomo Rubber Industries Ltd. | 8,400 | 73,888 | ||||||||||
|
| |||||||||||
| 2,265,709 | ||||||||||||
|
| |||||||||||
Household & Personal Products – 0.2% | ||||||||||||
Household Products – 0.1% | ||||||||||||
Kimberly-Clark Corp. | 2,064 | 273,666 | ||||||||||
Procter & Gamble Co. (The) | 3,597 | 493,148 | ||||||||||
|
| |||||||||||
| 766,814 | ||||||||||||
|
| |||||||||||
Personal Products – 0.1% | ||||||||||||
Unilever NV(b) | 5,438 | 306,561 | ||||||||||
Unilever PLC | 15,639 | 891,248 | ||||||||||
|
| |||||||||||
| 1,197,809 | ||||||||||||
|
| |||||||||||
| 1,964,623 | ||||||||||||
|
| |||||||||||
Commercial & Professional Services – 0.2% | ||||||||||||
Diversified Support Services – 0.1% | ||||||||||||
Cintas Corp. | 208 | 65,426 | ||||||||||
Copart, Inc.(a) | 509 | 56,173 | ||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 33 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Ever Sunshine Lifestyle Services Group Ltd.(c) | 560,120 | $ | 968,535 | |||||||||
|
| |||||||||||
| 1,090,134 | ||||||||||||
|
| |||||||||||
Environmental & Facilities Services – 0.0% | ||||||||||||
Rollins, Inc. | 1,027 | 59,412 | ||||||||||
|
| |||||||||||
Human Resource & Employment Services – 0.1% | ||||||||||||
Adecco Group AG | 771 | 37,805 | ||||||||||
Persol Holdings Co., Ltd.(b) | 7,600 | 115,111 | ||||||||||
Randstad NV(a) | 6,179 | 308,311 | ||||||||||
|
| |||||||||||
| 461,227 | ||||||||||||
|
| |||||||||||
Research & Consulting Services – 0.0% | ||||||||||||
RELX PLC (London) | 17,832 | 352,858 | ||||||||||
|
| |||||||||||
| 1,963,631 | ||||||||||||
|
| |||||||||||
Food & Staples Retailing – 0.2% | ||||||||||||
Food Retail – 0.1% | ||||||||||||
Empire Co., Ltd. – Class A | 10,543 | 287,652 | ||||||||||
J Sainsbury PLC | 66,431 | 173,400 | ||||||||||
Koninklijke Ahold Delhaize NV | 24,464 | 670,700 | ||||||||||
Kroger Co. (The) | 2,539 | 81,781 | ||||||||||
|
| |||||||||||
| 1,213,533 | ||||||||||||
|
| |||||||||||
Hypermarkets & Super Centers – 0.1% | ||||||||||||
Aeon Co., Ltd. | 2,200 | 56,206 | ||||||||||
Coles Group Ltd. | 41,820 | 522,426 | ||||||||||
|
| |||||||||||
| 578,632 | ||||||||||||
|
| |||||||||||
| 1,792,165 | ||||||||||||
|
| |||||||||||
Telecommunication Services – 0.1% | ||||||||||||
Integrated Telecommunication Services – 0.0% | ||||||||||||
Telenor ASA | 29,449 | 455,054 | ||||||||||
|
| |||||||||||
Wireless Telecommunication Services – 0.1% | ||||||||||||
SoftBank Corp. | 31,100 | 361,925 | ||||||||||
SoftBank Group Corp. | 2,500 | 162,835 | ||||||||||
|
| |||||||||||
| 524,760 | ||||||||||||
|
| |||||||||||
| 979,814 | ||||||||||||
|
| |||||||||||
Total Common Stocks | 583,004,981 | |||||||||||
|
| |||||||||||
34 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Company | Principal Amount (000) | U.S. $ Value | ||||||||||
| ||||||||||||
INFLATION-LINKED SECURITIES – 4.1% | ||||||||||||
Japan – 4.1% | ||||||||||||
Japanese Government CPI Linked Bond | JPY | 3,996,280 | $ | 37,979,829 | ||||||||
|
| |||||||||||
| Shares | ||||||||||||
INVESTMENT COMPANIES – 3.3% | ||||||||||||
Funds and Investment Trusts – 3.3%(f) | ||||||||||||
iShares MSCI Global Metals & Mining Producers ETF(b) | 381,656 | 10,174,949 | ||||||||||
VanEck Vectors Agribusiness ETF(b) | 54,379 | 3,609,678 | ||||||||||
VanEck Vectors Gold Miners ETF | 213,115 | 7,989,681 | ||||||||||
Vanguard Global ex-U.S. Real Estate ETF | 138,350 | 6,499,683 | ||||||||||
Vanguard Real Estate ETF | 36,480 | 2,794,003 | ||||||||||
|
| |||||||||||
Total Investment Companies | 31,067,994 | |||||||||||
|
| |||||||||||
SHORT-TERM INVESTMENTS – 24.7% |
| |||||||||||
Investment Companies – 24.7% | ||||||||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio – Class AB, 0.03%(f)(g)(h) | 229,369,414 | 229,369,414 | ||||||||||
|
| |||||||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 94.9% | 881,422,218 | |||||||||||
|
| |||||||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.7% | ||||||||||||
Investment Companies – 0.7% | ||||||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.03%(f)(g)(h) | 6,911,120 | 6,911,120 | ||||||||||
|
| |||||||||||
Total Investments – 95.6% | 888,333,338 | |||||||||||
Other assets less liabilities – 4.4% | 40,795,193 | |||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 929,128,531 | ||||||||||
|
| |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 35 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
FUTURES (see Note D)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Purchased Contracts |
| |||||||||||||||
Brent Crude Futures | 212 | April 2021 | $ | 8,488,480 | $ | 270,631 | ||||||||||
Brent Crude Futures | 159 | October 2021 | 6,593,730 | 192,487 | ||||||||||||
Brent Crude Futures | 108 | April 2022 | 4,602,960 | 53,553 | ||||||||||||
Brent Crude Futures | 104 | October 2022 | 4,534,400 | 3,354 | ||||||||||||
Cattle Feeder Futures | 21 | January 2021 | 1,408,312 | 83,315 | ||||||||||||
Cocoa Futures | 33 | March 2021 | 760,650 | (23,771 | ) | |||||||||||
Copper Futures | 32 | December 2020 | 2,438,000 | 116,574 | ||||||||||||
Cotton No.2 Futures | 44 | December 2020 | 1,516,240 | 21,870 | ||||||||||||
Gold 100 OZ Futures | 34 | December 2020 | 6,391,660 | (121,718 | ) | |||||||||||
LME Nickel Futures | 63 | December 2020 | 5,723,298 | 724,594 | ||||||||||||
LME Nickel Futures | 10 | January 2021 | 909,330 | (54,003 | ) | |||||||||||
LME Primary Aluminum Futures | 59 | December 2020 | 2,733,175 | 96,726 | ||||||||||||
LME Zinc Futures | 44 | November 2020 | 2,766,775 | 269,790 | ||||||||||||
LME Zinc Futures | 16 | January 2021 | 1,009,000 | (22,512 | ) | |||||||||||
MSCI EAFE Futures | 79 | December 2020 | 7,046,405 | (475,446 | ) | |||||||||||
Natural Gas Futures | 1,040 | November 2020 | 34,881,600 | 6,892,221 | ||||||||||||
S&P 500 E-Mini Futures | 227 | December 2020 | 37,054,345 | (1,420,643 | ) | |||||||||||
S&P/TSX 60 Index Futures | 7 | December 2020 | 972,424 | (52,147 | ) | |||||||||||
Soybean Meal Futures | 272 | December 2020 | 10,297,920 | 2,116,132 | ||||||||||||
Soybean Oil Futures | 443 | December 2020 | 8,933,538 | 1,008,969 | ||||||||||||
WTI Crude Futures | 220 | May 2021 | 8,375,400 | 615,802 | ||||||||||||
WTI Crude Futures | 175 | November 2021 | 6,872,250 | 469,210 | ||||||||||||
WTI Crude Futures | 119 | May 2022 | 4,752,860 | 216,178 | ||||||||||||
WTI Crude Futures | 115 | November 2022 | 4,671,300 | 137,375 | ||||||||||||
Sold Contracts | ||||||||||||||||
Brent Crude Futures | 39 | November 2020 | 1,479,660 | 114,583 | ||||||||||||
Coffee ‘C’ Futures | 19 | December 2020 | 743,850 | 33,756 | ||||||||||||
Corn Futures | 116 | December 2020 | 2,311,300 | 18,182 | ||||||||||||
Japan 10 Yr Bond (OSE) Futures | 10 | December 2020 | 14,506,901 | (11,047 | ) | |||||||||||
LME Nickel Futures | 63 | December 2020 | 5,723,298 | (965,344 | ) | |||||||||||
LME Primary Aluminum Futures | 59 | December 2020 | 2,733,175 | (121,235 | ) | |||||||||||
LME Zinc Futures | 44 | November 2020 | 2,766,775 | (111,638 | ) | |||||||||||
MSCI Emerging Markets Futures | 131 | December 2020 | 7,217,445 | (73,939 | ) | |||||||||||
Silver Futures | 20 | December 2020 | 2,364,600 | (97,945 | ) | |||||||||||
WTI Crude Futures | 39 | November 2020 | 1,395,810 | 174,453 | ||||||||||||
|
| |||||||||||||||
| $ | 10,078,367 | |||||||||||||||
|
| |||||||||||||||
36 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Australia and New Zealand Banking Group Ltd. | USD | 2,344 | SGD | 3,184 | 01/07/2021 | $ | (12,442 | ) | ||||||||||||
Australia and New Zealand Banking Group Ltd. | USD | 4,843 | THB | 152,033 | 01/07/2021 | 33,348 | ||||||||||||||
Bank of America, NA | KRW | 2,835,017 | USD | 2,382 | 11/10/2020 | (111,258 | ) | |||||||||||||
Bank of America, NA | USD | 4,233 | KRW | 5,022,793 | 11/10/2020 | 183,389 | ||||||||||||||
Bank of America, NA | USD | 2,329 | CAD | 3,055 | 12/10/2020 | (35,985 | ) | |||||||||||||
Barclays Bank PLC | KRW | 2,281,959 | USD | 1,925 | 11/10/2020 | (81,663 | ) | |||||||||||||
Barclays Bank PLC | PHP | 407,786 | USD | 8,419 | 11/10/2020 | 13,526 | ||||||||||||||
Barclays Bank PLC | PHP | 113,846 | USD | 2,319 | 11/10/2020 | (27,426 | ) | |||||||||||||
Barclays Bank PLC | USD | 5,932 | PHP | 288,706 | 11/10/2020 | 18,981 | ||||||||||||||
Barclays Bank PLC | USD | 11,453 | PHP | 554,833 | 11/10/2020 | (16,599 | ) | |||||||||||||
Barclays Bank PLC | CNY | 99,181 | USD | 14,716 | 11/18/2020 | (69,809 | ) | |||||||||||||
Barclays Bank PLC | TWD | 43,553 | USD | 1,511 | 11/18/2020 | (19,625 | ) | |||||||||||||
Barclays Bank PLC | USD | 14,958 | AUD | 21,260 | 11/18/2020 | (12,967 | ) | |||||||||||||
Barclays Bank PLC | USD | 3,099 | CHF | 2,825 | 11/18/2020 | (16,474 | ) | |||||||||||||
Barclays Bank PLC | USD | 25,808 | CNY | 176,377 | 11/18/2020 | 485,344 | ||||||||||||||
Barclays Bank PLC | USD | 2,659 | EUR | 2,269 | 11/18/2020 | (15,406 | ) | |||||||||||||
Barclays Bank PLC | USD | 1,332 | GBP | 1,027 | 11/18/2020 | (1,869 | ) | |||||||||||||
Barclays Bank PLC | USD | 941 | TWD | 26,812 | 11/18/2020 | 1,172 | ||||||||||||||
Barclays Bank PLC | USD | 625 | RUB | 49,704 | 11/19/2020 | (103 | ) | |||||||||||||
Barclays Bank PLC | USD | 8,213 | ZAR | 138,077 | 11/27/2020 | 247,486 | ||||||||||||||
Barclays Bank PLC | ZAR | 130,396 | USD | 7,905 | 11/27/2020 | (85,517 | ) | |||||||||||||
Barclays Bank PLC | CAD | 15,128 | USD | 11,393 | 12/10/2020 | 36,135 | ||||||||||||||
Barclays Bank PLC | USD | 549 | CAD | 729 | 12/10/2020 | (1,741 | ) | |||||||||||||
Barclays Bank PLC | JPY | 131,904 | USD | 1,263 | 12/11/2020 | 2,324 | ||||||||||||||
Barclays Bank PLC | CNY | 30,910 | USD | 4,619 | 12/17/2020 | 19,651 | ||||||||||||||
Barclays Bank PLC | HKD | 257,719 | USD | 33,243 | 12/17/2020 | 1,238 | ||||||||||||||
Barclays Bank PLC | IDR | 34,931,470 | USD | 2,340 | 01/15/2021 | (5,016 | ) | |||||||||||||
Barclays Bank PLC | USD | 5,228 | INR | 385,822 | 01/15/2021 | (89,134 | ) | |||||||||||||
Barclays Bank PLC | MYR | 9,812 | USD | 2,339 | 03/25/2021 | (7,001 | ) | |||||||||||||
Barclays Bank PLC | USD | 2,359 | MYR | 9,812 | 03/25/2021 | (12,398 | ) | |||||||||||||
BNP Paribas SA | BRL | 16,763 | USD | 3,025 | 11/04/2020 | 103,160 | ||||||||||||||
BNP Paribas SA | USD | 2,904 | BRL | 16,763 | 11/04/2020 | 17,134 | ||||||||||||||
BNP Paribas SA | USD | 4,276 | ILS | 14,726 | 11/12/2020 | 40,466 | ||||||||||||||
BNP Paribas SA | NOK | 46,814 | USD | 5,036 | 11/18/2020 | 132,636 | ||||||||||||||
BNP Paribas SA | CAD | 2,954 | USD | 2,224 | 12/10/2020 | 6,232 | ||||||||||||||
BNP Paribas SA | HUF | 223,581 | USD | 722 | 12/23/2020 | 12,388 | ||||||||||||||
Citibank, NA | ILS | 2,300 | USD | 675 | 11/12/2020 | 629 | ||||||||||||||
Citibank, NA | CLP | 2,952,357 | USD | 3,862 | 11/13/2020 | 44,593 | ||||||||||||||
Citibank, NA | CLP | 2,562,443 | USD | 3,251 | 11/13/2020 | (62,505 | ) | |||||||||||||
Citibank, NA | COP | 15,652,143 | USD | 4,134 | 11/13/2020 | 91,246 | ||||||||||||||
Citibank, NA | GBP | 1,373 | EUR | 1,502 | 11/19/2020 | (28,545 | ) | |||||||||||||
Citibank, NA | USD | 1,177 | CHF | 1,069 | 11/19/2020 | (10,466 | ) | |||||||||||||
Citibank, NA | USD | 2,298 | GBP | 1,778 | 11/19/2020 | 4,662 | ||||||||||||||
Citibank, NA | USD | 1,462 | GBP | 1,126 | 11/19/2020 | (3,245 | ) | |||||||||||||
Citibank, NA | USD | 2,357 | RUB | 181,657 | 11/19/2020 | (74,362 | ) | |||||||||||||
Citibank, NA | JPY | 143,766 | USD | 1,362 | 12/11/2020 | (12,171 | ) | |||||||||||||
Citibank, NA | USD | 4,682 | JPY | 494,270 | 12/11/2020 | 41,843 | ||||||||||||||
Citibank, NA | USD | 13,739 | CNY | 92,339 | 12/17/2020 | (294 | ) | |||||||||||||
Citibank, NA | EUR | 19,381 | USD | 22,792 | 12/18/2020 | 195,866 | ||||||||||||||
Citibank, NA | CZK | 285,390 | USD | 12,376 | 12/23/2020 | 166,360 | ||||||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 37 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Credit Suisse International | KRW | 2,277,854 | USD | 1,986 | 11/10/2020 | $ | (16,627 | ) | ||||||||||||
Credit Suisse International | CAD | 5,218 | USD | 3,909 | 11/18/2020 | (8,251 | ) | |||||||||||||
Credit Suisse International | JPY | 156,853 | USD | 1,505 | 11/18/2020 | 6,954 | ||||||||||||||
Credit Suisse International | NOK | 36,124 | USD | 3,803 | 11/18/2020 | 19,577 | ||||||||||||||
Credit Suisse International | NZD | 2,961 | USD | 1,963 | 11/18/2020 | 5,025 | ||||||||||||||
Credit Suisse International | SEK | 96,005 | USD | 10,802 | 11/18/2020 | 11,293 | ||||||||||||||
Credit Suisse International | USD | 1,999 | CHF | 1,818 | 11/19/2020 | (15,575 | ) | |||||||||||||
Credit Suisse International | ZAR | 46,839 | USD | 2,763 | 11/27/2020 | (107,165 | ) | |||||||||||||
Credit Suisse International | USD | 2,322 | CAD | 3,051 | 12/10/2020 | (31,490 | ) | |||||||||||||
Credit Suisse International | MXN | 48,628 | USD | 2,306 | 12/11/2020 | 22,909 | ||||||||||||||
Credit Suisse International | MXN | 35,397 | USD | 1,647 | 12/11/2020 | (15,127 | ) | |||||||||||||
Credit Suisse International | USD | 3,936 | MXN | 84,906 | 12/11/2020 | 50,469 | ||||||||||||||
Credit Suisse International | SEK | 50,895 | EUR | 4,908 | 12/18/2020 | (182 | ) | |||||||||||||
Credit Suisse International | USD | 3,194 | CZK | 74,702 | 12/23/2020 | 2,190 | ||||||||||||||
Deutsche Bank AG | USD | 8,620 | PHP | 419,669 | 11/10/2020 | 29,628 | ||||||||||||||
Deutsche Bank AG | CLP | 1,388,408 | USD | 1,728 | 11/13/2020 | (67,620 | ) | |||||||||||||
Deutsche Bank AG | PEN | 45,093 | USD | 12,685 | 11/13/2020 | 212,647 | ||||||||||||||
Deutsche Bank AG | USD | 2,636 | CLP | 2,036,343 | 11/13/2020 | (2,743 | ) | |||||||||||||
Deutsche Bank AG | USD | 1,731 | PEN | 6,248 | 11/13/2020 | (2,419 | ) | |||||||||||||
Deutsche Bank AG | USD | 1,786 | GBP | 1,376 | 11/19/2020 | (3,657 | ) | |||||||||||||
Deutsche Bank AG | USD | 2,434 | ZAR | 41,052 | 11/27/2020 | 81,571 | ||||||||||||||
Deutsche Bank AG | USD | 11,609 | INR | 860,774 | 01/15/2021 | (143,593 | ) | |||||||||||||
Goldman Sachs Bank USA | BRL | 2,496 | USD | 442 | 11/04/2020 | 7,005 | ||||||||||||||
Goldman Sachs Bank USA | BRL | 19,259 | USD | 3,337 | 11/04/2020 | (19,685 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 432 | BRL | 2,496 | 11/04/2020 | 2,551 | ||||||||||||||
Goldman Sachs Bank USA | USD | 3,412 | BRL | 19,259 | 11/04/2020 | (55,569 | ) | |||||||||||||
Goldman Sachs Bank USA | KRW | 1,318,474 | USD | 1,164 | 11/10/2020 | 4,184 | ||||||||||||||
Goldman Sachs Bank USA | PHP | 741,577 | USD | 15,160 | 11/10/2020 | (125,168 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 2,341 | KRW | 2,650,208 | 11/10/2020 | (10,435 | ) | |||||||||||||
Goldman Sachs Bank USA | CLP | 7,272,140 | USD | 9,495 | 11/13/2020 | 91,830 | ||||||||||||||
Goldman Sachs Bank USA | CLP | 1,026,294 | USD | 1,289 | 11/13/2020 | (37,549 | ) | |||||||||||||
Goldman Sachs Bank USA | COP | 6,381,605 | USD | 1,659 | 11/13/2020 | 11,066 | ||||||||||||||
Goldman Sachs Bank USA | COP | 1,923,742 | USD | 492 | 11/13/2020 | (4,952 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 928 | CLP | 731,897 | 11/13/2020 | 18,712 | ||||||||||||||
Goldman Sachs Bank USA | USD | 3,855 | CLP | 2,952,357 | 11/13/2020 | (37,281 | ) | |||||||||||||
Goldman Sachs Bank USA | TWD | 161,900 | USD | 5,596 | 11/18/2020 | (94,895 | ) | |||||||||||||
Goldman Sachs Bank USA | RUB | 105,908 | USD | 1,347 | 11/19/2020 | 15,883 | ||||||||||||||
Goldman Sachs Bank USA | USD | 9,207 | RUB | 708,281 | 11/19/2020 | (307,749 | ) | |||||||||||||
Goldman Sachs Bank USA | BRL | 2,496 | USD | 433 | 12/02/2020 | (1,715 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 442 | BRL | 2,496 | 12/02/2020 | (7,252 | ) | |||||||||||||
Goldman Sachs Bank USA | MXN | 35,809 | USD | 1,677 | 12/11/2020 | (4,071 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 12,561 | JPY | 1,310,360 | 12/11/2020 | (39,433 | ) | |||||||||||||
Goldman Sachs Bank USA | CNY | 12,333 | USD | 1,825 | 12/17/2020 | (10,291 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 5,490 | SGD | 7,463 | 01/07/2021 | (26,541 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 8,191 | IDR | 122,772,598 | 01/15/2021 | 51,651 | ||||||||||||||
HSBC Bank USA | GBP | 7,659 | USD | 9,951 | 11/18/2020 | 28,017 | ||||||||||||||
HSBC Bank USA | USD | 15,536 | CAD | 20,439 | 11/18/2020 | (194,636 | ) | |||||||||||||
HSBC Bank USA | USD | 20,446 | SEK | 179,836 | 11/18/2020 | (233,136 | ) | |||||||||||||
HSBC Bank USA | MXN | 49,577 | USD | 2,273 | 12/11/2020 | (54,291 | ) | |||||||||||||
HSBC Bank USA | PLN | 8,839 | USD | 2,279 | 12/23/2020 | 45,446 | ||||||||||||||
JPMorgan Chase Bank, NA | USD | 3,482 | KRW | 4,030,344 | 11/10/2020 | 62,117 | ||||||||||||||
JPMorgan Chase Bank, NA | USD | 2,340 | ILS | 7,995 | 11/12/2020 | 3,007 | ||||||||||||||
JPMorgan Chase Bank, NA | COP | 17,180,990 | USD | 4,621 | 11/13/2020 | 183,652 | ||||||||||||||
JPMorgan Chase Bank, NA | COP | 5,700,534 | USD | 1,459 | 11/13/2020 | (13,650 | ) | |||||||||||||
38 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
JPMorgan Chase Bank, NA | TRY | 7,415 | EUR | 764 | 12/01/2020 | $ | 17,953 | |||||||||||||
JPMorgan Chase Bank, NA | USD | 4,170 | MXN | 89,465 | 12/11/2020 | 30,542 | ||||||||||||||
JPMorgan Chase Bank, NA | DKK | 13,651 | USD | 2,160 | 01/15/2021 | 20,660 | ||||||||||||||
Morgan Stanley & Co., Inc. | USD | 2,292 | KRW | 2,669,431 | 11/10/2020 | 54,708 | ||||||||||||||
Morgan Stanley & Co., Inc. | ILS | 38,657 | USD | 11,366 | 11/12/2020 | 35,466 | ||||||||||||||
Morgan Stanley & Co., Inc. | CHF | 652 | USD | 720 | 11/19/2020 | 8,154 | ||||||||||||||
Morgan Stanley & Co., Inc. | EUR | 1,502 | GBP | 1,367 | 11/19/2020 | 21,051 | ||||||||||||||
Morgan Stanley & Co., Inc. | GBP | 451 | USD | 582 | 11/19/2020 | (2,114 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | USD | 930 | CHF | 853 | 11/19/2020 | 175 | ||||||||||||||
Morgan Stanley & Co., Inc. | USD | 719 | CHF | 652 | 11/19/2020 | (7,845 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | USD | 1,808 | GBP | 1,373 | 11/19/2020 | (29,665 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | USD | 3,531 | ZAR | 58,761 | 11/27/2020 | 69,850 | ||||||||||||||
Morgan Stanley & Co., Inc. | ZAR | 21,676 | USD | 1,259 | 11/27/2020 | (69,229 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | EUR | 3,870 | USD | 4,572 | 12/18/2020 | 59,859 | ||||||||||||||
Morgan Stanley & Co., Inc. | USD | 9,505 | EUR | 8,045 | 12/18/2020 | (125,229 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | NZD | 2,855 | USD | 1,901 | 12/22/2020 | 13,212 | ||||||||||||||
Morgan Stanley & Co., Inc. | AUD | 2,262 | USD | 1,613 | 01/12/2021 | 22,855 | ||||||||||||||
Natwest Markets PLC | USD | 2,391 | KRW | 2,835,017 | 11/10/2020 | 102,290 | ||||||||||||||
Natwest Markets PLC | USD | 4,334 | TWD | 127,440 | 11/10/2020 | 137,651 | ||||||||||||||
Natwest Markets PLC | CHF | 17,814 | USD | 19,602 | 11/18/2020 | 166,302 | ||||||||||||||
Natwest Markets PLC | USD | 2,300 | TWD | 66,196 | 11/18/2020 | 26,851 | ||||||||||||||
Natwest Markets PLC | USD | 5,829 | MXN | 125,320 | 12/11/2020 | 54,911 | ||||||||||||||
Societe Generale | GBP | 587 | USD | 761 | 11/19/2020 | 515 | ||||||||||||||
Standard Chartered Bank | KRW | 2,740,834 | USD | 2,317 | 11/10/2020 | (93,121 | ) | |||||||||||||
Standard Chartered Bank | USD | 12,388 | NZD | 18,696 | 11/18/2020 | (26,608 | ) | |||||||||||||
Standard Chartered Bank | INR | 84,323 | USD | 1,130 | 01/15/2021 | 6,600 | ||||||||||||||
Standard Chartered Bank | NOK | 15,859 | USD | 1,718 | 01/15/2021 | 56,946 | ||||||||||||||
Standard Chartered Bank | USD | 3,605 | TWD | 99,809 | 07/07/2021 | 42,082 | ||||||||||||||
State Street Bank & Trust Co. | CHF | 691 | USD | 762 | 11/19/2020 | 7,995 | ||||||||||||||
State Street Bank & Trust Co. | GBP | 1,483 | USD | 1,916 | 11/19/2020 | (6,004 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 988 | CHF | 905 | 11/19/2020 | 138 | ||||||||||||||
State Street Bank & Trust Co. | USD | 580 | CHF | 527 | 11/19/2020 | (4,741 | ) | |||||||||||||
State Street Bank & Trust Co. | TRY | 3,721 | EUR | 379 | 12/01/2020 | 3,959 | ||||||||||||||
State Street Bank & Trust Co. | JPY | 114,921 | USD | 1,085 | 12/11/2020 | (12,990 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 952 | HKD | 7,381 | 12/17/2020 | (52 | ) | |||||||||||||
State Street Bank & Trust Co. | EUR | 556 | USD | 654 | 12/18/2020 | 5,836 | ||||||||||||||
State Street Bank & Trust Co. | USD | 1,175 | THB | 36,774 | 01/07/2021 | 4,510 | ||||||||||||||
State Street Bank & Trust Co. | USD | 1,699 | AUD | 2,381 | 01/12/2021 | (25,144 | ) | |||||||||||||
State Street Bank & Trust Co. | SEK | 13,707 | USD | 1,556 | 01/15/2021 | 13,821 | ||||||||||||||
UBS AG | KRW | 2,574,894 | USD | 2,266 | 11/10/2020 | 2,311 | ||||||||||||||
UBS AG | TWD | 127,440 | USD | 4,340 | 11/10/2020 | (132,224 | ) | |||||||||||||
UBS AG | AUD | 38,674 | USD | 27,429 | 11/18/2020 | 242,637 | ||||||||||||||
UBS AG | EUR | 8,952 | USD | 10,555 | 11/18/2020 | 125,467 | ||||||||||||||
UBS AG | USD | 12,589 | JPY | 1,326,807 | 11/18/2020 | 86,124 | ||||||||||||||
UBS AG | GBP | 3,145 | USD | 4,090 | 11/19/2020 | 16,289 | ||||||||||||||
UBS AG | ZAR | 38,979 | USD | 2,352 | 11/27/2020 | (36,785 | ) | |||||||||||||
UBS AG | USD | 2,312 | TRY | 18,608 | 12/01/2020 | (123,935 | ) | |||||||||||||
UBS AG | JPY | 9,481,529 | USD | 90,018 | 12/11/2020 | (589,176 | ) | |||||||||||||
UBS AG | USD | 38,293 | JPY | 4,166,878 | 12/11/2020 | 1,526,291 | ||||||||||||||
UBS AG | USD | 710 | HUF | 223,581 | 12/23/2020 | (744 | ) | |||||||||||||
|
| |||||||||||||||||||
| $ | 2,058,829 | |||||||||||||||||||
|
| |||||||||||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 39 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
INFLATION (CPI) SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||||
Goldman Sachs International | USD | 246,010 | 04/26/2027 | 1.705 | % | CPI | # | Maturity | $ | 3,524,811 | $ | — | $ | 3,524,811 | ||||||||||||||||||||||
Goldman Sachs International | USD | 69,760 | 04/26/2027 | 2.175 | % | CPI | # | Maturity | (726,802 | ) | — | (726,802 | ) | |||||||||||||||||||||||
Goldman Sachs International | USD | 110,190 | 04/25/2030 | 1.900 | % | CPI | # | Maturity | 1,481,442 | — | 1,481,442 | |||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 34,880 | 04/26/2027 | 2.183 | % | CPI | # | Maturity | (377,304 | ) | — | (377,304 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| $ | 3,902,147 | $ | — | $ | 3,902,147 | |||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
TOTAL RETURN SWAPS (see Note D)
Counterparty & | Rate Paid/ Received | Payment Frequency | Current Notional (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Receive Total Return on Reference Obligation |
| |||||||||||||||||||||||
JPMorgan Chase Bank, NA | ||||||||||||||||||||||||
Bloomberg Industrial Metals Subindex 3 Month Forward | 0.12% | Annual | USD | 45,989 | 12/15/2020 | $ | 146,736 | |||||||||||||||||
Bloomberg Industrial Metals Subindex 3 Month Forward | 0.12% | Annual | USD | 3,314 | 12/15/2020 | 10,482 | ||||||||||||||||||
Bloomberg Precious Metals Subindex | 0.08% | Annual | USD | 61,962 | 12/15/2020 | (4,497,807 | ) | |||||||||||||||||
Bloomberg Softs Subindex 3 Month Forward | 0.18% | Annual | USD | 2,159 | 12/15/2020 | 16,433 | ||||||||||||||||||
JPMorgan JMABRF34 Index(1) | 0.60% | Annual | USD | 26,199 | 12/15/2020 | (1,412,947 | ) | |||||||||||||||||
Merrill Lynch International | ||||||||||||||||||||||||
Bloomberg Grains Subindex 3 Month Forward | 0.13% | Annual | USD | 46,552 | 12/15/2020 | 3,294,104 | ||||||||||||||||||
Bloomberg Livestock Subindex 3 Month Forward | 0.15% | Maturity | USD | 7,146 | 12/15/2020 | – 0 | – | |||||||||||||||||
Bloomberg Livestock Subindex 3 Month Forward | 0.19% | Annual | USD | 7,179 | 12/15/2020 | (324,340 | ) | |||||||||||||||||
Bloomberg Softs Subindex 3 Month Forward | 0.18% | Annual | USD | 20,138 | 12/15/2020 | 153,249 | ||||||||||||||||||
Pay Total Return on Reference Obligation |
| |||||||||||||||||||||||
UBS AG | ||||||||||||||||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index | | 3 Month LIBOR Plus 0.18% | | Quarterly | USD | 27,797 | 12/15/2020 | 2,105,054 | ||||||||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index | | 3 Month LIBOR Minus 0.12% | | Quarterly | USD | 29,013 | 04/15/2021 | 1,707,273 | ||||||||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index | | 3 Month LIBOR Plus 0.14% | | Quarterly | USD | 9,289 | 08/16/2021 | 428,959 | ||||||||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index | | 3 Month LIBOR Plus 0.20% | | Quarterly | USD | 10,774 | 09/15/2021 | 646,094 | ||||||||||||||||
|
| |||||||||||||||||||||||
| $ | 2,273,290 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
40 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
VARIANCE SWAPS (see Note D)
Swap | Volatility Strike Rate | Payment Frequency | Notional Amount (000) | Market Value | Upfront Premiums (Paid) Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
Buy Contracts |
| |||||||||||||||||||||||
UBS AG |
| |||||||||||||||||||||||
USD/JPY 09/30/2021* | 7.85 | % | Maturity | 1,342 | $ | (103,168) | $ | — | $ | (103,168) | ||||||||||||||
| * | Termination date |
| (a) | Non-income producing security. |
| (b) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $14,803,747 or 1.6% of net assets. |
| (d) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (e) | Fair valued by the Adviser. |
| (f) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov. Additionally, shareholder reports for AB funds can be obtained by calling AB at (800) 227-4618. |
| (g) | Affiliated investments. |
| (h) | The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
AUD – Australian Dollar
BRL – Brazilian Real
CAD – Canadian Dollar
CHF – Swiss Franc
CLP – Chilean Peso
CNY – Chinese Yuan Renminbi
COP – Colombian Peso
CZK – Czech Koruna
DKK – Danish Krone
EUR – Euro
GBP – Great British Pound
HKD – Hong Kong Dollar
HUF – Hungarian Forint
IDR – Indonesian Rupiah
ILS – Israeli Shekel
INR – Indian Rupee
JPY – Japanese Yen
KRW – South Korean Won
MXN – Mexican Peso
MYR – Malaysian Ringgit
NOK – Norwegian Krone
NZD – New Zealand Dollar
PEN – Peruvian Sol
PHP – Philippine Peso
PLN – Polish Zloty
RUB – Russian Ruble
SEK – Swedish Krona
SGD – Singapore Dollar
THB – Thailand Baht
TRY – Turkish Lira
TWD – New Taiwan Dollar
USD – United States Dollar
ZAR – South African Rand
Glossary:
ADR – American Depositary Receipt
CBT – Chicago Board of Trade
CPI – Consumer Price Index
EAFE – Europe, Australia, and Far East
EPRA – European Public Real Estate Association
ETF – Exchange Traded Fund
FTSE – Financial Times Stock Exchange
GDR – Global Depositary Receipt
KC HRW – Kansas City Hard Red Winter
LIBOR – London Interbank Offered Rate
LME – London Metal Exchange
MSCI – Morgan Stanley Capital International
NAREIT – National Association of Real Estate Investment Trusts
OSE – Osaka Securities Exchange
PJSC – Public Joint Stock Company
RBOB – Reformulated Gasoline Blend-Stock for Oxygen Blending (Unleaded Gas)
REIT – Real Estate Investment Trust
TSX – Toronto Stock Exchange
ULSD – Ultra-Low Sulfur Diesel
WTI – West Texas Intermediate
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 41 | |
CONSOLIDATED PORTFOLIO OF INVESTMENTS (continued)
| (1) | The following table represents the (long/(short)) commodity basket holdings underlying the total return swap with JPMorgan JMABRF34 Index as of October 31, 2020. |
| Security Description | Current Notional | Percent of Basket’s Value | ||||||
Natural Gas Futures 01/2021 | $ | (5,928,703 | ) | (22.7 | )% | |||
LME Zinc Futures 01/2021 | (5,723,100 | ) | (21.9 | )% | ||||
LME Zinc Futures 05/2021 | 5,720,640 | 21.9 | % | |||||
Natural Gas Futures 03/2021 | 5,694,944 | 21.8 | % | |||||
Soybean Meal Futures 01/2021 | (5,688,311 | ) | (21.8 | )% | ||||
LME Primary Aluminum Futures 01/2021 | (5,658,150 | ) | (21.7 | )% | ||||
KC HRW Wheat Futures 12/2020 | (5,650,173 | ) | (21.6 | )% | ||||
Copper Futures 05/2021 | 5,624,399 | 21.5 | % | |||||
Copper Futures 12/2020 | (5,623,242 | ) | (21.5 | )% | ||||
KC HRW Wheat Futures 05/2021 | 5,622,421 | 21.5 | % | |||||
Sugar #11 (World) Futures 03/2021 | (5,591,109 | ) | (21.4 | )% | ||||
LME Nickel Futures 01/2021 | (5,581,943 | ) | (21.4 | )% | ||||
LME Nickel Futures 05/2021 | 5,580,137 | 21.4 | % | |||||
LME Primary Aluminum Futures 05/2021 | 5,575,303 | 21.3 | % | |||||
Cotton No. 2 Futures 05/2021 | 5,549,616 | 21.2 | % | |||||
Wheat (CBT) Futures 12/2020 | (5,549,354 | ) | (21.2 | )% | ||||
Cotton No. 2 Futures 12/2020 | (5,528,884 | ) | (21.2 | )% | ||||
Soybean Meal Futures 05/2021 | 5,528,667 | 21.2 | % | |||||
Wheat (CBT) Futures 05/2021 | 5,517,073 | 21.1 | % | |||||
Lean Hogs Futures 12/2020 | (5,516,663 | ) | (21.1 | )% | ||||
Corn Futures 12/2020 | (5,504,990 | ) | (21.1 | )% | ||||
Sugar #11 (World) Futures 05/2021 | 5,472,734 | 20.9 | % | |||||
Corn Futures 05/2021 | 5,454,558 | 20.9 | % | |||||
Soybean Oil Futures 01/2021 | (5,453,104 | ) | (20.9 | )% | ||||
Soybean Futures 01/2021 | (5,451,617 | ) | (20.9 | )% | ||||
Soybean Futures 05/2021 | 5,433,556 | 20.8 | % | |||||
Soybean Oil Futures 05/2021 | 5,375,171 | 20.6 | % | |||||
Coffee ‘C’ Futures 05/2021 | 5,179,937 | 19.8 | % | |||||
Coffee ‘C’ Futures 12/2020 | (5,156,525 | ) | (19.7 | )% | ||||
Live Cattle Futures 12/2020 | (5,120,739 | ) | (19.6 | )% | ||||
Live Cattle Futures 04/2021 | 5,093,573 | 19.5 | % | |||||
NY Harbor ULSD Futures 01/2021 | (5,046,029 | ) | (19.3 | )% | ||||
Lean Hogs Futures 04/2021 | 5,012,596 | 19.2 | % | |||||
NY Harbor ULSD Futures 05/2021 | 4,990,010 | 19.1 | % | |||||
WTI Crude Futures 05/2021 | 4,921,226 | 18.8 | % | |||||
Brent Crude Futures 05/2021 | 4,884,945 | 18.7 | % | |||||
WTI Crude Futures 01/2021 | (4,857,796 | ) | (18.6 | )% | ||||
Gasoline RBOB Futures 05/2021 | 4,856,865 | 18.6 | % | |||||
Gasoline RBOB Futures 01/2021 | (4,849,745 | ) | (18.6 | )% | ||||
Brent Crude Futures 01/2021 | (4,840,847 | ) | (18.5 | )% | ||||
See notes to consolidated financial statements.
42 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $700,733,539) | $ | 652,052,804 | (a) | |
Affiliated issuers (cost $236,280,534—including investment of cash collateral for securities loaned of $6,911,120) | 236,280,534 | |||
Cash | 314,488 | |||
Cash collateral due from broker | 43,598,933 | |||
Foreign currencies, at value (cost $9,339,784) | 9,297,047 | |||
Unrealized appreciation on total return swaps | 8,508,384 | |||
Unrealized appreciation on forward currency exchange contracts | 5,851,204 | |||
Unrealized appreciation on inflation swaps | 5,006,253 | |||
Unaffiliated dividends and interest receivable | 1,247,701 | |||
Receivable for variation margin on futures | 594,853 | |||
Receivable for capital stock sold | 272,148 | |||
Receivable for terminated total return swaps | 31,349 | |||
Affiliated dividends receivable | 5,058 | |||
|
| |||
Total assets | 963,060,756 | |||
|
| |||
| Liabilities | ||||
Cash collateral due to broker | 11,658,000 | |||
Payable for collateral received on securities loaned | 6,911,120 | |||
Unrealized depreciation on total return swaps | 6,235,094 | |||
Unrealized depreciation on forward currency exchange contracts | 3,792,375 | |||
Payable for capital stock redeemed | 2,312,364 | |||
Unrealized depreciation on inflation swaps | 1,104,106 | |||
Payable for investment securities purchased and foreign currency transactions | 772,864 | |||
Advisory fee payable | 584,828 | |||
Distribution fee payable | 105,996 | |||
Unrealized depreciation on variance swaps | 103,168 | |||
Payable for terminated total return swaps | 89,479 | |||
Administrative fee payable | 25,585 | |||
Transfer Agent fee payable | 12,756 | |||
Directors’ fees payable | 2,696 | |||
Accrued expenses and other liabilities | 221,794 | |||
|
| |||
Total liabilities | 33,932,225 | |||
|
| |||
Net Assets | $ | 929,128,531 | ||
|
| |||
| Composition of Net Assets |
| |||
Capital stock, at par | $ | 123,072 | ||
Additional paid-in capital | 1,088,321,352 | |||
Accumulated loss | (159,315,893 | ) | ||
|
| |||
| $ | 929,128,531 | |||
|
| |||
| (a) | Includes securities on loan with a value of $14,231,622 (see Note E). |
See notes to consolidated financial statements.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 43 | |
CONSOLIDATED STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—33 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 6,926,298 | 904,954 | $ | 7.65 | * | ||||||
| ||||||||||||
| C | $ | 507,642 | 66,282 | $ | 7.66 | |||||||
| ||||||||||||
| Advisor | $ | 11,761,390 | 1,540,807 | $ | 7.63 | |||||||
| ||||||||||||
| R | $ | 53,650 | 7,124 | $ | 7.53 | |||||||
| ||||||||||||
| K | $ | 1,453,042 | 192,346 | $ | 7.55 | |||||||
| ||||||||||||
| I | $ | 21,817,128 | 2,878,534 | $ | 7.58 | |||||||
| ||||||||||||
| 1 | $ | 470,634,792 | 62,617,299 | $ | 7.52 | |||||||
| ||||||||||||
| 2 | $ | 7,698 | 1,000 | $ | 7.70 | |||||||
| ||||||||||||
| Z | $ | 415,966,891 | 54,863,555 | $ | 7.58 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $7.99 which reflects a sales charge of 4.25%. |
See notes to consolidated financial statements.
44 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers (net of foreign taxes withheld of $940,602) | $ | 23,174,781 | ||||||
Affiliated issuers | 748,044 | |||||||
Interest(a) | (290,668 | ) | ||||||
Securities lending income | 257,827 | $ | 23,889,984 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 7,596,973 | |||||||
Distribution fee—Class A | 19,699 | |||||||
Distribution fee—Class C | 6,036 | |||||||
Distribution fee—Class R | 1,154 | |||||||
Distribution fee—Class K | 4,237 | |||||||
Distribution fee—Class 1 | 1,315,581 | |||||||
Transfer agency—Class A | 24,090 | |||||||
Transfer agency—Class C | 1,889 | |||||||
Transfer agency—Advisor Class | 42,364 | |||||||
Transfer agency—Class R | 603 | |||||||
Transfer agency—Class K | 3,409 | |||||||
Transfer agency—Class I | 7,075 | |||||||
Transfer agency—Class 1 | 122,932 | |||||||
Transfer agency—Class 2 | 1 | |||||||
Transfer agency—Class Z | 93,216 | |||||||
Custody and accounting | 374,215 | |||||||
Audit and tax | 134,786 | |||||||
Registration fees | 127,715 | |||||||
Administrative | 77,346 | |||||||
Printing | 46,949 | |||||||
Legal | 42,452 | |||||||
Directors’ fees | 29,604 | |||||||
Miscellaneous | 96,546 | |||||||
|
| |||||||
Total expenses | 10,168,872 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | (170,499 | ) | ||||||
|
| |||||||
Net expenses | 9,998,373 | |||||||
|
| |||||||
Net investment income | 13,891,611 | |||||||
|
|
| (a) | The negative interest income reflects coupon income adjusted for fluctuations in the inflation index related to inflation-indexed bonds and the amortization of premiums. |
See notes to consolidated financial statements.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 45 | |
CONSOLIDATED STATEMENT OF OPERATIONS (continued)
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions | $ | (43,876,984 | ) | |||||
Forward currency exchange contracts | 5,816,771 | |||||||
Futures | (5,633,601 | ) | ||||||
Options written | (11,499,114 | ) | ||||||
Swaps | (10,831,291 | ) | ||||||
Foreign currency transactions | (446,651 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | (93,047,299 | ) | ||||||
Forward currency exchange contracts | 1,840,477 | |||||||
Futures | 8,923,950 | |||||||
Options written | (537,591 | ) | ||||||
Swaps | 19,424,636 | |||||||
Foreign currency denominated assets and liabilities | (60,371 | ) | ||||||
Net loss on investment and foreign currency transactions | (129,927,068 | ) | ||||||
|
| |||||||
Contributions from Affiliates (see Note B) | 9,171 | |||||||
|
| |||||||
Net Decrease in Net Assets from Operations | $ | (116,026,286 | ) | |||||
|
|
See notes to consolidated financial statements.
46 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 13,891,611 | $ | 22,137,750 | ||||
Net realized loss on investment and foreign currency transactions | (66,470,870 | ) | (59,892,278 | ) | ||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | (63,456,198 | ) | 74,481,928 | |||||
Contributions from Affiliates (see Note B) | 9,171 | – 0 | – | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | (116,026,286 | ) | 36,727,400 | |||||
| Distributions to Shareholders |
| |||||||
Class A | (167,388 | ) | (155,536 | ) | ||||
Class C | (4,157 | ) | (4,520 | ) | ||||
Advisor Class | (343,095 | ) | (407,794 | ) | ||||
Class R | (3,960 | ) | (2,749 | ) | ||||
Class K | (34,127 | ) | (33,957 | ) | ||||
Class I | (500,083 | ) | (296,068 | ) | ||||
Class 1 | (11,399,122 | ) | (10,161,406 | ) | ||||
Class 2 | (184 | ) | (157 | ) | ||||
Class Z | (10,352,467 | ) | (13,581,524 | ) | ||||
| Capital Stock Transactions |
| |||||||
Net decrease | (83,740,442 | ) | (569,837,468 | ) | ||||
|
|
|
| |||||
Total decrease | (222,571,311 | ) | (557,753,779 | ) | ||||
| Net Assets |
| |||||||
Beginning of period | 1,151,699,842 | 1,709,453,621 | ||||||
|
|
|
| |||||
End of period | $ | 929,128,531 | $ | 1,151,699,842 | ||||
|
|
|
| |||||
See notes to consolidated financial statements.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 47 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB All Market Real Return Portfolio (the “Fund”), a non-diversified portfolio. As part of the Fund’s investment strategy, the Fund seeks to gain exposure to commodities and commodities-related instruments and derivatives primarily through investments in AllianceBernstein Cayman Inflation Strategy, Ltd., a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”). The Fund is the sole shareholder of the Subsidiary and it is intended that the Fund will remain the sole shareholder and will continue to control the Subsidiary. Under the Articles of Association of the Subsidiary, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary. As of October 31, 2020, consolidated net assets of the Fund were $929,128,531, of which $194,340,965, or 21%, represented the Fund’s ownership of all issued shares and voting rights of the Subsidiary. This report presents the consolidated financial statements of the Fund and the Subsidiary. All intercompany transactions and balances have been eliminated in consolidation. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class 1, Class 2, Class Z, and Class T shares. Class B and Class T shares have not been issued. Class 1 shares are sold only to the private clients of Sanford C. Bernstein & Co. LLC by its registered representatives. As of October 31, 2020, AllianceBernstein L.P. (the “Adviser”), was the sole shareholder of Class 2 shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Class R, Class K, Class 1, and Class Z shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I, and Class 2 shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, divi-
48 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
dend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, the Adviser will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 49 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the
50 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 51 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks: | ||||||||||||||||
Real Estate | $ | 177,450,478 | $ | 140,955,789 | $ | – 0 | – | $ | 318,406,267 | |||||||
Materials | 26,220,667 | 40,522,245 | – 0 | – | 66,742,912 | |||||||||||
Energy | 19,427,807 | 33,512,386 | – 0 | – | 52,940,193 | |||||||||||
Software & Services | 17,151,145 | 1,856,213 | – 0 | – | 19,007,358 | |||||||||||
Capital Goods | 7,868,691 | 5,796,847 | – 0 | – | 13,665,538 | |||||||||||
Pharmaceuticals & Biotechnology | 7,950,451 | 4,070,925 | – 0 | – | 12,021,376 | |||||||||||
Food Beverage & Tobacco | 6,535,114 | 4,809,866 | – 0 | – | 11,344,980 | |||||||||||
Retailing | 9,030,718 | 1,714,758 | – 0 | – | 10,745,476 | |||||||||||
Media & Entertainment | 8,271,279 | 1,443,113 | – 0 | – | 9,714,392 | |||||||||||
Technology Hardware & Equipment | 6,483,749 | 1,484,280 | – 0 | – | 7,968,029 | |||||||||||
Utilities | 2,775,818 | 5,127,782 | – 0 | – | 7,903,600 | |||||||||||
Semiconductors & Semiconductor Equipment | 4,967,135 | 1,512,630 | – 0 | – | 6,479,765 | |||||||||||
Diversified Financials | 4,134,857 | 2,322,744 | – 0 | – | 6,457,601 | |||||||||||
Health Care Equipment & Services | 5,307,304 | 1,062,710 | – 0 | – | 6,370,014 | |||||||||||
Consumer Durables & Apparel | 3,785,046 | 2,561,521 | 0 | (a) | 6,346,567 | |||||||||||
Transportation | 1,046,381 | 4,890,229 | – 0 | – | 5,936,610 | |||||||||||
Insurance | 3,080,521 | 1,300,991 | – 0 | – | 4,381,512 | |||||||||||
Consumer Services | 2,976,205 | 1,003,607 | – 0 | – | 3,979,812 | |||||||||||
52 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Banks | $ | 1,888,040 | $ | 1,738,997 | $ | – 0 | – | $ | 3,627,037 | |||||||
Automobiles & Components | 1,316,085 | 949,624 | – 0 | – | 2,265,709 | |||||||||||
Household & Personal Products | 766,814 | 1,197,809 | – 0 | – | 1,964,623 | |||||||||||
Commercial & Professional Services | 181,011 | 1,782,620 | – 0 | – | 1,963,631 | |||||||||||
Food & Staples Retailing | 369,433 | 1,422,732 | – 0 | – | 1,792,165 | |||||||||||
Telecommunication Services | – 0 | – | 979,814 | – 0 | – | 979,814 | ||||||||||
Inflation-Linked Securities | – 0 | – | 37,979,829 | – 0 | – | 37,979,829 | ||||||||||
Investment Companies | 31,067,994 | – 0 | – | – 0 | – | 31,067,994 | ||||||||||
Short-Term Investments | 229,369,414 | – 0 | – | – 0 | – | 229,369,414 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 6,911,120 | – 0 | – | – 0 | – | 6,911,120 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 586,333,277 | 302,000,061 | – 0 | – | 888,333,338 | |||||||||||
Other Financial Instruments(b): | ||||||||||||||||
Assets: | ||||||||||||||||
Futures | 13,629,755 | – 0 | – | – 0 | – | 13,629,755 | (c) | |||||||||
Forward Currency Exchange Contracts | – 0 | – | 5,851,204 | – 0 | – | 5,851,204 | ||||||||||
Inflation (CPI) Swaps | – 0 | – | 5,006,253 | – 0 | ��� | 5,006,253 | ||||||||||
Total Return Swaps | – 0 | – | 8,508,384 | – 0 | – | 8,508,384 | ||||||||||
Liabilities: | ||||||||||||||||
Futures | (3,551,388 | ) | – 0 | – | – 0 | – | (3,551,388 | )(c) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (3,792,375 | ) | – 0 | – | (3,792,375 | ) | ||||||||
Inflation (CPI) Swaps | – 0 | – | (1,104,106 | ) | – 0 | – | (1,104,106 | ) | ||||||||
Total Return Swaps | – 0 | – | (6,235,094 | ) | – 0 | – | (6,235,094 | ) | ||||||||
Variance Swaps | – 0 | – | (103,168 | ) | – 0 | – | (103,168 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 596,411,644 | $ | 310,131,159 | $ | – 0 | – | $ | 906,542,803 | |||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | The Fund held securities with zero market value at period end. |
| (b) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (c) | Only variation margin receivable/(payable) at period end is reported within the consolidated statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the consolidated portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 53 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
If, during a taxable year, the Subsidiary’s taxable losses (and other deductible items) exceed its income and gains, the net loss will not pass through to the Fund as a deductible amount for Federal income tax purposes. Note that the loss from the Subsidiary’s contemplated activities also cannot be carried forward to reduce future Subsidiary’s income in subsequent years. However, if the Subsidiary’s taxable gains exceed its losses and other deductible items during a taxable year, the net gain will pass through to the Fund as income for Federal income tax purposes.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s consolidated financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes
54 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .75% of the Fund’s average daily net assets. The Adviser agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis (the “Expense Caps”) to 1.30%, 2.05%, 1.05%, 1.55%, 1.30%, 1.05%, 1.30%, 1.05% and 1.05% of daily average net assets for Class A, Class C, Advisor Class, Class R, Class K, Class I, Class 1, Class 2 and Class Z shares, respectively. This fee waiver and/or expense reimbursement agreement will remain in effect until January 31, 2021. For the year ended October 31, 2020, such reimbursement amounted to $20,577.
The Subsidiary has entered into a separate agreement with the Adviser for the management of the Subsidiary’s portfolio. The Adviser receives no compensation from the Subsidiary for its services under the agreement.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the reimbursement for such services amounted to $77,346.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 55 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $223,989 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $141 from the sale of Class A shares and received $1 and $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $147,605.
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 22,320 | $ | 1,368,659 | $ | 1,161,609 | $ | 229,370 | $ | 748 | ||||||||||
Government Money Market Portfolio* | 9,974 | 271,801 | 274,864 | 6,911 | 27 | |||||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 236,281 | $ | 775 | ||||||||||||||||
|
|
|
| |||||||||||||||||
| * | Investments of cash collateral for securities lending transactions (see Note E). |
During the year ended October 31, 2020, the Adviser reimbursed the Fund $9,171 for trading losses incurred due to a trade entry error.
56 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”) at an annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares, .25% of the Fund’s average daily net assets attributable to Class K shares and .25% of the Fund’s average daily net assets attributable to Class 1 shares. There are no distribution and servicing fees on the Advisor Class, Class I, Class 2 and Class Z shares. Payments under the Plan in respect of Class A shares are currently limited to an annual rate of .25% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 57 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $159,813, $16,669, $19,770 and $1,949,570 for Class C, Class R, Class K and Class 1 shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 683,963,068 | $ | 865,081,497 | ||||
U.S. government securities | – 0 | – | – 0 | – | ||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 1,183,887,781 | ||
|
| |||
Gross unrealized appreciation | $ | 93,107,752 | ||
Gross unrealized depreciation | (348,659,169 | ) | ||
|
| |||
Net unrealized depreciation | $ | (255,551,417 | ) | |
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the consolidated statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the consolidated statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended October 31, 2020, the Fund held futures for hedging and non-hedging purposes.
| • | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 59 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2020, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
| • | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are
60 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
During the year ended October 31, 2020, the Fund held purchased options for hedging and non-hedging purposes. During the year ended October 31, 2020, the Fund held written options for hedging and non-hedging purposes.
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 61 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the consolidated statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the consolidated statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the consolidated statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the consolidated statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the consolidated statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the consolidated statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the
62 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
difference between the value of the contract at the time it was opened and the time it was closed.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Fund against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the year ended October 31, 2020, the Fund held inflation (CPI) swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the year ended October 31, 2020, the Fund held total return swaps for hedging and non-hedging purposes.
Variance Swaps:
The Fund may enter into variance swaps to hedge equity market risk or adjust exposure to the equity markets. Variance swaps are contracts in which two parties agree to exchange cash payments based on the difference between the stated level of variance and the actual variance realized on underlying asset(s) or index(es). Actual “variance” as used here is defined as the sum of the square of the returns on the reference asset(s) or index(es) (which in effect is a measure of its “volatility”) over the length of the contract term. So the parties to a variance swap can be said to exchange actual volatility for a contractually stated rate of volatility.
During the year ended October 31, 2020, the Fund held variance swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 63 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Consolidated | Fair Value | Consolidated | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 11,047 | * | ||||||||
Equity contracts | Receivable/Payable for variation margin on futures | 2,022,175 | * | |||||||||
Commodity contracts | Receivable/Payable for variation margin on futures | $ | 13,629,755 | * | Receivable/Payable for variation margin on futures | | 1,518,166 | * | ||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts |
| 5,851,204 |
| Unrealized depreciation on forward currency exchange contracts | | 3,792,375 | |||||
Interest rate contracts | Unrealized appreciation on inflation swaps | | 5,006,253 | Unrealized depreciation on inflation swaps | | 1,104,106 | ||||||
64 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Consolidated | Fair Value | Consolidated | Fair Value | ||||||||
Commodity contracts | Unrealized appreciation on total return swaps | $ | 3,621,004 | Unrealized depreciation on total return swaps | $ | 6,235,094 | ||||||
Equity contracts | Unrealized appreciation on total return swaps | 4,887,380 | ||||||||||
Foreign currency contracts | Unrealized depreciation on variance swaps | 103,168 | ||||||||||
|
|
|
| |||||||||
Total | $ | 32,995,596 | $ | 14,786,131 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the consolidated statement of assets and liabilities. |
This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the consolidated portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | 972,546 | $ | (407,050 | ) | ||||
Equity contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | (1,748,567 | ) | (1,776,622 | ) | |||||
Commodity contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | (4,857,580 | ) | 11,107,622 | ||||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | 5,816,771 | 1,840,477 | |||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 65 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Foreign exchange contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | $ | 932,442 | $ | – 0 | – | ||||
Equity contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | 12,400,884 | – 0 | – | ||||||
Foreign exchange contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | (846,745 | ) | (537,591 | ) | |||||
Equity contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | (10,652,369 | ) | – 0 | – | |||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (6,911,734 | ) | 9,603,439 | ||||||
Commodity contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (16,504,258 | ) | 2,413,640 | ||||||
Foreign exchange contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 936,296 | (103,168 | ) | ||||||
Equity contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 11,648,405 | 7,510,725 | |||||||
|
|
|
| |||||||
Total | $ | (8,813,909 | ) | $ | 29,651,472 | |||||
|
|
|
| |||||||
66 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Futures: | ||||
Average notional amount of buy contracts | $ | 190,633,339 | ||
Average notional amount of sale contracts | $ | 69,126,974 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 644,237,387 | ||
Average principal amount of sale contracts | $ | 775,431,240 | ||
Purchased Options: | ||||
Average notional amount | $ | 43,782,730 | (a) | |
Options Written: | ||||
Average notional amount | $ | 115,153,327 | (b) | |
Inflation Swaps: | ||||
Average notional amount | $ | 481,468,308 | ||
Total Return Swaps: | ||||
Average notional amount | $ | 349,117,986 | ||
Variance Swaps: | ||||
Average notional amount | $ | 1,511,964 | (c) |
| (a) | Positions were open for seven months during the year. |
| (b) | Positions were open for eight months during the year. |
| (c) | Positions were open for ten months during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the consolidated statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
AB All Market Real Return Portfolio
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Australia and New Zealand Banking Group Ltd. | $ | 33,348 | $ | (12,442 | ) | $ | – 0 | – | $ | – 0 | – | $ | 20,906 | |||||||
Bank of America, NA | 183,389 | (147,243 | ) | – 0 | – | – 0 | – | 36,146 | ||||||||||||
Barclays Bank PLC | 825,857 | (462,748 | ) | (280,000 | ) | – 0 | – | 83,109 | ||||||||||||
BNP Paribas SA | 312,016 | – 0 | – | – 0 | – | – 0 | – | 312,016 | ||||||||||||
Citibank, NA | 545,199 | (191,588 | ) | – 0 | – | – 0 | – | 353,611 | ||||||||||||
Credit Suisse International | 118,417 | (118,417 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 67 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Deutsche Bank AG | $ | 323,846 | $ | (220,032 | ) | $ | – 0 | – | $ | – 0 | – | $ | 103,814 | |||||||
Goldman Sachs Bank USA/Goldman Sachs International | 5,209,135 | (1,509,388 | ) | (3,699,747 | ) | – 0 | – | – 0 | – | |||||||||||
HSBC Bank USA | 73,463 | (73,463 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA | 317,931 | (317,931 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Morgan Stanley & Co., Inc. | 285,330 | (234,082 | ) | – 0 | – | – 0 | – | 51,248 | ||||||||||||
Natwest Markets PLC | 488,005 | – 0 | – | (258,000 | ) | – 0 | – | 230,005 | ||||||||||||
Societe Generale | 515 | – 0 | – | – 0 | – | – 0 | – | 515 | ||||||||||||
Standard Chartered Bank | 105,628 | (105,628 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 36,259 | (36,259 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
UBS AG | 6,886,499 | (986,032 | ) | (4,330,000 | ) | – 0 | – | 1,570,467 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 15,744,837 | $ | (4,415,253 | ) | $ | (8,567,747 | ) | $ | – 0 | – | $ | 2,761,837 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Australia and New Zealand Banking Group Ltd. | $ | 12,442 | $ | (12,442 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
Bank of America, NA | 147,243 | (147,243 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Barclays Bank PLC | 462,748 | (462,748 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Citibank, NA | 191,588 | (191,588 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Credit Suisse International | 194,417 | (118,417 | ) | – 0 | – | – 0 | – | 76,000 | ||||||||||||
Deutsche Bank AG | 220,032 | (220,032 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 1,509,388 | (1,509,388 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
HSBC Bank USA | 482,063 | (73,463 | ) | – 0 | – | – 0 | – | 408,600 | ||||||||||||
JPMorgan Chase Bank, NA | 390,954 | (317,931 | ) | (73,023 | ) | – 0 | – | – 0 | – | |||||||||||
Morgan Stanley & Co., Inc. | 234,082 | (234,082 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Standard Chartered Bank | 119,729 | (105,628 | ) | – 0 | – | – 0 | – | 14,101 | ||||||||||||
State Street Bank & Trust Co. | 48,931 | (36,259 | ) | – 0 | – | – 0 | – | 12,672 | ||||||||||||
UBS AG | 986,032 | (986,032 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 4,999,649 | $ | (4,415,253 | ) | $ | (73,023 | ) | $ | – 0 | – | $ | 511,373 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
68 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
AllianceBernstein Cayman Inflation Strategy, Ltd.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
JPMorgan Chase Bank, NA | $ | 173,651 | $ | (173,651 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
Merrill Lynch International | 3,447,353 | (324,340 | ) | (2,570,000 | ) | – 0 | – | 553,013 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 3,621,004 | $ | (497,991 | ) | $ | (2,570,000 | ) | $ | – 0 | – | $ | 553,013 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
JPMorgan Chase Bank, NA | $ | 5,910,754 | $ | (173,651 | ) | $ | (5,737,103 | ) | $ | –0 | – | $ | – 0 | – | ||||||
Merrill Lynch International | 324,340 | (324,340 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 6,235,094 | $ | (497,991 | ) | $ | (5,737,103 | ) | $ | –0 | – | $ | – 0 | – ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E
Securities Lending
The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash collateral and/or non-cash collateral. Non-cash collateral
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 69 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. If the Fund receives non-cash collateral, the Fund will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities. The Fund will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the consolidated statement of assets and liabilities. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the consolidated statement of operations. When the Fund earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Fund in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Fund’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower.
70 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A summary of the Fund’s transactions surrounding securities lending for the year ended October 31, 2020 is as follows:
| Government Money Market Portfolio | ||||||||||||||||||||
Market Value on Loan* | Cash Collateral* | Market Value of Non-Cash Collateral* | Income from Borrowers | Income Earned | Advisory Fee Waived | |||||||||||||||
| $ 14,231,622 | $ | 6,911,120 | $ | 7,982,118 | $ | 230,574 | $ | 27,253 | $ | 2,317 | ||||||||||
| * | As of October 31, 2020. |
NOTE F
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
Year Ended 2020 | Year Ended 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Shares sold | 106,944 | 88,868 | $ | 878,328 | $ | 747,515 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 18,577 | 18,167 | 159,388 | 148,059 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 5,054 | 11,207 | 40,141 | 93,211 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (454,169 | ) | (235,310 | ) | (3,812,340 | ) | (1,954,142 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (323,594 | ) | (117,068 | ) | $ | (2,734,483 | ) | $ | (965,357 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||
Shares sold | 5,106 | 167 | $ | 41,696 | $ | 1,393 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 428 | 478 | 3,697 | 3,914 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (5,044 | ) | (11,204 | ) | (40,141 | ) | (93,211 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (21,492 | ) | (46,500 | ) | (175,527 | ) | (390,586 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (21,002 | ) | (57,059 | ) | $ | (170,275 | ) | $ | (478,490 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Advisor Class | �� | |||||||||||||||||||||||
Shares sold | 266,300 | 440,752 | $ | 2,062,690 | $ | 3,703,318 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 30,646 | 41,667 | 261,410 | 337,917 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (911,996 | ) | (1,385,151 | ) | (6,219,619 | ) | (11,502,566 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (615,050 | ) | (902,732 | ) | $ | (3,895,519 | ) | $ | (7,461,331 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 71 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
Year Ended 2020 | Year Ended 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class R | ||||||||||||||||||||||||
Shares sold | 5,559 | 6,000 | $ | 43,032 | $ | 49,723 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 467 | 341 | 3,960 | 2,749 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (30,671 | ) | (6,884 | ) | (234,057 | ) | (57,094 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (24,645 | ) | (543 | ) | $ | (187,065 | ) | $ | (4,622 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class K | ||||||||||||||||||||||||
Shares sold | 111,348 | 42,717 | $ | 803,021 | $ | 354,929 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 4,034 | 4,218 | 34,127 | 33,957 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (165,165 | ) | (113,920 | ) | (1,162,309 | ) | (944,442 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (49,783 | ) | (66,985 | ) | $ | (325,161 | ) | $ | (555,556 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class I | ||||||||||||||||||||||||
Shares sold | 275,947 | 1,387,415 | $ | 1,888,924 | $ | 11,593,309 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 59,111 | 36,824 | 500,083 | 296,068 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (200,636 | ) | (124,079 | ) | (1,540,739 | ) | (1,046,283 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 134,422 | 1,300,160 | $ | 848,268 | $ | 10,843,094 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Class 1 | ||||||||||||||||||||||||
Shares sold | 7,351,843 | 8,874,111 | $ | 57,260,027 | $ | 73,005,826 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 1,079,630 | 1,016,698 | 9,079,689 | 8,123,413 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (17,336,540 | ) | (14,897,881 | ) | (130,350,693 | ) | (122,185,527 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (8,905,067 | ) | (5,007,072 | ) | $ | (64,010,977 | ) | $ | (41,056,288 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class Z | ||||||||||||||||||||||||
Shares sold | 669,090 | 315,577 | $ | 4,754,066 | $ | 2,604,947 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 1,223,696 | 1,687,146 | 10,352,467 | 13,581,524 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (3,826,335 | ) | (65,030,200 | ) | (28,371,763 | ) | (546,345,389 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (1,933,549 | ) | (63,027,477 | ) | $ | (13,265,230 | ) | $ | (530,158,918 | ) | ||||||||||||||
| ||||||||||||||||||||||||
There were no transactions in capital shares for Class 2 for the year ended October 31, 2020 and the year ended October 31, 2019.
At October 31, 2020, certain AB mutual funds owned approximately 39% of the Fund’s outstanding shares. Significant transactions by such shareholder, if any, may impact the Fund’s performance.
72 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE G
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the stock, bond or commodities market fluctuates. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Commodity Risk—Investing in commodities and commodity-linked derivative instruments, either directly or through the Subsidiary, may subject the Fund to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the consolidated statement of assets and liabilities.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 73 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Subsidiary Risk—By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated with the Subsidiary’s investments. The derivatives and other investments held by the Subsidiary are generally similar to those that are permitted to be held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund. The Subsidiary is not registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and, unless otherwise noted in the Fund’s Prospectus, is not subject to all of the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are managed by the Adviser, making it unlikely the Subsidiary will take actions contrary to the interests of the Fund or its shareholders.
Real Estate Risk—The Fund’s investments in the real estate securities have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in real estate investment trusts, or “REITs”, may have additional risks. REITs are
74 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in taxes.
Non-Diversification Risk—The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.
Active Trading Risk—The Fund expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate may greatly exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Fund’s return. In addition, a high rate of portfolio turnover may result in substantial short-term gains, which may have adverse tax consequences for Fund shareholders.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 75 | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the consolidated statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income… | $ | 22,804,583 | $ | 24,643,711 | ||||
|
|
|
| |||||
Total distributions paid | $ | 22,804,583 | $ | 24,643,711 | ||||
|
|
|
| |||||
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 31,120,422 | ||
Accumulated capital and other losses | (131,023,017 | )(a) | ||
Unrealized appreciation/(depreciation) | (255,580,416 | )(b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | (355,483,011 | )(c) | |
|
|
| (a) | As of October 31, 2020, the Fund had a net capital loss carryforward of $131,023,017. |
76 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of Treasury inflation-protected securities, the tax treatment of earnings from the Subsidiary, the tax treatment of swaps, the tax deferral of losses on wash sales, and the tax treatment of partnership investments. |
| (c) | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to the accrual of foreign capital gains tax. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund had a net short-term capital loss carryforward of $90,232,566 and a net long-term capital loss carryforward of $40,790,451, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to book/tax differences associated with the treatment of earnings from the Subsidiary and contributions from the Adviser resulted in a net decrease in accumulated loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE J
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s consolidated net assets.
NOTE K
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the consolidated financial statements through the date the consolidated financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s consolidated financial statements through this date.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 77 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.66 | $ 8.53 | $ 8.90 | $ 8.24 | $ 8.13 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .09 | .12 | .14 | .09 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.96 | ) | .13 | (.23 | ) | .76 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.87 | ) | .25 | (.09 | ) | .85 | .21 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.12 | ) | (.28 | ) | (.19 | ) | (.10 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.65 | $ 8.66 | $ 8.53 | $ 8.90 | $ 8.24 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (10.11 | )% | 2.97 | % | (1.11 | )% | 10.45 | % | 2.75 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $6,926 | $10,634 | $11,478 | $11,819 | $13,682 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 1.29 | % | 1.30 | % | 1.26 | % | 1.27 | % | 1.30 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 1.40 | % | 1.32 | % | 1.27 | % | 1.28 | % | 1.36 | % | ||||||||||
Net investment income(b) | 1.10 | % | 1.42 | % | 1.52 | % | 1.05 | % | 1.23 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
78 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.63 | $ 8.49 | $ 8.83 | $ 8.17 | $ 8.03 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .03 | .06 | .07 | .02 | .04 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.95 | ) | .11 | (.23 | ) | .76 | .12 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.92 | ) | .17 | (.16 | ) | .78 | .16 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.05 | ) | (.03 | ) | (.18 | ) | (.12 | ) | (.02 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.66 | $ 8.63 | $ 8.49 | $ 8.83 | $ 8.17 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (10.74 | )%(g) | 2.05 | %(g) | (1.82 | )% | 9.73 | % | 2.07 | %(g) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $508 | $754 | $1,225 | $1,801 | $2,814 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 2.04 | % | 2.05 | % | 2.01 | % | 2.02 | % | 2.03 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 2.15 | % | 2.07 | % | 2.02 | % | 2.03 | % | 2.11 | % | ||||||||||
Net investment income(b) | .34 | % | .66 | % | .78 | % | .27 | % | .51 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 79 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.63 | $ 8.51 | $ 8.89 | $ 8.22 | $ 8.13 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .11 | .14 | .16 | .11 | .12 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.95 | ) | .12 | (.24 | ) | .77 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.84 | ) | .26 | (.08 | ) | .88 | .23 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.14 | ) | (.30 | ) | (.21 | ) | (.14 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.63 | $ 8.63 | $ 8.51 | $ 8.89 | $ 8.22 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (9.79 | )% | 3.15 | % | (.96 | )% | 10.87 | % | 3.00 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $11,761 | $18,611 | $26,030 | $27,670 | $25,307 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 1.04 | % | 1.05 | % | 1.01 | % | 1.02 | % | 1.04 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 1.14 | % | 1.07 | % | 1.02 | % | 1.02 | % | 1.10 | % | ||||||||||
Net investment income(b) | 1.33 | % | 1.66 | % | 1.77 | % | 1.31 | % | 1.51 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
80 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class R | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.53 | $ 8.40 | $ 8.79 | $ 8.14 | $ 8.06 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .07 | .10 | .11 | .07 | .07 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.95 | ) | .11 | (.23 | ) | .76 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.88 | ) | .21 | (.12 | ) | .83 | .18 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.08 | ) | (.27 | ) | (.18 | ) | (.10 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.53 | $ 8.53 | $ 8.40 | $ 8.79 | $ 8.14 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (10.32 | )% | 2.62 | % | (1.47 | )% | 10.29 | % | 2.41 | %(g) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $54 | $271 | $271 | $239 | $201 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 1.54 | % | 1.55 | % | 1.55 | % | 1.54 | % | 1.54 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 1.60 | % | 1.57 | % | 1.58 | % | 1.60 | % | 1.66 | % | ||||||||||
Net investment income(b) | .92 | % | 1.16 | % | 1.24 | % | .81 | % | .91 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 81 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class K | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.55 | $ 8.42 | $ 8.80 | $ 8.15 | $ 8.07 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .08 | .12 | .13 | .09 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.94 | ) | .13 | (.23 | ) | .75 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.86 | ) | .25 | (.10 | ) | .84 | .21 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.12 | ) | (.28 | ) | (.19 | ) | (.13 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.55 | $ 8.55 | $ 8.42 | $ 8.80 | $ 8.15 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (10.10 | )% | 3.03 | % | (1.20 | )% | 10.48 | % | 2.81 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $1,453 | $2,069 | $2,604 | $2,265 | $1,888 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 1.28 | % | 1.27 | % | 1.26 | % | 1.28 | % | 1.29 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 1.29 | % | 1.28 | % | 1.27 | % | 1.29 | % | 1.35 | % | ||||||||||
Net investment income(b) | 1.08 | % | 1.44 | % | 1.52 | % | 1.05 | % | 1.23 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
82 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class I | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.58 | $ 8.46 | $ 8.83 | $ 8.17 | $ 8.11 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .12 | .15 | .17 | .12 | .12 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.94 | ) | .13 | (.22 | ) | .77 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.82 | ) | .28 | (.05 | ) | .89 | .23 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.18 | ) | (.16 | ) | (.32 | ) | (.23 | ) | (.17 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.58 | $ 8.58 | $ 8.46 | $ 8.83 | $ 8.17 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (9.76 | )% | 3.39 | % | (.69 | )% | 10.98 | % | 3.03 | %(g) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $21,817 | $23,541 | $12,213 | $16,753 | $15,646 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | .86 | % | .85 | % | .83 | % | .85 | % | .91 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | .87 | % | .86 | % | .84 | % | .86 | % | .92 | % | ||||||||||
Net investment income(b) | 1.49 | % | 1.79 | % | 1.96 | % | 1.48 | % | 1.61 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 83 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 1 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.51 | $ 8.39 | $ 8.76 | $ 8.11 | $ 8.05 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .10 | .13 | .15 | .10 | .11 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.93 | ) | .12 | (.22 | ) | .76 | .10 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.83 | ) | .25 | (.07 | ) | .86 | .21 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.13 | ) | (.30 | ) | (.21 | ) | (.15 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.52 | $ 8.51 | $ 8.39 | $ 8.76 | $ 8.11 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (9.94 | )% | 3.14 | % | (.92 | )% | 10.69 | % | 2.82 | %(g) | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $470,635 | $608,485 | $641,891 | $649,421 | $505,143 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | 1.10 | % | 1.09 | % | 1.08 | % | 1.09 | % | 1.15 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | 1.11 | % | 1.10 | % | 1.08 | % | 1.10 | % | 1.16 | % | ||||||||||
Net investment income(b) | 1.26 | % | 1.62 | % | 1.71 | % | 1.24 | % | 1.38 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
84 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 2 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.71 | $ 8.58 | $ 8.96 | $ 8.29 | $ 8.22 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .12 | .16 | .18 | .13 | .13 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.95 | ) | .13 | (.24 | ) | .77 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.83 | ) | .29 | (.06 | ) | .90 | .24 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.18 | ) | (.16 | ) | (.32 | ) | (.23 | ) | (.17 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.70 | $ 8.71 | $ 8.58 | $ 8.96 | $ 8.29 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (9.70 | )% | 3.46 | % | (.77 | )% | 10.96 | % | 3.17 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $8 | $9 | $9 | $9 | $8 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | .82 | % | .81 | % | .82 | % | .82 | % | .90 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | .84 | % | .81 | % | .82 | % | .83 | % | .90 | % | ||||||||||
Net investment income(b) | 1.53 | % | 1.90 | % | 1.95 | % | 1.50 | % | 1.60 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
See footnote summary on page 86-87.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 85 | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class Z | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 8.58 | $ 8.46 | $ 8.83 | $ 8.17 | $ 8.11 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .12 | .16 | .17 | .13 | .12 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.94 | ) | .12 | (.22 | ) | .76 | .11 | |||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | .00 | (c) | .00 | (c) | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.82 | ) | .28 | (.05 | ) | .89 | .23 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.18 | ) | (.16 | ) | (.32 | ) | (.23 | ) | (.17 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.58 | $ 8.58 | $ 8.46 | $ 8.83 | $ 8.17 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d)* | (9.75 | )% | 3.37 | % | (.68 | )% | 10.98 | % | 3.09 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $415,967 | $487,326 | $1,013,733 | $692,895 | $8,634 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f)‡ | .85 | % | .84 | % | .83 | % | .82 | % | .92 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f)‡ | .86 | % | .85 | % | .84 | % | .83 | % | .92 | % | ||||||||||
Net investment income(b) | 1.51 | % | 1.89 | % | 1.86 | % | 1.60 | % | 1.56 | % | ||||||||||
Portfolio turnover rate | 88 | % | 100 | % | 141 | % | 123 | % | 119 | % | ||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||
portfolios | .04 | % | .02 | % | .03 | % | .04 | % | .02 | % | ||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Net of expenses waived/reimbursed by the Adviser. |
| (c) | Amount is less than $.005. |
86 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (e) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the years ended October 31, 2020, October 31, 2019, October 31, 2018 and October 31, 2017, such waiver amounted to .01%, .01%, .01% and .01%, respectively. |
| (f) | The expense ratios presented below exclude interest/bank overdraft expense: |
| Year Ended October 31, | ||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||
| ||||||||||||
Class A | ||||||||||||
Net of waivers/reimbursements | N/A | 1.29 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 1.32 | % | N/A | N/A | N/A | ||||||
Class C | ||||||||||||
Net of waivers/reimbursements | N/A | 2.04 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 2.07 | % | N/A | N/A | N/A | ||||||
Advisor Class | ||||||||||||
Net of waivers/reimbursements | N/A | 1.04 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 1.06 | % | N/A | N/A | N/A | ||||||
Class R | ||||||||||||
Net of waivers/reimbursements | N/A | 1.54 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 1.57 | % | N/A | N/A | N/A | ||||||
Class K | ||||||||||||
Net of waivers/reimbursements | N/A | 1.27 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 1.28 | % | N/A | N/A | N/A | ||||||
Class I | ||||||||||||
Net of waivers/reimbursements | N/A | .84 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | .85 | % | N/A | N/A | N/A | ||||||
Class 1 | ||||||||||||
Net of waivers/reimbursements | N/A | 1.09 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | 1.09 | % | N/A | N/A | N/A | ||||||
Class 2 | ||||||||||||
Net of waivers/reimbursements | N/A | .81 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | .81 | % | N/A | N/A | N/A | ||||||
Class Z | ||||||||||||
Net of waivers/reimbursements | N/A | .83 | % | N/A | N/A | N/A | ||||||
Before waivers/reimbursements | N/A | .84 | % | N/A | N/A | N/A | ||||||
| (g) | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
| * | Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the Fund’s performance for the years ended October 31, 2020 and October 31, 2019 by .02% and .07%, respectively. |
See notes to consolidated financial statements.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 87 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AB All Market Real Return Portfolio
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities of AB All Market Real Return Portfolio (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the consolidated portfolio of investments, as of October 31, 2020, and the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the consolidated results of its operations for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended and its consolidated financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
| 88 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 28, 2020
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 89 | |
2020 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2020. For individual shareholders, the Fund designates 56.68% of dividends paid as qualified dividend income. For corporate shareholders, 16.06% of dividends paid qualify for the dividends received deduction. For foreign shareholders, 4.38% of ordinary dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2021.
| 90 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Vinod Chathlani(2), Vice President Daniel J. Loewy(2), Vice President Leon Zhu(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s All Market Real Return Portfolio Team. Messrs. Chathlani, Loewy and Zhu are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
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MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Portfolio are managed under the direction of the Board of Directors. Certain information concerning the Portfolio’s Directors is set forth below.
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
| INDEPENDENT DIRECTORS | ||||||||
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## 76 (2005) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## 72 (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
Jeanette Loeb,## 68 (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Garry L. Moody,## 68 (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX DIRECTOR | OTHER PUBLIC COMPANY | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund as defined in the “40 Act”, due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
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MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE | PRINCIPAL POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST 5 YEARS | ||
Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
Vinod Chathlani 38 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since December 2015. | ||
Daniel J. Loewy 46 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer and Head of Multi-Asset Solutions and Chief Investment Officer of Dynamic Asset Allocation. | ||
Leon Zhu 53 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc, (“ABIS”)**, with which he has been associated since prior to 2015. | ||
Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Strategy. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI.
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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
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Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB All Market Real Return Portfolio (the “Fund”) at a meeting held by video conference on August 4-5, 2020 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
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Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
102 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute transactions for their clients); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5-, and 10-year periods ended May 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, and their discussion with the Adviser of the reasons for the Fund’s underperformance in the periods reviewed, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 103 | |
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors previously discussed these matters with an independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional clients. In this regard, the Adviser noted, among other things, that, compared to institutional accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund invests in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund
104 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the medians. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund does not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. The directors informed the Adviser that they would monitor the Fund’s asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 105 | |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
106 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
NOTES
| abfunds.com | AB ALL MARKET REAL RETURN PORTFOLIO | 107 | |
NOTES
108 | AB ALL MARKET REAL RETURN PORTFOLIO | abfunds.com | |
AB ALL MARKET REAL RETURN PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
AMRR-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB BOND INFLATION STRATEGY
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Bond Inflation Strategy (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB BOND INFLATION STRATEGY | 1 | |
ANNUAL REPORT
December 10, 2020
This report provides management’s discussion of fund performance for AB Bond Inflation Strategy for the annual reporting period ended October 31, 2020.
The Fund’s investment objective is to maximize real return without assuming what the Adviser considers to be undue risk.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB BOND INFLATION STRATEGY | ||||||||
| Class 1 Shares1 | 8.71% | 7.84% | ||||||
| Class 2 Shares1 | 8.78% | 7.96% | ||||||
| Class A Shares | 8.66% | 7.64% | ||||||
| Class C Shares | 8.27% | 6.92% | ||||||
| Advisor Class Shares2 | 8.81% | 7.93% | ||||||
| Class R Shares2,3 | 8.54% | 7.43% | ||||||
| Class K Shares2 | 8.66% | 7.74% | ||||||
| Class I Shares2 | 8.83% | 7.97% | ||||||
| Class Z Shares2 | 8.84% | 7.92% | ||||||
| Bloomberg Barclays 1-10 Year TIPS Index | 3.81% | 7.00% | ||||||
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. |
| 2 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the Financial Highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays 1-10 Year Treasury Inflation-Protected Securities (“TIPS”) Index, for the six- and 12-month periods ended October 31, 2020.
During the 12-month period, all share classes except Class C outperformed the benchmark, before sales charges. Off-benchmark sector allocation was the primary contributor, relative to the benchmark, as gains from allocations to investment-grade corporate bonds, high-yield credit
2 | AB BOND INFLATION STRATEGY | abfunds.com | |
default swaps and collateralized mortgage obligations more than offset a loss in commercial mortgage-backed securities (“CMBS”). Currency decisions also added to returns. The Fund’s long exposure to inflation breakevens detracted from performance.
During the six-month period, all share classes outperformed the benchmark, before sales charges. Off-benchmark sector allocation was the primary contributor to performance, mostly from allocations to investment-grade corporate bonds and credit default swaps, as well as CMBS, emerging-market treasuries and asset-backed securities. Currency selection was a minor contributor to returns. The Fund’s long exposure to inflation breakevens detracted.
During both periods, the Fund utilized currency forwards to hedge currency risk and actively manage currency positions. Credit default swaps were utilized in the corporate and commercial mortgage-backed securities sectors for hedging and investment purposes. Treasury futures and interest rate swaps were utilized to manage duration, country exposure and yield-curve positioning. Consumer Price Index (“CPI”) swaps were used to hedge inflation and for investment purposes, which added slightly for the six-month period, and detracted slightly for the 12-month period. Total return swaps and written options were used in the corporate sector for hedging and investment purposes. Purchased and written swaptions were used for duration management.
MARKET REVIEW AND INVESTMENT STRATEGY
Global fixed-income market returns were positive over the 12-month period ended October 31, 2020. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, which set the stage for a rebound in risk assets following the sell-off that started in March. Government bonds rallied as interest rates were slashed. Emerging- and developed-market investment-grade corporate bonds led gains, followed by developed-market high-yield corporate bonds, as investors searched for higher yields in a period of falling interest rates. Corporate bonds in the US outperformed their European counterparts. Securitized assets also advanced, while emerging-market sovereign bonds were slightly positive and emerging-market local bonds fell during the period. The US dollar declined against most major developed-market currencies and gained against a majority of emerging-market currencies. Brent crude oil prices fell almost 34% as demand slowed sharply and the oil industry outlook was uncertain.
| abfunds.com | AB BOND INFLATION STRATEGY | 3 | |
INVESTMENT POLICIES
The Fund seeks real return. Real return is the rate of return after adjusting for inflation. The Fund pursues its objective by investing principally
in inflation-indexed securities (such as TIPS or inflation-indexed securities from issuers other than the US Treasury) or by gaining inflation protection through derivatives transactions, such as inflation (CPI) swaps or total return swaps linked to TIPS. In deciding whether to purchase inflation-indexed securities or use inflation-linked derivatives transactions, the Adviser considers the relative costs and efficiency of each method. In addition, in seeking to maximize real return, the Fund may also invest in other fixed-income investments, such as US and non-US government securities, corporate fixed-income securities and mortgage-related securities, as well as derivatives linked to such securities.
Under normal circumstances, the Fund invests at least 80% of its net assets in fixed-income securities. While the Fund expects to invest principally in investment-grade securities, it may invest up to 15% of its total assets in fixed-income securities rated BB or B or the equivalent by at least one national rating agency (or deemed by the Adviser to be of comparable credit quality), which are not investment-grade (“junk bonds”).
Inflation-indexed securities are fixed-income securities structured to provide protection against inflation. Their principal value and/or the interest paid on them are adjusted to reflect official inflation measures. The inflation measure for TIPS is the CPI for Urban Consumers. The Fund may also invest in other inflation-indexed securities, issued by both US and non-US issuers, and in derivative instruments linked to these securities.
The Fund may invest in derivatives, such as options, futures contracts, forwards or swaps. The Fund intends to use leverage for investment purposes. To do this, the Fund expects to enter into (i) reverse repurchase agreement transactions and use the cash made available from these transactions to make additional investments in fixed-income securities in accordance with the Fund’s investment policies and (ii) total return swaps. In determining when and to what extent to employ leverage or enter into derivatives transactions, the Adviser considers factors such as the relative risks and returns expected of potential investments and the costs of such transactions. The Adviser considers the impact of reverse repurchase agreements, swaps and other derivatives in making its assessments of the Fund’s risks. The resulting exposures to markets, sectors, issuers or specific securities will be continuously monitored by the Adviser.
(continued on next page)
4 | AB BOND INFLATION STRATEGY | abfunds.com | |
The Adviser selects securities for purchase or sale based on its assessment of the securities’ risk and return characteristics as well as the securities’ impact on the overall risk and return characteristics of
the Fund. In making this assessment, the Adviser takes into account various factors, including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings.
The Fund may also invest in loan participations and assignments, structured securities, asset-backed securities, variable, floating, and inverse floating-rate instruments, and preferred stock, and may use other investment techniques. The Fund may invest in fixed-income securities of any maturity and duration. If the rating of a fixed-income security falls below investment-grade, the Fund will not be obligated to sell the security and may continue to hold it if, in the Adviser’s opinion, the investment is appropriate under the circumstances.
| abfunds.com | AB BOND INFLATION STRATEGY | 5 | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays 1-10 Year TIPS Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays 1-10 Year TIPS Index represents the performance of inflation-protected securities issued by the US Treasury. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities. Although the Fund
6 | AB BOND INFLATION STRATEGY | abfunds.com | |
DISCLOSURES AND RISKS (continued)
invests principally in inflation-indexed securities, the value of its securities may be vulnerable to changes in expectations of inflation or interest rates.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Mortgage-Related and/or Other Asset-Backed Securities Risk: Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally go down.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment
| abfunds.com | AB BOND INFLATION STRATEGY | 7 | |
DISCLOSURES AND RISKS (continued)
techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com. For Class 1 shares, go to www.bernstein.com and click on “Investments”, then “Mutual Fund and Money Market Information—Mutual Fund Performance at a Glance.”
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Class 1 and Class 2 shares do not carry sales charges. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB BOND INFLATION STRATEGY | abfunds.com | |
HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
10/31/2010 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Bond Inflation Strategy Class A shares (from 10/31/2010 to 10/31/2020) as compared to the performance of the Fund’s benchmark. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
| abfunds.com | AB BOND INFLATION STRATEGY | 9 | |
HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | ||||||||||
| CLASS 1 SHARES2 | 0.58% | |||||||||||
| 1 Year | 7.84% | 7.84% | ||||||||||
| 5 Years | 4.35% | 4.35% | ||||||||||
| 10 Years | 2.91% | 2.91% | ||||||||||
| CLASS 2 SHARES2 | 0.68% | |||||||||||
| 1 Year | 7.96% | 7.96% | ||||||||||
| 5 Years | 4.44% | 4.44% | ||||||||||
| 10 Years | 3.00% | 3.00% | ||||||||||
| CLASS A SHARES | 0.41% | |||||||||||
| 1 Year | 7.64% | 3.03% | ||||||||||
| 5 Years | 4.18% | 3.28% | ||||||||||
| 10 Years | 2.72% | 2.28% | ||||||||||
| CLASS C SHARES | -0.31% | |||||||||||
| 1 Year | 6.92% | 5.92% | ||||||||||
| 5 Years | 3.41% | 3.41% | ||||||||||
| 10 Years | 1.98% | 1.98% | ||||||||||
| ADVISOR CLASS SHARES3 | 0.68% | |||||||||||
| 1 Year | 7.93% | 7.93% | ||||||||||
| 5 Years | 4.43% | 4.43% | ||||||||||
| 10 Years | 2.99% | 2.99% | ||||||||||
| CLASS R SHARES3 | -0.07% | |||||||||||
| 1 Year | 7.43% | 7.43% | ||||||||||
| 5 Years | 3.94% | 3.94% | ||||||||||
| 10 Years | 2.50% | 2.50% | ||||||||||
| CLASS K SHARES3 | 0.24% | |||||||||||
| 1 Year | 7.74% | 7.74% | ||||||||||
| 5 Years | 4.19% | 4.19% | ||||||||||
| 10 Years | 2.75% | 2.75% | ||||||||||
| CLASS I SHARES3 | 0.57% | |||||||||||
| 1 Year | 7.97% | 7.97% | ||||||||||
| 5 Years | 4.45% | 4.45% | ||||||||||
| 10 Years | 3.01% | 3.01% | ||||||||||
| CLASS Z SHARES3 | 0.66% | |||||||||||
| 1 Year | 7.92% | 7.92% | ||||||||||
| 5 Years | 4.44% | 4.44% | ||||||||||
| Since Inception4 | 3.60% | 3.60% | ||||||||||
(footnotes continued on next page)
10 | AB BOND INFLATION STRATEGY | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
The Fund’s prospectus fee table shows the Fund’s total annual operating expense ratios as 1.20%, 1.09%, 1.51%, 2.26%, 1.24%, 1.83%, 1.57%, 1.18% and 1.10% for Class 1, Class 2, Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expenses (exclusive of extraordinary expenses, interest expense and acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest) to 0.60%, 0.50%, 0.75%, 1.50%, 0.50%, 1.00%, 0.75%, 0.50% and 0.50% for Class 1, Class 2, Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated before January 31, 2021, and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2020. |
| 2 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. These share classes do not carry front-end sales charges; therefore their respective NAV and SEC returns are the same. |
| 3 | These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 4 | Inception date: 12/11/2014. |
| abfunds.com | AB BOND INFLATION STRATEGY | 11 | |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS 1 SHARES1 | ||||
| 1 Year | 7.98% | |||
| 5 Years | 4.35% | |||
| 10 Years | 3.07% | |||
| CLASS 2 SHARES1 | ||||
| 1 Year | 8.10% | |||
| 5 Years | 4.44% | |||
| 10 Years | 3.16% | |||
| CLASS A SHARES | ||||
| 1 Year | 3.24% | |||
| 5 Years | 3.31% | |||
| 10 Years | 2.43% | |||
| CLASS C SHARES | ||||
| 1 Year | 5.95% | |||
| 5 Years | 3.40% | |||
| 10 Years | 2.13% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 8.04% | |||
| 5 Years | 4.46% | |||
| 10 Years | 3.15% | |||
| CLASS R SHARES2 | ||||
| 1 Year | 7.57% | |||
| 5 Years | 3.97% | |||
| 10 Years | 2.66% | |||
| CLASS K SHARES2 | ||||
| 1 Year | 7.79% | |||
| 5 Years | 4.18% | |||
| 10 Years | 2.89% | |||
| CLASS I SHARES2 | ||||
| 1 Year | 8.01% | |||
| 5 Years | 4.44% | |||
| 10 Years | 3.17% | |||
| CLASS Z SHARES2 | ||||
| 1 Year | 8.06% | |||
| 5 Years | 4.46% | |||
| Since Inception3 | 3.62% | |||
(footnotes continued on next page)
12 | AB BOND INFLATION STRATEGY | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. |
| 2 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 12/11/2014. |
| abfunds.com | AB BOND INFLATION STRATEGY | 13 | |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of a mutual fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
14 | AB BOND INFLATION STRATEGY | abfunds.com | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
| Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,086.60 | $ | 4.25 | 0.81 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.06 | $ | 4.12 | 0.81 | % | ||||||||
| Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,082.70 | $ | 8.17 | 1.56 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.29 | $ | 7.91 | 1.56 | % | ||||||||
| Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,088.10 | $ | 2.94 | 0.56 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.32 | $ | 2.85 | 0.56 | % | ||||||||
| Class R | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,085.40 | $ | 5.56 | 1.06 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.81 | $ | 5.38 | 1.06 | % | ||||||||
| Class K | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,086.60 | $ | 4.25 | 0.81 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.06 | $ | 4.12 | 0.81 | % | ||||||||
| Class I | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,088.30 | $ | 2.94 | 0.56 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.32 | $ | 2.85 | 0.56 | % | ||||||||
| Class 1 | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,087.10 | $ | 3.46 | 0.66 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.82 | $ | 3.35 | 0.66 | % | ||||||||
| Class 2 | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,087.80 | $ | 2.94 | 0.56 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.32 | $ | 2.85 | 0.56 | % | ||||||||
| Class Z | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,088.40 | $ | 2.83 | 0.54 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.42 | $ | 2.75 | 0.54 | % | ||||||||
| * | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| abfunds.com | AB BOND INFLATION STRATEGY | 15 | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $572.6
Total Investments ($mil): $796.5
INFLATION PROTECTION BREAKDOWN1
| U.S. Inflation-Protected Exposure | 85.2 | % | ||
| Non-U.S. Inflation-Protected Exposure | 1.5 | |||
| Non-Inflation Exposure | 13.3 | |||
| 100.0 | % | |||
SECTOR BREAKDOWN OF NET PORTFOLIO ASSETS, EXCLUDING TREASURY SECURITIES, TIPS, INTEREST RATE DERIVATIVES AND NET CASH EQUIVALENTS1
| Commercial Mortgage-Backed Securities | 10.3 | % | ||
| Collateralized Mortgage Obligations | 6.8 | % | ||
| Asset-Backed Securities | 2.8 | % | ||
| Corporates–Non-Investment Grade | 2.5 | % | ||
| Collateralized Loan Obligations | 1.2 | % | ||
| Governments–Sovereign Bonds | 1.0 | % | ||
| Mortgage Pass-Throughs | 1.0 | % | ||
| Quasi-Sovereigns | 1.0 | % | ||
| Emerging Markets–Corporate Bonds | 0.5 | % | ||
| Local Governments–US Municipal Bonds | 0.4 | % | ||
| Emerging Markets–Sovereigns | (4.8) | % | ||
| Corporates–Investment Grade | (6.5) | % | ||
SECTOR BREAKDOWN OF TOTAL PORTFOLIO INVESTMENTS, EXCLUDING DERIVATIVES2
| Inflation-Linked Securities | 62.4% | |||
| Corporates–Investment Grade | 16.9% | |||
| Commercial Mortgage-Backed Securities | 6.8% | |||
| Collateralized Mortgage Obligations | 4.8% | |||
| Asset-Backed Securities | 2.0% | |||
| Corporates–Non-Investment Grade | 1.9% | |||
| Collateralized Loan Obligations | 0.9% | |||
| Governments–Sovereign Bonds | 0.7% | |||
| Mortgage Pass-Throughs | 0.7% | |||
| Emerging Markets–Treasuries | 0.7% | |||
| Quasi-Sovereigns | 0.7% | |||
| Emerging Markets–Corporate Bonds | 0.4% | |||
| Local Governments–US Municipal Bonds | 0.3% | |||
| Other | 0.5% | |||
| Short-Term | 0.3% | |||
| 1 | All data are as of October 31, 2020. The Fund’s sector and inflation protection exposure breakdowns are expressed as an approximate percentage of the Fund’s total net assets (and may vary over time) inclusive of derivative exposure except as noted, based on the Adviser’s internal classification. |
| 2 | The Fund’s sector breakdown is expressed, based on the Adviser’s internal classification, as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions (not reflected in the table), which may be used for hedging or investment purposes or to adjust the risk profile or exposures of the Fund (see “Portfolio of Investments” section of the report for additional details). “Other” sector breakdown weightings represent 0.3% or less in the following sectors: Emerging Markets–Sovereigns and Government–Treasuries. Derivative transactions may result in a form of leverage for the Fund. The Fund uses leverage for investment purposes by entering into reverse repurchase agreements. As a result, the Fund’s total investments will generally exceed its net assets. |
16 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
INFLATION-LINKED SECURITIES – 86.8% | ||||||||||||
Canada – 0.7% |
| |||||||||||
Canadian Government Real Return Bond 0.50%, 12/01/2050 | CAD | 4,312 | $ | 3,945,156 | ||||||||
|
| |||||||||||
Japan – 0.8% |
| |||||||||||
Japanese Government CPI Linked Bond | JPY | 486,664 | 4,626,550 | |||||||||
|
| |||||||||||
United States – 85.3% |
| |||||||||||
U.S. Treasury Inflation Index | U.S.$ | 34,590 | 36,484,357 | |||||||||
0.125%, 07/15/2022 (TIPS)(a) | 14,558 | 14,856,127 | ||||||||||
0.125%, 07/15/2024-07/15/2026 (TIPS)(b) | 84,973 | 90,506,227 | ||||||||||
0.25%, 07/15/2029 (TIPS) | 23,018 | 25,459,992 | ||||||||||
0.375%, 07/15/2023 (TIPS)(a) | 17,846 | 18,618,381 | ||||||||||
0.375%, 07/15/2025 (TIPS) | 6,371 | 6,860,321 | ||||||||||
0.375%, 07/15/2027 (TIPS)(b) | 63,771 | 70,237,363 | ||||||||||
0.50%, 01/15/2028 (TIPS)(b) | 27,125 | 30,130,438 | ||||||||||
0.625%, 07/15/2021 (TIPS)(a) | 44,585 | 44,989,050 | ||||||||||
0.625%, 01/15/2024 (TIPS)(b) | 24,352 | 25,729,056 | ||||||||||
0.625%, 01/15/2026 (TIPS) | 20,403 | 22,315,984 | ||||||||||
0.75%, 07/15/2028 (TIPS)(b) | 42,895 | 48,893,557 | ||||||||||
0.875%, 01/15/2029 (TIPS) | 1,791 | 2,063,187 | ||||||||||
1.75%, 01/15/2028 (TIPS) | 10,730 | 12,929,068 | ||||||||||
2.00%, 01/15/2026 (TIPS) | 12,717 | 14,844,867 | ||||||||||
2.375%, 01/15/2027 (TIPS) | 3,837 | 4,685,985 | ||||||||||
2.50%, 01/15/2029 (TIPS)(b) | 11,179 | 14,427,736 | ||||||||||
3.875%, 04/15/2029 (TIPS) | 3,233 | 4,589,289 | ||||||||||
|
| |||||||||||
| 488,620,985 | ||||||||||||
|
| |||||||||||
Total Inflation-Linked Securities | 497,192,691 | |||||||||||
|
| |||||||||||
CORPORATES – INVESTMENT GRADE – 23.5% | ||||||||||||
Industrial – 13.9% | ||||||||||||
Basic – 1.4% | ||||||||||||
Alpek SAB de CV | 232 | 237,287 | ||||||||||
Celulosa Arauco y Constitucion SA | 489 | 521,091 | ||||||||||
DuPont de Nemours, Inc. | 915 | 1,005,942 | ||||||||||
4.493%, 11/15/2025 | 915 | 1,055,370 | ||||||||||
Eastman Chemical Co. | 227 | 249,330 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Fresnillo PLC | U.S.$ | 1,730 | $ | 1,758,112 | ||||||||
GUSAP III LP | 1,000 | 1,048,813 | ||||||||||
Industrias Penoles SAB de CV | 343 | 358,864 | ||||||||||
Inversiones CMPC SA | 845 | 940,591 | ||||||||||
Inversiones CMPC SA/Cayman Islands Branch | 270 | 286,486 | ||||||||||
Nutrition & Biosciences, Inc. | 300 | 300,882 | ||||||||||
Suzano Austria GmbH | 222 | 226,906 | ||||||||||
|
| |||||||||||
| 7,989,674 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.0% | ||||||||||||
Westinghouse Air Brake Technologies Corp. | 180 | 191,086 | ||||||||||
|
| |||||||||||
Communications - Media – 0.9% | ||||||||||||
Cox Communications, Inc. | 163 | 171,153 | ||||||||||
Interpublic Group of Cos., Inc. (The) | 580 | 697,183 | ||||||||||
Prosus NV | 487 | 505,262 | ||||||||||
Tencent Holdings Ltd. | 874 | 889,470 | ||||||||||
3.24%, 06/03/2050(c) | 655 | 657,784 | ||||||||||
Time Warner Cable LLC | 235 | 257,398 | ||||||||||
ViacomCBS, Inc. | 175 | 201,610 | ||||||||||
4.95%, 01/15/2031 | 287 | 347,899 | ||||||||||
Weibo Corp. | 1,254 | 1,257,919 | ||||||||||
|
| |||||||||||
| 4,985,678 | ||||||||||||
|
| |||||||||||
Communications - Telecommunications – 1.0% | ||||||||||||
AT&T, Inc. | 129 | 133,680 | ||||||||||
3.50%, 09/15/2053(c) | 450 | 428,233 | ||||||||||
3.65%, 09/15/2059(c) | 827 | 788,735 | ||||||||||
Sprint Spectrum Co. LLC/Sprint Spectrum | 1,150 | 1,250,004 | ||||||||||
18 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Verizon Communications, Inc. | U.S.$ | 309 | $ | 340,858 | ||||||||
4.862%, 08/21/2046 | 574 | 762,565 | ||||||||||
Vodafone Group PLC | 2,003 | 2,185,673 | ||||||||||
|
| |||||||||||
| 5,889,748 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 1.2% | ||||||||||||
General Motors Co. | 194 | 227,168 | ||||||||||
6.80%, 10/01/2027 | 272 | 334,459 | ||||||||||
General Motors Financial Co., Inc. | 665 | 672,415 | ||||||||||
5.10%, 01/17/2024 | 1,166 | 1,280,676 | ||||||||||
Harley-Davidson Financial Services, Inc. | 1,732 | 1,826,117 | ||||||||||
Lear Corp. | 400 | 416,536 | ||||||||||
3.80%, 09/15/2027 | 122 | 130,395 | ||||||||||
Nissan Motor Co., Ltd. | 1,378 | 1,381,982 | ||||||||||
Volkswagen Group of America Finance LLC | 676 | 697,862 | ||||||||||
|
| |||||||||||
| 6,967,610 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.2% |
| |||||||||||
Las Vegas Sands Corp. | 765 | 758,222 | ||||||||||
3.20%, 08/08/2024 | 446 | 451,138 | ||||||||||
Marriott International, Inc./MD | 92 | 102,435 | ||||||||||
|
| |||||||||||
| 1,311,795 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.8% |
| |||||||||||
Advance Auto Parts, Inc. | 332 | 329,789 | ||||||||||
3.90%, 04/15/2030 | 383 | 432,131 | ||||||||||
AutoNation, Inc. | 355 | 416,497 | ||||||||||
Ralph Lauren Corp. | 1,687 | 1,749,537 | ||||||||||
Ross Stores, Inc. | 1,083 | 1,272,850 | ||||||||||
|
| |||||||||||
| 4,200,804 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 2.9% | ||||||||||||
AbbVie, Inc. | 337 | 427,410 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Altria Group, Inc. | U.S.$ | 950 | $ | 1,031,092 | ||||||||
4.80%, 02/14/2029 | 226 | 265,150 | ||||||||||
Anheuser-Busch InBev Worldwide, Inc. | 607 | 726,591 | ||||||||||
5.55%, 01/23/2049 | 1,080 | 1,453,658 | ||||||||||
Banner Health | 325 | 322,732 | ||||||||||
Baptist Healthcare System Obligated Group | 800 | 798,720 | ||||||||||
BAT Capital Corp. | 1,727 | 1,725,549 | ||||||||||
2.726%, 03/25/2031 | 671 | 664,465 | ||||||||||
4.70%, 04/02/2027 | 605 | 693,318 | ||||||||||
Baxalta, Inc. | 209 | 218,079 | ||||||||||
Cigna Corp. | 212 | 229,482 | ||||||||||
4.125%, 11/15/2025 | 374 | 428,525 | ||||||||||
4.375%, 10/15/2028 | 501 | 592,868 | ||||||||||
Coca-Cola Femsa SAB de CV | 384 | 380,938 | ||||||||||
2.75%, 01/22/2030 | 458 | 489,396 | ||||||||||
CommonSpirit Health | 518 | 519,704 | ||||||||||
CVS Health Corp. | 126 | 146,129 | ||||||||||
5.05%, 03/25/2048 | 662 | 840,191 | ||||||||||
Kimberly-Clark de Mexico SAB de CV | 350 | 351,203 | ||||||||||
Mylan NV | 623 | 702,208 | ||||||||||
Royalty Pharma PLC | 194 | 192,985 | ||||||||||
Sigma Alimentos SA de CV | 209 | 226,438 | ||||||||||
Sutter Health | 810 | 813,783 | ||||||||||
Takeda Pharmaceutical Co., Ltd. | 1,151 | 1,278,140 | ||||||||||
Tyson Foods, Inc. | 650 | 723,470 | ||||||||||
|
| |||||||||||
| 16,242,224 | ||||||||||||
|
| |||||||||||
20 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Energy – 2.9% | ||||||||||||
Baker Hughes a GE Co. LLC/Baker Hughes Co-Obligor, Inc. | U.S.$ | 728 | $ | 777,948 | ||||||||
Boardwalk Pipelines LP | 604 | 580,861 | ||||||||||
BP Capital Markets America, Inc. | 761 | 831,415 | ||||||||||
Cenovus Energy, Inc. | 33 | 33,489 | ||||||||||
Energy Transfer Operating LP | 2,118 | 2,081,253 | ||||||||||
5.20%, 02/01/2022 | 510 | 527,554 | ||||||||||
Eni SpA | 954 | 1,079,728 | ||||||||||
Exxon Mobil Corp. | 1,180 | 1,213,158 | ||||||||||
2.992%, 03/19/2025 | 835 | 909,423 | ||||||||||
Husky Energy, Inc. | 2,161 | 2,197,672 | ||||||||||
Kinder Morgan Energy Partners LP | 104 | 108,602 | ||||||||||
5.00%, 10/01/2021 | 1,200 | 1,234,944 | ||||||||||
Marathon Petroleum Corp. | 569 | 614,809 | ||||||||||
Oleoducto Central SA | 453 | 472,343 | ||||||||||
ONEOK, Inc. | 184 | 213,615 | ||||||||||
Sabine Pass Liquefaction LLC | 418 | 469,201 | ||||||||||
Tengizchevroil Finance Co. International Ltd. | 306 | 310,685 | ||||||||||
TransCanada PipeLines Ltd. | 930 | 943,355 | ||||||||||
Valero Energy Corp. | 672 | 691,542 | ||||||||||
Williams Cos., Inc. (The) | 1,250 | 1,362,650 | ||||||||||
|
| |||||||||||
| 16,654,247 | ||||||||||||
|
| |||||||||||
Other Industrial – 0.1% | ||||||||||||
Alfa SAB de CV | 600 | 638,625 | ||||||||||
|
| |||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Services – 0.3% | ||||||||||||
Booking Holdings, Inc. | U.S.$ | 1,433 | $ | 1,697,231 | ||||||||
Expedia Group, Inc. | 76 | 83,569 | ||||||||||
|
| |||||||||||
| 1,780,800 | ||||||||||||
|
| |||||||||||
Technology – 1.4% | ||||||||||||
Analog Devices, Inc. | 96 | 104,251 | ||||||||||
Baidu, Inc. | 201 | 220,389 | ||||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. | 186 | 200,019 | ||||||||||
Broadcom, Inc. | 840 | 936,020 | ||||||||||
4.15%, 11/15/2030 | 1,160 | 1,299,884 | ||||||||||
5.00%, 04/15/2030 | 312 | 367,383 | ||||||||||
Dell International LLC/EMC Corp. | 111 | 122,057 | ||||||||||
6.02%, 06/15/2026(c) | 974 | 1,154,307 | ||||||||||
Infor, Inc. | 450 | 462,501 | ||||||||||
Micron Technology, Inc. | 1,523 | 1,721,356 | ||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. | 143 | 151,942 | ||||||||||
Oracle Corp. | 1,140 | 1,221,191 | ||||||||||
Seagate HDD Cayman | 200 | 216,882 | ||||||||||
|
| |||||||||||
| 8,178,182 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.4% | ||||||||||||
Delta Air Lines, Inc./SkyMiles IP Ltd. | 528 | 536,199 | ||||||||||
4.75%, 10/20/2028(c) | 614 | 628,012 | ||||||||||
Southwest Airlines Co. | 693 | 768,904 | ||||||||||
|
| |||||||||||
| 1,933,115 | ||||||||||||
|
| |||||||||||
Transportation - Railroads – 0.1% | ||||||||||||
Lima Metro Line 2 Finance Ltd. | 241 | 264,799 | ||||||||||
5.875%, 07/05/2034(c) | 316 | 378,735 | ||||||||||
|
| |||||||||||
| 643,534 | ||||||||||||
|
| |||||||||||
22 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Transportation - Services – 0.3% | ||||||||||||
Aviation Capital Group LLC | U.S.$ | 101 | $ | 100,841 | ||||||||
3.50%, 11/01/2027(c) | 140 | 123,679 | ||||||||||
3.875%, 05/01/2023(c) | 524 | 524,073 | ||||||||||
4.125%, 08/01/2025(c) | 7 | 6,738 | ||||||||||
4.375%, 01/30/2024(c) | 194 | 195,376 | ||||||||||
4.875%, 10/01/2025(c) | 246 | 242,819 | ||||||||||
5.50%, 12/15/2024(c) | 550 | 572,737 | ||||||||||
|
| |||||||||||
| 1,766,263 | ||||||||||||
|
| |||||||||||
| 79,373,385 | ||||||||||||
|
| |||||||||||
Financial Institutions – 8.9% | ||||||||||||
Banking – 6.8% | ||||||||||||
ABN AMRO Bank NV | 200 | 227,024 | ||||||||||
AIB Group PLC | 364 | 391,708 | ||||||||||
4.75%, 10/12/2023(c) | 425 | 461,712 | ||||||||||
American Express Co. | 485 | 453,475 | ||||||||||
Australia & New Zealand Banking Group Ltd. | 600 | 679,062 | ||||||||||
Banco de Credito del Peru | 958 | 967,580 | ||||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand | 487 | 544,831 | ||||||||||
Banco Santander SA | 1,400 | 1,595,020 | ||||||||||
Bank of America Corp. | 1,750 | 2,016,332 | ||||||||||
Series DD | 295 | 334,064 | ||||||||||
Series L | 2,182 | 2,432,254 | ||||||||||
Series Z | 458 | 509,099 | ||||||||||
Bank of New York Mellon Corp. (The) | 273 | 292,227 | ||||||||||
Bank of Nova Scotia (The) | 344 | 345,410 | ||||||||||
Barclays Bank PLC | 137 | 184,236 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Barclays PLC | U.S.$ | 700 | $ | 722,491 | ||||||
BNP Paribas SA | 600 | 674,850 | ||||||||
BPCE SA | 213 | 239,210 | ||||||||
Capital One Financial Corp. | 564 | 591,010 | ||||||||
CIT Group, Inc. | 579 | 647,108 | ||||||||
Citigroup, Inc. | 483 | 533,710 | ||||||||
4.45%, 09/29/2027 | 1,103 | 1,273,402 | ||||||||
5.95%, 01/30/2023(d) | 257 | 265,216 | ||||||||
Series Q | 409 | 401,119 | ||||||||
Series R | 528 | 524,832 | ||||||||
Commonwealth Bank of Australia | 404 | 455,664 | ||||||||
Cooperatieve Rabobank UA | 396 | 447,761 | ||||||||
Danske Bank A/S | 663 | 703,032 | ||||||||
Deutsche Bank AG/New York NY | 150 | 151,676 | ||||||||
3.961%, 11/26/2025 | 405 | 432,807 | ||||||||
Discover Bank | 327 | 342,928 | ||||||||
Fifth Third Bancorp | 334 | 337,196 | ||||||||
Goldman Sachs Group, Inc. (The) | 406 | 417,961 | ||||||||
2.905%, 07/24/2023 | 922 | 957,506 | ||||||||
HSBC Holdings PLC | 787 | 877,505 | ||||||||
4.25%, 03/14/2024 | 266 | 288,129 | ||||||||
4.292%, 09/12/2026 | 377 | 422,696 | ||||||||
JPMorgan Chase & Co. | 834 | 871,789 | ||||||||
Mastercard, Inc. | 449 | 509,108 | ||||||||
3.85%, 03/26/2050 | 674 | 841,725 | ||||||||
24 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Morgan Stanley | U.S.$ | 429 | $ | 483,234 | ||||||||
3.737%, 04/24/2024 | 1,196 | 1,286,202 | ||||||||||
5.00%, 11/24/2025 | 187 | 220,699 | ||||||||||
Series G | 499 | 578,880 | ||||||||||
5.50%, 07/28/2021 | 456 | 473,200 | ||||||||||
Series J | 195 | 191,913 | ||||||||||
Nationwide Building Society | 820 | 889,618 | ||||||||||
Natwest Group PLC | 480 | 496,013 | ||||||||||
Series U | 600 | 576,540 | ||||||||||
PNC Bank NA | 940 | 1,021,479 | ||||||||||
Santander Holdings USA, Inc. | 424 | 472,052 | ||||||||||
Standard Chartered PLC | 400 | 355,520 | ||||||||||
7.50%, 04/02/2022(c)(d) | 380 | 392,453 | ||||||||||
State Street Corp. | 85 | 92,340 | ||||||||||
Truist Financial Corp. | 1,060 | 1,158,251 | ||||||||||
UBS AG/Stamford CT | 465 | 517,192 | ||||||||||
UBS Group AG | 1,030 | 1,055,740 | ||||||||||
UniCredit SpA | 1,725 | 1,713,563 | ||||||||||
US Bancorp | 427 | 465,656 | ||||||||||
Wells Fargo & Co. | 589 | 612,996 | ||||||||||
Series G | 444 | 509,383 | ||||||||||
|
| |||||||||||
| 38,927,389 | ||||||||||||
|
| |||||||||||
Brokerage – 0.1% | ||||||||||||
Charles Schwab Corp. (The) | 554 | 606,940 | ||||||||||
|
| |||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Finance – 1.3% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | U.S.$ | 176 | $ | 173,978 | ||||||||
3.30%, 01/23/2023 | 176 | 177,786 | ||||||||||
3.65%, 07/21/2027 | 176 | 166,332 | ||||||||||
4.125%, 07/03/2023 | 176 | 180,856 | ||||||||||
4.50%, 09/15/2023 | 488 | 506,964 | ||||||||||
6.50%, 07/15/2025 | 209 | 230,023 | ||||||||||
Air Lease Corp. | 101 | 105,458 | ||||||||||
4.25%, 02/01/2024 | 411 | 431,254 | ||||||||||
Aircastle Ltd. | 232 | 228,367 | ||||||||||
4.40%, 09/25/2023 | 531 | 534,250 | ||||||||||
5.00%, 04/01/2023 | 49 | 49,962 | ||||||||||
5.25%, 08/11/2025(c) | 409 | 405,855 | ||||||||||
GE Capital European Funding Unlimited Co. | EUR | 200 | 275,791 | |||||||||
GE Capital Funding LLC | U.S.$ | 1,570 | 1,715,853 | |||||||||
Synchrony Financial | 1,875 | 2,085,338 | ||||||||||
|
| |||||||||||
| 7,268,067 | ||||||||||||
|
| |||||||||||
Insurance – 0.6% | ||||||||||||
Alleghany Corp. | 1,257 | 1,406,948 | ||||||||||
Centene Corp. | 208 | 218,878 | ||||||||||
4.625%, 12/15/2029 | 237 | 258,029 | ||||||||||
Guardian Life Insurance Co. of America (The) | 183 | 232,405 | ||||||||||
MetLife, Inc. | 90 | 129,962 | ||||||||||
Nationwide Financial Services, Inc. | 360 | 366,145 | ||||||||||
Nationwide Mutual Insurance Co. | 125 | 212,045 | ||||||||||
Voya Financial, Inc. | 335 | 345,167 | ||||||||||
|
| |||||||||||
| 3,169,579 | ||||||||||||
|
| |||||||||||
Other Finance – 0.0% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 233 | 234,803 | ||||||||||
|
| |||||||||||
26 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
REITS – 0.1% | ||||||||||||
Welltower, Inc. | U.S.$ | 212 | $ | 217,033 | ||||||||
3.10%, 01/15/2030 | 168 | 177,064 | ||||||||||
3.625%, 03/15/2024 | 101 | 109,531 | ||||||||||
4.00%, 06/01/2025 | 232 | 261,056 | ||||||||||
|
| |||||||||||
| 764,684 | ||||||||||||
|
| |||||||||||
| 50,971,462 | ||||||||||||
|
| |||||||||||
Utility – 0.7% | ||||||||||||
Electric – 0.7% | ||||||||||||
AES Panama Generation Holdings SRL | 358 | 377,747 | ||||||||||
CMS Energy Corp. | 144 | 150,899 | ||||||||||
Colbun SA | 400 | 417,010 | ||||||||||
Enel Chile SA | 821 | 959,544 | ||||||||||
Israel Electric Corp., Ltd. | 620 | 700,600 | ||||||||||
Kentucky Utilities Co. | 513 | 552,126 | ||||||||||
NextEra Energy Capital Holdings, Inc. | 231 | 249,265 | ||||||||||
Star Energy Geothermal Darajat II/Star Energy Geothermal Salak | 614 | 632,420 | ||||||||||
|
| |||||||||||
| 4,039,611 | ||||||||||||
|
| |||||||||||
Total Corporates – Investment Grade | 134,384,458 | |||||||||||
|
| |||||||||||
COMMERCIAL MORTGAGE-BACKED | ||||||||||||
Non-Agency Fixed Rate CMBS – 6.7% | ||||||||||||
BAMLL Commercial Mortgage Securities Trust | 520 | 459,895 | ||||||||||
CCUBS Commercial Mortgage Trust | 1,210 | 1,358,628 | ||||||||||
CFCRE Commercial Mortgage Trust | 730 | 785,608 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
CGRBS Commercial Mortgage Trust | U.S.$ | 885 | $ | 929,694 | ||||||
Citigroup Commercial Mortgage Trust | 915 | 953,667 | ||||||||
Series 2013-GC11, Class D | 191 | 181,364 | ||||||||
Series 2015-GC27, Class A5 | 1,382 | 1,486,340 | ||||||||
Series 2015-GC35, Class A4 | 450 | 500,093 | ||||||||
Series 2016-C1, Class A4 | 775 | 846,445 | ||||||||
Series 2016-GC36, Class A5 | 565 | 624,146 | ||||||||
Series 2017-P8, Class AS | 526 | 590,729 | ||||||||
Commercial Mortgage Trust | 130 | 128,601 | ||||||||
Series 2015-3BP, Class A | 250 | 266,364 | ||||||||
Series 2015-CR24, Class A5 | 590 | 653,662 | ||||||||
Series 2015-CR25, Class A4 | 1,155 | 1,283,240 | ||||||||
Series 2015-DC1, Class A5 | 1,220 | 1,317,910 | ||||||||
Series 2015-PC1, Class A5 | 745 | 823,281 | ||||||||
CSAIL Commercial Mortgage Trust | 475 | 520,268 | ||||||||
Series 2015-C3, Class A4 | 395 | 432,923 | ||||||||
Series 2015-C4, Class A4 | 1,853 | 2,052,110 | ||||||||
GS Mortgage Securities Trust | 110 | 89,395 | ||||||||
Series 2013-G1, Class A1 | 207 | 208,838 | ||||||||
Series 2014-GC18, Class D | 393 | 107,276 | ||||||||
Series 2014-GC22, Class A5 | 1,072 | 1,165,288 | ||||||||
28 �� | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2015-GC28, Class A5 | U.S.$ | 1,300 | $ | 1,402,945 | ||||||
Series 2018-GS9, Class A4 | 1,150 | 1,324,807 | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 129 | 103,128 | ||||||||
JPMBB Commercial Mortgage Securities Trust | 1,220 | 1,328,240 | ||||||||
Series 2014-C21, Class B | 314 | 328,051 | ||||||||
Series 2014-C22, Class XA | 19,902 | 527,630 | ||||||||
Series 2015-C30, Class A5 | 585 | 648,443 | ||||||||
Series 2015-C31, Class A3 | 990 | 1,097,708 | ||||||||
Series 2015-C33, Class A4 | 1,150 | 1,285,918 | ||||||||
JPMCC Commercial Mortgage Securities Trust | 8,881 | 451,353 | ||||||||
LB-UBS Commercial Mortgage Trust | 132 | 76,540 | ||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | 10,423 | 417,348 | ||||||||
Morgan Stanley Capital I Trust | 100 | 100,101 | ||||||||
Series 2016-UB12, Class A4 | 870 | 965,393 | ||||||||
UBS Commercial Mortgage Trust | 990 | 1,139,095 | ||||||||
Series 2018-C9, Class A4 | 1,800 | 2,064,476 | ||||||||
Series 2018-C10, Class A4 | 1,200 | 1,394,546 | ||||||||
UBS-Barclays Commercial Mortgage Trust | 2,309 | 2,387,875 | ||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Wells Fargo Commercial Mortgage Trust | U.S.$ | 1,160 | $ | 1,262,268 | ||||||||
Series 2015-SG1, Class C | 537 | 505,139 | ||||||||||
Series 2016-LC25, Class C | 330 | 317,726 | ||||||||||
Series 2016-NXS6, Class A4 | 900 | 966,986 | ||||||||||
Series 2016-NXS6, Class C | 525 | 505,487 | ||||||||||
Series 2018-C48, Class A5 | 145 | 169,802 | ||||||||||
|
| |||||||||||
| 38,536,770 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate CMBS – 2.7% | ||||||||||||
Ashford Hospitality Trust | 891 | 839,919 | ||||||||||
Series 2018-KEYS, Class A | 1,250 | 1,178,370 | ||||||||||
BAMLL Commercial Mortgage Securities Trust | 1,755 | 1,658,445 | ||||||||||
BBCMS Mortgage Trust | 963 | 960,726 | ||||||||||
BHMS | 1,001 | 954,710 | ||||||||||
Braemar Hotels & Resorts Trust | 1,000 | 946,232 | ||||||||||
BX Commercial Mortgage Trust | 766 | 736,354 | ||||||||||
BX Trust | 1,130 | 1,028,803 | ||||||||||
30 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
CLNY Trust | U.S.$ | 1,000 | $ | 906,049 | ||||||||
DBWF Mortgage Trust | 1,042 | 1,013,478 | ||||||||||
GS Mortgage Securities Corp. Trust | 1,368 | 1,337,018 | ||||||||||
Series 2019-SMP, Class A | 1,125 | 1,091,241 | ||||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 149 | 136,347 | ||||||||||
Morgan Stanley Capital I Trust | 182 | 146,572 | ||||||||||
Natixis Commercial Mortgage Securities Trust | 1,200 | 1,187,377 | ||||||||||
Series 2019-MILE, Class A | 461 | 456,554 | ||||||||||
Starwood Retail Property Trust | 961 | 711,444 | ||||||||||
|
| |||||||||||
| 15,289,639 | ||||||||||||
|
| |||||||||||
Total Commercial Mortgage-Backed Securities | 53,826,409 | |||||||||||
|
| |||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS – 6.8% | ||||||||||||
Risk Share Floating Rate – 5.1% | ||||||||||||
Bellemeade Re Ltd. | 412 | 409,111 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2019-1A, Class M1B | U.S.$ | 945 | $ | 943,892 | ||||||
Series 2019-2A, Class M1C | 707 | 698,294 | ||||||||
Series 2019-3A, Class M1B | 660 | 646,479 | ||||||||
Series 2019-3A, Class M1C | 480 | 456,492 | ||||||||
Series 2019-4A, Class M1B | 965 | 954,538 | ||||||||
Series 2020-2A, Class M1B | 518 | 522,012 | ||||||||
Series 2020-3A, Class M1B | 330 | 329,974 | ||||||||
Connecticut Avenue Securities Trust | 372 | 370,205 | ||||||||
Series 2019-R02, Class 1M2 | 257 | 255,866 | ||||||||
Series 2019-R03, Class 1M2 | 135 | 134,036 | ||||||||
Series 2019-R04, Class 2M2 | 488 | 483,572 | ||||||||
Series 2019-R05, Class 1M2 | 287 | 285,600 | ||||||||
Series 2019-R06, Class 2M2 | 606 | 600,035 | ||||||||
Series 2019-R07, Class 1M2 | 1,065 | 1,055,507 | ||||||||
Series 2020-R01, Class 1M2 | 1,270 | 1,243,999 | ||||||||
32 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Eagle Re Ltd. | U.S.$ | 1,100 | $ | 1,091,631 | ||||||
Federal Home Loan Mortgage Corp. | 218 | 223,725 | ||||||||
Series 2017-DNA3, Class M2 | 900 | 909,563 | ||||||||
Series 2017-HQA3, Class M2 | 893 | 900,961 | ||||||||
Series 2019-DNA3, Class M2 | 71 | 69,673 | ||||||||
Series 2019-DNA4, Class M2 | 802 | 795,239 | ||||||||
Series 2019-FTR2, Class M2 | 515 | 483,602 | ||||||||
Series 2019-HQA3, Class M2 | 454 | 444,633 | ||||||||
Series 2020-DNA1, Class M2 | 950 | 928,844 | ||||||||
Series 2020-DNA5, Class M2 | 960 | 959,399 | ||||||||
Federal National Mortgage Association Connecticut Avenue Securities | 268 | 278,160 | ||||||||
Series 2015-C01, Class 1M2 | 581 | 590,072 | ||||||||
Series 2015-C01, Class 2M2 | 71 | 71,732 | ||||||||
Series 2015-C02, Class 1M2 | 286 | 287,483 | ||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2015-C02, Class 2M2 | U.S.$ | 102 | $ | 103,112 | ||||||
Series 2015-C03, Class 1M2 | 278 | 282,732 | ||||||||
Series 2015-C03, Class 2M2 | 177 | 181,476 | ||||||||
Series 2015-C04, Class 1M2 | 559 | 591,835 | ||||||||
Series 2016-C05, Class 2M2 | 580 | 601,814 | ||||||||
Series 2016-C06, Class 1M2 | 259 | 267,548 | ||||||||
Series 2016-C07, Class 2M2 | 857 | 890,851 | ||||||||
Series 2017-C03, Class 1M2 | 531 | 534,906 | ||||||||
Home Re Ltd. | 790 | 790,008 | ||||||||
Mortgage Insurance-Linked Notes | 805 | 798,474 | ||||||||
Oaktown Re V Ltd. | 1,427 | 1,425,542 | ||||||||
PMT Credit Risk Transfer Trust | 277 | 247,311 | ||||||||
Series 2019-2R, Class A | 516 | 462,951 | ||||||||
Series 2019-3R, Class A | 175 | 156,873 | ||||||||
34 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2020-1R, Class A | U.S.$ | 624 | $ | 558,640 | ||||||||
Radnor Re Ltd. | 586 | 585,971 | ||||||||||
Series 2019-2, Class M1B | 723 | 717,232 | ||||||||||
Series 2020-1, Class M1A | 391 | 389,733 | ||||||||||
Series 2020-2, Class M1C | 578 | 579,070 | ||||||||||
Traingle Re Ltd. | 1,640 | 1,638,967 | ||||||||||
|
| |||||||||||
| 29,229,375 | ||||||||||||
|
| |||||||||||
Agency Floating Rate – 1.3% |
| |||||||||||
Federal Home Loan Mortgage Corp. REMICs | 3,268 | 651,337 | ||||||||||
Series 4693, Class SL | 2,000 | 456,015 | ||||||||||
Series 4727, Class SA | 2,212 | 446,896 | ||||||||||
Series 4954, Class SL | 3,003 | 541,198 | ||||||||||
Series 4981, Class HS | 6,644 | 1,221,744 | ||||||||||
Federal National Mortgage Association REMICs | 991 | 233,482 | ||||||||||
Series 2014-17, Class SA | 2,486 | 629,898 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2014-78, Class SE | U.S.$ | 1,578 | $ | 312,907 | ||||||||
Series 2016-77, Class DS | 1,751 | 351,435 | ||||||||||
Series 2017-62, Class AS | 1,966 | 367,085 | ||||||||||
Series 2017-81, Class SA | 2,123 | 473,547 | ||||||||||
Series 2017-97, Class LS | 2,248 | 583,349 | ||||||||||
Series 2020-26, Class GS | 3,217 | 572,504 | ||||||||||
Government National Mortgage Association | 1,467 | 305,432 | ||||||||||
Series 2017-134, Class MS | 1,474 | 318,821 | ||||||||||
|
| |||||||||||
| 7,465,650 | ||||||||||||
|
| |||||||||||
Agency Fixed Rate – 0.3% |
| |||||||||||
Federal Home Loan Mortgage Corp. REMICs | 4,715 | 762,129 | ||||||||||
Series 5015, Class BI 4.00%, 09/25/2050(f) | 3,526 | 573,922 | ||||||||||
Series 5018, Class EI 4.00%, 10/25/2050(f) | 2,991 | 424,359 | ||||||||||
|
| |||||||||||
| 1,760,410 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate – 0.1% |
| |||||||||||
Chase Mortgage Reference Notes | 283 | 282,775 | ||||||||||
|
| |||||||||||
Total Collateralized Mortgage Obligations | 38,738,210 | |||||||||||
|
| |||||||||||
36 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
ASSET-BACKED SECURITIES – 2.8% | ||||||||||||
Autos - Fixed Rate – 1.5% |
| |||||||||||
Avis Budget Rental Car Funding AESOP LLC | U.S.$ | 1,760 | $ | 1,849,886 | ||||||||
Series 2018-2A, Class A | 1,425 | 1,524,937 | ||||||||||
First Investors Auto Owner Trust | 1,200 | 1,238,190 | ||||||||||
Series 2020-1A, Class A | 610 | 615,377 | ||||||||||
Flagship Credit Auto Trust | 325 | 334,129 | ||||||||||
Series 2016-4, Class D | 330 | 335,994 | ||||||||||
Series 2018-3, Class B | 1,200 | 1,224,825 | ||||||||||
Hertz Vehicle Financing II LP | 300 | 301,492 | ||||||||||
Series 2017-1A, Class A | 468 | 468,953 | ||||||||||
Series 2019-1A, Class A | 370 | 369,819 | ||||||||||
Series 2019-2A, Class A | 310 | 311,691 | ||||||||||
|
| |||||||||||
| 8,575,293 | ||||||||||||
|
| |||||||||||
Credit Cards - Fixed Rate – 0.8% |
| |||||||||||
World Financial Network Credit Card Master Trust | 1,675 | 1,688,267 | ||||||||||
Series 2018-B, Class A | 850 | 871,416 | ||||||||||
Series 2018-B, Class M | 935 | 945,032 | ||||||||||
Series 2019-B, Class M | 1,070 | 1,103,126 | ||||||||||
|
| |||||||||||
| 4,607,841 | ||||||||||||
|
| |||||||||||
Other ABS - Fixed Rate – 0.5% |
| |||||||||||
Affirm Asset Securitization Trust | 711 | 712,522 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 37 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Marlette Funding Trust | U.S.$ | 161 | $ | 161,888 | ||||||||
Prosper Marketplace Issuance Trust | 121 | 121,542 | ||||||||||
SoFi Consumer Loan Program LLC | 33 | 33,232 | ||||||||||
Series 2017-5, Class A2 | 269 | 271,301 | ||||||||||
Series 2017-6, Class A2 | 223 | 223,686 | ||||||||||
SoFi Consumer Loan Program Trust | 507 | 512,006 | ||||||||||
Upstart Securitization Trust | 641 | 641,315 | ||||||||||
|
| |||||||||||
| 2,677,492 | ||||||||||||
|
| |||||||||||
Total Asset-Backed Securities | 15,860,626 | |||||||||||
|
| |||||||||||
CORPORATES – NON-INVESTMENT GRADE – 2.6% | ||||||||||||
Industrial – 1.6% | ||||||||||||
Basic – 0.1% | ||||||||||||
Ingevity Corp. | 683 | 693,716 | ||||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
TransDigm, Inc. | 512 | 533,919 | ||||||||||
|
| |||||||||||
Communications - Media – 0.4% | ||||||||||||
Cable One, Inc. | 499 | 506,520 | ||||||||||
CCO Holdings LLC/CCO Holdings Capital Corp. | 656 | 662,566 | ||||||||||
5.00%, 02/01/2028(c) | 702 | 737,100 | ||||||||||
CSC Holdings LLC | 145 | 151,628 | ||||||||||
|
| |||||||||||
| 2,057,814 | ||||||||||||
|
| |||||||||||
38 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Consumer Cyclical - Automotive – 0.0% | ||||||||||||
Clarios Global LP/Clarios US Finance Co. | EUR | 191 | $ | 223,220 | ||||||||
|
| |||||||||||
Consumer Cyclical - Entertainment – 0.2% | ||||||||||||
Royal Caribbean Cruises Ltd. | U.S.$ | 394 | 429,767 | |||||||||
11.50%, 06/01/2025(c) | 708 | 809,896 | ||||||||||
|
| |||||||||||
| 1,239,663 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.1% | ||||||||||||
International Game Technology PLC | 207 | 212,044 | ||||||||||
6.50%, 02/15/2025(c) | 460 | 490,558 | ||||||||||
|
| |||||||||||
| 702,602 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Restaurants – 0.2% | ||||||||||||
1011778 BC ULC/New Red Finance, Inc. | 1,046 | 1,039,996 | ||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.2% | ||||||||||||
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC | 1,160 | 1,178,560 | ||||||||||
|
| |||||||||||
Energy – 0.3% | ||||||||||||
Sunoco LP/Sunoco Finance Corp. | 618 | 620,744 | ||||||||||
5.875%, 03/15/2028 | 640 | 664,083 | ||||||||||
Transocean Poseidon Ltd. | 388 | 292,308 | ||||||||||
|
| |||||||||||
| 1,577,135 | ||||||||||||
|
| |||||||||||
| 9,246,625 | ||||||||||||
|
| |||||||||||
Financial Institutions – 1.0% | ||||||||||||
Banking – 0.6% | ||||||||||||
Credit Suisse Group AG | 320 | 345,991 | ||||||||||
7.50%, 07/17/2023-12/11/2023(c)(d) | 1,356 | 1,441,167 | ||||||||||
Discover Financial Services | 1,667 | 1,784,890 | ||||||||||
|
| |||||||||||
| 3,572,048 | ||||||||||||
|
| |||||||||||
Finance – 0.4% | ||||||||||||
Navient Corp. | 722 | 729,552 | ||||||||||
6.625%, 07/26/2021 | 415 | 423,263 | ||||||||||
7.25%, 01/25/2022 | 54 | 55,709 | ||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 39 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
SLM Corp. | U.S.$ | 900 | $ | 913,059 | ||||||||
|
| |||||||||||
| 2,121,583 | ||||||||||||
|
| |||||||||||
| 5,693,631 | ||||||||||||
|
| |||||||||||
Total Corporates - Non-Investment Grade | 14,940,256 | |||||||||||
|
| |||||||||||
COLLATERALIZED LOAN OBLIGATIONS – 1.2% | ||||||||||||
CLO - Floating Rate – 1.2% | ||||||||||||
Dryden CLO Ltd. | 700 | 702,216 | ||||||||||
Series 2020-78A, Class C | 880 | 857,761 | ||||||||||
Series 2020-78A, Class D | 460 | 429,565 | ||||||||||
Elevation CLO Ltd. | 780 | 744,018 | ||||||||||
Goldentree Loan Management US CLO Ltd. | 1,024 | 1,026,783 | ||||||||||
Kayne CLO Ltd. | 400 | 392,804 | ||||||||||
Magnetite XXVI Ltd. | 1,485 | 1,488,703 | ||||||||||
OCP CLO Ltd. | 1,022 | 1,023,393 | ||||||||||
Voya CLO Ltd. | 340 | 295,921 | ||||||||||
|
| |||||||||||
Total Collateralized Loan Obligations | 6,961,164 | |||||||||||
|
| |||||||||||
40 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GOVERNMENTS – SOVEREIGN BONDS – 1.0% | ||||||||||||
Colombia – 0.0% | ||||||||||||
Colombia Government International Bond | U.S.$ | 248 | $ | 254,448 | ||||||||
|
| |||||||||||
Israel – 0.1% | ||||||||||||
Israel Government International Bond | 656 | 760,550 | ||||||||||
|
| |||||||||||
Mexico – 0.1% | ||||||||||||
Mexico Government International Bond | 723 | 789,742 | ||||||||||
|
| |||||||||||
Qatar – 0.1% | ||||||||||||
Qatar Government International Bond | 398 | 437,178 | ||||||||||
|
| |||||||||||
Saudi Arabia – 0.2% | ||||||||||||
Saudi Government International Bond | 1,112 | 1,187,060 | ||||||||||
|
| |||||||||||
United Arab Emirates – 0.4% | ||||||||||||
Abu Dhabi Government International Bond | 786 | 772,245 | ||||||||||
2.50%, 04/16/2025(c) | 643 | 680,937 | ||||||||||
3.875%, 04/16/2050(c) | 550 | 652,781 | ||||||||||
|
| |||||||||||
| 2,105,963 | ||||||||||||
|
| |||||||||||
Uruguay – 0.1% | ||||||||||||
Uruguay Government International Bond | 238 | 287,903 | ||||||||||
|
| |||||||||||
Total Governments – Sovereign Bonds | 5,822,844 | |||||||||||
|
| |||||||||||
MORTGAGE PASS-THROUGHS – 1.0% | ||||||||||||
Agency Fixed Rate 30-Year – 1.0% |
| |||||||||||
Uniform Mortgage-Backed Security | 5,700 | 5,738,297 | ||||||||||
|
| |||||||||||
EMERGING MARKETS – TREASURIES – 1.0% | ||||||||||||
South Africa – 1.0% | ||||||||||||
Republic of South Africa Government Bond | ZAR | 97,953 | 5,535,451 | |||||||||
|
| |||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 41 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
QUASI-SOVEREIGNS – 0.9% | ||||||||||||
Quasi-Sovereign Bonds – 0.9% | ||||||||||||
Chile – 0.2% | ||||||||||||
Corp. Nacional del Cobre de Chile | ||||||||||||
3.15%, 01/14/2030(c) | U.S.$ | 655 | $ | 696,551 | ||||||||
3.75%, 01/15/2031(c) | 202 | 223,210 | ||||||||||
Empresa de Transporte de Pasajeros Metro SA | 200 | 217,600 | ||||||||||
|
| |||||||||||
| 1,137,361 | ||||||||||||
|
| |||||||||||
Indonesia – 0.3% | ||||||||||||
Indonesia Asahan Aluminium Persero PT | 435 | 472,519 | ||||||||||
Pertamina Persero PT | 575 | 746,425 | ||||||||||
Perusahaan Perseroan Persero PT Perusahaan Listrik Negara | 305 | 387,826 | ||||||||||
|
| |||||||||||
| 1,606,770 | ||||||||||||
|
| |||||||||||
Malaysia – 0.1% | ||||||||||||
Petronas Capital Ltd. | 705 | 879,604 | ||||||||||
|
| |||||||||||
Mexico – 0.1% | ||||||||||||
Petroleos Mexicanos |
| |||||||||||
6.75%, 09/21/2047 | 529 | 409,711 | ||||||||||
6.84%, 01/23/2030 | 258 | 230,676 | ||||||||||
|
| |||||||||||
| 640,387 | ||||||||||||
|
| |||||||||||
Peru – 0.2% | ||||||||||||
Corp. Financiera de Desarrollo SA | 1,185 | 1,203,960 | ||||||||||
|
| |||||||||||
Total Quasi-Sovereigns | 5,468,082 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – CORPORATE | ||||||||||||
Industrial – 0.5% | ||||||||||||
Basic – 0.1% | ||||||||||||
Braskem Netherlands Finance BV | 600 | 555,894 | ||||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
Embraer Netherlands Finance BV |
| |||||||||||
5.40%, 02/01/2027 | 590 | 558,668 | ||||||||||
6.95%, 01/17/2028(c) | 384 | 383,791 | ||||||||||
42 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Odebrecht Finance Ltd. | U.S.$ | 426 | $ | 14,910 | ||||||||
|
| |||||||||||
| 957,369 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.1% | ||||||||||||
Globo Comunicacao e Participacoes SA | 427 | 423,664 | ||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.1% | ||||||||||||
BRF GmbH | 327 | 330,577 | ||||||||||
Virgolino de Oliveira Finance SA | 655 | 5,744 | ||||||||||
|
| |||||||||||
| 336,321 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.1% | ||||||||||||
Rumo Luxembourg SARL | 458 | 479,183 | ||||||||||
|
| |||||||||||
| 2,752,431 | ||||||||||||
|
| |||||||||||
Utility – 0.0% | ||||||||||||
Electric – 0.0% | ||||||||||||
Terraform Global Operating LLC | 89 | 90,240 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Corporate Bonds | 2,842,671 | |||||||||||
|
| |||||||||||
LOCAL GOVERNMENTS – US MUNICIPAL | ||||||||||||
United States – 0.4% | ||||||||||||
Port Authority of New York & New Jersey | 660 | 667,484 | ||||||||||
State of California | 825 | 869,938 | ||||||||||
Tobacco Settlement Finance Authority/WV | 770 | 769,392 | ||||||||||
|
| |||||||||||
Total Local Governments – US Municipal Bonds | 2,306,814 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – | ||||||||||||
Brazil – 0.1% | ||||||||||||
Brazilian Government International Bond | 781 | 789,835 | ||||||||||
|
| |||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 43 | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Principal Amount (000) | U.S. $ Value | ||||||||||
| ||||||||||||
Dominican Republic – 0.2% | ||||||||||||
Dominican Republic International Bond | U.S.$ | 1,213 | $ | 1,236,123 | ||||||||
|
| |||||||||||
Egypt – 0.1% | ||||||||||||
Egypt Government International Bond | 255 | 262,012 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 2,287,970 | |||||||||||
|
| |||||||||||
GOVERNMENTS – TREASURIES – 0.3% | ||||||||||||
Malaysia – 0.3% | ||||||||||||
Malaysia Government Bond | MYR | 6,633 | 1,644,595 | |||||||||
|
| |||||||||||
| Shares | ||||||||||||
COMMON STOCKS – 0.0% | ||||||||||||
Financials – 0.0% | ||||||||||||
Insurance – 0.0% | ||||||||||||
Mt Logan Re Ltd. (Preference Shares)(j)(l)(m)(n) | 260 | 270,501 | ||||||||||
|
| |||||||||||
SHORT-TERM INVESTMENTS – 0.5% | ||||||||||||
Investment Companies – 0.5% | ||||||||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio – Class AB, | 2,643,692 | 2,643,692 | ||||||||||
|
| |||||||||||
Total Investments – 139.1% | 796,464,731 | |||||||||||
Other assets less liabilities – (39.1)% | (223,878,096 | ) | ||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 572,586,635 | ||||||||||
|
| |||||||||||
FUTURES (see Note D)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Purchased Contracts | ||||||||||||||||
U.S. T-Note 5 Yr (CBT) Futures | 503 | December 2020 | $ | 63,177,586 | $ | (134,233 | ) | |||||||||
44 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Sold Contracts | ||||||||||||||||
10 Yr Canadian Bond Futures | 123 | December 2020 | $ | 13,944,247 | $ | 79,198 | ||||||||||
Japan 10 Yr Bond (OSE) Futures | 4 | December 2020 | 5,802,760 | (4,418 | ) | |||||||||||
Long Gilt Futures | 151 | December 2020 | 26,541,780 | 74,162 | ||||||||||||
U.S. 10 Yr Ultra Futures | 98 | December 2020 | 15,413,563 | 167,025 | ||||||||||||
U.S. T-Note 10 Yr (CBT) Futures | 369 | December 2020 | 51,002,719 | 413,474 | ||||||||||||
U.S. T-Note 2 Yr (CBT) Futures | 63 | December 2020 | 13,913,156 | 2,558 | ||||||||||||
U.S. Ultra Bond (CBT) Futures | 48 | December 2020 | 10,320,000 | 409,634 | ||||||||||||
|
| |||||||||||||||
| $ | 1,007,400 | |||||||||||||||
|
| |||||||||||||||
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Bank of America, NA | ZAR | 175,291 | USD | 10,483 | 11/27/2020 | $ | (258,315 | ) | ||||||||
BNP Paribas SA | CAD | 40,951 | USD | 30,829 | 12/10/2020 | 86,391 | ||||||||||
Citibank, NA | CNY | 79,149 | USD | 11,777 | 12/17/2020 | 252 | ||||||||||
Citibank, NA | NZD | 17,407 | USD | 11,539 | 12/22/2020 | 29,077 | ||||||||||
Citibank, NA | USD | 679 | GBP | 525 | 11/19/2020 | 1,305 | ||||||||||
Citibank, NA | USD | 869 | ZAR | 14,692 | 11/27/2020 | 31,218 | ||||||||||
Citibank, NA | USD | 21,190 | JPY | 2,233,969 | 12/11/2020 | 158,135 | ||||||||||
Goldman Sachs Bank USA | KRW | 5,075,860 | USD | 4,291 | 11/16/2020 | (172,390 | ) | |||||||||
Goldman Sachs Bank USA | USD | 11,324 | AUD | 16,066 | 01/12/2021 | (26,297 | ) | |||||||||
Goldman Sachs Bank USA | USD | 4,262 | CNY | 29,721 | 11/16/2020 | 169,435 | ||||||||||
HSBC Bank USA | USD | 2,875 | ZAR | 47,731 | 11/27/2020 | 49,498 | ||||||||||
JPMorgan Chase Bank, NA | SEK | 126,478 | USD | 14,355 | 01/15/2021 | 126,711 | ||||||||||
Morgan Stanley Capital Services, Inc. | AUD | 32,455 | USD | 23,168 | 01/12/2021 | 347,325 | ||||||||||
Morgan Stanley Capital Services, Inc. | MYR | 7,213 | USD | 1,731 | 03/25/2021 | 5,994 | ||||||||||
Natwest Markets PLC | USD | 1,714 | ZAR | 28,711 | 11/27/2020 | 44,968 | ||||||||||
Standard Chartered Bank | KRW | 8,501,874 | USD | 7,190 | 11/16/2020 | (285,806 | ) | |||||||||
Standard Chartered Bank | USD | 7,146 | CNY | 49,737 | 11/16/2020 | 269,488 | ||||||||||
Standard Chartered Bank | USD | 11,590 | KRW | 13,480,973 | 11/10/2020 | 263,393 | ||||||||||
State Street Bank & Trust Co. | GBP | 525 | USD | 677 | 11/19/2020 | (3,444 | ) | |||||||||
State Street Bank & Trust Co. | EUR | 76 | USD | 89 | 12/18/2020 | 935 | ||||||||||
State Street Bank & Trust Co. | USD | 21,530 | EUR | 18,273 | 12/18/2020 | (225,452 | ) | |||||||||
|
| |||||||||||||||
| $ | 612,421 | |||||||||||||||
|
| |||||||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 45 | |
PORTFOLIO OF INVESTMENTS (continued)
CALL OPTIONS WRITTEN (see Note D)
| Description | Counterparty | Contracts | Exercise Price | Expiration Month | Notional (000) | Premiums Received | U.S. $ Value | |||||||||||||||||||||||||||||
iShares 7-10 Year Treasury Bond ETF(n) | Citibank, NA | 380,900 | USD | 121.00 | | November 2020 | | USD | 46,089 | $ | 344,715 | $ | (163,845 | ) | ||||||||||||||||||||||
iShares TIPS Bond ETF(n) | UBS AG | 312,610 | USD | 127.00 | | December 2020 | | USD | 39,701 | 507,616 | (178,183 | ) | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||
| $ | 852,331 | $ | (342,028 | ) | ||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||
CREDIT DEFAULT SWAPTIONS WRITTEN (see Note D)
| Description | Counterparty | Buy/Sell Protection | Strike Rate | Expiration Month | Notional Amount (000) | Premiums Received | Market Value | |||||||||||||||||||
Put |
| |||||||||||||||||||||||||
CDX-NAHY Series 34, 5 Year Index RTP | Bank of America, NA | Sell | 103.00 | % | | December 2020 | | $ | 28,500 | $ | 636,120 | $ | (584,499 | ) | ||||||||||||
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| Description | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Buy Contracts |
| |||||||||||||||||||||||||||||||
CDX-NAIG Series 34, 5 Year Index, 06/20/2025* | (1.00 | )% | Quarterly | 0.91 | % | USD | 119,190 | $ | (631,751 | ) | $ | (622,212 | ) | $ | (9,539 | ) | ||||||||||||||||
Malaysia, 12/20/2025* | (1.00 | ) | Quarterly | 0.48 | USD | 50,370 | (1,399,663 | ) | (1,288,578 | ) | (111,085 | ) | ||||||||||||||||||||
People’s Republic of China, 7.500%, 10/28/2027, 06/20/2025* | (1.00 | ) | Quarterly | 0.34 | USD | 29,050 | (901,844 | ) | (637,902 | ) | (263,942 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (2,933,258 | ) | $ | (2,548,692 | ) | $ | (384,566 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
CENTRALLY CLEARED INFLATION (CPI) SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| USD | 64,600 | 02/26/2022 | CPI# | 1.440% | Maturity | $ | 441,423 | $ | — | $ | 441,423 | |||||||||||||||
| USD | 38,550 | 02/28/2022 | CPI# | 1.352% | Maturity | 192,213 | — | 192,213 | ||||||||||||||||||
| USD | 4,500 | 07/15/2022 | 1.484% | CPI# | Maturity | (15,413 | ) | — | (15,413 | ) | ||||||||||||||||
| USD | 11,250 | 07/15/2022 | 1.575% | CPI# | Maturity | (70,157 | ) | — | (70,157 | ) | ||||||||||||||||
| USD | 9,450 | 07/15/2022 | 1.758% | CPI# | Maturity | (100,007 | ) | — | (100,007 | ) | ||||||||||||||||
| USD | 12,000 | 07/15/2022 | 1.850% | CPI# | Maturity | (173,788 | ) | — | (173,788 | ) | ||||||||||||||||
46 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| USD | 21,500 | 07/15/2022 | 1.851% | CPI# | Maturity | $ | (312,505 | ) | $ | — | $ | (312,505 | ) | |||||||||||||
| USD | 9,000 | 07/15/2023 | 1.902% | CPI# | Maturity | (162,415 | ) | — | (162,415 | ) | ||||||||||||||||
| USD | 3,000 | 01/15/2024 | 1.599% | CPI# | Maturity | (6,638 | ) | — | (6,638 | ) | ||||||||||||||||
| USD | 64,600 | 02/26/2025 | 1.589% | CPI# | Maturity | (85,178 | ) | — | (85,178 | ) | ||||||||||||||||
| USD | 38,550 | 02/28/2025 | 1.527% | CPI# | Maturity | 73,716 | — | 73,716 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | (218,749 | ) | $ | — | $ | (218,749 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| CAD | 49,600 | 08/27/2021 | 3 Month CDOR | 1.623% | Semi-Annual/ Semi-Annual | $ | 426,413 | $ | 140 | $ | 426,273 | |||||||||||||||
| SEK | 217,650 | 08/30/2024 | 3 Month STIBOR | (0.165)% | Quarterly/Annual | (154,303 | ) | 143 | (154,446 | ) | ||||||||||||||||
| CAD | 34,186 | 03/24/2025 | 3 Month CDOR | 0.958% | Semi-Annual/ Semi-Annual | 263,573 | 340 | 263,233 | ||||||||||||||||||
| USD | 117,740 | 06/09/2025 | 0.512% | 3 Month LIBOR | Semi-Annual/ Quarterly | (726,903 | ) | — | (726,903 | ) | ||||||||||||||||
| USD | 1,160 | 06/09/2025 | 2.488% | 3 Month LIBOR | Semi-Annual/ Quarterly | (121,388 | ) | — | (121,388 | ) | ||||||||||||||||
| USD | 2,106 | 08/04/2025 | 2.293% | 3 Month LIBOR | Semi-Annual/ Quarterly | (196,867 | ) | — | (196,867 | ) | ||||||||||||||||
| CAD | 64,890 | 08/07/2025 | 3 Month CDOR | 0.698% | Semi-Annual/ Semi-Annual | (136,200 | ) | (638 | ) | (135,562 | ) | |||||||||||||||
| USD | 5,400 | 10/04/2026 | 1.487% | 3 Month LIBOR | Semi-Annual/ Quarterly | (305,563 | ) | — | (305,563 | ) | ||||||||||||||||
| USD | 1,080 | 11/08/2026 | 1.657% | 3 Month LIBOR | Semi-Annual/ Quarterly | (79,813 | ) | — | (79,813 | ) | ||||||||||||||||
| USD | 1,080 | 11/09/2026 | 1.672% | 3 Month LIBOR | Semi-Annual/ Quarterly | (80,677 | ) | — | (80,677 | ) | ||||||||||||||||
| USD | 7,030 | 04/04/2027 | 2.436% | 3 Month LIBOR | Semi-Annual/ Quarterly | (839,005 | ) | — | (839,005 | ) | ||||||||||||||||
| USD | 20,920 | 06/05/2027 | 0.558% | 3 Month LIBOR | Semi-Annual/ Quarterly | 30,887 | — | 30,887 | ||||||||||||||||||
| USD | 715 | 07/12/2027 | 2.355% | 3 Month LIBOR | Semi-Annual/ Quarterly | (87,489 | ) | — | (87,489 | ) | ||||||||||||||||
| USD | 5,395 | 06/04/2029 | 2.150% | 3 Month LIBOR | Semi-Annual/ Quarterly | (666,804 | ) | — | (666,804 | ) | ||||||||||||||||
| USD | 3,170 | 09/27/2029 | 1.593% | 3 Month LIBOR | Semi-Annual/ Quarterly | (220,945 | ) | — | (220,945 | ) | ||||||||||||||||
| USD | 1,490 | 11/10/2035 | 2.631% | 3 Month LIBOR | Semi-Annual/ Quarterly | (339,927 | ) | — | (339,927 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | (3,235,011 | ) | $ | (15 | ) | $ | (3,234,996 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 47 | |
PORTFOLIO OF INVESTMENTS (continued)
CREDIT DEFAULT SWAPS (see Note D)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Buy Contracts | ||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | )% | Monthly | 9.62 | % | USD | 683 | $ | 176,760 | $ | 53,364 | $ | 123,396 | |||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 1,367 | 353,780 | 100,563 | 253,217 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 1,367 | 353,779 | 97,138 | 256,641 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 1,683 | 435,560 | 115,556 | 320,004 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 346 | 89,545 | 23,115 | 66,430 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 328 | 84,887 | 22,404 | 62,483 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 346 | 89,545 | 23,115 | 66,430 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 708 | 183,289 | 144,052 | 39,237 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 707 | 183,031 | 143,738 | 39,293 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 2,682 | 694,326 | 549,266 | 145,060 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 1,341 | 347,274 | 269,548 | 77,726 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 536 | 138,806 | 106,769 | 32,037 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 541 | 139,965 | 111,496 | 28,469 | |||||||||||||||||||||||
Goldman Sachs International |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 664 | 171,898 | 116,441 | 55,457 | |||||||||||||||||||||||
JPMorgan Securities, LLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 288 | 74,511 | 58,743 | 15,768 | |||||||||||||||||||||||
48 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Morgan Stanley & Co. International PLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) % | Monthly | 9.62 | % | USD | 708 | $ | 183,289 | $ | 146,114 | $ | 37,175 | |||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 354 | 91,645 | 69,442 | 22,203 | |||||||||||||||||||||||
Sale Contracts | ||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 723 | (233,902 | ) | (87,707 | ) | (146,195 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 547 | (176,963 | ) | (82,313 | ) | (94,650 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 67 | (21,676 | ) | (10,579 | ) | (11,097 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 209 | (67,615 | ) | (30,532 | ) | (37,083 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 475 | (153,710 | ) | (53,304 | ) | (100,406 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 683 | (221,019 | ) | (76,646 | ) | (144,373 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 950 | (307,420 | ) | (104,253 | ) | (203,167 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,367 | (442,361 | ) | (150,015 | ) | (292,346 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 953 | (308,391 | ) | (102,529 | ) | (205,862 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 376 | (121,673 | ) | (39,657 | ) | (82,016 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 653 | (211,365 | ) | (77,187 | ) | (134,178 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 195 | (63,118 | ) | (23,050 | ) | (40,068 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 100 | (32,352 | ) | (9,970 | ) | (22,382 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 248 | (80,232 | ) | (32,240 | ) | (47,992 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 210 | (67,939 | ) | (27,949 | ) | (39,990 | ) | |||||||||||||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 49 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 335 | $ | (108,406 | ) | $ | (43,035 | ) | $ | (65,371 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 340 | (110,024 | ) | (42,285 | ) | (67,739 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 292 | (94,492 | ) | (36,316 | ) | (58,176 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 475 | (153,710 | ) | (59,075 | ) | (94,635 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 69 | (22,328 | ) | (8,710 | ) | (13,618 | ) | |||||||||||||||||||||
Credit Suisse International |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 130 | (42,057 | ) | (10,334 | ) | (31,723 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 169 | (54,674 | ) | (13,719 | ) | (40,955 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 326 | (105,467 | ) | (30,489 | ) | (74,978 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 122 | (39,469 | ) | (14,576 | ) | (24,893 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 471 | (152,376 | ) | (29,867 | ) | (122,509 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 138 | (44,646 | ) | (9,353 | ) | (35,293 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 226 | (73,115 | ) | (32,865 | ) | (40,250 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 139 | (44,980 | ) | (16,904 | ) | (28,076 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 5 | (1,618 | ) | (612 | ) | (1,006 | ) | |||||||||||||||||||||
CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 1,145 | (142,909 | ) | (24,961 | ) | (117,948 | ) | |||||||||||||||||||||
Deutsche Bank AG |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 436 | (141,053 | ) | (30,661 | ) | (110,392 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 130 | (42,057 | ) | (16,057 | ) | (26,000 | ) | |||||||||||||||||||||
50 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 662 | $ | (214,168 | ) | $ | (45,479 | ) | $ | (168,689 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 714 | (230,991 | ) | (40,173 | ) | (190,818 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 464 | (150,112 | ) | (37,411 | ) | (112,701 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 30 | (9,705 | ) | (3,447 | ) | (6,258 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 150 | (48,528 | ) | (18,528 | ) | (30,000 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 217 | (70,203 | ) | (24,331 | ) | (45,872 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 218 | (70,526 | ) | (24,433 | ) | (46,093 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 247 | (79,908 | ) | (26,083 | ) | (53,825 | ) | |||||||||||||||||||||
Goldman Sachs International |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,000 | (323,600 | ) | (129,773 | ) | (193,827 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 710 | (229,696 | ) | (80,135 | ) | (149,561 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,300 | (420,572 | ) | (150,517 | ) | (270,055 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 598 | (193,463 | ) | (90,107 | ) | (103,356 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 371 | (120,025 | ) | (59,439 | ) | (60,586 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 517 | (167,258 | ) | (84,022 | ) | (83,236 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 15 | (4,853 | ) | (2,233 | ) | (2,620 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 178 | (57,586 | ) | (15,077 | ) | (42,509 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.005 | USD | 15 | (4,853 | ) | (1,318 | ) | (3,535 | ) | |||||||||||||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 51 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 30 | $ | (9,705 | ) | $ | (2,684 | ) | $ | (7,021 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 30 | (9,706 | ) | (2,905 | ) | (6,801 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 59 | (19,088 | ) | (6,244 | ) | (12,844 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 322 | (104,172 | ) | (42,956 | ) | (61,216 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 166 | (53,704 | ) | (17,336 | ) | (36,368 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 27 | (8,737 | ) | (3,394 | ) | (5,343 | ) | |||||||||||||||||||||
JPMorgan Securities, LLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 122 | (39,469 | ) | (11,635 | ) | (27,834 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 28 | (9,059 | ) | (2,678 | ) | (6,381 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 691 | (223,550 | ) | (83,067 | ) | (140,483 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 241 | (77,968 | ) | (29,227 | ) | (48,741 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 30 | (9,706 | ) | (2,870 | ) | (6,836 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 118 | (38,175 | ) | (14,760 | ) | (23,415 | ) | |||||||||||||||||||||
Morgan Stanley & Co. International PLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,100 | (355,868 | ) | (159,352 | ) | (196,516 | ) | |||||||||||||||||||||
Morgan Stanley Capital Services LLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 191 | (61,791 | ) | (13,202 | ) | (48,589 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (3,507,972 | ) | $ | (401,702 | ) | $ | (3,106,270 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
52 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
INFLATION (CPI) SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||||
| JPMorgan Chase Bank, NA | USD | 23,800 | 07/15/2023 | 1.848 | % | CPI | # | Maturity | $ | (360,438 | ) | $ | — | $ | (360,438 | ) | ||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||
| Morgan Stanley Capital Services LLC | USD | 595 | 03/06/2042 | 2.804 | % | | 3 Month LIBOR | | Semi-Annual/ Quarterly | $ | (184,314 | ) | $ | — | $ | (184,314 | ) | |||||||||||||||||
TOTAL RETURN SWAPS (see Note D)
| Counterparty & Referenced Obligation | Rate Paid/ Received | Payment Frequency | Current Notional (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | |||||||||||
Pay Total Return on Reference Obligation |
| |||||||||||||||
Barclays Bank PLC iBoxx $ Liquid High Yield Index | 3 Month LIBOR | Maturity | USD 21,258 | 12/20/2020 | $ | (392,553 | ) | |||||||||
REVERSE REPURCHASE AGREEMENTS (see Note D)
| Broker | Interest Rate | Maturity | U.S. $ Value at October 31, 2020 | |||||||||
HSBC Bank USA† | 0.14 | % | — | $ | 5,611,745 | |||||||
HSBC Bank USA† | 0.14 | % | — | 43,054,512 | ||||||||
HSBC Bank USA† | 0.14 | % | — | 14,105,080 | ||||||||
HSBC Bank USA† | 0.14 | % | — | 30,959,075 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 4,744,890 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 26,758,026 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 36,118,666 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 61,615,180 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 7,728,034 | ||||||||
|
| |||||||||||
| $ | 230,695,208 | |||||||||||
|
| |||||||||||
| † | The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on October 31, 2020. |
The type of underlying collateral and the remaining maturity of open reverse repurchase agreements on the statements of assets and liabilities is as follows:
| abfunds.com | AB BOND INFLATION STRATEGY | 53 | |
PORTFOLIO OF INVESTMENTS (continued)
| Overnight and Continuous | Up to 30 Days | 31-90 Days | Greater than 90 Days | Total | ||||||||||||||||
Inflation-Linked Securities | $ | 230,695,208 | $ | – 0 – | $ | – 0 – | $ | – 0 – | $ | 230,695,208 | ||||||||||
| (a) | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (b) | Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements. |
| (c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $117,225,339 or 20.5% of net assets. |
| (d) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (e) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (f) | IO – Interest Only. |
| (g) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.30% of net assets as of October 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
| 144A/Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Morgan Stanley Capital I Trust | 11/16/2015 | $ | 181,926 | $ | 146,572 | 0.03 | % | |||||||||
PMT Credit Risk Transfer Trust | 03/21/2019 | 277,233 | 247,311 | 0.04 | % | |||||||||||
PMT Credit Risk Transfer Trust | 06/07/2019 | 516,385 | 462,951 | 0.08 | % | |||||||||||
PMT Credit Risk Transfer Trust Series 2019-3R, Class A | 10/11/2019 | 175,139 | 156,873 | 0.03 | % | |||||||||||
PMT Credit Risk Transfer Trust Series 2020-1R, Class A | 02/11/2000 | 624,119 | 558,640 | 0.10 | % | |||||||||||
Terraform Global Operating LLC | 02/08/2018 | 89,000 | 90,240 | 0.02 | % | |||||||||||
Virgolino de Oliveira Finance SA | 01/24/2014 | 363,153 | 5,744 | 0.00 | % | |||||||||||
| (h) | Inverse interest only security. |
| (i) | Defaulted. |
| (j) | Non-income producing security. |
| (k) | Defaulted matured security. |
| (l) | Restricted and illiquid security. |
54 | AB BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Mt Logan Re Ltd. (Preference Shares) | 12/30/2014 | $ | 260,000 | $ | 270,501 | 0.05 | % | |||||||||
| (m) | Fair valued by the Adviser. |
| (n) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (o) | Affiliated investments. |
| (p) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (q) | The rate shown represents the 7-day yield as of period end. |
| (r) | One contract relates to 1 share. |
Currency Abbreviations:
AUD – Australian Dollar CAD – Canadian Dollar CNY – Chinese Yuan Renminbi EUR – Euro GBP – Great British Pound JPY – Japanese Yen KRW – South Korean Won MYR – Malaysian Ringgit NZD – New Zealand Dollar SEK – Swedish Krona USD – United States Dollar ZAR – South African Rand | Glossary:
ABS – Asset-Backed Securities CBT – Chicago Board of Trade CDOR – Canadian Dealer Offered Rate CDX-CMBX.NA – North American Commercial Mortgage-Backed Index CDX-NAHY – North American High Yield Credit Default Swap Index CDX-NAIG – North American Investment Grade Credit Default Swap Index CLO – Collateralized Loan Obligations CMBS – Commercial Mortgage-Backed Securities CPI – Consumer Price Index ETF – Exchange Traded Fund LIBOR – London Interbank Offered Rate OSE – Osaka Securities Exchange REIT – Real Estate Investment Trust REMICs – Real Estate Mortgage Investment Conduits RTP – Right To Pay SOFR – Secured Overnight Financing Rate STIBOR – Stockholm Interbank Offered Rate TBA – To Be Announced TIPS – Treasury Inflation Protected Security |
See notes to financial statements.
| abfunds.com | AB BOND INFLATION STRATEGY | 55 | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets |
| |||
Investments in securities, at value |
| |||
Unaffiliated issuers (cost $750,916,837) | $ | 793,821,039 | ||
Affiliated issuers (cost $2,643,692) | 2,643,692 | |||
Cash collateral due from broker | 14,227,671 | |||
Foreign currencies, at value (cost $93,117) | 93,803 | |||
Receivable for investment securities sold | 6,882,061 | |||
Market value on credit default swaps (net premiums paid $2,150,864) | 3,791,890 | |||
Interest receivable | 2,698,503 | |||
Receivable for capital stock sold | 1,873,723 | |||
Unrealized appreciation on forward currency exchange contracts | 1,584,125 | |||
Receivable for variation margin on centrally cleared swaps | 343,700 | |||
Receivable for variation margin on futures | 225,026 | |||
Affiliated dividends receivable | 95 | |||
|
| |||
Total assets | 828,185,328 | |||
|
| |||
| Liabilities | ||||
Swaptions written, at value (premiums received $636,120) | 584,499 | |||
Options written, at value (premiums received $852,331) | 342,028 | |||
Payable for reverse repurchase agreements | 230,695,208 | |||
Payable for investment securities purchased | 13,585,748 | |||
Market value on credit default swaps (net premiums received $2,552,566) | 7,299,862 | |||
Unrealized depreciation on forward currency exchange contracts | 971,704 | |||
Unrealized depreciation on total return swaps | 392,553 | |||
Payable for capital stock redeemed | 365,329 | |||
Unrealized depreciation on inflation swaps | 360,438 | |||
Cash collateral due to broker | 343,000 | |||
Unrealized depreciation on interest rate swaps | 184,314 | |||
Advisory fee payable | 171,421 | |||
Distribution fee payable | 38,704 | |||
Administrative fee payable | 27,300 | |||
Transfer Agent fee payable | 12,274 | |||
Directors’ fees payable | 2,172 | |||
Accrued expenses and other liabilities | 222,139 | |||
|
| |||
Total liabilities | 255,598,693 | |||
|
| |||
Net Assets | $ | 572,586,635 | ||
|
| |||
| Composition of Net Assets | ||||
Capital stock, at par | $ | 50,152 | ||
Additional paid-in capital | 545,637,981 | |||
Distributable earnings | 26,898,502 | |||
|
| |||
| $ | 572,586,635 | |||
|
| |||
See notes to financial statements.
56 | AB BOND INFLATION STRATEGY | abfunds.com | |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—33 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 31,247,611 | 2,702,462 | $ | 11.56 | * | ||||||
| ||||||||||||
| C | $ | 3,822,801 | 339,863 | $ | 11.25 | |||||||
| ||||||||||||
| Advisor | $ | 135,677,322 | 11,724,465 | $ | 11.57 | |||||||
| ||||||||||||
| R | $ | 3,065,808 | 265,088 | $ | 11.57 | |||||||
| ||||||||||||
| K | $ | 6,789,631 | 588,508 | $ | 11.54 | |||||||
| ||||||||||||
| I | $ | 8,296,628 | 725,380 | $ | 11.44 | |||||||
| ||||||||||||
| 1 | $ | 312,381,888 | 27,523,291 | $ | 11.35 | |||||||
| ||||||||||||
| 2 | $ | 60,289,022 | 5,315,263 | $ | 11.34 | |||||||
| ||||||||||||
| Z | $ | 11,015,924 | 968,082 | $ | 11.38 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $12.07 which reflects a sales charge of 4.25%. |
See notes to financial statements.
| abfunds.com | AB BOND INFLATION STRATEGY | 57 | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest | $ | 18,764,546 | ||||||
Dividends—Affiliated issuers | 28,311 | $ | 18,792,857 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 2,996,853 | |||||||
Distribution fee—Class A | 83,290 | |||||||
Distribution fee—Class C | 29,985 | |||||||
Distribution fee—Class R | 17,725 | |||||||
Distribution fee—Class K | 14,728 | |||||||
Distribution fee—Class 1 | 310,724 | |||||||
Transfer agency—Class A | 49,036 | |||||||
Transfer agency—Class C | 4,463 | |||||||
Transfer agency—Advisor Class | 221,520 | |||||||
Transfer agency—Class R | 9,190 | |||||||
Transfer agency—Class K | 11,783 | |||||||
Transfer agency—Class I | 11,054 | |||||||
Transfer agency—Class 1 | 37,378 | |||||||
Transfer agency—Class 2 | 7,097 | |||||||
Transfer agency—Class Z | 4,905 | |||||||
Custody and accounting | 186,761 | |||||||
Registration fees | 129,629 | |||||||
Audit and tax | 118,303 | |||||||
Printing | 96,722 | |||||||
Administrative | 89,571 | |||||||
Legal | 37,102 | |||||||
Directors’ fees | 24,436 | |||||||
Miscellaneous | 24,723 | |||||||
|
| |||||||
Total expenses before interest expense | 4,516,978 | |||||||
Interest expense | 916,186 | |||||||
|
| |||||||
Total expenses | 5,433,164 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (1,068,255 | ) | ||||||
|
| |||||||
Net expenses | 4,364,909 | |||||||
|
| |||||||
Net investment income | 14,427,948 | |||||||
|
|
See notes to financial statements.
58 | AB BOND INFLATION STRATEGY | abfunds.com | |
STATEMENT OF OPERATIONS (continued)
Year Ended October 31, 2020
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions(a) | $ | 11,633,122 | ||||||
Forward currency exchange contracts | 2,296,118 | |||||||
Futures | (4,659,435 | ) | ||||||
Options written | 941,234 | |||||||
Swaps | (1,104,759 | ) | ||||||
Swaptions written | 1,331,546 | |||||||
Foreign currency transactions | (2,916,531 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments(b) | 24,129,748 | |||||||
Forward currency exchange contracts | 660,695 | |||||||
Futures | 562,399 | |||||||
Options written | 510,303 | |||||||
Swaps | (5,279,135 | ) | ||||||
Swaptions written | 51,621 | |||||||
Foreign currency denominated assets and liabilities | 18,793 | |||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 28,175,719 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 42,603,667 | ||||||
|
| |||||||
| (a) | Net of foreign capital gains taxes of $4,850. |
| (b) | Net of decrease in accrued foreign capital gains taxes of $20,257. |
See notes to financial statements.
| abfunds.com | AB BOND INFLATION STRATEGY | 59 | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 14,427,948 | $ | 14,513,091 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 7,521,295 | (6,508,444 | ) | |||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | 20,654,424 | 34,328,281 | ||||||
Contributions from Affiliates (see Note B) | – 0 | – | 5,918 | |||||
|
|
|
| |||||
Net increase in net assets from operations | 42,603,667 | 42,338,846 | ||||||
Distributions to Shareholders |
| |||||||
Class A | (649,771 | ) | (872,187 | ) | ||||
Class C | (50,256 | ) | (51,492 | ) | ||||
Advisor Class | (3,332,209 | ) | (4,083,274 | ) | ||||
Class R | (62,687 | ) | (132,330 | ) | ||||
Class K | (127,416 | ) | (152,387 | ) | ||||
Class I | (224,256 | ) | (225,817 | ) | ||||
Class 1 | (7,448,238 | ) | (8,206,740 | ) | ||||
Class 2 | (1,473,613 | ) | (1,472,842 | ) | ||||
Class Z | (502,262 | ) | (817,986 | ) | ||||
Return of capital |
| |||||||
Class A | – 0 | – | (20,252 | ) | ||||
Class C | – 0 | – | (1,196 | ) | ||||
Advisor Class | – 0 | – | (94,813 | ) | ||||
Class R | – 0 | – | (3,073 | ) | ||||
Class K | – 0 | – | (3,538 | ) | ||||
Class I | – 0 | – | (5,243 | ) | ||||
Class 1 | – 0 | – | (190,560 | ) | ||||
Class 2 | – 0 | – | (34,199 | ) | ||||
Class Z | – 0 | – | (18,994 | ) | ||||
| Capital Stock Transactions |
| |||||||
Net increase (decrease) | (98,268,014 | ) | 3,088,080 | |||||
|
|
|
| |||||
Total increase (decrease) | (69,535,055 | ) | 29,040,003 | |||||
| Net Assets |
| |||||||
Beginning of period | 642,121,690 | 613,081,687 | ||||||
|
|
|
| |||||
End of period | $ | 572,586,635 | $ | 642,121,690 | ||||
|
|
|
| |||||
See notes to financial statements.
60 | AB BOND INFLATION STRATEGY | abfunds.com | |
STATEMENT OF CASH FLOWS
For the Year Ended October 31, 2020
| Cash flows from operating activities | ||||||||
Net increase in net assets from operations | $ | 42,603,667 | ||||||
| Reconciliation of net increase in net assets from operations to net decrease in cash from operating activities | ||||||||
Purchases of long-term investments | $ | (409,807,237 | ) | |||||
Purchases of short-term investments | (383,965,928 | ) | ||||||
Proceeds from disposition of long-term investments | 392,612,074 | |||||||
Proceeds from disposition of short-term investments | 381,448,961 | |||||||
Net realized gain on investment transactions and foreign currency transactions | (7,521,295 | ) | ||||||
Net realized gain on forward currency exchange contracts | 2,296,118 | |||||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | (20,654,424 | ) | ||||||
Net accretion of bond discount and amortization of bond premium | 1,849,137 | |||||||
Inflation index adjustment | (5,748,699 | ) | ||||||
Increase in receivable for investments sold | (6,763,574 | ) | ||||||
Increase in interest receivable | (188,413 | ) | ||||||
Decrease in affiliated dividends receivable | 5,562 | |||||||
Increase in cash collateral due from broker | (9,298,397 | ) | ||||||
Increase in payable for investments purchased | 10,264,645 | |||||||
Increase in cash collateral due to broker | 258,000 | |||||||
Increase in advisory fee payable | 29,454 | |||||||
Increase in administrative fee payable | 2,717 | |||||||
Decrease in Transfer Agent fee payable | (2,130 | ) | ||||||
Decrease in distribution fee payable | (2,888 | ) | ||||||
Increase in Directors’ fee payable | 236 | |||||||
Decrease in accrued expenses | (47,729 | ) | ||||||
Proceeds from options written, net | 1,793,565 | |||||||
Proceeds from swaptions written, net | 1,973,360 | |||||||
Payments on swaps, net | (4,758,445 | ) | ||||||
Payments for exchange-traded derivatives settlements, net | (5,231,461 | ) | ||||||
|
| |||||||
Total adjustments | (61,456,791 | ) | ||||||
|
| |||||||
Net cash provided by (used in) operating activities
| (18,853,124 | ) | ||||||
| Cash flows from financing activities | ||||||||
Redemptions of capital stock, net | (109,775,306 | ) | ||||||
Cash dividends paid (net of dividend reinvestments)† | (2,575,656 | ) | ||||||
Increase in reverse repurchase agreements | 134,155,036 | |||||||
|
| |||||||
Net cash provided by (used in) financing activities | 21,804,074 | |||||||
Effect of exchange rate on cash | (2,897,738 | ) | ||||||
|
| |||||||
Net increase in cash | 53,212 | |||||||
Cash at beginning of year | 40,591 | |||||||
|
| |||||||
Cash at end of year | $ | 93,803 | ||||||
|
| |||||||
| Supplemental disclosure of cash flow information | ||||||||
† Reinvestment of dividends | $ | 11,295,052 | ||||||
Interest expense paid during the year | $ | 1,104,837 |
In accordance with U.S. GAAP, the Fund has included a Statement of Cash Flows as a result of its significant investments in reverse repurchase agreements throughout the year.
See notes to financial statements.
| abfunds.com | AB BOND INFLATION STRATEGY | 61 | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Bond Inflation Strategy (the “Fund”), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2. Class B and Class T shares have not been issued. Class 1 shares are sold only to the private clients of Sanford C. Bernstein & Co. LLC by its registered representatives. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Class R, Class K, and Class 1 shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I, Class 2 and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
62 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this
| abfunds.com | AB BOND INFLATION STRATEGY | 63 | |
NOTES TO FINANCIAL STATEMENTS (continued)
determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates,
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NOTES TO FINANCIAL STATEMENTS (continued)
yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
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NOTES TO FINANCIAL STATEMENTS (continued)
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
| |||||||||||||||
Inflation-Linked Securities | $ | – 0 | – | $ | 497,192,691 | $ | – 0 | – | $ | 497,192,691 | ||||||
Corporates – Investment Grade | – 0 | – | 134,384,458 | – 0 | – | 134,384,458 | ||||||||||
Commercial Mortgage-Backed Securities | – 0 | – | 53,826,409 | – 0 | – | 53,826,409 | ||||||||||
Collateralized Mortgage Obligations | – 0 | – | 38,738,210 | – 0 | – | 38,738,210 | ||||||||||
Asset-Backed Securities | – 0 | – | 15,860,626 | – 0 | – | 15,860,626 | ||||||||||
Corporates – Non-Investment Grade | – 0 | – | 14,940,256 | – 0 | – | 14,940,256 | ||||||||||
Collateralized Loan Obligations | – 0 | – | 6,961,164 | – 0 | – | 6,961,164 | ||||||||||
Governments – Sovereign Bonds | – 0 | – | 5,822,844 | – 0 | – | 5,822,844 | ||||||||||
Mortgage Pass-Throughs | – 0 | – | 5,738,297 | – 0 | – | 5,738,297 | ||||||||||
Emerging Markets – Treasuries | – 0 | – | 5,535,451 | – 0 | – | 5,535,451 | ||||||||||
Quasi-Sovereigns | – 0 | – | 5,468,082 | – 0 | – | 5,468,082 | ||||||||||
Emerging Markets – Corporate Bonds | – 0 | – | 2,842,671 | – 0 | – | 2,842,671 | ||||||||||
Local Governments – US Municipal Bonds | – 0 | – | 2,306,814 | – 0 | – | 2,306,814 | ||||||||||
Emerging Markets – Sovereigns | – 0 | – | 2,287,970 | – 0 | – | 2,287,970 | ||||||||||
Governments – Treasuries | – 0 | – | 1,644,595 | – 0 | – | 1,644,595 | ||||||||||
Common Stocks | – 0 | – | – 0 | – | 270,501 | 270,501 | ||||||||||
Short-Term Investments | 2,643,692 | – 0 | – | – 0 | – | 2,643,692 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 2,643,692 | 793,550,538 | 270,501 | 796,464,731 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: |
| |||||||||||||||
Futures | 1,146,051 | – 0 | – | – 0 | – | 1,146,051 | (b) | |||||||||
Forward Currency Exchange Contracts | – 0 | – | 1,584,125 | – 0 | – | 1,584,125 | ||||||||||
Centrally Cleared Inflation (CPI) Swaps | – 0 | – | 707,352 | – 0 | – | 707,352 | (b) | |||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 720,873 | – 0 | – | 720,873 | (b) | |||||||||
Credit Default Swaps | – 0 | – | 3,791,890 | – 0 | – | 3,791,890 | ||||||||||
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Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Liabilities: |
| |||||||||||||||
Futures | $ | (138,651 | ) | $ | – 0 | – | $ | – 0 | – | $ | (138,651 | )(b) | ||||
Forward Currency Exchange Contracts | – 0 | – | (971,704 | ) | – 0 | – | (971,704 | ) | ||||||||
Call Options Written | – 0 | – | (342,028 | ) | – 0 | – | (342,028 | ) | ||||||||
Credit Default Swaptions Written | – 0 | – | (584,499 | ) | – 0 | – | (584,499 | ) | ||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | (2,933,258 | ) | – 0 | – | (2,933,258 | )(b) | ||||||||
Centrally Cleared Inflation (CPI) Swaps | – 0 | – | (926,101 | ) | – 0 | – | (926,101 | )(b) | ||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (3,955,884 | ) | – 0 | – | (3,955,884 | )(b) | ||||||||
Credit Default Swaps | – 0 | – | (7,299,862 | ) | – 0 | – | (7,299,862 | ) | ||||||||
Inflation (CPI) Swaps | – 0 | – | (360,438 | ) | – 0 | – | (360,438 | ) | ||||||||
Interest Rate Swaps | – 0 | – | (184,314 | ) | – 0 | – | (184,314 | ) | ||||||||
Total Return Swaps | – 0 | – | (392,553 | ) | – 0 | – | (392,553 | ) | ||||||||
Reverse Repurchase Agreements | (230,695,208 | ) | – 0 | – | – 0 | – | (230,695,208 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (227,044,116 | ) | $ | 782,404,137 | $ | 270,501 | $ | 555,630,522 | |||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated
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NOTES TO FINANCIAL STATEMENTS (continued)
assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are
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NOTES TO FINANCIAL STATEMENTS (continued)
determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Fund’s average daily net assets. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding extraordinary expenses, interest expense, and acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest), on an annual basis (“Expense Caps”) to .75%, 1.50%, .50%, 1.00%, .75%, .50%, ..60%, .50% and .50% of the daily average net assets for the Class A, Class C, Advisor Class, Class R, Class K, Class I, Class 1, Class 2, and Class Z shares, respectively. This fee waiver and/or expense reimbursement agreement will remain in effect until January 31, 2021 and then may be extended for additional one-year terms. For the year ended October 31, 2020, such reimbursement amounted to $1,063,673.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the reimbursement for such services amounted to $89,571.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $147,692 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $2,458 from the sale of Class A shares and received $0 and $504 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
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NOTES TO FINANCIAL STATEMENTS (continued)
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of ..20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $4,582.
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 3,423 | $ | 369,337 | $ | 370,116 | $ | 2,644 | $ | 28 | ||||||||||
During the year ended October 31, 2019, the Adviser reimbursed the Fund $5,918 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the
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NOTES TO FINANCIAL STATEMENTS (continued)
Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares, .25% of the Fund’s average daily net assets attributable to Class K shares and .10% of the Fund’s average daily net assets attributable to Class 1 shares. There are no distribution and servicing fees on the Advisor Class, Class I, Class 2 and Class Z shares. Payments under the Agreement in respect of Class A shares are currently limited to an annual rate of .25% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $253,807, $52,558, $55,888 and $1,583,117 for Class C, Class R, Class K and Class 1 shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
| abfunds.com | AB BOND INFLATION STRATEGY | 71 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 181,496,703 | $ | 116,776,202 | ||||
U.S. government securities | 228,398,069 | 256,701,309 | ||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 754,210,428 | ||
|
| |||
Gross unrealized appreciation | $ | 56,343,341 | ||
Gross unrealized depreciation | (17,562,694 | ) | ||
|
| |||
Net unrealized appreciation | $ | 38,780,647 | ||
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are
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NOTES TO FINANCIAL STATEMENTS (continued)
known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended October 31, 2020, the Fund held futures for hedging and non-hedging purposes.
| • | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2020, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
| • | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities,
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NOTES TO FINANCIAL STATEMENTS (continued)
including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
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NOTES TO FINANCIAL STATEMENTS (continued)
The Fund may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The Fund’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended October 31, 2020, the Fund held written options for hedging and non-hedging purposes.
During the year ended October 31, 2020, the Fund held purchased swaptions for hedging and non-hedging purposes. During the year ended October 31, 2020, the Fund held written swaptions for hedging and non-hedging purposes.
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions.” A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the
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NOTES TO FINANCIAL STATEMENTS (continued)
Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
76 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging and non-hedging purposes.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Fund against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the year ended October 31, 2020, the Fund held inflation (CPI) swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments
| abfunds.com | AB BOND INFLATION STRATEGY | 77 | |
NOTES TO FINANCIAL STATEMENTS (continued)
from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The
78 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the year ended October 31, 2020, the Fund held total return swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 1,146,051 | * | Receivable/Payable for variation margin on futures | $ | 138,651 | * | ||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | 384,566 | * | |||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 79 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | $ | 1,427,745 | * | Receivable/Payable for variation margin on centrally cleared swaps | $ | 4,881,490 | * | ||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts |
| 1,584,125 |
| Unrealized depreciation on forward currency exchange contracts |
| 971,704 |
| ||||
Credit contracts | Swaptions written, at value |
| 584,499 |
| ||||||||
Equity contracts | Options written, at value | 342,028 | ||||||||||
Interest rate contracts | Unrealized depreciation on interest rate swaps |
| 184,314 |
| ||||||||
Interest rate contracts | Unrealized depreciation on inflation swaps |
| 360,438 |
| ||||||||
Credit contracts | Market value on credit default swaps | 3,791,890 | Market value on credit default swaps | 7,299,862 | ||||||||
Credit contracts | Unrealized depreciation on total return swaps | 392,553 | ||||||||||
|
|
|
| |||||||||
Total | $ | 7,949,811 | $ | 15,540,105 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of Gain | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | (4,659,435 | ) | $ | 562,399 | ||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | 2,296,118 | 660,695 | |||||||
80 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of Gain | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | $ | (721,790 | ) | $ | – 0 | – | |||
Interest rate contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | – 0 | – | 510,303 | ||||||
Equity contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | 941,234 | – 0 | – | ||||||
Interest rate contracts | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | 1,153,676 | – 0 | – | ||||||
Credit contracts | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | 177,870 | 51,621 | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (1,926,614 | ) | (1,194,432 | ) | |||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 821,855 | (4,084,703 | ) | ||||||
|
|
|
| |||||||
Total | $ | (1,917,086 | ) | $ | (3,494,117 | ) | ||||
|
|
|
| |||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 81 | |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Futures: |
| |||
Average notional amount of buy contracts | $ | 55,221,083 | ||
Average notional amount of sale contracts | $ | 111,028,836 | ||
Forward Currency Exchange Contracts: |
| |||
Average principal amount of buy contracts | $ | 20,906,458 | (a) | |
Average principal amount of sale contracts | $ | 41,407,978 | ||
Purchased Swaptions: |
| |||
Average notional amount | $ | 26,377,143 | (b) | |
Options Written: |
| |||
Average notional amount | $ | 87,302,277 | (c) | |
Swaptions Written: |
| |||
Average notional amount | $ | 40,350,122 | (d) | |
Interest Rate Swaps: |
| |||
Average notional amount | $ | 595,000 | ||
Inflation Swaps: |
| |||
Average notional amount | $ | 35,253,846 | ||
Centrally Cleared Interest Rate Swaps: |
| |||
Average notional amount | $ | 218,217,075 | ||
Centrally Cleared Inflation Swaps: |
| |||
Average notional amount | $ | 246,446,154 | ||
Credit Default Swaps: |
| |||
Average notional amount of buy contracts | $ | 10,300,308 | ||
Average notional amount of sale contracts | $ | 27,249,692 | ||
Centrally Cleared Credit Default Swaps: |
| |||
Average notional amount of buy contracts | $ | 132,249,702 | ||
Average notional amount of sale contracts | $ | 24,982,727 | (e) | |
Total Return Swaps: |
| |||
Average notional amount | $ | 31,290,000 | (e) | |
| (a) | Positions were open for eleven months during the year. |
| (b) | Positions were open for seven months during the year. |
| (c) | Positions were open for three months during the year. |
| (d) | Positions were open for eight months during the year. |
| (e) | Positions were open for four months during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
82 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
BNP Paribas SA | $ | 86,391 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 86,391 | |||||||
Citibank, NA/Citigroup Global Markets, Inc. | 3,490,534 | (3,162,541 | ) | (263,000 | ) | – 0 | – | 64,993 | ||||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 341,333 | (341,333 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
HSBC Bank USA | 49,498 | – 0 | – | – 0 | – | – 0 | – | 49,498 | ||||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 201,222 | (201,222 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley Capital Services, Inc. | 628,253 | (601,973 | ) | – 0 | – | – 0 | – | 26,280 | ||||||||||||
Natwest Markets PLC | 44,968 | – 0 | – | – 0 | – | – 0 | – | 44,968 | ||||||||||||
Standard Chartered Bank | 532,881 | (285,806 | ) | – 0 | – | – 0 | – | 247,075 | ||||||||||||
State Street Bank & Trust Co. | 935 | (935 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 5,376,015 | $ | (4,593,810 | ) | $ | (263,000 | ) | $ | – 0 | – | $ | 519,205 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Bank of America, NA | $ | 842,814 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 842,814 | |||||||
Barclays Bank PLC | 392,553 | – 0 | – | – 0 | – | (322,422 | ) | 70,131 | ||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 3,162,541 | (3,162,541 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Credit Suisse International | 701,311 | – 0 | – | (260,000 | ) | (305,258 | ) | 136,053 | ||||||||||||
Deutsche Bank AG | 1,057,251 | – 0 | – | – 0 | – | (1,057,251 | ) | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 1,925,705 | (341,333 | ) | – 0 | – | (1,584,372 | ) | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 758,365 | (201,222 | ) | (334,800 | ) | (222,343 | ) | – 0 | – | |||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley Capital Services LLC | 601,973 | (601,973 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Standard Chartered Bank | 285,806 | (285,806 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 228,896 | (935 | ) | – 0 | – | – 0 | – | 227,961 | ||||||||||||
UBS AG | 178,183 | – 0 | – | – 0 | – | – 0 | – | 178,183 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 10,135,398 | $ | (4,593,810 | ) | $ | (594,800 | ) | $ | (3,491,646 | ) | $ | 1,455,142 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 83 | |
NOTES TO FINANCIAL STATEMENTS (continued)
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
See Note D.3 for additional disclosure of netting arrangements regarding reverse repurchase agreements.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. Reverse Repurchase Agreements
The Fund may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Fund is permitted to offset payables and/or receivables with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund in the event of a default. In the event of a default by a MRA counterparty, the Fund may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the year ended October 31, 2020, the average amount of reverse repurchase agreements outstanding was $191,771,869 and the daily weighted average interest rate was 0.4%. At October 31, 2020, the Fund had reverse repurchase agreements outstanding in the amount of $230,695,208 as reported on the statement of assets and liabilities.
84 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table presents the Fund’s RVP liabilities by counterparty net of the related collateral pledged by the Fund as of October 31, 2020:
Counterparty | RVP Liabilities Subject to a MRA | Securities Collateral Pledged†* | Net Amount of RVP Liabilities | |||||||||
HSBC Bank USA | $ | 93,730,412 | $ | (93,730,412 | ) | $ | – 0 | – | ||||
JPMorgan Chase Bank | 136,964,796 | (136,564,579 | ) | 400,217 | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 230,695,208 | $ | (230,294,991 | ) | $ | 400,217 | |||||
|
|
|
|
|
| |||||||
| † | Including accrued interest. |
| * | The actual collateral pledged may be more than the amount reported due to overcollateralization. |
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| �� | ||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Shares sold | 1,261,189 | 1,335,847 | $ | 14,062,730 | $ | 14,431,686 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 43,961 | 62,261 | 495,138 | 668,363 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 14,046 | 12,244 | 156,235 | 134,636 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,126,950 | ) | (2,875,737 | ) | (23,152,124 | ) | (30,519,097 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (807,754 | ) | (1,465,385 | ) | $ | (8,438,021 | ) | $ | (15,284,412 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||
Shares sold | 187,777 | 35,201 | $ | 2,049,635 | $ | 369,805 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 3,364 | 3,952 | 37,161 | 41,489 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (14,427 | ) | (12,562 | ) | (156,235 | ) | (134,636 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (81,140 | ) | (113,462 | ) | (868,047 | ) | (1,186,063 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 95,574 | (86,871 | ) | $ | 1,062,514 | $ | (909,405 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
| abfunds.com | AB BOND INFLATION STRATEGY | 85 | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Advisor Class | ||||||||||||||||||||||||
Shares sold | 5,506,776 | 8,127,810 | $ | 60,921,189 | $ | 87,174,658 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 253,528 | 321,349 | 2,856,501 | 3,475,201 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (9,408,756 | ) | (7,376,016 | ) | (103,456,299 | ) | (78,961,128 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (3,648,452 | ) | 1,073,143 | $ | (39,678,609 | ) | $ | 11,688,731 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class R | ||||||||||||||||||||||||
Shares sold | 77,780 | 220,089 | $ | 845,022 | $ | 2,367,556 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 4,957 | 12,562 | 55,751 | 135,386 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (457,340 | ) | (200,399 | ) | (4,996,719 | ) | (2,150,725 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (374,603 | ) | 32,252 | $ | (4,095,946 | ) | $ | 352,217 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class K | ||||||||||||||||||||||||
Shares sold | 289,515 | 209,936 | $ | 3,233,235 | $ | 2,243,823 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 11,291 | 14,611 | 127,416 | 155,925 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (174,841 | ) | (915,078 | ) | (1,884,738 | ) | (9,803,750 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 125,965 | (690,531 | ) | $ | 1,475,913 | $ | (7,404,002 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
| Class I | ||||||||||||||||||||||||
Shares sold | 366,818 | 665,974 | $ | 4,053,521 | $ | 6,999,802 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 20,138 | 21,589 | 224,256 | 231,059 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (574,453 | ) | (322,578 | ) | (6,419,617 | ) | (3,425,749 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (187,497 | ) | 364,985 | $ | (2,141,840 | ) | $ | 3,805,112 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class 1 | ||||||||||||||||||||||||
Shares sold | 4,785,245 | 5,037,568 | $ | 52,219,913 | $ | 53,163,034 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 515,381 | 588,041 | 5,712,290 | 6,246,030 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (7,432,024 | ) | (5,661,186 | ) | (80,548,968 | ) | (59,833,807 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (2,131,398 | ) | (35,577 | ) | $ | (22,616,765 | ) | $ | (424,743 | ) | ||||||||||||||
| ||||||||||||||||||||||||
86 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class 2 | ||||||||||||||||||||||||
Shares sold | 2,095,390 | 1,269,811 | $ | 22,581,072 | $ | 13,428,822 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 115,965 | 117,535 | 1,284,697 | 1,249,674 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,363,445 | ) | (832,324 | ) | (25,251,716 | ) | (8,662,540 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (152,090 | ) | 555,022 | $ | (1,385,947 | ) | $ | 6,015,956 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class Z | ||||||||||||||||||||||||
Shares sold | 1,366,377 | 1,121,518 | $ | 14,759,779 | $ | 11,902,841 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 45,824 | 78,469 | 501,842 | 836,980 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (3,464,375 | ) | (704,502 | ) | (37,710,934 | ) | (7,491,195 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (2,052,174 | ) | 495,485 | $ | (22,449,313 | ) | $ | 5,248,626 | ||||||||||||||||
| ||||||||||||||||||||||||
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
| abfunds.com | AB BOND INFLATION STRATEGY | 87 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities. Although the Fund invests principally in inflation-indexed securities, the value of its securities may be vulnerable to changes in expectations of inflation or interest rates.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Mortgage-Related and/or Other Asset-Backed Securities Risk—Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to
88 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed
| abfunds.com | AB BOND INFLATION STRATEGY | 89 | |
NOTES TO FINANCIAL STATEMENTS (continued)
in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 13,870,708 | $ | 16,015,055 | ||||
|
|
|
| |||||
Total taxable distributions paid | $ | 13,870,708 | $ | 16,015,055 | ||||
Return of capital | – 0 | – | 371,868 | |||||
|
|
|
| |||||
Total distributions paid | $ | 13,870,708 | $ | 16,386,923 | ||||
|
|
|
| |||||
90 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (11,427,672 | )(a) | |
Unrealized appreciation/(depreciation) | 38,726,683 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 27,299,011 | (c) | |
|
|
| (a) | As of October 31, 2020, the Fund had a net capital loss carryforward of $11,427,672. During the fiscal year, the Fund utilized $6,094,772 of capital loss carry forwards to offset current year net realized gains. |
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of Treasury inflation-protected securities, the tax treatment of swaps, the tax deferral of losses on wash sales, and the amortization on callable bonds. |
| (c) | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the accrual of foreign capital gains tax and the tax treatment of defaulted securities. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the fund had a net long-term capital loss carryforward of $11,427,672, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps resulted in a net increase in distributable earnings and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
| abfunds.com | AB BOND INFLATION STRATEGY | 91 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
92 | AB BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.95 | $ 10.47 | $ 10.83 | $ 10.92 | $ 10.44 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .25 | .21 | .28 | .21 | .18 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .59 | .52 | (.38 | ) | (.11 | ) | .51 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .84 | .73 | (.10 | ) | .10 | .69 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.23 | ) | (.24 | ) | (.26 | ) | (.19 | ) | (.21 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.23 | ) | (.25 | ) | (.26 | ) | (.19 | ) | (.21 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.56 | $ 10.95 | $ 10.47 | $ 10.83 | $ 10.92 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 7.64 | % | 7.00 | % | (.99 | )% | .91 | % | 6.63 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $31,248 | $38,422 | $52,116 | $27,718 | $16,712 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .91 | % | 1.25 | % | 1.31 | % | 1.01 | % | .98 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | 1.18 | % | 1.51 | % | 1.56 | % | 1.34 | % | 1.42 | % | ||||||||||
Net investment income(b) | 2.26 | % | 1.93 | % | 2.60 | % | 1.95 | % | 1.71 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
| abfunds.com | AB BOND INFLATION STRATEGY | 93 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.67 | $ 10.24 | $ 10.61 | $ 10.71 | $ 10.27 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .18 | .13 | .19 | .13 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .56 | .49 | (.37 | ) | (.11 | ) | .50 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .74 | .62 | (.18 | ) | .02 | .60 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.19 | ) | (.19 | ) | (.12 | ) | (.16 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.25 | $ 10.67 | $ 10.24 | $ 10.61 | $ 10.71 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 6.92 | % | 6.18 | % | (1.77 | )% | .16 | % | 5.86 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $3,823 | $2,607 | $3,391 | $3,627 | $2,505 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.64 | % | 1.99 | % | 2.03 | % | 1.76 | % | 1.72 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | 1.91 | % | 2.26 | % | 2.29 | % | 2.09 | % | 2.16 | % | ||||||||||
Net investment income(b) | 1.62 | % | 1.28 | % | 1.77 | % | 1.26 | % | .96 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
94 | AB BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.96 | $ 10.49 | $ 10.84 | $ 10.93 | $ 10.46 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .27 | .27 | .30 | .25 | .22 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .60 | .48 | (.37 | ) | (.13 | ) | .49 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .87 | .75 | (.07 | ) | .12 | .71 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.26 | ) | (.27 | ) | (.28 | ) | (.21 | ) | (.24 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.26 | ) | (.28 | ) | (.28 | ) | (.21 | ) | (.24 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.57 | $ 10.96 | $ 10.49 | $ 10.84 | $ 10.93 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 7.93 | % | 7.21 | % | (.68 | )% | 1.15 | % | 6.87 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $135,677 | $168,440 | $150,011 | $107,545 | $29,186 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .66 | % | .97 | % | 1.05 | % | .77 | % | .73 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | .92 | % | 1.24 | % | 1.31 | % | 1.10 | % | 1.16 | % | ||||||||||
Net investment income(b) | 2.44 | % | 2.47 | % | 2.80 | % | 2.31 | % | 2.04 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
| abfunds.com | AB BOND INFLATION STRATEGY | 95 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class R | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.93 | $ 10.46 | $ 10.82 | $ 10.89 | $ 10.44 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .21 | .20 | .24 | .21 | .29 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .62 | .49 | (.37 | ) | (.12 | ) | .37 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .83 | .69 | (.13 | ) | .09 | .66 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends |
| |||||||||||||||||||
Dividends from net investment income | (.19 | ) | (.22 | ) | (.23 | ) | (.16 | ) | (.21 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.57 | $ 10.93 | $ 10.46 | $ 10.82 | $ 10.89 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 7.61 | %+ | 6.64 | % | (1.15 | )% | .80 | %(f) | 6.41 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $3,066 | $6,992 | $6,354 | $5,364 | $408 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.21 | % | 1.47 | % | 1.54 | % | 1.29 | % | 1.24 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | 1.58 | % | 1.83 | % | 1.90 | % | 1.67 | % | 1.71 | % | ||||||||||
Net investment income(b) | 1.88 | % | 1.88 | % | 2.24 | % | 2.08 | % | 2.71 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
96 | AB BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class K | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.92 | $ 10.45 | $ 10.81 | $ 10.89 | $ 10.42 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .27 | .17 | .27 | .21 | .20 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .58 | .54 | (.38 | ) | (.11 | ) | .49 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .85 | .71 | (.11 | ) | .10 | .69 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.23 | ) | (.23 | ) | (.25 | ) | (.18 | ) | (.22 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.23 | ) | (.24 | ) | (.25 | ) | (.18 | ) | (.22 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.54 | $ 10.92 | $ 10.45 | $ 10.81 | $ 10.89 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 7.74 | % | 6.88 | % | (1.01 | )% | .96 | % | 6.66 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $6,790 | $5,051 | $12,055 | $2,903 | $2,409 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .89 | % | 1.27 | % | 1.35 | % | 1.01 | % | .98 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | 1.21 | % | 1.57 | % | 1.65 | % | 1.37 | % | 1.36 | % | ||||||||||
Net investment income(b) | 2.40 | % | 1.61 | % | 2.57 | % | 1.95 | % | 1.87 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
| abfunds.com | AB BOND INFLATION STRATEGY | 97 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class I | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.84 | $ 10.38 | $ 10.74 | $ 10.84 | $ 10.38 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .27 | .25 | .28 | .24 | .22 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .59 | .49 | (.36 | ) | (.12 | ) | .50 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .86 | .74 | (.08 | ) | .12 | .72 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.26 | ) | (.27 | ) | (.28 | ) | (.22 | ) | (.26 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.26 | ) | (.28 | ) | (.28 | ) | (.22 | ) | (.26 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.44 | $ 10.84 | $ 10.38 | $ 10.74 | $ 10.84 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 7.97 | % | 7.23 | % | (.73 | )% | 1.15 | % | 6.98 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $8,297 | $9,893 | $5,688 | $642 | $345 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .65 | % | .94 | % | 1.11 | % | .76 | % | .72 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | .88 | % | 1.18 | % | 1.34 | % | .99 | % | 1.03 | % | ||||||||||
Net investment income(b) | 2.42 | % | 2.40 | % | 2.67 | % | 2.25 | % | 2.08 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
98 | AB BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 1 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.77 | $ 10.33 | $ 10.69 | $ 10.80 | $ 10.35 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .26 | .24 | .28 | .22 | .20 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .59 | .48 | (.36 | ) | (.11 | ) | .51 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .85 | .72 | (.08 | ) | .11 | .71 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.27 | ) | (.27 | ) | (.28 | ) | (.22 | ) | (.26 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.27 | ) | (.28 | ) | (.28 | ) | (.22 | ) | (.26 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.35 | $ 10.77 | $ 10.33 | $ 10.69 | $ 10.80 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 7.84 | % | 7.18 | % | (.77 | )%(f) | 1.01 | % | 6.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $312,381 | $319,282 | $306,620 | $274,366 | $226,408 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .75 | % | 1.07 | % | 1.14 | % | .86 | % | .82 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | .88 | % | 1.20 | % | 1.28 | % | 1.04 | % | 1.03 | % | ||||||||||
Net investment income(b) | 2.42 | % | 2.31 | % | 2.66 | % | 2.10 | % | 1.86 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
| abfunds.com | AB BOND INFLATION STRATEGY | 99 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 2 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.76 | $ 10.32 | $ 10.69 | $ 10.79 | $ 10.35 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .28 | .26 | .29 | .24 | .20 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .58 | .48 | (.37 | ) | (.11 | ) | .51 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .86 | .74 | (.08 | ) | .13 | .71 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.28 | ) | (.29 | ) | (.29 | ) | (.23 | ) | (.27 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.28 | ) | (.30 | ) | (.29 | ) | (.23 | ) | (.27 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.34 | $ 10.76 | $ 10.32 | $ 10.69 | $ 10.79 | |||||||||||||||
|
| |||||||||||||||||||
| Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 7.96 | % | 7.19 | % | (.77 | )% | 1.21 | % | 6.92 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $60,289 | $58,829 | $50,705 | $54,118 | $37,207 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .65 | % | .96 | % | 1.03 | % | .76 | % | .72 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | .78 | % | 1.09 | % | 1.17 | % | .94 | % | .93 | % | ||||||||||
Net investment income(b) | 2.53 | % | 2.45 | % | 2.78 | % | 2.24 | % | 1.93 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
100 | AB BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class Z | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.80 | $ 10.35 | $ 10.72 | $ 10.82 | $ 10.38 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .24 | .27 | .28 | .24 | .25 | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .62 | .47 | (.36 | ) | (.11 | ) | .46 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .86 | .74 | (.08 | ) | .13 | .71 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.28 | ) | (.28 | ) | (.29 | ) | (.23 | ) | (.27 | ) | ||||||||||
Return of capital | – 0 | – | (.01 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.28 | ) | (.29 | ) | (.29 | ) | (.23 | ) | (.27 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.38 | $ 10.80 | $ 10.35 | $ 10.72 | $ 10.82 | |||||||||||||||
|
| |||||||||||||||||||
| Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 7.92 | % | 7.26 | % | (.77 | )% | 1.19 | % | 6.89 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $11,016 | $32,606 | $26,142 | $16,019 | $11,576 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .67 | % | .96 | % | 1.06 | % | .76 | % | .73 | % | ||||||||||
Expenses, before waivers/reimbursements(e) | .81 | % | 1.10 | % | 1.21 | % | .94 | % | .95 | % | ||||||||||
Net investment income(b) | 2.16 | % | 2.50 | % | 2.69 | % | 2.22 | % | 2.40 | % | ||||||||||
Portfolio turnover rate | 48 | % | 40 | % | 36 | % | 42 | % | 41 | % | ||||||||||
See footnote summary on page 102.
| abfunds.com | AB BOND INFLATION STRATEGY | 101 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (a) | Based on average shares outstanding. |
| (b) | Net of expenses waived/reimbursed by the Adviser. |
| (c) | Amount is less than $.005. |
| (d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
| + | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
| (e) | The expense ratios presented below exclude interest expense: |
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Class A |
| |||||||||||||||||||
Net of waivers/reimbursements | .75 | % | .75 | % | .75 | % | .75 | % | .76 | % | ||||||||||
Before waivers/reimbursements | 1.01 | % | 1.02 | % | 1.01 | % | 1.07 | % | 1.20 | % | ||||||||||
Class C |
| |||||||||||||||||||
Net of waivers/reimbursements | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | ||||||||||
Before waivers/reimbursements | 1.77 | % | 1.77 | % | 1.76 | % | 1.82 | % | 1.94 | % | ||||||||||
Advisor Class |
| |||||||||||||||||||
Net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Before waivers/reimbursements | .77 | % | .77 | % | .76 | % | .83 | % | .93 | % | ||||||||||
Class R |
| |||||||||||||||||||
Net of waivers/reimbursements | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||
Before waivers/reimbursements | 1.37 | % | 1.36 | % | 1.36 | % | 1.38 | % | 1.47 | % | ||||||||||
Class K |
| |||||||||||||||||||
Net of waivers/reimbursements | .75 | % | .75 | % | .75 | % | .75 | % | .75 | % | ||||||||||
Before waivers/reimbursements | 1.07 | % | 1.04 | % | 1.05 | % | 1.10 | % | 1.13 | % | ||||||||||
Class I |
| |||||||||||||||||||
Net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Before waivers/reimbursements | .73 | % | .73 | % | .73 | % | .72 | % | .81 | % | ||||||||||
Class 1 |
| |||||||||||||||||||
Net of waivers/reimbursements | .60 | % | .60 | % | .60 | % | .60 | % | .60 | % | ||||||||||
Before waivers/reimbursements | .73 | % | .73 | % | .74 | % | .77 | % | .81 | % | ||||||||||
Class 2 |
| |||||||||||||||||||
Net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Before waivers/reimbursements | .63 | % | .63 | % | .64 | % | .67 | % | .71 | % | ||||||||||
Class Z |
| |||||||||||||||||||
Net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Before waivers/reimbursements | .63 | % | .64 | % | .65 | % | .68 | % | .72 | % | ||||||||||
| (f) | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
See notes to financial statements.
102 | AB BOND INFLATION STRATEGY | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of AB Bond Inflation Strategy
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Bond Inflation Strategy (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
| abfunds.com | AB BOND INFLATION STRATEGY | 103 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 28, 2020
| 104 | AB BOND INFLATION STRATEGY | abfunds.com | |
2020 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2020. For foreign shareholders, 92.66% of ordinary income dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2021.
| abfunds.com | AB BOND INFLATION STRATEGY | 105 | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Michael Canter(2), Vice President Shawn E. Keegan(2), Vice President Janaki Rao(2), Vice President Dimitri Silva(2), Vice President Emilie D. Wrapp, Secretary | Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s U.S. Multi-Sector Fixed-Income Team. Messrs. Canter, Keegan, Rao and Silva are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
106 | AB BOND INFLATION STRATEGY | abfunds.com | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | 77 | None | |||||
| abfunds.com | AB BOND INFLATION STRATEGY | 107 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
| INDEPENDENT DIRECTORS |
| |||||||
Marshall C. Turner, Jr.,## Chairman of the Board (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
108 | AB BOND INFLATION STRATEGY | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## 76 (2005) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
| abfunds.com | AB BOND INFLATION STRATEGY | 109 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
Jeanette Loeb,## (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
Garry L. Moody,## (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL AND OTHER INFORMATION*** | PORTFOLIOS DIRECTOR | OTHER DIRECTOR | |||||
INDEPENDENT DIRECTORS (continued) | ||||||||
| Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention Legal and Compliance Department—Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund as defined in the “40 Act”, due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
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MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE | PRINCIPAL HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST 5 YEARS | ||
| Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
Michael Canter 51 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Director of Securitized Assets and US Multi-Sector Fixed-Income. | ||
Shawn E. Keegan 49 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Janaki Rao 50 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Dimitri Silva 38 | Vice President | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2015. | ||
| Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
| Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI.
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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
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Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Bond Inflation Strategy (the “Fund”) at a meeting held on November 4-6, 2019 (the “Meeting”).*
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business
| * | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. |
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judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2017 and 2018 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and
| abfunds.com | AB BOND INFLATION STRATEGY | 117 | |
distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s recent profitability to the Adviser would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended July 31, 2019 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and noted that it was above the median. The directors took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this pur-
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pose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors previously discussed these matters with an independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
| abfunds.com | AB BOND INFLATION STRATEGY | 119 | |
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
| abfunds.com | AB BOND INFLATION STRATEGY | 121 | |
NOTES
122 | AB BOND INFLATION STRATEGY | abfunds.com | |
NOTES
| abfunds.com | AB BOND INFLATION STRATEGY | 123 | |
NOTES
124 | AB BOND INFLATION STRATEGY | abfunds.com | |
AB BOND INFLATION STRATEGY
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
BIS-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB INCOME FUND
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Income Fund (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB INCOME FUND | 1 | |
ANNUAL REPORT
December 9, 2020
This report provides management’s discussion of fund performance for AB Income Fund for the annual reporting period ended October 31, 2020.
The investment objective of the Fund is to seek high current income consistent with preservation of capital.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB INCOME FUND | ||||||||
| Class A Shares | 7.55% | 3.55% | ||||||
| Class C Shares | 7.14% | 2.77% | ||||||
| Advisor Class Shares1 | 7.67% | 3.80% | ||||||
| Class Z Shares1 | 7.69% | 3.89% | 2 | |||||
| Bloomberg Barclays US Aggregate Bond Index | 1.27% | 6.19% | ||||||
| 1 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund, or through other limited or special arrangements approved by the Adviser, such as purchases by shareholders of the Fund’s Predecessor Fund. |
| 2 | Since inception on 11/20/2019. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays US Aggregate Bond Index, for the six- and 12-month periods ended October 31, 2020. The inception date for Class Z shares was November 20, 2019; due to limited performance history, there is no discussion of performance for this share class for the 12-month period.
During the 12-month period, all share classes underperformed the benchmark, before sales charges. Security selection was the primary detractor, relative to the benchmark, as losses mostly from commercial mortgage-backed securities (“CMBS”), high-yield corporate bonds and investment-grade credit default swaps were greater than gains in emerging-market corporate bonds and investment-grade corporates. Sector allocation also detracted, primarily from positioning in emerging-market corporates, high-yield credit default swaps and US agency mortgages, which outweighed gains from sector allocation to cash, as well as investment-grade and high-yield corporate bonds. Yield-curve positioning contributed, mainly from exposure in five- to 10-year maturities and short-term bonds that offset losses from positioning among two-year and 20- to 30-year maturities.
2 | AB INCOME FUND | abfunds.com | |
Currency decisions and country allocations were small contributors to performance.
During the six-month period, all share classes outperformed the benchmark, before sales charges. Sector allocation was the primary contributor due to exposures in agency risk-sharing transactions, high-yield corporate bonds and emerging-market sovereign bonds, which more than offset exposure to investment-grade corporate bonds. Security selection also contributed, mostly within emerging-market corporate and sovereign bonds, investment-grade corporates and asset-backed securities, while selection in high-yield corporate bonds and US agency mortgages detracted. Yield-curve positioning also added, due to positioning in the 20- and 30-year parts of the yield curve. Country allocations to Indonesia and Mexico contributed to returns. Currency decisions were a minor contributor to performance.
During both periods, the Fund utilized derivatives in the form of futures, interest rate swaptions and interest rate swaps to manage and hedge duration risk and/or to take active yield-curve positioning. Currency forwards were used to hedge foreign currency exposure and to take active currency risk. Credit default swaps, both single name and index, were used to create synthetic exposure in investment-grade and high-yield credit risk. The utilization of government-agency-related To Be Announced mortgage short-term positions was a significant contributor to the Fund’s turnover rate of 246%.
MARKET REVIEW AND INVESTMENT STRATEGY
Global fixed-income market returns were positive over the 12-month period ended October 31, 2020. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, which set the stage for a rebound in risk assets following the sell-off that started in March. Government bonds rallied as interest rates were slashed. Emerging- and developed-market investment-grade corporate bonds led gains, followed by developed-market high-yield corporate bonds, as investors searched for higher yields in a period of falling interest rates. Corporate bonds in the US outperformed their European counterparts. Securitized assets also advanced, while emerging-market sovereign bonds were slightly positive and emerging-market local bonds fell during the period. The US dollar declined against most major developed-market currencies and gained against a majority of emerging-market currencies. Brent crude oil prices fell almost 34% as demand slowed sharply and the oil industry outlook was uncertain.
The Fund’s Senior Investment Management Team (the “Team”) continues to pursue high income, while preserving capital by investing primarily in government bonds from both US and non-US issuers as well as corporate
| abfunds.com | AB INCOME FUND | 3 | |
bonds, with scope to invest a select amount in below investment-grade bonds. The Team manages the Fund with a core fixed-income strategy through a global, multi-sector approach that seeks an attractive risk/return profile.
INVESTMENT POLICIES
The Fund pursues its objective by investing, under normal circumstances, at least 80% of its net assets in income-producing securities. The Fund also normally invests at least 65% of its total assets in securities of US and foreign governments, their agencies or instrumentalities and repurchase agreements relating to US government securities.
The Fund normally invests at least 65% of its total assets in US dollar-denominated securities. The Fund may also invest up to 35% of its total assets in non-government fixed-income securities, including corporate debt securities, non-government mortgage-backed and other asset-backed securities, certificates of deposit and commercial paper. The Fund may invest up to 35% of its net assets in below investment-grade securities (commonly known as “junk bonds”). The Fund may invest no more than 25% of its total assets in securities of issuers in any one country other than the US. The Fund’s investments in foreign securities may include investments in securities of emerging-market countries or of issuers in emerging markets.
The Adviser selects securities for purchase or sale based on its assessment of the securities’ risks and return characteristics as well as the securities’ impact on the overall risks and return characteristics of the Fund. In making this assessment, the Adviser takes into account various factors, including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings. The Fund may invest in fixed-income securities with any maturity or duration.
The Fund utilizes derivatives, such as options, futures contracts, forwards and swaps to a significant extent. The Fund may, for example, use credit default, interest rate and total return swaps to establish exposure to the fixed-income markets or particular fixed-income securities. Derivatives may provide a more efficient and economical exposure to market segments than direct investments, and may also be a more efficient way to alter the Fund’s exposure. The Fund may also enter into transactions such as reverse repurchase agreements that are similar to borrowings for investment purposes. The Fund’s use of derivatives and these borrowing transactions may create aggregate exposure that is substantially in excess of its net assets, effectively leveraging the Fund.
4 | AB INCOME FUND | abfunds.com | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays US Aggregate Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays US Aggregate Bond Index represents the performance of securities within the US investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, asset-backed securities and commercial mortgage-backed securities. The index is not leveraged, whereas the Fund utilizes leverage. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and may be more difficult to trade than other types of securities.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of
| abfunds.com | AB INCOME FUND | 5 | |
DISCLOSURES AND RISKS (continued)
a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline, as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline.
Mortgage-Related and/or Other Asset-Backed Securities Risk: Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be
6 | AB INCOME FUND | abfunds.com | |
DISCLOSURES AND RISKS (continued)
subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
The Fund commenced operations on April 22, 2016. The Fund acquired the assets and liabilities of the AllianceBernstein Income Fund, Inc., a closed-end fund (the “Predecessor Fund”), effective at the close of business on April 21, 2016 (the “Reorganization”). The Fund has the same investment objective that the Predecessor Fund
| abfunds.com | AB INCOME FUND | 7 | |
DISCLOSURES AND RISKS (continued)
had and similar investment strategies and policies. In addition, the Fund has higher expenses (including transfer agency and shareholder servicing fees), and a different advisory fee arrangement than the Predecessor Fund had.
Performance information prior to April 22, 2016 shown in this report reflects the historical performance of the Predecessor Fund based on its NAV. Such performance information may not be representative of performance the Fund would have achieved as an open-end fund under its current investment strategies and policies and expense levels.
8 | AB INCOME FUND | abfunds.com | |
HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
10/31/2010 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Income Fund Advisor Class shares (from 10/31/2010 to 10/31/2020) as compared to the performance of the Fund’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
| 1 | Performance returns of Advisor Class shares for the periods prior to April 21, 2016 are based on the NAV per share of the Predecessor Fund. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund, or through other limited or special arrangements approved by the Adviser, such as purchases by shareholders of the Fund’s Predecessor Fund. |
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HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | ||||||||||
| CLASS A SHARES | 2.40% | |||||||||||
| 1 Year | 3.55% | -0.80% | ||||||||||
| Since Inception2 | 4.46% | 3.48% | ||||||||||
| CLASS C SHARES | 1.75% | |||||||||||
| 1 Year | 2.77% | 1.78% | ||||||||||
| Since Inception2 | 3.70% | 3.70% | ||||||||||
| ADVISOR CLASS SHARES3 | 2.75% | |||||||||||
| 1 Year | 3.80% | 3.80% | ||||||||||
| 5 Years | 4.62% | 4.62% | ||||||||||
| 10 Years | 5.02% | 5.02% | ||||||||||
| CLASS Z SHARES3 | 2.83% | |||||||||||
| Since Inception2 | 3.89% | 3.89% | ||||||||||
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 0.83%, 1.57%, 0.58% and 0.50% for Class A, Class C, Advisor Class and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses and brokerage commissions and other transaction costs to 0.77%, 1.52%, 0.52% and 0.50% for Class A, Class C, Advisor Class and Class Z shares, respectively. These waivers/reimbursements may not be terminated before January 31, 2021. Any fees waived and expense borne by the Adviser through April 22, 2018 under the expense limitations in effect prior to that date may be reimbursed by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne, provided that no reimbursement payment will be made that would cause the Fund’s total annual operating expenses to exceed the expense limitations. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2020. |
| 2 | Inception dates: 4/21/2016 for all share classes except Class Z; 11/20/2019 for Class Z shares. |
| 3 | Performance returns of Advisor Class shares for the periods prior to April 21, 2016 are based on the NAV per share of the Predecessor Fund. These share classes are offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund, or through other limited or special arrangements approved by the Adviser, such as purchases by shareholders of the Fund’s Predecessor Fund. |
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HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS A SHARES | ||||
| 1 Year | -0.17% | |||
| Since Inception1 | 3.62% | |||
| CLASS C SHARES | ||||
| 1 Year | 2.42% | |||
| Since Inception1 | 3.86% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 4.46% | |||
| 5 Years | 4.75% | |||
| 10 Years | 5.15% | |||
| CLASS Z SHARES2 | ||||
| Since Inception1 | 4.06% | |||
| 1 | Inception dates: 4/21/2016 for all share classes except Class Z; 11/20/2019 for Class Z shares. |
| 2 | Performance returns of Advisor Class shares for the periods prior to April 21, 2016 are based on the NAV per share of the Predecessor Fund. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund, or through other limited or special arrangements approved by the Adviser, such as purchases by shareholders of the Fund’s Predecessor Fund. |
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EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,075.50 | $ | 4.12 | 0.79 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.17 | $ | 4.01 | 0.79 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,071.40 | $ | 8.02 | 1.54 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.39 | $ | 7.81 | 1.54 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,076.70 | $ | 2.82 | 0.54 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.42 | $ | 2.75 | 0.54 | % | ||||||||
Class Z | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,076.90 | $ | 2.65 | 0.48 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,024.04 | $ | 2.58 | 0.48 | % | ||||||||
| * | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| 12 | AB INCOME FUND | abfunds.com | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $4,623.3
| 1 | All data are as of October 31, 2020. The Fund’s security type breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” security type weightings represent 0.7% or less in the following types: Agencies, Common Stocks, Emerging Markets–Treasuries, Local Governments–Provincial Bonds, Local Governments–US Municipal Bonds, Options Purchased–Puts, Preferred Stocks, Quasi-Sovereigns, Warrants and Whole Loan Trusts. |
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PORTFOLIO SUMMARY (continued)
October 31, 2020 (unaudited)
| 1 | All data are as of October 31, 2020. The Fund’s country breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” country weightings represent 0.5% or less in the following: Angola, Australia, Bahrain, Bermuda, Chile, China, Colombia, Costa Rica, Denmark, Ecuador, El Salvador, Finland, Germany, Ghana, Guatemala, Honduras, Hong Kong, Indonesia, Ireland, Israel, Ivory Coast, Jamaica, Japan, Kazakhstan, Kenya, Kuwait, Lebanon, Luxembourg, Macau, Malaysia, Nigeria, Norway, Oman, Pakistan, Panama, Peru, Qatar, Saudi Arabia, Senegal, Spain, Sri Lanka, Sweden, Switzerland, Turkey, Ukraine, United Arab Emirates and Zambia. |
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PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GOVERNMENTS – | ||||||||||||
Indonesia – 0.4% | ||||||||||||
Indonesia Treasury Bond | IDR | 223,106,000 | $ | 16,841,643 | ||||||||
|
| |||||||||||
Mexico – 0.8% | ||||||||||||
Mexican Bonos | MXN | 645,000 | 35,434,861 | |||||||||
|
| |||||||||||
Russia – 0.7% | ||||||||||||
Russian Federal Bond – OFZ | RUB | 670,156 | 8,643,963 | |||||||||
Series 6227 | 1,925,000 | 26,060,178 | ||||||||||
|
| |||||||||||
| 34,704,141 | ||||||||||||
|
| |||||||||||
United States – 50.4% | ||||||||||||
U.S. Treasury Bonds | U.S.$ | 37,958 | 36,107,167 | |||||||||
1.25%, 05/15/2050 | 54,108 | 49,187,826 | ||||||||||
4.50%, 02/15/2036 | 17,631 | 26,060,822 | ||||||||||
5.50%, 08/15/2028(a)(b) | 161,400 | 220,361,438 | ||||||||||
6.00%, 02/15/2026 | 30,903 | 39,893,454 | ||||||||||
6.125%, 11/15/2027(c) | 469,196 | 647,417,720 | ||||||||||
6.125%, 08/15/2029 | 47,418 | 69,156,189 | ||||||||||
6.25%, 05/15/2030(c) | 122,903 | 184,584,192 | ||||||||||
6.375%, 08/15/2027 | 45,300 | 62,741,054 | ||||||||||
6.50%, 11/15/2026 | 39,144 | 53,076,818 | ||||||||||
6.625%, 02/15/2027 | 106,822 | 147,013,365 | ||||||||||
6.875%, 08/15/2025 | 18,100 | 23,665,750 | ||||||||||
7.50%, 11/15/2024 | 20,000 | 25,800,000 | ||||||||||
U.S. Treasury Notes | 158,239 | 155,147,904 | ||||||||||
1.50%, 08/15/2026(b) | 69,083 | 73,055,167 | ||||||||||
1.625%, 08/15/2022(b)(c) | 100,287 | 102,919,739 | ||||||||||
1.625%, 10/31/2023-08/15/2029 | 45,600 | 47,975,919 | ||||||||||
1.75%, 11/15/2029(c) | 78,385 | 84,961,991 | ||||||||||
2.125%, 07/31/2024(b) | 125,561 | 134,272,115 | ||||||||||
2.25%, 11/15/2025(b)(d) | 16,500 | 18,028,828 | ||||||||||
2.625%, 02/15/2029 | 9,944 | 11,448,030 | ||||||||||
2.875%, 09/30/2023 | 65,000 | 70,057,813 | ||||||||||
3.125%, 11/15/2028 | 39,000 | 46,324,688 | ||||||||||
|
| |||||||||||
| 2,329,257,989 | ||||||||||||
|
| |||||||||||
Total Governments – Treasuries | 2,416,238,634 | |||||||||||
|
| |||||||||||
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PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
MORTGAGE PASS-THROUGHS – 24.8% | ||||||||||||
Agency Fixed Rate 30-Year – 24.8% | ||||||||||||
Federal Home Loan Mortgage Corp. | U.S.$ | 132,426 | $ | 141,721,745 | ||||||||
4.50%, 02/01/2050 | 6,374 | 7,128,784 | ||||||||||
Federal National Mortgage Association | 5 | 5,002 | ||||||||||
Series 1999 7.50%, 11/01/2029 | 9 | 10,550 | ||||||||||
Series 2020 2.50%, 08/01/2050-09/01/2050 | 75,698 | 80,746,155 | ||||||||||
4.50%, 02/01/2050 | 11,769 | 13,107,122 | ||||||||||
Government National Mortgage | 77,688 | 81,080,859 | ||||||||||
Uniform Mortgage-Backed Security | 92,255 | 98,507,464 | ||||||||||
Series 2019 | 271,125 | 293,196,631 | ||||||||||
Series 2020 | 13,429 | 14,178,908 | ||||||||||
1.50%, 11/01/2050, TBA | 85,148 | 85,719,852 | ||||||||||
3.00%, 11/01/2050, TBA | 315,523 | 329,796,014 | ||||||||||
|
| |||||||||||
Total Mortgage Pass-Throughs | 1,145,199,086 | |||||||||||
|
| |||||||||||
CORPORATES – INVESTMENT GRADE – 13.7% | ||||||||||||
Financial Institutions – 7.5% | ||||||||||||
Banking – 4.4% | ||||||||||||
AIB Group PLC | 4,005 | 4,309,861 | ||||||||||
4.75%, 10/12/2023(e) | 1,734 | 1,883,783 | ||||||||||
Ally Financial, Inc. | 1,497 | 1,746,610 | ||||||||||
8.00%, 11/01/2031 | 75 | 103,748 | ||||||||||
American Express Co. | 711 | 664,785 | ||||||||||
Australia & New Zealand Banking Group Ltd. | 200 | 226,354 | ||||||||||
4.50%, 03/19/2024(e) | 2,577 | 2,818,130 | ||||||||||
16 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Banco de Credito del Peru | U.S.$ | 3,765 | $ | 3,802,650 | ||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand | 3,998 | 4,472,762 | ||||||||
Banco Santander SA | 4,000 | 4,557,200 | ||||||||
Bank of America Corp. | 2,526 | 2,860,493 | ||||||||
Series X | 6,520 | 7,081,372 | ||||||||
Series Z | 2,072 | 2,303,173 | ||||||||
Bank of New York Mellon Corp. (The) | 844 | 833,425 | ||||||||
Series G | 992 | 1,061,867 | ||||||||
Barclays Bank PLC | 656 | 882,182 | ||||||||
Barclays PLC | GBP | 333 | 451,893 | |||||||
7.25%, 03/15/2023(e)(g) | 1,350 | 1,797,020 | ||||||||
7.875%, 03/15/2022(e)(g) | U.S.$ | 205 | 211,380 | |||||||
8.00%, 12/15/2020(g) | EUR | 614 | 719,843 | |||||||
BBVA Bancomer SA/Texas | U.S.$ | 5,343 | 5,563,399 | |||||||
BNP Paribas SA | 1,296 | 1,331,458 | ||||||||
7.625%, 03/30/2021(e)(g) | 4,218 | 4,273,973 | ||||||||
CIT Group, Inc. | 1,568 | 1,633,213 | ||||||||
Citigroup, Inc. | 2,055 | 2,120,698 | ||||||||
Series Q | 927 | 909,137 | ||||||||
Series T | 1,388 | 1,546,537 | ||||||||
Series U | 2,540 | 2,554,783 | ||||||||
Series V | 3,590 | 3,513,246 | ||||||||
Comerica, Inc. | 10,316 | 11,096,509 | ||||||||
| abfunds.com | AB INCOME FUND | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Commonwealth Bank of Australia | U.S.$ | 6,462 | $ | 7,288,361 | ||||||
Cooperatieve Rabobank UA | 2,250 | 2,503,642 | ||||||||
Credit Agricole SA | EUR | 3,780 | 4,484,922 | |||||||
8.125%, 12/23/2025(e)(g) | U.S.$ | 2,233 | 2,625,718 | |||||||
Danske Bank A/S | 200 | 212,076 | ||||||||
5.00%, 01/12/2022(e) | 478 | 500,528 | ||||||||
5.375%, 01/12/2024(e) | 1,459 | 1,637,684 | ||||||||
5.875%, 04/06/2022(e)(g) | EUR | 3,302 | 3,927,395 | |||||||
Discover Bank | U.S.$ | 500 | 548,995 | |||||||
4.682%, 08/09/2028 | 8,350 | 8,756,728 | ||||||||
Fifth Third Bancorp | 1,353 | 1,365,948 | ||||||||
Goldman Sachs Group, Inc. (The) | 760 | 808,929 | ||||||||
HSBC Holdings PLC | EUR | 4,667 | 5,463,904 | |||||||
6.00%, 09/29/2023(e)(g) | 3,669 | 4,529,487 | ||||||||
6.375%, 03/30/2025(g) | U.S.$ | 1,277 | 1,337,389 | |||||||
ING Groep NV 6 | 6,341 | 6,722,475 | ||||||||
6.875%, 04/16/2022(e)(g) | 515 | 533,143 | ||||||||
Intesa Sanpaolo SpA | 3,000 | 3,049,560 | ||||||||
JPMorgan Chase & Co. | 2,998 | 3,269,079 | ||||||||
Series V | 37 | 34,605 | ||||||||
Series Z | 119 | 117,297 | ||||||||
Lloyds Banking Group PLC | 4,360 | 4,788,414 | ||||||||
Morgan Stanley | 847 | 833,592 | ||||||||
Nationwide Building Society | 1,150 | 1,194,953 | ||||||||
18 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Natwest Group PLC | U.S.$ | 3,800 | $ | 3,926,768 | ||||||||
Nordea Bank Abp | 8,725 | 9,798,349 | ||||||||||
Santander Holdings USA, Inc. | 463 | 515,472 | ||||||||||
Societe Generale SA | 8,825 | 9,728,062 | ||||||||||
Standard Chartered PLC | 7,800 | 6,932,640 | ||||||||||
7.50%, 04/02/2022(e)(g) | 1,278 | 1,319,880 | ||||||||||
7.75%, 04/02/2023(e)(g) | 265 | 281,610 | ||||||||||
Swedbank AB | 200 | 204,424 | ||||||||||
Series NC5 | 2,000 | 2,092,680 | ||||||||||
Truist Financial Corp. Series P | 10,721 | 11,453,030 | ||||||||||
Series Q 5. | 2,924 | 3,195,026 | ||||||||||
UBS Group AG | 3,569 | 3,844,363 | ||||||||||
UniCredit SpA | 4,320 | 4,291,358 | ||||||||||
4.875%, 02/20/2029(e) | EUR | 2,970 | 3,641,335 | |||||||||
|
| |||||||||||
| 205,091,305 | ||||||||||||
|
| |||||||||||
Brokerage – 0.2% |
| |||||||||||
Charles Schwab Corp. (The) | U.S.$ | 6,567 | 7,194,543 | |||||||||
|
| |||||||||||
Finance – 1.0% |
| |||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 373 | 368,714 | ||||||||||
3.30%, 01/23/2023 | 150 | 151,522 | ||||||||||
3.65%, 07/21/2027 | 1,600 | 1,512,112 | ||||||||||
3.875%, 01/23/2028 | 1,421 | 1,343,925 | ||||||||||
4.125%, 07/03/2023 | 430 | 441,864 | ||||||||||
4.50%, 09/15/2023 | 2,506 | 2,603,383 | ||||||||||
4.875%, 01/16/2024 | 3,065 | 3,206,388 | ||||||||||
6.50%, 07/15/2025 | 861 | 947,608 | ||||||||||
Air Lease Corp. | 3,032 | 3,181,417 | ||||||||||
Aircastle Ltd. | 678 | 667,383 | ||||||||||
| abfunds.com | AB INCOME FUND | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
4.40%, 09/25/2023 | U.S.$ | 1,556 | $ | 1,565,523 | ||||||||
5.00%, 04/01/2023 | 140 | 142,748 | ||||||||||
5.25%, 08/11/2025(e) | 5,324 | 5,283,058 | ||||||||||
GE Capital Funding LLC | 3,510 | 3,836,079 | ||||||||||
Huarong Finance II Co., Ltd. | 2,067 | 2,288,557 | ||||||||||
5.50%, 01/16/2025(e) | 4,215 | 4,695,684 | ||||||||||
Synchrony Financial | 806 | 831,397 | ||||||||||
3.95%, 12/01/2027 | 6,904 | 7,529,502 | ||||||||||
4.25%, 08/15/2024 | 4,911 | 5,368,705 | ||||||||||
4.375%, 03/19/2024 | 499 | 546,126 | ||||||||||
4.50%, 07/23/2025 | 576 | 640,616 | ||||||||||
|
| |||||||||||
| 47,152,311 | ||||||||||||
|
| |||||||||||
Insurance – 1.3% |
| |||||||||||
ACE Capital Trust II | 750 | 1,114,995 | ||||||||||
AIG Life Holdings, Inc. | 509 | 725,518 | ||||||||||
Assicurazioni Generali SpA | EUR | 6,630 | 9,015,312 | |||||||||
Caisse Nationale de Reassurance | 3,100 | 4,390,193 | ||||||||||
CNP Assurances | 7,200 | 8,932,466 | ||||||||||
Fairfax Financial Holdings Ltd. | U.S.$ | 5,000 | 6,142,000 | |||||||||
Hartford Financial Services Group, Inc. | 3,275 | 2,861,564 | ||||||||||
MetLife Capital Trust IV | 4,117 | 5,674,049 | ||||||||||
Prudential Financial, Inc. | 4,029 | 4,251,804 | ||||||||||
5.625%, 06/15/2043 | 2,868 | 3,061,561 | ||||||||||
Voya Financial, Inc. | 12,065 | 12,431,173 | ||||||||||
|
| |||||||||||
| 58,600,635 | ||||||||||||
|
| |||||||||||
Other Finance – 0.0% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 710 | 715,495 | ||||||||||
|
| |||||||||||
20 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
REITS – 0.6% | ||||||||||||
Brixmor Operating Partnership LP | U.S.$ | 2,215 | $ | 2,392,931 | ||||||||
GLP Capital LP/GLP Financing II, Inc. | 886 | 970,259 | ||||||||||
5.375%, 04/15/2026 | 283 | 314,645 | ||||||||||
Kite Realty Group LP | 515 | 499,921 | ||||||||||
MPT Operating Partnership LP/MPT Finance Corp. | 1,047 | 1,096,753 | ||||||||||
5.00%, 10/15/2027 | 75 | 78,134 | ||||||||||
Omega Healthcare Investors, Inc. | 336 | 359,661 | ||||||||||
Regency Centers LP | 1,700 | 1,828,044 | ||||||||||
Sabra Health Care LP | 1,946 | 2,055,696 | ||||||||||
Spirit Realty LP | 2,453 | 2,475,249 | ||||||||||
3.40%, 01/15/2030 | 1,800 | 1,826,136 | ||||||||||
4.45%, 09/15/2026 | 1,010 | 1,092,355 | ||||||||||
STORE Capital Corp. | 1,143 | 1,237,366 | ||||||||||
Trust Fibra Uno | 4,814 | 5,006,560 | ||||||||||
VEREIT Operating Partnership LP | 2,588 | 2,709,843 | ||||||||||
4.625%, 11/01/2025 | 1,286 | 1,424,682 | ||||||||||
4.875%, 06/01/2026 | 459 | 519,831 | ||||||||||
|
| |||||||||||
| 25,888,066 | ||||||||||||
|
| |||||||||||
| 344,642,355 | ||||||||||||
|
| |||||||||||
Industrial – 5.6% | ||||||||||||
Basic – 0.9% | ||||||||||||
Anglo American Capital PLC | 2,450 | 2,787,537 | ||||||||||
5.375%, 04/01/2025(e) | 3,216 | 3,708,788 | ||||||||||
ArcelorMittal SA | 1,180 | 1,441,476 | ||||||||||
Arconic Corp. | 1,765 | 1,867,458 | ||||||||||
Glencore Funding LLC | 7,218 | 7,804,463 | ||||||||||
Gold Fields Orogen Holdings BVI Ltd. | 1,445 | 1,578,663 | ||||||||||
GTL Trade Finance, Inc. | 274 | 357,142 | ||||||||||
| abfunds.com | AB INCOME FUND | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GTL Trade Finance, Inc./Gerdau | U.S.$ | 1,243 | $ | 1,364,231 | ||||||||
GUSAP III LP | 1,491 | 1,563,779 | ||||||||||
Industrias Penoles SAB de CV | 970 | 1,147,631 | ||||||||||
MEGlobal Canada ULC | 1,988 | 2,161,950 | ||||||||||
Minsur SA | 285 | 312,609 | ||||||||||
Nexa Resources SA | 10,030 | 10,596,695 | ||||||||||
Suzano Austria GmbH | 1,304 | 1,332,818 | ||||||||||
7.00%, 03/16/2047(e) | 1,532 | 1,849,890 | ||||||||||
Vale Overseas Ltd. | 614 | 641,931 | ||||||||||
|
| |||||||||||
| 40,517,061 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
General Electric Co. | 815 | 863,387 | ||||||||||
Series D | 1,203 | 983,284 | ||||||||||
Westinghouse Air Brake Technologies Corp. | 419 | 444,806 | ||||||||||
4.40%, 03/15/2024 | 2,081 | 2,270,891 | ||||||||||
|
| |||||||||||
| 4,562,368 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.3% | ||||||||||||
Prosus NV | 5,224 | 5,666,407 | ||||||||||
4.027%, 08/03/2050(e) | 1,123 | 1,165,113 | ||||||||||
5.50%, 07/21/2025(e) | 683 | 781,181 | ||||||||||
Weibo Corp. | 4,574 | 4,771,254 | ||||||||||
|
| |||||||||||
| 12,383,955 | ||||||||||||
|
| |||||||||||
Communications - Telecommunications – 0.1% | ||||||||||||
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC | 1,990 | 2,163,050 | ||||||||||
5.152%, 03/20/2028(e) | 1,990 | 2,320,201 | ||||||||||
|
| |||||||||||
| 4,483,251 | ||||||||||||
|
| |||||||||||
22 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Consumer Cyclical - | ||||||||||||
General Motors Co. | U.S.$ | 1,290 | $ | 1,510,551 | ||||||||
6.80%, 10/01/2027 | 1,832 | 2,252,682 | ||||||||||
General Motors Financial Co., Inc. | EUR | 1,571 | 1,889,569 | |||||||||
3.50%, 11/07/2024 | U.S.$ | 951 | 1,006,586 | |||||||||
3.70%, 05/09/2023 | 336 | 353,099 | ||||||||||
3.95%, 04/13/2024 | 1,800 | 1,918,260 | ||||||||||
4.15%, 06/19/2023 | 1,073 | 1,142,970 | ||||||||||
5.10%, 01/17/2024 | 5,068 | 5,566,438 | ||||||||||
5.20%, 03/20/2023 | 1,712 | 1,858,907 | ||||||||||
5.25%, 03/01/2026 | 146 | 166,634 | ||||||||||
Harley-Davidson Financial Services, Inc. 2.55%, 06/09/2022(e) | 130 | 132,196 | ||||||||||
3.35%, 06/08/2025(e) | 5,173 | 5,454,101 | ||||||||||
Lear Corp. | 855 | 890,346 | ||||||||||
3.80%, 09/15/2027 | 1,378 | 1,472,820 | ||||||||||
4.25%, 05/15/2029 | 545 | 598,056 | ||||||||||
Nissan Motor Acceptance Corp. | 246 | 248,716 | ||||||||||
2.80%, 01/13/2022(e) | 225 | 228,096 | ||||||||||
3.45%, 03/15/2023(e) | 356 | 365,818 | ||||||||||
Nissan Motor Co., Ltd. | 4,615 | 4,628,337 | ||||||||||
Volkswagen Group of America Finance LLC 3.35%, 05/13/2025(e) | 3,894 | 4,239,203 | ||||||||||
|
| |||||||||||
| 35,923,385 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.0% | ||||||||||||
Lennar Corp. | 75 | 85,559 | ||||||||||
Marriott International, Inc./MD | 1,526 | 1,699,079 | ||||||||||
Standard Industries, Inc./NJ | 212 | 219,017 | ||||||||||
|
| |||||||||||
| 2,003,655 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.1% | ||||||||||||
VF Corp. | 2,807 | 3,030,886 | ||||||||||
|
| |||||||||||
Consumer Non - Cyclical – 0.4% | ||||||||||||
Altria Group, Inc. | 1,145 | 1,343,348 | ||||||||||
| abfunds.com | AB INCOME FUND | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
BAT Capital Corp. | U.S.$ | 5,837 | $ | 6,286,041 | ||||||||
Cigna Corp. | 6,987 | 7,417,190 | ||||||||||
Kimberly-Clark de Mexico SAB de CV | 1,267 | 1,271,355 | ||||||||||
|
| |||||||||||
| 16,317,934 | ||||||||||||
|
| |||||||||||
Energy – 1.4% | ||||||||||||
Boardwalk Pipelines LP | 1,798 | 2,074,784 | ||||||||||
Cenovus Energy, Inc. | 2,500 | 2,537,275 | ||||||||||
5.375%, 07/15/2025 | 1,453 | 1,532,813 | ||||||||||
Ecopetrol SA | 813 | 887,918 | ||||||||||
6.875%, 04/29/2030 | 4,658 | 5,598,916 | ||||||||||
Empresa Electrica Cochrane SpA | 994 | 999,323 | ||||||||||
Enable Midstream Partners LP | 5,350 | 5,073,565 | ||||||||||
Energy Transfer Operating LP | 7,425 | 8,234,622 | ||||||||||
Eni SpA | 1,969 | 2,228,495 | ||||||||||
Hess Corp. | 8,898 | 10,848,798 | ||||||||||
Oleoducto Central SA | 1,169 | 1,218,916 | ||||||||||
ONEOK, Inc. | 3,952 | 4,126,639 | ||||||||||
5.85%, 01/15/2026 | 7,452 | 8,484,847 | ||||||||||
PBF Holding Co. LLC/PBF Finance Corp. | 4,960 | 4,431,859 | ||||||||||
Plains All American Pipeline LP/PAA Finance Corp. | 1,287 | 1,366,640 | ||||||||||
4.65%, 10/15/2025 | 3,902 | 4,163,668 | ||||||||||
Raizen Fuels Finance SA | 2,218 | 2,407,223 | ||||||||||
Sunoco Logistics Partners Operations LP | 383 | 396,290 | ||||||||||
|
| |||||||||||
| 66,612,591 | ||||||||||||
|
| |||||||||||
Services – 0.0% | ||||||||||||
Expedia Group, Inc. | 1,612 | 1,772,539 | ||||||||||
|
| |||||||||||
24 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Technology – 0.5% | ||||||||||||
Baidu, Inc. | U.S.$ | 797 | $ | 845,918 | ||||||||
3.425%, 04/07/2030 | 225 | 246,704 | ||||||||||
Broadcom, Inc. | 6,425 | 7,226,519 | ||||||||||
Dell International LLC/EMC Corp. | 4,940 | 5,625,326 | ||||||||||
NXP BV/NXP Funding LLC | 3,499 | 4,147,330 | ||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. | 1,227 | 1,383,320 | ||||||||||
VMware, Inc. | 5,333 | 6,026,397 | ||||||||||
|
| |||||||||||
| 25,501,514 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.6% | ||||||||||||
Delta Air Lines, Inc. | 4,659 | 5,083,761 | ||||||||||
Delta Air Lines, Inc./SkyMiles IP Ltd. | 1,412 | 1,432,686 | ||||||||||
4.75%, 10/20/2028(e) | 1,640 | 1,677,425 | ||||||||||
Mileage Plus Holdings LLC/Mileage Plus Intellectual Property Assets Ltd. | 8,739 | 9,113,318 | ||||||||||
Southwest Airlines Co. | 9,941 | 11,029,838 | ||||||||||
|
| |||||||||||
| 28,337,028 | ||||||||||||
|
| |||||||||||
Transportation - Railroads – 0.1% | ||||||||||||
Lima Metro Line 2 Finance Ltd. | 387 | 425,216 | ||||||||||
5.875%, 07/05/2034(e) | 1,757 | 2,108,924 | ||||||||||
|
| |||||||||||
| 2,534,140 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.3% | ||||||||||||
Aviation Capital Group LLC | 1,672 | 1,669,375 | ||||||||||
3.50%, 11/01/2027(e) | 766 | 676,700 | ||||||||||
3.875%, 05/01/2023(e) | 3,587 | 3,587,502 | ||||||||||
4.125%, 08/01/2025(e) | 1,592 | 1,532,411 | ||||||||||
4.375%, 01/30/2024(e) | 1,694 | 1,706,010 | ||||||||||
4.875%, 10/01/2025(e) | 1,315 | 1,297,997 | ||||||||||
5.50%, 12/15/2024(e) | 4,722 | 4,917,208 | ||||||||||
|
| |||||||||||
| 15,387,203 | ||||||||||||
|
| |||||||||||
| 259,367,510 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Utility – 0.6% | ||||||||||||
Electric – 0.6% |
| |||||||||||
AES Panama Generation Holdings SRL | U.S.$ | 1,094 | $ | 1,154,344 | ||||||||
Colbun SA | 209 | 217,888 | ||||||||||
ComEd Financing III | 3,462 | 4,038,319 | ||||||||||
Empresas Publicas de Medellin ESP | 3,775 | 3,875,188 | ||||||||||
4.375%, 02/15/2031(e) | 5,315 | 5,422,961 | ||||||||||
Enel Finance International NV | 5,060 | 5,822,795 | ||||||||||
Engie Energia Chile SA | 6,212 | 6,807,187 | ||||||||||
LLPL Capital Pte Ltd. | 1,155 | 1,325,689 | ||||||||||
|
| |||||||||||
| 28,664,371 | ||||||||||||
|
| |||||||||||
Total Corporates – Investment Grade | 632,674,236 | |||||||||||
|
| |||||||||||
CORPORATES – NON-INVESTMENT GRADE – 12.6% | ||||||||||||
Industrial – 10.5% |
| |||||||||||
Basic – 1.0% |
| |||||||||||
Advanced Drainage Systems, Inc. | 489 | 513,323 | ||||||||||
Alcoa Nederland Holding BV | 510 | 546,506 | ||||||||||
Big River Steel LLC/BRS Finance Corp. | 1,726 | 1,775,502 | ||||||||||
CF Industries, Inc. | 75 | 89,775 | ||||||||||
Cleveland-Cliffs, Inc. | 3,089 | 3,532,086 | ||||||||||
Constellium SE | EUR | 2,060 | 2,409,568 | |||||||||
Element Solutions, Inc. | U.S.$ | 792 | 781,870 | |||||||||
ERP Iron Ore, LLC | 118 | 100,623 | ||||||||||
Graham Packaging Co., Inc. | 454 | 475,406 | ||||||||||
Graphic Packaging International LLC | 1,032 | 1,121,031 | ||||||||||
Hecla Mining Co. | 5,371 | 5,773,932 | ||||||||||
26 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Illuminate Buyer LLC/Illuminate Holdings IV, Inc. | U.S.$ | 2,965 | $ | 3,171,216 | ||||||||
INEOS Group Holdings SA | EUR | 3,215 | 3,730,009 | |||||||||
Intelligent Packaging Ltd. Finco, Inc./Intelligent Packaging Ltd. Co-Issuer LLC | U.S.$ | 2,626 | 2,673,688 | |||||||||
Joseph T Ryerson & Son, Inc. | 2,712 | 2,909,054 | ||||||||||
Kaiser Aluminum Corp. | 1,211 | 1,286,276 | ||||||||||
Magnetation LLC/Mag Finance Corp. | 1,407 | – 0 | – | |||||||||
Nouryon Holding BV | EUR | 2,515 | 2,980,911 | |||||||||
8.00%, 10/01/2026(e) | U.S.$ | 772 | 814,483 | |||||||||
OCI NV | 2,462 | 2,518,675 | ||||||||||
Olin Corp. | 1,148 | 1,185,241 | ||||||||||
Peabody Energy Corp. | 2,380 | 1,088,160 | ||||||||||
SPCM SA | 913 | 942,006 | ||||||||||
United States Steel Corp. | 5,365 | 5,954,452 | ||||||||||
Valvoline, Inc. | 1,485 | 1,516,022 | ||||||||||
|
| |||||||||||
| 47,889,815 | ||||||||||||
|
| |||||||||||
Capital Goods – 1.1% | ||||||||||||
ARD Finance SA | EUR | 1,076 | 1,212,436 | |||||||||
6.50% (6.50% Cash or | U.S.$ | 5,393 | 5,470,120 | |||||||||
Bombardier, Inc. | 2,000 | 1,783,780 | ||||||||||
7.50%, 12/01/2024-03/15/2025(e) | 2,675 | 1,972,057 | ||||||||||
7.875%, 04/15/2027(e) | 1,946 | 1,417,233 | ||||||||||
Clean Harbors, Inc. | 1,462 | 1,527,907 | ||||||||||
Cleaver-Brooks, Inc. | 1,258 | 1,218,889 | ||||||||||
Colfax Corp. | 338 | 351,777 | ||||||||||
6.375%, 02/15/2026(e) | 361 | 384,071 | ||||||||||
| abfunds.com | AB INCOME FUND | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Energizer Holdings, Inc. | U.S.$ | 139 | $ | 143,554 | ||||||||
F-Brasile SpA/F-Brasile US LLC | 2,778 | 2,411,637 | ||||||||||
Gates Global LLC/Gates Corp. | 4,047 | 4,188,645 | ||||||||||
GFL Environmental, Inc. | 273 | 286,478 | ||||||||||
7.00%, 06/01/2026(e) | 910 | 950,231 | ||||||||||
8.50%, 05/01/2027(e) | 960 | 1,047,984 | ||||||||||
Griffon Corp. | 3,209 | 3,363,192 | ||||||||||
OI European Group BV | EUR | 3,140 | 3,659,049 | |||||||||
Signature Aviation US Holdings, Inc. | U.S.$ | 2,300 | 2,225,273 | |||||||||
Terex Corp. | 677 | 687,697 | ||||||||||
TransDigm, Inc. | 1,033 | 1,077,223 | ||||||||||
6.375%, 06/15/2026 | 847 | 844,044 | ||||||||||
6.50%, 07/15/2024 | 1,489 | 1,493,497 | ||||||||||
8.00%, 12/15/2025(e) | 920 | 996,157 | ||||||||||
Triumph Group, Inc. | 1,309 | 1,131,421 | ||||||||||
7.75%, 08/15/2025 | 724 | 470,622 | ||||||||||
8.875%, 06/01/2024(e) | 1,838 | 1,956,661 | ||||||||||
Trivium Packaging Finance BV | EUR | 100 | 115,009 | |||||||||
8.50%, 08/15/2027(e) | U.S.$ | 2,328 | 2,492,473 | |||||||||
Vertical Holdco GmbH | 1,124 | 1,167,634 | ||||||||||
Vertical US Newco, Inc. | 2,459 | 2,530,508 | ||||||||||
Wesco Distribution, Inc. | 724 | 792,165 | ||||||||||
|
| |||||||||||
| 49,369,424 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.9% | ||||||||||||
Advantage Sales & Marketing, Inc. | 1,300 | 1,269,944 | ||||||||||
6.50%, 11/15/2028(e) | 6,967 | 6,809,755 | ||||||||||
Banijay Entertainment SASU | EUR | 600 | 684,814 | |||||||||
5.375%, 03/01/2025(e) | U.S.$ | 1,955 | 1,977,639 | |||||||||
CCO Holdings LLC/CCO Holdings Capital Corp. | 75 | 77,742 | ||||||||||
28 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Clear Channel Worldwide Holdings, Inc. | U.S.$ | 1,977 | $ | 1,935,799 | ||||||||
CSC Holdings LLC | 459 | 441,517 | ||||||||||
6.50%, 02/01/2029(e) | 692 | 767,892 | ||||||||||
7.50%, 04/01/2028(e) | 1,631 | 1,786,548 | ||||||||||
DISH DBS Corp. | 3,045 | 3,229,223 | ||||||||||
iHeartCommunications, Inc. | 1,439 | 1,420,969 | ||||||||||
6.375%, 05/01/2026 | 81 | 84,738 | ||||||||||
8.375%, 05/01/2027 | 147 | 143,795 | ||||||||||
Lamar Media Corp. | 364 | 378,585 | ||||||||||
LCPR Senior Secured Financing DAC | 3,152 | 3,347,991 | ||||||||||
Meredith Corp. | 2,853 | 2,364,909 | ||||||||||
National CineMedia LLC | 2,267 | 1,581,301 | ||||||||||
Sinclair Television Group, Inc. | 2,251 | 2,117,943 | ||||||||||
Sirius XM Radio, Inc. | 75 | 81,612 | ||||||||||
TEGNA, Inc. | 3,630 | 3,674,831 | ||||||||||
Univision Communications, Inc. | 270 | 265,402 | ||||||||||
6.625%, 06/01/2027(e) | 3,010 | 3,039,769 | ||||||||||
Ziggo Bond Co. BV 5. | 693 | 712,813 | ||||||||||
6.00%, 01/15/2027(e) | 3,000 | 3,114,630 | ||||||||||
|
| |||||||||||
| 41,310,161 | ||||||||||||
|
| |||||||||||
Communications - Telecommunications – 0.3% | ||||||||||||
C&W Senior Financing DAC | 1,247 | 1,324,676 | ||||||||||
7.50%, 10/15/2026(e) | 893 | 940,659 | ||||||||||
Connect Finco SARL/Connect US Finco LLC | 2,301 | 2,318,165 | ||||||||||
Consolidated Communications, Inc. | 3,624 | 3,723,479 | ||||||||||
DKT Finance ApS | EUR | 1,424 | 1,666,754 | |||||||||
Intelsat Jackson Holdings SA | U.S.$ | 4,941 | 2,907,235 | |||||||||
| abfunds.com | AB INCOME FUND | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Telecom Italia Capital SA | U.S.$ | 75 | $ | 101,898 | ||||||||
Zayo Group Holdings, Inc. | 2,825 | 2,859,776 | ||||||||||
|
| |||||||||||
| 15,842,642 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - | ||||||||||||
Adient US LLC | 2,568 | 2,823,336 | ||||||||||
American Axle & Manufacturing, Inc. | 3,792 | 3,853,772 | ||||||||||
Clarios Global LP/Clarios US Finance Co. 4.375%, 05/15/2026(e) | EUR | 360 | 420,729 | |||||||||
6.25%, 05/15/2026(e) | U.S.$ | 226 | 235,248 | |||||||||
8.50%, 05/15/2027(e) | 1,679 | 1,752,439 | ||||||||||
Dealer Tire LLC/DT Issuer LLC | 2,269 | 2,324,749 | ||||||||||
Exide International | 3,093 | 0 | ||||||||||
Exide Technologies | 3,206 | 0 | ||||||||||
Ford Motor Co. | 8,065 | 8,900,615 | ||||||||||
9.00%, 04/22/2025 | 2,242 | 2,641,323 | ||||||||||
Garrett LX I Sarl/Garrett Borrowing LLC | EUR | 2,434 | 2,792,690 | |||||||||
IHO Verwaltungs GmbH | 560 | 651,304 | ||||||||||
3.875%, 05/15/2027(e)(l) | 623 | 725,577 | ||||||||||
Jaguar Land Rover Automotive PLC | U.S.$ | 1,661 | 1,677,793 | |||||||||
Meritor, Inc. | 1,006 | 1,029,571 | ||||||||||
PM General Purchaser LLC | 1,079 | 1,127,447 | ||||||||||
Tenneco, Inc. | EUR | 2,484 | 2,835,362 | |||||||||
5.00%, 07/15/2026 | U.S.$ | 2,680 | 2,080,377 | |||||||||
Titan International, Inc. | 873 | 673,240 | ||||||||||
Truck Hero, Inc. | 1,851 | 1,953,286 | ||||||||||
|
| |||||||||||
| 38,498,858 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - | ||||||||||||
AMC Entertainment Holdings, Inc. | 2,000 | 97,800 | ||||||||||
30 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Carnival Corp. | U.S.$ | 1,508 | $ | 1,568,486 | ||||||||
11.50%, 04/01/2023(e) | 8,707 | 9,582,924 | ||||||||||
Cedar Fair LP | 996 | 902,197 | ||||||||||
Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp./Millennium Op | 9,553 | 9,671,648 | ||||||||||
Mattel, Inc. | 1,591 | 1,728,208 | ||||||||||
6.75%, 12/31/2025(e) | 450 | 472,630 | ||||||||||
Royal Caribbean Cruises Ltd. | 2,193 | 2,392,081 | ||||||||||
11.50%, 06/01/2025(e) | 3,954 | 4,523,060 | ||||||||||
SeaWorld Parks & Entertainment, Inc. | 4,017 | 4,219,899 | ||||||||||
9.50%, 08/01/2025(e) | 3,735 | 3,920,405 | ||||||||||
Six Flags Theme Parks, Inc. | 1,820 | 1,927,125 | ||||||||||
Viking Cruises Ltd. | 1,057 | 816,342 | ||||||||||
VOC Escrow Ltd. | 75 | 65,029 | ||||||||||
|
| |||||||||||
| 41,887,834 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.9% | ||||||||||||
Adams Homes, Inc. | 2,232 | 2,248,450 | ||||||||||
Beazer Homes USA, Inc. | 663 | 676,220 | ||||||||||
Boyd Gaming Corp. | 787 | 860,884 | ||||||||||
Brookfield Residential Properties, Inc./Brookfield Residential US Corp. | 937 | 890,319 | ||||||||||
6.25%, 09/15/2027(e) | 3,475 | 3,558,574 | ||||||||||
Caesars Entertainment, Inc. | 1,876 | 1,929,691 | ||||||||||
Five Point Operating Co. LP/Five Point Capital Corp. | 2,330 | 2,327,297 | ||||||||||
Forestar Group, Inc. | 1,669 | 1,655,665 | ||||||||||
8.00%, 04/15/2024(e) | 1,470 | 1,540,281 | ||||||||||
Forterra Finance LLC/FRTA Finance Corp. | 1,383 | 1,463,629 | ||||||||||
Hilton Domestic Operating Co., Inc. | 314 | 326,221 | ||||||||||
| abfunds.com | AB INCOME FUND | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
5.75%, 05/01/2028(e) | U.S.$ | 339 | $ | 355,563 | ||||||||
Installed Building Products, Inc. | 846 | 890,440 | ||||||||||
International Game Technology PLC | 1,325 | 1,319,514 | ||||||||||
K. Hovnanian Enterprises, Inc. | 3,302 | 3,193,463 | ||||||||||
Marriott Ownership Resorts, Inc. | 1,618 | 1,686,555 | ||||||||||
Marriott Ownership Resorts, Inc./ILG LLC | 2,111 | 2,173,401 | ||||||||||
Mattamy Group Corp. | 954 | 1,008,855 | ||||||||||
Shea Homes LP/Shea Homes Funding Corp. | 1,969 | 2,000,406 | ||||||||||
Sugarhouse HSP Gaming Prop Mezz LP/Sugarhouse HSP Gaming Finance Corp. | 688 | 667,133 | ||||||||||
Taylor Morrison Communities, Inc. | 1,345 | 1,491,565 | ||||||||||
Twin River Worldwide Holdings, Inc. | 2,577 | 2,610,166 | ||||||||||
Wyndham Destinations, Inc. | 2,404 | 2,558,433 | ||||||||||
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp. | 75 | 71,788 | ||||||||||
Wynn Resorts Finance LLC/Wynn Resorts Capital Corp. | 1,583 | 1,520,519 | ||||||||||
7.75%, 04/15/2025(e) | 793 | 834,537 | ||||||||||
|
| |||||||||||
| 39,859,569 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Restaurants – 0.0% |
| |||||||||||
1011778 BC ULC/New Red Finance, Inc. | 14 | 14,215 | ||||||||||
IRB Holding Corp. | 1,031 | 1,039,444 | ||||||||||
|
| |||||||||||
| 1,053,659 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.6% |
| |||||||||||
Burlington Coat Factory Warehouse Corp. 6.25%, 04/15/2025(e) | 616 | 647,219 | ||||||||||
Dufry One BV | EUR | 1,810 | 1,905,584 | |||||||||
FirstCash, Inc. | U.S.$ | 1,608 | 1,636,944 | |||||||||
L Brands, Inc. | 252 | 247,943 | ||||||||||
32 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
6.625%, 10/01/2030(e) | U.S.$ | 1,849 | $ | 1,940,248 | ||||||||
6.75%, 07/01/2036 | 704 | 712,786 | ||||||||||
6.875%, 07/01/2025(e) | 186 | 199,316 | ||||||||||
6.875%, 11/01/2035 | 2,210 | 2,246,885 | ||||||||||
7.50%, 06/15/2029 | 236 | 252,609 | ||||||||||
9.375%, 07/01/2025(e) | 320 | 371,360 | ||||||||||
Penske Automotive Group, Inc. | 790 | 792,259 | ||||||||||
PetSmart, Inc. | 5,216 | 5,129,466 | ||||||||||
Rite Aid Corp. | 2,583 | 2,583,594 | ||||||||||
Specialty Building Products Holdings LLC/SBP Finance Corp. | 3,230 | 3,301,674 | ||||||||||
Staples, Inc. | 4,173 | 3,896,831 | ||||||||||
10.75%, 04/15/2027(e) | 1,108 | 881,946 | ||||||||||
TPro Acquisition Corp. | 1,216 | 1,217,739 | ||||||||||
William Carter Co. (The) | 2,154 | 2,262,217 | ||||||||||
|
| |||||||||||
| 30,226,620 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.8% |
| |||||||||||
Acadia Healthcare Co., Inc. | 1,720 | 1,797,452 | ||||||||||
AdaptHealth LLC | 1,265 | 1,317,497 | ||||||||||
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC | 799 | 824,025 | ||||||||||
4.875%, 02/15/2030(e) | 82 | 87,058 | ||||||||||
Bausch Health Americas, Inc. | 223 | 243,681 | ||||||||||
Bausch Health Cos., Inc. | EUR | 1,800 | 2,075,637 | |||||||||
6.125%, 04/15/2025(e) | U.S.$ | 446 | 457,636 | |||||||||
7.25%, 05/30/2029(e) | 223 | 239,926 | ||||||||||
CD&R Smokey Buyer, Inc. | 332 | 352,903 | ||||||||||
CHS/Community Health Systems, Inc. | 162 | 124,853 | ||||||||||
Emergent BioSolutions, Inc. | 642 | 645,255 | ||||||||||
Endo Dac/Endo Finance LLC/Endo Finco, Inc. | ||||||||||||
6.00%, 06/30/2028(e) | 1,928 | 1,489,322 | ||||||||||
| abfunds.com | AB INCOME FUND | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
9.50%, 07/31/2027(e) | U.S.$ | 1,413 | $ | 1,515,442 | ||||||||
Envision Healthcare Corp. | 1,623 | 769,221 | ||||||||||
Grifols SA | EUR | 5,083 | 5,901,683 | |||||||||
Mallinckrodt International Finance SA/Mallinckrodt CB LLC | U.S.$ | 548 | 193,093 | |||||||||
5.625%, 10/15/2023(e)(j)(o) | 107 | 34,636 | ||||||||||
MEDNAX, Inc. | 75 | 77,359 | ||||||||||
Par Pharmaceutical, Inc. | 1,366 | 1,446,908 | ||||||||||
Post Holdings, Inc. | 2,122 | 2,180,461 | ||||||||||
Providence Service Corp. (The) | 870 | 885,486 | ||||||||||
Radiology Partners, Inc. | 3,294 | 3,510,021 | ||||||||||
RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc. | 4,840 | 5,214,084 | ||||||||||
Sunshine Mid BV | EUR | 2,077 | 2,419,486 | |||||||||
Tenet Healthcare Corp. | U.S.$ | 2,520 | 2,714,821 | |||||||||
Vizient, Inc. | 561 | 591,384 | ||||||||||
|
| |||||||||||
| 37,109,330 | ||||||||||||
|
| |||||||||||
Energy – 1.3% |
| |||||||||||
Antero Resources Corp. | 1,908 | 1,768,010 | ||||||||||
Callon Petroleum, Co. | 1,252 | 485,976 | ||||||||||
Citgo Holding, Inc. | 737 | 617,790 | ||||||||||
CITGO Petroleum Corp. | 1,577 | 1,517,705 | ||||||||||
7.00%, 06/15/2025(e) | 2,880 | 2,667,370 | ||||||||||
Comstock Resources, Inc. | 1,613 | 1,699,796 | ||||||||||
Diamond Offshore Drilling, Inc. | 2,642 | 180,924 | ||||||||||
EnLink Midstream Partners LP | 318 | 289,956 | ||||||||||
EQT Corp. | 2,652 | 3,294,314 | ||||||||||
34 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Genesis Energy LP/Genesis Energy Finance Corp. | U.S.$ | 1,149 | $ | 920,418 | ||||||
6.50%, 10/01/2025 | 179 | 148,212 | ||||||||
7.75%, 02/01/2028 | 4,346 | 3,608,484 | ||||||||
Global Partners LP/GLP Finance Corp. | 1,924 | 1,982,413 | ||||||||
Gran Tierra Energy, Inc. | 1,998 | 696,423 | ||||||||
Gulfport Energy Corp. | 280 | 155,134 | ||||||||
6.375%, 05/15/2025-01/15/2026 | 2,469 | 1,365,407 | ||||||||
Hess Midstream Operations LP | 2,739 | 2,737,603 | ||||||||
HighPoint Operating Corp. | 343 | 76,307 | ||||||||
Indigo Natural Resources LLC | 1,285 | 1,272,176 | ||||||||
Nabors Industries Ltd. | 1,294 | 538,175 | ||||||||
7.50%, 01/15/2028(e) | 1,372 | 548,827 | ||||||||
New Fortress Energy, Inc. | 6,052 | 6,239,673 | ||||||||
NGL Energy Partners LP/NGL Energy Finance Corp. | 2,596 | 1,398,907 | ||||||||
Occidental Petroleum Corp. | 4,990 | 4,152,927 | ||||||||
3.20%, 08/15/2026 | 771 | 595,351 | ||||||||
5.875%, 09/01/2025 | 1,121 | 986,166 | ||||||||
8.00%, 07/15/2025 | 1,755 | 1,711,634 | ||||||||
8.50%, 07/15/2027 | 891 | 855,387 | ||||||||
8.875%, 07/15/2030 | 891 | 871,959 | ||||||||
Parkland Corp./Canada | 2,841 | 2,935,492 | ||||||||
PDC Energy, Inc. | 1,075 | 1,013,005 | ||||||||
QEP Resources, Inc. 5.25%, 05/01/2023 | 581 | 458,827 | ||||||||
5.625%, 03/01/2026 | 1,571 | 995,904 | ||||||||
SandRidge Energy, Inc. | 1,259 | – 0 | – | |||||||
SM Energy Co. | 685 | 272,185 | ||||||||
Sunoco LP/Sunoco Finance Corp. | 1,164 | 1,207,801 | ||||||||
6.00%, 04/15/2027 | 87 | 89,937 | ||||||||
| abfunds.com | AB INCOME FUND | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Targa Resources Partners LP/Targa Resources Partners Finance Corp. | U.S.$ | 775 | $ | 817,625 | ||||||||
Transocean Phoenix 2 Ltd. | 480 | 440,582 | ||||||||||
Transocean, Inc. | 1,061 | 234,385 | ||||||||||
8.00%, 02/01/2027(e) | 2,513 | 692,859 | ||||||||||
Vantage Drilling International | 3,068 | – 0 | – | |||||||||
Vine Oil & Gas LP/Vine Oil & Gas Finance Corp. | 3,507 | 2,573,752 | ||||||||||
Western Midstream Operating LP | 207 | 191,703 | ||||||||||
4.65%, 07/01/2026 | 3,058 | 2,929,962 | ||||||||||
4.75%, 08/15/2028 | 1,490 | 1,397,605 | ||||||||||
5.05%, 02/01/2030 | 1,254 | 1,189,406 | ||||||||||
|
| |||||||||||
| 60,824,454 | ||||||||||||
|
| |||||||||||
Other Industrial – 0.1% |
| |||||||||||
Avient Corp. | 1,790 | 1,880,305 | ||||||||||
KAR Auction Services, Inc. | 75 | 76,081 | ||||||||||
Laureate Education, Inc. | 992 | 1,056,589 | ||||||||||
|
| |||||||||||
| 3,012,975 | ||||||||||||
|
| |||||||||||
Services – 0.8% |
| |||||||||||
Allied Universal Holdco LLC/Allied Universal Finance Corp. | 2,167 | 2,269,434 | ||||||||||
9.75%, 07/15/2027(e) | 1,513 | 1,617,972 | ||||||||||
ANGI Group LLC | 458 | 452,664 | ||||||||||
APX Group, Inc. | 3,506 | 3,671,729 | ||||||||||
7.625%, 09/01/2023(c) | 2,000 | 2,016,180 | ||||||||||
7.875%, 12/01/2022 | 694 | 693,077 | ||||||||||
Aramark Services, Inc. | 2,767 | 2,903,939 | ||||||||||
Cars.com, Inc. | 2,427 | 2,414,501 | ||||||||||
eDreams ODIGEO SA | EUR | 1,327 | 1,294,997 | |||||||||
Garda World Security Corp. | U.S.$ | 3,358 | 3,606,123 | |||||||||
Gartner, Inc. | 921 | 961,192 | ||||||||||
36 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Monitronics International, Inc. | U.S.$ | 1,835 | $ | – 0 | – | |||||||
MPH Acquisition Holdings LLC | 4,123 | 4,051,878 | ||||||||||
Prime Security Services Borrower LLC/Prime Finance, Inc. | 75 | 78,427 | ||||||||||
6.25%, 01/15/2028(e) | 3,102 | 3,134,075 | ||||||||||
Refinitiv US Holdings, Inc. | 348 | 378,126 | ||||||||||
Sabre GLBL, Inc. | 1,581 | 1,750,009 | ||||||||||
TripAdvisor, Inc. | 1,231 | 1,280,228 | ||||||||||
Verscend Escrow Corp. | 4,000 | 4,299,680 | ||||||||||
|
| |||||||||||
| 36,874,231 | ||||||||||||
|
| |||||||||||
Technology – 0.6% |
| |||||||||||
Avaya, Inc. | 3,860 | 3,965,146 | ||||||||||
Banff Merger Sub, Inc. | 2,954 | 3,104,300 | ||||||||||
Cablevision Lightpath LLC | 1,847 | 1,866,190 | ||||||||||
CDW LLC/CDW Finance Corp. | 772 | 771,352 | ||||||||||
CommScope, Inc. | 589 | 610,834 | ||||||||||
8.25%, 03/01/2027(e) | 1,061 | 1,098,634 | ||||||||||
Logan Merger Sub, Inc. | 881 | 893,184 | ||||||||||
Microchip Technology, Inc. | 994 | 1,030,291 | ||||||||||
NCR Corp. | 473 | 487,587 | ||||||||||
6.125%, 09/01/2029(e) | 366 | 386,196 | ||||||||||
8.125%, 04/15/2025(e) | 1,180 | 1,297,398 | ||||||||||
Presidio Holdings, Inc. | 165 | 169,488 | ||||||||||
8.25%, 02/01/2028(e) | 1,836 | 1,948,180 | ||||||||||
Science Applications International Corp. | 448 | 469,284 | ||||||||||
Veritas US, Inc./Veritas Bermuda Ltd. | 7,607 | 7,686,769 | ||||||||||
Xerox Corp. | 27 | 28,103 | ||||||||||
|
| |||||||||||
| 25,812,936 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 37 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Transportation - Airlines – 0.2% |
| |||||||||||
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd. | U.S.$ | 7,724 | $ | 8,188,262 | ||||||||
|
| |||||||||||
Transportation - Services – 0.2% |
| |||||||||||
Algeco Global Finance PLC | 2,258 | 2,262,584 | ||||||||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc. | 787 | 742,172 | ||||||||||
10.50%, 05/15/2025(e) | 4,367 | 5,031,701 | ||||||||||
XPO Logistics, Inc. | 170 | 179,792 | ||||||||||
|
| |||||||||||
| 8,216,249 | ||||||||||||
|
| |||||||||||
| 485,977,019 | ||||||||||||
|
| |||||||||||
Financial Institutions – 2.0% |
| |||||||||||
Banking – 1.0% |
| |||||||||||
Alliance Data Systems Corp. | 4,513 | 4,201,422 | ||||||||||
7.00%, 01/15/2026(e) | 1,800 | 1,806,012 | ||||||||||
Banco Bilbao Vizcaya Argentaria SA | EUR | 6,400 | 7,323,319 | |||||||||
Series 9 | U.S.$ | 1,800 | 1,772,568 | |||||||||
Banco Santander SA | EUR | 3,700 | 4,449,254 | |||||||||
Citizens Financial Group, Inc. | U.S.$ | 222 | 214,277 | |||||||||
Credit Suisse Group AG | 640 | 682,605 | ||||||||||
6.375%, 08/21/2026(e)(g) | 3,961 | 4,282,712 | ||||||||||
7.50%, 07/17/2023-12/11/2023(e)(g) | 7,239 | 7,717,627 | ||||||||||
Discover Financial Services | 2,197 | 2,352,372 | ||||||||||
Exide Global Holding NETH | 1,124 | 899,242 | ||||||||||
HSBC Finance Corp. | 2,765 | 2,791,489 | ||||||||||
Intesa Sanpaolo SpA | 999 | 1,054,305 | ||||||||||
Societe Generale SA | 2,015 | 2,258,251 | ||||||||||
UniCredit SpA | EUR | 2,700 | 3,368,510 | |||||||||
|
| |||||||||||
| 45,173,965 | ||||||||||||
|
| |||||||||||
38 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Brokerage – 0.1% |
| |||||||||||
NFP Corp. | U.S.$ | 2,285 | $ | 2,220,769 | ||||||||
7.00%, 05/15/2025(e) | 2,239 | 2,379,139 | ||||||||||
|
| |||||||||||
| 4,599,908 | ||||||||||||
|
| |||||||||||
Finance – 0.2% |
| |||||||||||
Curo Group Holdings Corp. | 2,000 | 1,654,620 | ||||||||||
Enova International, Inc. | 3,418 | 3,167,939 | ||||||||||
goeasy Ltd. | 2,145 | 2,170,997 | ||||||||||
Jefferies Finance LLC/JFIN Co-Issuer Corp. 6.25%, 06/03/2026(e) | 823 | 840,036 | ||||||||||
Lincoln Financing SARL | EUR | 759 | 840,452 | |||||||||
Navient Corp. | U.S.$ | 71 | 72,924 | |||||||||
|
| |||||||||||
| 8,746,968 | ||||||||||||
|
| |||||||||||
Insurance – 0.2% |
| |||||||||||
Acrisure LLC/Acrisure Finance, Inc. | 4,241 | 4,234,554 | ||||||||||
10.125%, 08/01/2026(e) | 831 | 920,249 | ||||||||||
Alliant Holdings Intermediate LLC/Alliant Holdings Co-Issuer | 2,948 | 3,095,400 | ||||||||||
Ardonagh Midco 2 PLC | 2,227 | 2,191,257 | ||||||||||
|
| |||||||||||
| 10,441,460 | ||||||||||||
|
| |||||||||||
Other Finance – 0.3% |
| |||||||||||
Altice France Holding SA | 3,024 | 3,333,990 | ||||||||||
Intrum AB | EUR | 127 | 146,581 | |||||||||
3.00%, 09/15/2027(e) | 1,490 | 1,504,738 | ||||||||||
3.50%, 07/15/2026(e) | 1,040 | 1,078,000 | ||||||||||
Nordic Aviation Capital | U.S.$ | 12,727 | 9,450,051 | |||||||||
|
| |||||||||||
| 15,513,360 | ||||||||||||
|
| |||||||||||
REITS – 0.2% |
| |||||||||||
Brookfield Property REIT, Inc./BPR Cumulus LLC/BPR Nimbus LLC/GGSI Sellco LL | 2,479 | 2,055,488 | ||||||||||
Diversified Healthcare Trust | 1,389 | 1,526,205 | ||||||||||
| abfunds.com | AB INCOME FUND | 39 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Iron Mountain, Inc. | U.S.$ | 1,110 | $ | 1,119,682 | ||||||||
5.00%, 07/15/2028(e) | 138 | 140,876 | ||||||||||
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc. | 628 | 639,436 | ||||||||||
Realogy Group LLC/Realogy Co-Issuer Corp. | 4,479 | 4,747,605 | ||||||||||
|
| |||||||||||
| 10,229,292 | ||||||||||||
|
| |||||||||||
| 94,704,953 | ||||||||||||
|
| |||||||||||
Utility – 0.1% |
| |||||||||||
Electric – 0.1% |
| |||||||||||
NRG Energy, Inc. | 75 | 78,904 | ||||||||||
Talen Energy Supply LLC | 394 | 234,552 | ||||||||||
7.25%, 05/15/2027(e) | 850 | 839,698 | ||||||||||
10.50%, 01/15/2026(e) | 3,081 | 2,104,200 | ||||||||||
Vistra Operations Co. LLC | 75 | 78,375 | ||||||||||
|
| |||||||||||
| 3,335,729 | ||||||||||||
|
| |||||||||||
Total Corporates – Non-Investment Grade | 584,017,701 | |||||||||||
|
| |||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS – 8.4% | ||||||||||||
Risk Share Floating Rate – 7.4% |
| |||||||||||
Bellemeade Re Ltd. | 541 | 540,177 | ||||||||||
Series 2018-3A, Class M1B 1.999% (LIBOR 1 Month + 1.85%), 10/25/2028(e)(f) | 944 | 937,432 | ||||||||||
Series 2019-1A, Class M2 2.849% (LIBOR 1 Month + 2.70%), 03/25/2029(e)(f) | 1,340 | 1,258,768 | ||||||||||
Series 2019-2A, Class M1C 2.149% (LIBOR 1 Month + 2.00%), 04/25/2029(e)(f) | 9,029 | 8,916,403 | ||||||||||
Series 2019-3A, Class M1B 1.749% (LIBOR 1 Month + 1.60%), 07/25/2029(e)(f) | 634 | 621,503 | ||||||||||
Series 2019-3A, Class M1C 2.099% (LIBOR 1 Month + 1.95%), 07/25/2029(e)(f) | 15,567 | 14,804,609 | ||||||||||
40 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2019-4A, Class M1C 2.649% (LIBOR 1 Month + 2.50%), 10/25/2029(e)(f) | U.S.$ | 7,608 | $ | 7,418,412 | ||||||||
Series 2020-2A, Class M1C 4.149% (LIBOR 1 Month + 4.00%), 08/26/2030(e)(f) | 10,680 | 10,733,741 | ||||||||||
Connecticut Avenue Securities Trust | 6,728 | 6,721,716 | ||||||||||
Eagle RE Ltd. | 513 | 505,317 | ||||||||||
Federal Home Loan Mortgage Corp. | ||||||||||||
Series 2018-HQA2, Class M2 2.449% (LIBOR 1 Month + 2.30%), 10/25/2048(e)(f) | 11,000 | 10,688,148 | ||||||||||
Series 2020-HQA2, Class M2 3.249% (LIBOR 1 Month + 3.10%), 03/25/2050(e)(f) | 509 | 500,274 | ||||||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | ||||||||||||
Series 2013-DN2, Class M2 | 2,449 | 2,246,011 | ||||||||||
Series 2014-DN3, Class M3 | 2,350 | 2,368,111 | ||||||||||
Series 2014-HQ2, Class M3 | 1,010 | 1,031,019 | ||||||||||
Series 2015-DN1, Class B | 2,541 | 2,844,043 | ||||||||||
Series 2015-DNA1, Class M3 | 700 | 720,534 | ||||||||||
Series 2015-DNA2, Class B | 1,485 | 1,486,731 | ||||||||||
Series 2015-DNA3, Class B | 2,467 | 2,865,542 | ||||||||||
Series 2015-HQA1, Class B | 1,573 | 1,682,662 | ||||||||||
| abfunds.com | AB INCOME FUND | 41 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2016-DNA1, Class B | U.S.$ | 2,226 | $ | 2,442,051 | ||||||||
Series 2016-DNA2, Class M3 | 4,632 | 4,810,647 | ||||||||||
Series 2016-DNA4, Class M3 | 5,093 | 5,280,981 | ||||||||||
Series 2016-HQA2, Class M3 | 7,384 | 7,695,081 | ||||||||||
Series 2017-DNA1, Class M2 | 2,516 | 2,587,932 | ||||||||||
Series 2017-DNA2, Class B1 | 5,178 | 5,371,540 | ||||||||||
Series 2017-DNA2, Class M2 | 1,168 | 1,200,309 | ||||||||||
Series 2017-DNA3, Class B1 | 4,550 | 4,481,780 | ||||||||||
Series 2017-HQA2, Class B1 | 3,000 | 2,955,008 | ||||||||||
Series 2017-HQA3, Class B1 | 9,090 | 8,824,019 | ||||||||||
Series 2017-HQA3, Class M2 | 6,985 | 7,047,856 | ||||||||||
Series 2018-HQA1, Class B1 | 4,520 | 4,246,004 | ||||||||||
Series 2018-HQA1, Class M2 | 2,999 | 2,932,137 | ||||||||||
Series 2020-DNA1, Class M2 1.849% (LIBOR 1 Month + 1.70%), 01/25/2050(e)(f) | 11,178 | 10,929,180 | ||||||||||
Federal National Mortgage Association Connecticut Avenue Securities | ||||||||||||
Series 2014-C01, Class M2 | 4,204 | 3,983,396 | ||||||||||
42 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2014-C02, Class 1M2 | U.S.$ | 2,901 | $ | 2,554,891 | ||||||||
Series 2014-C04, Class 1M2 | 5,428 | 5,624,829 | ||||||||||
Series 2014-C04, Class 2M2 | 822 | 840,994 | ||||||||||
Series 2015-C02, Class 2M2 | 767 | 777,720 | ||||||||||
Series 2015-C03, Class 1M2 | 2,459 | 2,501,746 | ||||||||||
Series 2015-C03, Class 2M2 | 710 | 726,650 | ||||||||||
Series 2015-C04, Class 1M2 | 3,208 | 3,396,034 | ||||||||||
Series 2015-C04, Class 2M2 | 1,695 | 1,779,162 | ||||||||||
Series 2016-C01, Class 1M2 | 2,005 | 2,135,862 | ||||||||||
Series 2016-C01, Class 2M2 | 776 | 835,640 | ||||||||||
Series 2016-C02, Class 1M2 | 4,980 | 5,240,068 | ||||||||||
Series 2016-C04, Class 1M2 | 441 | 455,641 | ||||||||||
Series 2016-C05, Class 2B | 2,741 | 3,104,739 | ||||||||||
Series 2016-C05, Class 2M2 | 3,797 | 3,942,805 | ||||||||||
Series 2016-C07, Class 2B | 1,191 | 1,271,293 | ||||||||||
Series 2016-C07, Class 2M2 | 494 | 513,564 | ||||||||||
| abfunds.com | AB INCOME FUND | 43 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2017-C01, Class 1B1 | U.S.$ | 16,579 | $ | 17,035,821 | ||||||||
Series 2017-C02, Class 2B1 | 7,031 | 7,244,370 | ||||||||||
Series 2017-C02, Class 2M2 | 536 | 540,699 | ||||||||||
Series 2017-C03, Class 1B1 | 7,080 | 7,115,287 | ||||||||||
Series 2017-C03, Class 1M2 | 193 | 194,595 | ||||||||||
Series 2017-C05, Class 1B1 | 7,280 | 6,843,027 | ||||||||||
Series 2017-C07, Class 1M2 | 814 | 801,952 | ||||||||||
Series 2017-C07, Class 2B1 | 7,313 | 7,102,662 | ||||||||||
Series 2018-C01, Class 1B1 | 8,575 | 7,930,686 | ||||||||||
Series 2018-C03, Class 1B1 | 7,250 | 6,678,219 | ||||||||||
Series 2018-C04, Class 2M2 | 951 | 932,551 | ||||||||||
Series 2018-C05, Class 1B1 | 6,873 | 6,443,005 | ||||||||||
Series 2018-C06, Class 2M2 | 520 | 507,524 | ||||||||||
Home Re Ltd. | ||||||||||||
Series 2020-1, Class M2 | 4,734 | 4,733,935 | ||||||||||
Series 2018-1, Class M1 | 698 | 689,146 | ||||||||||
Series 2019-1, Class B1 | 2,000 | 1,813,495 | ||||||||||
44 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
JP Morgan Madison Avenue Securities Trust | ||||||||||||
Series 2014-CH1, Class M2 4.399% (LIBOR 1 Month + 4.25%), 11/25/2024(f)(m) | U.S.$ | 885 | $ | 823,892 | ||||||||
Series 2015-CH1, Class M2 5.649% (LIBOR 1 Month + 5.50%), 10/25/2025(f)(m) | 1,612 | 1,466,820 | ||||||||||
Mortgage Insurance-Linked Notes | 13,630 | 12,340,364 | ||||||||||
Oaktown Re III Ltd. | 7,478 | 7,069,499 | ||||||||||
Oaktown Re Ltd. | 444 | 443,464 | ||||||||||
PMT Credit Risk Transfer Trust | ||||||||||||
Series 2019-1R, Class A | 2,526 | 2,253,152 | ||||||||||
Series 2019-2R, Class A | 3,456 | 3,098,799 | ||||||||||
Series 2019-3R, Class A | 1,439 | 1,289,022 | ||||||||||
Series 2020-1R, Class A | 6,875 | 6,153,420 | ||||||||||
Radnor Re Ltd. | ||||||||||||
Series 2018-1, Class B1 | 1,500 | 1,357,977 | ||||||||||
Series 2018-1, Class M2 | 721 | 690,387 | ||||||||||
Series 2019-1, Class M1B | 2,673 | 2,672,146 | ||||||||||
Series 2019-1, Class M2 | 6,106 | 5,861,528 | ||||||||||
Series 2019-2, Class M1B | 9,100 | 9,029,837 | ||||||||||
| abfunds.com | AB INCOME FUND | 45 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2020-1, Class M1A | U.S.$ | 6,523 | $ | 6,498,795 | ||||||||
Series 2020-1, Class M1B | 4,640 | 4,493,989 | ||||||||||
Series 2020-1, Class M1C | 2,088 | 1,957,533 | ||||||||||
STACR Trust | 7,000 | 6,531,702 | ||||||||||
Traingle Re Ltd. | 4,200 | 4,196,917 | ||||||||||
Wells Fargo Credit Risk Transfer Securities Trust | 555 | 541,897 | ||||||||||
|
| |||||||||||
| 344,758,826 | ||||||||||||
|
| |||||||||||
Agency Floating Rate – 0.9% |
| |||||||||||
Federal Home Loan Mortgage Corp. REMICs | ||||||||||||
Series 3119, Class PI | 1,420 | 369,052 | ||||||||||
Series 3856, Class KS | 9,685 | 1,893,920 | ||||||||||
Series 4248, Class SL | 856 | 162,300 | ||||||||||
Series 4372, Class JS | 5,047 | 1,023,854 | ||||||||||
Series 4570, Class ST | 2,036 | 475,338 | ||||||||||
Series 4735, Class SA | 9,910 | 2,606,626 | ||||||||||
Series 4763, Class SB | 17,776 | 3,709,413 | ||||||||||
Series 4774, Class BS | 9,906 | 1,591,461 | ||||||||||
46 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 4774, Class SL | U.S.$ | 12,836 | $ | 2,076,877 | ||||||||
Series 4927, Class SJ | 5,323 | 978,818 | ||||||||||
Federal National Mortgage Association REMICs | ||||||||||||
Series 2013-4, Class ST | 3,241 | 685,007 | ||||||||||
Series 2014-88, Class BS | 2,937 | 616,837 | ||||||||||
Series 2015-90, Class SA | 22,645 | 5,307,817 | ||||||||||
Series 2016-69, Class DS | 33,352 | 6,729,088 | ||||||||||
Series 2017-49, Class SP | 2,842 | 670,783 | ||||||||||
Series 2018-32, Class SB | 6,142 | 1,359,881 | ||||||||||
Series 2018-45, Class SL | 3,994 | 939,142 | ||||||||||
Series 2018-57, Class SL | 17,695 | 2,890,933 | ||||||||||
Series 2018-58, Class SA | 6,476 | 1,046,415 | ||||||||||
Series 2018-59, Class HS | 18,103 | 2,989,570 | ||||||||||
Series 2019-25, Class SA | 5,493 | 1,247,472 | ||||||||||
Series 2019-60, Class SJ | 5,421 | 1,098,036 | ||||||||||
|
| |||||||||||
| 40,468,640 | ||||||||||||
|
| |||||||||||
Non-Agency Fixed Rate – 0.1% |
| |||||||||||
Alternative Loan Trust | 1,128 | 904,245 | ||||||||||
| abfunds.com | AB INCOME FUND | 47 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
CHL Mortgage Pass-Through Trust | U.S.$ | 636 | $ | 468,770 | ||||||||
Series 2007-HY4, | 252 | 234,946 | ||||||||||
Citigroup Mortgage Loan Trust | 168 | 162,546 | ||||||||||
CSMC Mortgage-Backed Trust | 430 | 287,742 | ||||||||||
Wells Fargo Mortgage Backed Securities Trust | 1,005 | 934,668 | ||||||||||
|
| |||||||||||
| 2,992,917 | ||||||||||||
|
| |||||||||||
Agency Fixed Rate – 0.0% |
| |||||||||||
Federal National Mortgage Association REMICs | 3,110 | 132,159 | ||||||||||
Series 2016-26, Class IO | 623 | 108,791 | ||||||||||
|
| |||||||||||
| 240,950 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate – 0.0% |
| |||||||||||
First Horizon Alternative Mortgage Securities Trust | 416 | 118,060 | ||||||||||
Lehman XS Trust | 351 | 68,098 | ||||||||||
|
| |||||||||||
| 186,158 | ||||||||||||
|
| |||||||||||
Total Collateralized Mortgage Obligations | 388,647,491 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – | ||||||||||||
Angola – 0.1% |
| |||||||||||
Angolan Government International Bond | 460 | 360,525 | ||||||||||
9.50%, 11/12/2025(e) | 4,256 | 3,633,560 | ||||||||||
|
| |||||||||||
| 3,994,085 | ||||||||||||
|
| |||||||||||
Bahrain – 0.4% |
| |||||||||||
Bahrain Government International Bond | 7,434 | 7,269,058 | ||||||||||
48 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
6.75%, 09/20/2029(e) | U.S.$ | 1,709 | $ | 1,849,458 | ||||||||
7.00%, 10/12/2028(e) | 2,107 | 2,322,310 | ||||||||||
7.375%, 05/14/2030(e) | 1,961 | 2,171,195 | ||||||||||
CBB International Sukuk Programme Co. SPC | 1,087 | 1,112,476 | ||||||||||
6.25%, 11/14/2024(e) | 2,362 | 2,546,531 | ||||||||||
|
| |||||||||||
| 17,271,028 | ||||||||||||
|
| |||||||||||
Brazil – 0.2% |
| |||||||||||
Brazilian Government International Bond | 8,569 | 8,665,937 | ||||||||||
|
| |||||||||||
Costa Rica – 0.2% |
| |||||||||||
Costa Rica Government International Bond | 5,214 | 4,306,438 | ||||||||||
7.158%, 03/12/2045(e) | 4,004 | 3,160,658 | ||||||||||
|
| |||||||||||
| 7,467,096 | ||||||||||||
|
| |||||||||||
Dominican Republic – 0.6% |
| |||||||||||
Dominican Republic International Bond | 9,442 | 9,527,568 | ||||||||||
4.875%, 09/23/2032(e) | 3,361 | 3,425,069 | ||||||||||
5.95%, 01/25/2027(e) | 1,251 | 1,364,763 | ||||||||||
6.40%, 06/05/2049(e) | 2,287 | 2,327,023 | ||||||||||
6.875%, 01/29/2026(e) | 6,782 | 7,653,063 | ||||||||||
7.50%, 05/06/2021(e) | 1,667 | 1,709,375 | ||||||||||
|
| |||||||||||
| 26,006,861 | ||||||||||||
|
| |||||||||||
Ecuador – 0.1% |
| |||||||||||
Ecuador Government International Bond Zero Coupon, 07/31/2030(e) | 626 | 281,955 | ||||||||||
0.50%, 07/31/2030-07/31/2040(e) | 7,137 | 4,100,486 | ||||||||||
|
| |||||||||||
| 4,382,441 | ||||||||||||
|
| |||||||||||
Egypt – 0.7% |
| |||||||||||
Egypt Government International Bond | 6,333 | 6,479,451 | ||||||||||
6.125%, 01/31/2022(e) | 5,970 | 6,134,175 | ||||||||||
6.20%, 03/01/2024(e) | 4,724 | 4,901,150 | ||||||||||
6.588%, 02/21/2028(e) | 1,000 | 1,006,562 | ||||||||||
7.053%, 01/15/2032(e) | 2,597 | 2,538,567 | ||||||||||
7.50%, 01/31/2027(e) | 6,064 | 6,414,575 | ||||||||||
7.60%, 03/01/2029(e) | 217 | 225,680 | ||||||||||
7.625%, 05/29/2032(e) | 5,226 | 5,289,692 | ||||||||||
|
| |||||||||||
| 32,989,852 | ||||||||||||
|
| |||||||||||
El Salvador – 0.0% |
| |||||||||||
El Salvador Government International Bond | 628 | 473,551 | ||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 49 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Ghana – 0.3% |
| |||||||||||
Ghana Government International Bond | U.S.$ | 13,133 | $ | 12,172,649 | ||||||||
8.627%, 06/16/2049(e) | 238 | 208,250 | ||||||||||
8.95%, 03/26/2051(e) | 1,313 | 1,176,366 | ||||||||||
10.75%, 10/14/2030(e) | 693 | 847,626 | ||||||||||
|
| |||||||||||
| 14,404,891 | ||||||||||||
|
| |||||||||||
Guatemala – 0.0% |
| |||||||||||
Guatemala Government Bond | 200 | 235,688 | ||||||||||
6.125%, 06/01/2050(e) | 1,172 | 1,446,321 | ||||||||||
|
| |||||||||||
| 1,682,009 | ||||||||||||
|
| |||||||||||
Honduras – 0.2% |
| |||||||||||
Honduras Government International Bond | 1,555 | 1,738,685 | ||||||||||
7.50%, 03/15/2024(e) | 3,298 | 3,629,861 | ||||||||||
8.75%, 12/16/2020(e) | 5,825 | 5,859,586 | ||||||||||
|
| |||||||||||
| 11,228,132 | ||||||||||||
|
| |||||||||||
Ivory Coast – 0.1% |
| |||||||||||
Ivory Coast Government International Bond | 1,654 | 1,666,405 | ||||||||||
6.375%, 03/03/2028(e) | 2,440 | 2,556,662 | ||||||||||
|
| |||||||||||
| 4,223,067 | ||||||||||||
|
| |||||||||||
Kenya – 0.2% |
| |||||||||||
Kenya Government International Bond | 620 | 654,487 | ||||||||||
7.00%, 05/22/2027(e) | 1,680 | 1,741,950 | ||||||||||
7.25%, 02/28/2028(e) | 1,639 | 1,712,755 | ||||||||||
8.00%, 05/22/2032(e) | 3,420 | 3,587,794 | ||||||||||
|
| |||||||||||
| 7,696,986 | ||||||||||||
|
| |||||||||||
Lebanon – 0.0% |
| |||||||||||
Lebanon Government International Bond | 507 | 69,871 | ||||||||||
6.85%, 03/23/2027(e)(j)(o) | 1,053 | 145,117 | ||||||||||
Series G 6.60%, 11/27/2026(e)(j)(o) | 1,284 | 176,951 | ||||||||||
|
| |||||||||||
| 391,939 | ||||||||||||
|
| |||||||||||
Nigeria – 0.3% |
| |||||||||||
Nigeria Government International Bond 5.625%, 06/27/2022 | 248 | 251,565 | ||||||||||
6.75%, 01/28/2021(e) | 2,136 | 2,149,350 | ||||||||||
7.625%, 11/21/2025-11/28/2047(e) | 11,691 | 11,859,854 | ||||||||||
7.696%, 02/23/2038(e) | 1,729 | 1,591,761 | ||||||||||
7.875%, 02/16/2032(e) | 426 | 412,821 | ||||||||||
|
| |||||||||||
| 16,265,351 | ||||||||||||
|
| |||||||||||
50 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Oman – 0.3% |
| |||||||||||
Oman Government International Bond | U.S.$ | 5,200 | $ | 5,107,375 | ||||||||
4.875%, 02/01/2025(e) | 1,810 | 1,739,863 | ||||||||||
5.375%, 03/08/2027(e) | 4,550 | 4,160,406 | ||||||||||
6.00%, 08/01/2029(e) | 4,272 | 3,900,870 | ||||||||||
|
| |||||||||||
| 14,908,514 | ||||||||||||
|
| |||||||||||
Pakistan – 0.0% |
| |||||||||||
Pakistan Government International Bond | 245 | 238,033 | ||||||||||
|
| |||||||||||
Senegal – 0.3% |
| |||||||||||
Senegal Government International Bond | 5,158 | 5,245,041 | ||||||||||
6.75%, 03/13/2048(e) | 6,453 | 6,291,675 | ||||||||||
8.75%, 05/13/2021(e) | 864 | 892,080 | ||||||||||
|
| |||||||||||
| 12,428,796 | ||||||||||||
|
| |||||||||||
South Africa – 0.6% |
| |||||||||||
Republic of South Africa Government International Bond | 425 | 412,250 | ||||||||||
4.85%, 09/30/2029 | 9,846 | 9,753,694 | ||||||||||
5.65%, 09/27/2047 | 2,762 | 2,490,116 | ||||||||||
5.75%, 09/30/2049 | 10,390 | 9,363,987 | ||||||||||
5.875%, 06/22/2030 | 2,797 | 2,954,331 | ||||||||||
6.30%, 06/22/2048 | 2,368 | 2,280,680 | ||||||||||
|
| |||||||||||
| 27,255,058 | ||||||||||||
|
| |||||||||||
Sri Lanka – 0.0% |
| |||||||||||
Sri Lanka Government International Bond | 685 | 368,187 | ||||||||||
|
| |||||||||||
Ukraine – 0.2% |
| |||||||||||
Ukraine Government International Bond 7.253%, 03/15/2033(e) | 4,689 | 4,407,660 | ||||||||||
7.375%, 09/25/2032(e) | 3,586 | 3,433,595 | ||||||||||
|
| |||||||||||
| 7,841,255 | ||||||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 220,183,069 | |||||||||||
|
| |||||||||||
COLLATERALIZED LOAN OBLIGATIONS – 2.5% | ||||||||||||
CLO - Floating Rate – 2.5% |
| |||||||||||
Apidos CLO | 550 | 481,735 | ||||||||||
| abfunds.com | AB INCOME FUND | 51 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Ares XXXIV CLO Ltd. | U.S.$ | 9,437 | $ | 9,058,793 | ||||||
Ballyrock CLO Ltd. | 8,315 | 8,248,854 | ||||||||
Black Diamond CLO Ltd. | 5,300 | 5,011,786 | ||||||||
BlueMountain Fuji US CLO II Ltd. | 3,300 | 2,783,085 | ||||||||
CBAM Ltd. | 1,604 | 1,403,134 | ||||||||
Series 2018-7A, Class B1 | 1,996 | 1,939,699 | ||||||||
Dryden CLO Ltd. | 1,480 | 1,442,597 | ||||||||
Series 2020-78A, Class D | 6,824 | 6,372,156 | ||||||||
Dryden Senior Loan Fund | 605 | 542,240 | ||||||||
Elevation CLO Ltd. | 4,490 | 4,218,746 | ||||||||
GoldenTree Loan Opportunities Ltd. | 2,815 | 2,646,092 | ||||||||
Greywolf CLO VI Ltd. | 5,300 | 5,170,484 | ||||||||
52 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Halcyon Loan Advisors Funding Ltd. | U.S.$ | 1,826 | $ | 1,754,339 | ||||||
Series 2018-1A, Class C | 2,000 | 1,705,454 | ||||||||
Kayne CLO 7 Ltd. | 2,663 | 2,628,527 | ||||||||
Marble Point CLO XI Ltd. | 2,400 | 2,354,967 | ||||||||
Northwoods Capital Ltd. | 1,350 | 1,272,731 | ||||||||
Octagon Investment Partners 29 Ltd. | 6,571 | 5,945,006 | ||||||||
OZLM Ltd. | 1,000 | 894,395 | ||||||||
Series 2018-18A, Class B | 5,450 | 5,240,638 | ||||||||
Rockford Tower CLO Ltd. | 4,444 | 4,084,888 | ||||||||
Series 2017-3A, Class A | 1,931 | 1,913,804 | ||||||||
Romark CLO III Ltd. | 4,450 | 4,360,159 | ||||||||
Series 2019-3A, Class B | 600 | 580,318 | ||||||||
Signal Peak Clo 2 LLC | 4,575 | 4,529,987 | ||||||||
| abfunds.com | AB INCOME FUND | 53 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Sound Point CLO XIX Ltd. | U.S.$ | 7,931 | $ | 7,759,484 | ||||||||
THL Credit Wind River CLO Ltd. | 12,200 | 12,072,083 | ||||||||||
TIAA CLO II Ltd. | 1,000 | 991,720 | ||||||||||
Venture CLO Ltd. | 1,591 | 1,424,643 | ||||||||||
Voya CLO Ltd. | 4,595 | 3,999,554 | ||||||||||
York CLO-7 Ltd. | 4,400 | 4,357,386 | ||||||||||
|
| |||||||||||
Total Collateralized Loan Obligations | 117,189,484 | |||||||||||
|
| |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES – 2.3% | ||||||||||||
Non-Agency Fixed Rate CMBS – 1.8% |
| |||||||||||
Banc of America Commercial Mortgage Trust | 372 | 369,249 | ||||||||||
BANK | 65,894 | 4,518,234 | ||||||||||
Barclays Commercial Mortgage Trust | 10,917 | 1,000,905 | ||||||||||
Benchmark Mortgage Trust | 44,479 | 3,388,897 | ||||||||||
CD Mortgage Trust | 14,802 | 734,569 | ||||||||||
CFCRE Commercial Mortgage Trust | 14,267 | 1,008,896 | ||||||||||
54 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Citigroup Commercial Mortgage Trust | U.S.$ | 516 | $ | 530,484 | ||||||
Series 2016-C3, Class XA | 37,587 | 1,711,393 | ||||||||
Commercial Mortgage Trust | 41,928 | 994,387 | ||||||||
Series 2015-CR27, Class XA | 6,598 | 251,621 | ||||||||
CSAIL Commercial Mortgage Trust | 670 | 444,211 | ||||||||
Series 2019-C15, Class B | 960 | 1,053,781 | ||||||||
GS Mortgage Securities Trust | 375 | 350,189 | ||||||||
Series 2011-GC5, Class D | ||||||||||
5.388%, 08/10/2044(e) | 14,025 | 11,397,490 | ||||||||
Series 2014-GC22, Class D | 1,805 | 1,208,735 | ||||||||
Series 2016-GS3, Class XA | 34,952 | 1,812,946 | ||||||||
Series 2019-GC39, Class XA | 15,745 | 1,126,398 | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 2,411 | 2,437,283 | ||||||||
Series 2012-C8, Class E | 2,103 | 1,234,273 | ||||||||
Series 2012-CBX, Class E | 1,863 | 712,341 | ||||||||
Series 2012-LC9, Class E | 7,500 | 5,458,070 | ||||||||
Series 2012-LC9, Class G | 831 | 538,267 | ||||||||
Series 2016-JP2, Class XA | 16,238 | 1,309,163 | ||||||||
JPMBB Commercial Mortgage Securities Trust | 1,599 | 1,672,391 | ||||||||
Series 2014-C21, Class D | 3,450 | 3,027,053 | ||||||||
Series 2014-C24, Class C | 5,869 | 5,410,149 | ||||||||
| abfunds.com | AB INCOME FUND | 55 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
JPMCC Commercial Mortgage Securities Trust | U.S.$ | 10,707 | $ | 547,443 | ||||||
JPMDB Commercial Mortgage Securities Trust | 37,352 | 2,507,046 | ||||||||
LB-UBS Commercial Mortgage Trust | 1,074 | 622,003 | ||||||||
LCCM | 45,107 | 2,988,961 | ||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | 680 | 549,498 | ||||||||
Series 2014-C18, Class C | 4,408 | 4,288,640 | ||||||||
Series 2015-C22, Class XA | 12,249 | 415,156 | ||||||||
UBS Commercial Mortgage Trust | 2,000 | 1,467,357 | ||||||||
Series 2017-C1, Class XA | 8,944 | 680,185 | ||||||||
Series 2019-C16, Class XA | 16,881 | 1,676,652 | ||||||||
Series 2019-C18, Class XA | 23,593 | 1,650,527 | ||||||||
UBS-Barclays Commercial Mortgage Trust | 2,414 | 2,442,749 | ||||||||
Series 2013-C5, Class C | 782 | 743,429 | ||||||||
Wells Fargo Commercial Mortgage Trust | 8,295 | 325,068 | ||||||||
Series 2016-C36, Class XA | 50,390 | 2,833,319 | ||||||||
Series 2016-LC24, Class XA | 31,438 | 2,283,552 | ||||||||
Series 2016-LC25, Class XA | 19,878 | 774,534 | ||||||||
Series 2019-C52, Class XA | 20,014 | 2,144,343 | ||||||||
56 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
WFRBS Commercial Mortgage Trust | U.S.$ | 489 | $ | 294,303 | ||||||||
Series 2014-LC14, Class C | 134 | 129,067 | ||||||||||
|
| |||||||||||
| 83,065,207 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate CMBS – 0.5% | ||||||||||||
BFLD | 11,227 | 10,118,036 | ||||||||||
DBWF Mortgage Trust | 1,994 | 1,791,674 | ||||||||||
Great Wolf Trust | 12,005 | 10,879,213 | ||||||||||
Morgan Stanley Capital I Trust | 1,651 | 1,306,046 | ||||||||||
|
| |||||||||||
| 24,094,969 | ||||||||||||
|
| |||||||||||
Agency CMBS – 0.0% | ||||||||||||
Government National Mortgage Association Series 2006-32, Class XM | 166 | 386 | ||||||||||
|
| |||||||||||
Total Commercial Mortgage-Backed Securities | 107,160,562 | |||||||||||
|
| |||||||||||
BANK LOANS – 2.1% | ||||||||||||
Industrial – 1.9% | ||||||||||||
Basic – 0.0% | ||||||||||||
Illuminate Buyer, LLC | 1,330 | 1,306,100 | ||||||||||
Nouryon Finance B.V. (fka AkzoNobel) | 168 | 162,398 | ||||||||||
|
| |||||||||||
| 1,468,498 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 57 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Capital Goods – 0.3% | ||||||||||||
Apex Tool Group, LLC | U.S.$ | 4,905 | $ | 4,632,489 | ||||||||
Brookfield WEC Holdings Inc. (fka Westinghouse Electric Company LLC) | 749 | 730,248 | ||||||||||
BWay Holding Company | 5,549 | 5,174,560 | ||||||||||
Garrett Motion SARL (fka Garrett Motion Inc.) | 2,080 | 2,017,717 | ||||||||||
Granite US Holdings Corporation | 3,598 | 3,363,812 | ||||||||||
|
| |||||||||||
| 15,918,826 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.1% | ||||||||||||
iHeartCommunications, Inc. (fka Clear Channel Communications, Inc.) | 248 | 232,572 | ||||||||||
Nielsen Finance LLC | 1,035 | 1,030,661 | ||||||||||
Univision Communications Inc. | 933 | 900,595 | ||||||||||
|
| |||||||||||
| 2,163,828 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 0.1% | ||||||||||||
Clarios Global LP | 399 | 386,522 | ||||||||||
Navistar, Inc. | 2,698 | 2,667,218 | ||||||||||
|
| |||||||||||
| 3,053,740 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.3% | ||||||||||||
Caesars Resort Collection, LLC | 4,565 | 4,269,362 | ||||||||||
Flutter Entertainment PLC | 332 | 331,284 | ||||||||||
58 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Golden Nugget Online Gaming, Inc. | U.S.$ | 1,359 | $ | 1,304,654 | ||||||||
13.000% (LIBOR 3 Month + 12.00%), 10/04/2023(n) | 111 | 106,546 | ||||||||||
Playtika Holding Corp. | 5,884 | 5,879,762 | ||||||||||
Scientific Games International, Inc. | 2,570 | 2,386,513 | ||||||||||
|
| |||||||||||
| 14,278,121 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Restaurants – 0.0% | ||||||||||||
IRB Holding Corp. (aka Arby’s/Buffalo Wild Wings) | 561 | 532,497 | ||||||||||
Whatabrands LLC | 602 | 585,209 | ||||||||||
|
| |||||||||||
| 1,117,706 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.1% | ||||||||||||
Bass Pro Group, LLC | 1,214 | 1,208,651 | ||||||||||
PetSmart, Inc. | 920 | 909,047 | ||||||||||
|
| |||||||||||
| 2,117,698 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.3% | ||||||||||||
Aldevron, LLC | 2,596 | 2,592,994 | ||||||||||
Alphabet Holding Company, Inc. (fka Nature’s Bounty) | 3,524 | 3,385,862 | ||||||||||
Froneri International Limited | 322 | 317,770 | ||||||||||
Global Medical Response, Inc. | 1,155 | 1,114,948 | ||||||||||
LifePoint Health, Inc. (fka Regionalcare Hospital Partners Holdings, Inc.) | 1,176 | 1,139,914 | ||||||||||
| abfunds.com | AB INCOME FUND | 59 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
U.S. Renal Care, Inc. | U.S.$ | 5,992 | $ | 5,750,452 | ||||||||
|
| |||||||||||
| 14,301,940 | ||||||||||||
|
| |||||||||||
Energy – 0.0% | ||||||||||||
CITGO Petroleum Corporation | 1,603 | 1,492,017 | ||||||||||
|
| |||||||||||
Other Industrial – 0.1% | ||||||||||||
American Tire Distributors, Inc. | 292 | 268,315 | ||||||||||
8.500% (LIBOR 1 Month + 7.50%), 09/02/2024(n) | 733 | 619,202 | ||||||||||
Dealer Tire, LLC | 1,320 | 1,285,374 | ||||||||||
KAR Auction Services, Inc. | 200 | 191,692 | ||||||||||
Rockwood Service Corporation | 182 | 179,208 | ||||||||||
|
| |||||||||||
| 2,543,791 | ||||||||||||
|
| |||||||||||
Services – 0.2% | ||||||||||||
Allied Universal Holdco LLC (fka USAGM Holdco, LLC) | 411 | 402,545 | ||||||||||
Amentum Government Services Holdings LLC | 449 | 429,798 | ||||||||||
Garda World Security Corporation | 390 | 387,423 | ||||||||||
Parexel International Corporation | 2,735 | 2,619,862 | ||||||||||
Team Health Holdings, Inc. | 2,649 | 2,152,172 | ||||||||||
Verscend Holding Corp. | 1,955 | 1,915,238 | ||||||||||
|
| |||||||||||
| 7,907,038 | ||||||||||||
|
| |||||||||||
60 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Technology – 0.4% | ||||||||||||
athenahealth, Inc. | U.S.$ | 4,973 | $ | 4,860,651 | ||||||||
Avaya Inc. | 125 | 122,579 | ||||||||||
Boxer Parent Company Inc. (fka BMC Software, Inc.) | 3,487 | 3,383,894 | ||||||||||
Pitney Bowes Inc. | 2,872 | 2,827,828 | ||||||||||
Presidio Holdings Inc. | 1,644 | 1,605,285 | ||||||||||
Solera, LLC (Solera Finance, Inc.) | 2,054 | 1,996,160 | ||||||||||
Veritas US Inc. | 5,761 | 5,633,717 | ||||||||||
|
| |||||||||||
| 20,430,114 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.0% | ||||||||||||
Delta Air Lines, Inc. | 688 | 684,407 | ||||||||||
|
| |||||||||||
| 87,477,724 | ||||||||||||
|
| |||||||||||
Financial Institutions – 0.1% | ||||||||||||
Finance – 0.0% | ||||||||||||
Jefferies Finance LLC | 1,804 | 1,747,900 | ||||||||||
|
| |||||||||||
Insurance – 0.1% | ||||||||||||
Hub International Limited | 2,870 | 2,851,285 | ||||||||||
Sedgwick Claims Management Services, Inc. (Lightning Cayman Merger Sub, Ltd.) 4.148% (LIBOR 1 Month + 4.00%), 09/03/2026(n) | 2,254 | 2,186,595 | ||||||||||
|
| |||||||||||
| 5,037,880 | ||||||||||||
|
| |||||||||||
| 6,785,780 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 61 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Utility – 0.1% |
| |||||||||||
Electric – 0.1% | ||||||||||||
Granite Generation LLC | U.S.$ | 4,072 | $ | 4,024,979 | ||||||||
|
| |||||||||||
Total Bank Loans | 98,288,483 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – CORPORATE BONDS – 1.9% | ||||||||||||
Industrial – 1.7% |
| |||||||||||
Basic – 0.6% |
| |||||||||||
Braskem Netherlands Finance BV | 5,877 | 5,444,982 | ||||||||||
Consolidated Energy Finance SA | 787 | 729,447 | ||||||||||
CSN Resources SA | 5,342 | 5,514,664 | ||||||||||
Eldorado Gold Corp. | 4,248 | 4,641,280 | ||||||||||
First Quantum Minerals Ltd. 6.875%, 10/15/2027(e) | 2,310 | 2,307,112 | ||||||||||
7.25%, 04/01/2023(e) | 1,952 | 1,962,370 | ||||||||||
7.50%, 04/01/2025(e) | 410 | 410,103 | ||||||||||
Indika Energy Capital IV Pte Ltd. | 4,123 | 4,102,385 | ||||||||||
Sasol Financing USA LLC | 1,467 | 1,408,778 | ||||||||||
|
| |||||||||||
| 26,521,121 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.2% | ||||||||||||
Cemex SAB de CV | 697 | 768,442 | ||||||||||
Embraer Netherlands Finance BV | 4,430 | 4,194,745 | ||||||||||
6.95%, 01/17/2028(e) | 2,058 | 2,056,881 | ||||||||||
Odebrecht Finance Ltd. | 6,760 | 236,600 | ||||||||||
5.25%, 06/27/2029(e)(j)(o) | 2,103 | 73,605 | ||||||||||
|
| |||||||||||
| 7,330,273 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.1% | ||||||||||||
Globo Comunicacao e Participacoes SA | 996 | 988,219 | ||||||||||
VTR Finance NV | 541 | 576,672 | ||||||||||
|
| |||||||||||
| 1,564,891 | ||||||||||||
|
| |||||||||||
62 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Communications - Telecommunications – 0.1% | ||||||||||||
Digicel Group 0.5 Ltd. | U.S.$ | 79 | $ | 10,616 | ||||||||
8.00% (5.00% Cash and 3.00% PIK), 04/01/2025(e)(l) | 476 | 162,012 | ||||||||||
10.00% (8.00% Cash and 2.00% PIK), 04/01/2024(l) | 1,322 | 1,000,294 | ||||||||||
Digicel International Finance Ltd./Digicel Holdings Bermuda Ltd. | 339 | 340,728 | ||||||||||
MTN Mauritius Investments Ltd. | 701 | 716,773 | ||||||||||
Sable International Finance Ltd. | 2,638 | 2,781,085 | ||||||||||
VTR Comunicaciones SpA | 759 | 800,271 | ||||||||||
|
| |||||||||||
| 5,811,779 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.2% | ||||||||||||
Melco Resorts Finance Ltd. | 200 | 192,750 | ||||||||||
5.625%, 07/17/2027(e) | 2,333 | 2,365,079 | ||||||||||
MGM China Holdings Ltd. | 895 | 896,398 | ||||||||||
5.375%, 05/15/2024(e) | 569 | 581,553 | ||||||||||
5.875%, 05/15/2026(e) | 598 | 604,727 | ||||||||||
Studio City Finance Ltd. | 1,088 | 1,089,360 | ||||||||||
6.50%, 01/15/2028(e) | 998 | 983,230 | ||||||||||
Wynn Macau Ltd. | 2,168 | 2,100,250 | ||||||||||
5.625%, 08/26/2028(e) | 1,919 | 1,835,044 | ||||||||||
|
| |||||||||||
| 10,648,391 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.2% | ||||||||||||
BRF GmbH | 941 | 951,292 | ||||||||||
BRF SA | 4,401 | 4,407,690 | ||||||||||
Cosan Ltd. | 437 | 451,476 | ||||||||||
Inretail Pharma SA | 2,434 | 2,526,796 | ||||||||||
Minerva Luxembourg SA | 261 | 271,440 | ||||||||||
Tonon Luxembourg SA | 867 | 26,095 | ||||||||||
| abfunds.com | AB INCOME FUND | 63 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Ulker Biskuvi Sanayi AS | U.S.$ | 609 | $ | 601,578 | ||||||||
Virgolino de Oliveira Finance SA | 4,738 | 41,552 | ||||||||||
10.875%, 01/13/2020(j)(k)(m) | 750 | 150,000 | ||||||||||
11.75%, 02/09/2022(j)(m)(o) | 1,690 | 8,471 | ||||||||||
|
| |||||||||||
| 9,436,390 | ||||||||||||
|
| |||||||||||
Energy – 0.3% | ||||||||||||
Geopark Ltd. | 410 | 357,084 | ||||||||||
Leviathan Bond Ltd. | 1,763 | 1,808,957 | ||||||||||
Medco Oak Tree Pte Ltd. | 1,031 | 998,459 | ||||||||||
Medco Platinum Road Pte Ltd. | 1,532 | 1,486,998 | ||||||||||
MV24 Capital BV | 1,747 | 1,758,372 | ||||||||||
Peru LNG Srl | 262 | 199,202 | ||||||||||
Petrobras Global Finance BV | 7,273 | 8,230,418 | ||||||||||
|
| |||||||||||
| 14,839,490 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.0% | ||||||||||||
Rumo Luxembourg SARL | 1,250 | 1,305,078 | ||||||||||
|
| |||||||||||
| 77,457,413 | ||||||||||||
|
| |||||||||||
Utility – 0.1% | ||||||||||||
Electric – 0.1% | ||||||||||||
AES Gener SA | 1,816 | 1,822,356 | ||||||||||
Cemig Geracao e Transmissao SA | 2,251 | 2,532,375 | ||||||||||
Light Servicos de Eletricidade SA/Light Energia SA | 1,396 | 1,461,437 | ||||||||||
Star Energy Geothermal Wayang Windu Ltd. | 839 | 921,300 | ||||||||||
Terraform Global Operating LLC | 289 | 293,026 | ||||||||||
|
| |||||||||||
| 7,030,494 | ||||||||||||
|
| |||||||||||
64 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Financial Institutions – 0.1% | ||||||||||||
Banking – 0.0% | ||||||||||||
Fidelity Bank PLC | U.S.$ | 575 | $ | 586,140 | ||||||||
|
| |||||||||||
Insurance – 0.1% | ||||||||||||
Highlands Holdings Bond Issuer Ltd./Highlands Holdings Bond Co-Issuer, Inc. | 3,138 | 3,118,670 | ||||||||||
|
| |||||||||||
| 3,704,810 | ||||||||||||
|
| |||||||||||
Total Emerging Markets – Corporate Bonds (cost $103,195,011) | 88,192,717 | |||||||||||
|
| |||||||||||
ASSET-BACKED SECURITIES – 1.6% | ||||||||||||
Other ABS - Fixed Rate – 0.9% | ||||||||||||
CLUB Credit Trust | 1,703 | 1,722,553 | ||||||||||
Consumer Loan Underlying Bond Certificate Issuer Trust I | 1,548 | 1,447,515 | ||||||||||
Series 2019-36, Class PT | 1,580 | 1,411,126 | ||||||||||
Series 2019-43, Class PT | 1,108 | 1,042,039 | ||||||||||
Consumer Loan Underlying Bond Credit Trust | 3,255 | 3,229,478 | ||||||||||
Marlette Funding Trust | 4,539 | 4,597,928 | ||||||||||
Series 2018-4A, Class C | 558 | 566,594 | ||||||||||
Series 2019-2A, Class C | 2,692 | 2,735,324 | ||||||||||
Series 2019-3A, Class C | 4,413 | 4,436,756 | ||||||||||
SoFi Consumer Loan Program LLC | 2,118 | 472,733 | ||||||||||
Series 2016-5, Class R | 24 | 401,347 | ||||||||||
Series 2017-5, Class R1 Zero Coupon, 09/25/2026(h)(i)(m) | 17 | 417,975 | ||||||||||
| abfunds.com | AB INCOME FUND | 65 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
SoFi Consumer Loan Program Trust | U.S.$ | 37 | $ | 1,481,640 | ||||||||
Series 2018-2, Class C | 1,400 | 1,429,629 | ||||||||||
Series 2018-3, Class C | 4,611 | 4,716,446 | ||||||||||
Series 2019-2, Class D | 1,000 | 1,023,734 | ||||||||||
Series 2019-3, Class D | 5,378 | 5,512,694 | ||||||||||
Series 2019-4, Class D | 3,000 | 2,956,012 | ||||||||||
|
| |||||||||||
| 39,601,523 | ||||||||||||
|
| |||||||||||
Autos - Fixed Rate – 0.7% | ||||||||||||
Avis Budget Rental Car Funding AESOP LLC | 2,372 | 2,460,002 | ||||||||||
CPS Auto Receivables Trust | 1,500 | 1,527,402 | ||||||||||
CPS Auto Trust | 3,000 | 3,042,640 | ||||||||||
Series 2017-A, Class E | 4,200 | 4,349,916 | ||||||||||
Exeter Automobile Receivables Trust | 2,000 | 2,060,829 | ||||||||||
Series 2017-3A, Class D | 4,370 | 4,562,541 | ||||||||||
Series 2019-2A, Class E | 2,670 | 2,779,819 | ||||||||||
Series 2019-3A, Class E | 4,355 | 4,451,008 | ||||||||||
First Investors Auto Owner Trust | 450 | 459,678 | ||||||||||
Flagship Credit Auto Trust | 1,000 | 1,043,172 | ||||||||||
Series 2018-3, Class D | 670 | 703,017 | ||||||||||
Series 2019-4, Class E | ||||||||||||
4.11%, 03/15/2027(e) | 2,970 | 2,992,150 | ||||||||||
66 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Westlake Automobile Receivables Trust | U.S.$ | 2,551 | $ | 2,602,560 | ||||||||
|
| |||||||||||
| 33,034,734 | ||||||||||||
|
| |||||||||||
Total Asset-Backed Securities | 72,636,257 | |||||||||||
|
| |||||||||||
INFLATION-LINKED SECURITIES – 1.4% | ||||||||||||
United States – 1.4% | ||||||||||||
U.S. Treasury Inflation Index | 61,430 | 64,598,006 | ||||||||||
|
| |||||||||||
GOVERNMENTS – SOVEREIGN BONDS – 1.1% | ||||||||||||
Colombia – 0.1% | ||||||||||||
Colombia Government International Bond | 864 | 886,464 | ||||||||||
4.125%, 05/15/2051 | 4,097 | 4,291,608 | ||||||||||
|
| |||||||||||
| 5,178,072 | ||||||||||||
|
| |||||||||||
Israel – 0.2% | ||||||||||||
Israel Government International Bond | 7,916 | 8,645,756 | ||||||||||
|
| |||||||||||
Mexico – 0.1% | ||||||||||||
Mexico Government International Bond 3.90%, 04/27/2025 | 1,205 | 1,316,237 | ||||||||||
4.75%, 04/27/2032 | 2,706 | 3,093,296 | ||||||||||
|
| |||||||||||
| 4,409,533 | ||||||||||||
|
| |||||||||||
Panama – 0.1% | ||||||||||||
Panama Notas del Tesoro | 5,330 | 5,734,747 | ||||||||||
|
| |||||||||||
Peru – 0.0% | ||||||||||||
Peruvian Government International Bond | 247 | 259,350 | ||||||||||
2.783%, 01/23/2031 | 719 | 778,677 | ||||||||||
|
| |||||||||||
| 1,038,027 | ||||||||||||
|
| |||||||||||
Qatar – 0.2% | ||||||||||||
Qatar Government International Bond | 4,399 | 4,733,049 | ||||||||||
3.40%, 04/16/2025(e) | 1,074 | 1,179,722 | ||||||||||
3.75%, 04/16/2030(e) | 1,810 | 2,102,994 | ||||||||||
3.875%, 04/23/2023(e) | 861 | 923,691 | ||||||||||
|
| |||||||||||
| 8,939,456 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 67 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Saudi Arabia – 0.2% | ||||||||||||
Saudi Government International Bond | U.S.$ | 3,031 | $ | 3,235,593 | ||||||||
3.25%, 10/22/2030(e) | 3,774 | 4,108,942 | ||||||||||
|
| |||||||||||
| 7,344,535 | ||||||||||||
|
| |||||||||||
United Arab Emirates – 0.2% | ||||||||||||
Abu Dhabi Government International Bond | 2,587 | 2,739,633 | ||||||||||
3.125%, 04/16/2030(e) | 4,640 | 5,162,000 | ||||||||||
|
| |||||||||||
| 7,901,633 | ||||||||||||
|
| |||||||||||
Total Governments – Sovereign Bonds | 49,191,759 | |||||||||||
|
| |||||||||||
AGENCIES – 0.9% | ||||||||||||
Agency Debentures – 0.9% | ||||||||||||
Federal Home Loan Banks | 8,695 | 13,389,778 | ||||||||||
Federal Home Loan Mortgage Corp. | 10,400 | 16,079,856 | ||||||||||
Series GDIF | 4,606 | 6,864,783 | ||||||||||
6.75%, 03/15/2031 | 4,000 | 6,162,160 | ||||||||||
|
| |||||||||||
Total Agencies | 42,496,577 | |||||||||||
|
| |||||||||||
QUASI-SOVEREIGNS – 0.9% | ||||||||||||
Quasi-Sovereign Bonds – 0.9% | ||||||||||||
Bahrain – 0.1% | ||||||||||||
Oil and Gas Holding Co. BSCC (The) | 668 | 710,585 | ||||||||||
8.375%, 11/07/2028(e) | 3,912 | 4,292,197 | ||||||||||
|
| |||||||||||
| 5,002,782 | ||||||||||||
|
| |||||||||||
Chile – 0.0% | ||||||||||||
Corp. Nacional del Cobre de Chile | 212 | 234,260 | ||||||||||
Empresa de Transporte de Pasajeros Metro SA | 200 | 217,600 | ||||||||||
|
| |||||||||||
| 451,860 | ||||||||||||
|
| |||||||||||
Indonesia – 0.1% | ||||||||||||
Indonesia Asahan Aluminium Persero PT | 2,044 | 2,220,295 | ||||||||||
5.71%, 11/15/2023(e) | 277 | 305,479 | ||||||||||
|
| |||||||||||
| 2,525,774 | ||||||||||||
|
| |||||||||||
68 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Kazakhstan – 0.1% | ||||||||||||
KazMunayGas National Co. JSC | U.S.$ | 768 | $ | 852,720 | ||||||||
5.375%, 04/24/2030(e) | 1,940 | 2,313,450 | ||||||||||
|
| |||||||||||
| 3,166,170 | ||||||||||||
|
| |||||||||||
Malaysia – 0.1% | ||||||||||||
Petronas Capital Ltd. | 3,739 | 4,163,526 | ||||||||||
|
| |||||||||||
Mexico – 0.5% | ||||||||||||
Petroleos Mexicanos | 11,914 | 9,959,389 | ||||||||||
6.49%, 01/23/2027 | 1,455 | 1,353,514 | ||||||||||
6.50%, 01/23/2029 | 403 | 359,516 | ||||||||||
6.75%, 09/21/2047 | 4,901 | 3,795,825 | ||||||||||
6.84%, 01/23/2030 | 2,180 | 1,949,124 | ||||||||||
7.69%, 01/23/2050 | 5,270 | 4,373,837 | ||||||||||
|
| |||||||||||
| 21,791,205 | ||||||||||||
|
| |||||||||||
Panama – 0.0% | ||||||||||||
Aeropuerto Internacional de Tocumen SA | 1,013 | 1,136,536 | ||||||||||
|
| |||||||||||
Ukraine – 0.0% | ||||||||||||
NAK Naftogaz Ukraine via Kondor Finance PLC | 2,168 | 2,032,785 | ||||||||||
|
| |||||||||||
United Arab Emirates – 0.0% | ||||||||||||
DP World Crescent Ltd. | 296 | 308,210 | ||||||||||
DP World PLC | 696 | 792,570 | ||||||||||
|
| |||||||||||
| 1,100,780 | ||||||||||||
|
| |||||||||||
Total Quasi-Sovereigns | 41,371,418 | |||||||||||
|
| |||||||||||
LOCAL GOVERNMENTS – PROVINCIAL BONDS – 0.7% | ||||||||||||
Canada – 0.7% | ||||||||||||
Province of Alberta Canada | CAD | 5,934 | 4,842,827 | |||||||||
Province of British Columbia Canada | 3,539 | 3,490,416 | ||||||||||
Province of Quebec Canada | 12,134 | 12,760,873 | ||||||||||
| abfunds.com | AB INCOME FUND | 69 | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Principal Amount (000) | U.S. $ Value | ||||||||||
| ||||||||||||
Province of Saskatchewan Canada | CAD | 12,746 | $ | 10,435,973 | ||||||||
|
| |||||||||||
Total Local Governments – Provincial Bonds | 31,530,089 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – TREASURIES – 0.4% | ||||||||||||
Brazil – 0.2% | ||||||||||||
Brazil Notas do Tesouro Nacional | BRL | 47,870 | 9,341,117 | |||||||||
|
| |||||||||||
Dominican Republic – 0.1% | ||||||||||||
Dominican Republic International Bond | DOP | 149,900 | 2,848,747 | |||||||||
| �� |
|
| ||||||||||
South Africa – 0.1% | ||||||||||||
Republic of South Africa Government Bond | ZAR | 135,695 | 7,668,288 | |||||||||
|
| |||||||||||
Total Emerging Markets – Treasuries | 19,858,152 | |||||||||||
|
| |||||||||||
| Shares | ||||||||||||
PREFERRED STOCKS – 0.2% | ||||||||||||
Industrial – 0.2% | ||||||||||||
Auto Components – 0.1% | ||||||||||||
Exide Corp.(h)(i) | 3,093 | 2,325,936 | ||||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
Stanley Black & Decker, Inc. | 4,000 | 4,792,000 | ||||||||||
|
| |||||||||||
| 7,117,936 | ||||||||||||
|
| |||||||||||
Financial Institutions – 0.0% |
| |||||||||||
Banking – 0.0% |
| |||||||||||
Paysafe Holdings UK Ltd. | 974,025 | 974,025 | ||||||||||
|
| |||||||||||
Total Preferred Stocks | 8,091,961 | |||||||||||
|
| |||||||||||
70 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
COMMON STOCKS – 0.1% | ||||||||||||
Consumer Discretionary – 0.1% | ||||||||||||
Auto Components – 0.1% | ||||||||||||
ATD New Holdings, Inc.(i)(j) | 29,486 | $ | 294,860 | |||||||||
Exide Corp.(h)(i)(j) | 497 | 484,575 | ||||||||||
Exide Technologies(h)(i)(j) | 585,460 | 1 | ||||||||||
Exide Technologies/Old(h)(i)(j) | 45,970 | – 0 | – | |||||||||
|
| |||||||||||
| 779,436 | ||||||||||||
|
| |||||||||||
Media – 0.0% | ||||||||||||
Ion Media Networks, Inc. – Class A(h)(i) | 2,512 | 2,403,984 | ||||||||||
|
| |||||||||||
| 3,183,420 | ||||||||||||
|
| |||||||||||
Energy – 0.0% | ||||||||||||
Oil, Gas & Consumable Fuels – 0.0% | ||||||||||||
Berry Corp. | 137,884 | 361,256 | ||||||||||
Denbury, Inc.(j) | 26,032 | 431,871 | ||||||||||
Golden Energy Offshore Services AS(j) | 1,497,659 | 108,246 | ||||||||||
Paragon Litigation – Class A(i) | 10,360 | 1,036 | ||||||||||
Paragon Litigation – Class B(i) | 15,538 | 100,997 | ||||||||||
Tervita Corp.(j) | 116,270 | 152,722 | ||||||||||
Vantage Drilling International(j) | 16,001 | 40,003 | ||||||||||
Whiting Petroleum Corp.(j) | 12,942 | 188,953 | ||||||||||
|
| |||||||||||
| 1,385,084 | ||||||||||||
|
| |||||||||||
Consumer Staples – 0.0% | ||||||||||||
Food & Staples Retailing – 0.0% | ||||||||||||
Southeastern Grocers, Inc. Npv(h)(i) | 16,421 | 1,190,523 | ||||||||||
|
| |||||||||||
Information Technology – 0.0% | ||||||||||||
IT Services – 0.0% | ||||||||||||
Paysafe Group Ltd.(h)(i) | 3,109 | 28,323 | ||||||||||
|
| |||||||||||
Software – 0.0% | ||||||||||||
Monitronics International, Inc.(h)(i)(j) | 68,348 | 227,289 | ||||||||||
|
| |||||||||||
| 255,612 | ||||||||||||
|
| |||||||||||
Communication Services – 0.0% | ||||||||||||
Media – 0.0% | ||||||||||||
iHeartMedia, Inc.– Class A(j) | 1,690 | 13,892 | ||||||||||
|
| |||||||||||
Total Common Stocks | 6,028,531 | |||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 71 | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Principal Amount (000) | U.S. $ Value | ||||||||||
| ||||||||||||
LOCAL GOVERNMENTS – US MUNICIPAL BONDS – 0.1% | ||||||||||||
United States – 0.1% |
| |||||||||||
Texas Transportation Commission State Highway Fund | U.S.$ | 2,560 | $ | 3,235,610 | ||||||||
|
| |||||||||||
| Notional Amount | ||||||||||||
OPTIONS PURCHASED – PUTS – 0.0% | ||||||||||||
Swaptions – 0.0% | ||||||||||||
IRS Swaption | USD | 17,889,000 | 411,752 | |||||||||
IRS Swaption | 4,935,000 | 124,774 | ||||||||||
IRS Swaption | 4,934,000 | 124,748 | ||||||||||
IRS Swaption | 3,795,000 | 88,149 | ||||||||||
|
| |||||||||||
Total Options Purchased – Puts | 749,423 | |||||||||||
|
| |||||||||||
| Shares | ||||||||||||
WARRANTS – 0.0% | ||||||||||||
Avaya Holdings Corp., | 2,936 | 7,193 | ||||||||||
Encore Automotive Acceptance, | 12 | – 0 | – | |||||||||
Flexpath Capital, Inc., | 17,195 | – 0 | – | |||||||||
72 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
iHeartMedia, Inc., | 12,695 | $ | 94,895 | |||||||||
SandRidge Energy, Inc., B-CW22, | 1,042 | 7 | ||||||||||
SandRidge Energy, Inc., A-CW22, | 2,475 | 25 | ||||||||||
|
| |||||||||||
Total Warrants | 102,120 | |||||||||||
|
| |||||||||||
| Principal Amount (000) | ||||||||||||
WHOLE LOAN TRUSTS – 0.0% | ||||||||||||
Performing Asset – 0.0% | ||||||||||||
Sheridan Auto Loan Holdings I LLC | U.S.$ | 1,719 | 89,129 | |||||||||
|
| |||||||||||
| Shares | ||||||||||||
SHORT-TERM INVESTMENTS – 0.7% | ||||||||||||
Investment Companies – 0.6% | ||||||||||||
AB Fixed Income Shares, Inc.—AB Government Money Market Portfolio –Class AB, 0.03%(r)(s)(t) | 26,220,252 | 26,220,252 | ||||||||||
|
| |||||||||||
| Principal Amount (000) | ||||||||||||
Governments – Treasuries – 0.1% | ||||||||||||
Egypt – 0.1% | ||||||||||||
Egypt Treasury Bills | EGP | 116,475 | 7,050,447 | |||||||||
|
| |||||||||||
Total Short-Term Investments | 33,270,699 | |||||||||||
|
| |||||||||||
Total Investments – 133.5% | 6,171,041,194 | |||||||||||
Other assets less liabilities – (33.5)% | (1,547,739,073 | ) | ||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 4,623,302,121 | ||||||||||
|
| |||||||||||
| abfunds.com | AB INCOME FUND | 73 | |
PORTFOLIO OF INVESTMENTS (continued)
FUTURES (see Note D)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Purchased Contracts |
| |||||||||||||||
Euro-BOBL Futures | 9 | December 2020 | $ | 1,424,169 | $ | 8,900 | ||||||||||
Long Gilt Futures | 13 | December 2020 | 2,285,054 | (8,939 | ) | |||||||||||
U.S. T-Note 10 Yr (CBT) Futures | 1,730 | December 2020 | 239,118,438 | (2,099,170 | ) | |||||||||||
| Sold Contracts |
| |||||||||||||||
Euro Buxl 30 Yr Bond Futures | 16 | December 2020 | 4,262,806 | (157,291 | ) | |||||||||||
Euro-Bund Futures | 61 | December 2020 | 12,514,340 | (173,409 | ) | |||||||||||
Euro-Schatz Futures | 496 | December 2020 | 64,967,256 | (116,042 | ) | |||||||||||
U.S. 10 Yr Ultra Futures | 42 | December 2020 | 6,605,812 | 92,801 | ||||||||||||
U.S. T-Note 2 Yr (CBT) Futures | 853 | December 2020 | 188,379,719 | 57,833 | ||||||||||||
U.S. Ultra Bond (CBT) Futures | 30 | December 2020 | 6,450,000 | 274,291 | ||||||||||||
|
| |||||||||||||||
| $ | (2,121,026 | ) | ||||||||||||||
|
| |||||||||||||||
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Bank of America, NA | ZAR | 99,938 | USD | 5,977 | 11/27/2020 | $ | (147,272 | ) | ||||||||
Barclays Bank PLC | CAD | 42,068 | USD | 31,681 | 12/10/2020 | 100,482 | ||||||||||
BNP Paribas SA | BRL | 61,115 | USD | 11,027 | 11/04/2020 | 376,094 | ||||||||||
BNP Paribas SA | USD | 10,589 | BRL | 61,115 | 11/04/2020 | 62,465 | ||||||||||
Citibank, NA | BRL | 61,115 | USD | 10,589 | 11/04/2020 | (62,465 | ) | |||||||||
Citibank, NA | USD | 10,660 | BRL | 61,115 | 11/04/2020 | (9,196 | ) | |||||||||
Citibank, NA | BRL | 61,115 | USD | 10,651 | 12/02/2020 | 14,399 | ||||||||||
Citibank, NA | AUD | 16,428 | USD | 11,551 | 01/12/2021 | (546 | ) | |||||||||
Goldman Sachs Bank USA | RUB | 2,808,480 | USD | 36,509 | 11/19/2020 | 1,220,289 | ||||||||||
Goldman Sachs Bank USA | AUD | 16,671 | USD | 11,750 | 01/12/2021 | 27,287 | ||||||||||
Goldman Sachs Bank USA | IDR | 205,054,625 | USD | 13,680 | 01/15/2021 | (86,268 | ) | |||||||||
JPMorgan Chase Bank, NA | MXN | 758,438 | USD | 35,349 | 12/11/2020 | (258,917 | ) | |||||||||
Morgan Stanley Capital Services, Inc. | GBP | 1,303 | USD | 1,694 | 11/19/2020 | 5,836 | ||||||||||
Morgan Stanley Capital Services, Inc. | EUR | 86,792 | USD | 102,084 | 12/18/2020 | 891,637 | ||||||||||
Morgan Stanley Capital Services, Inc. | USD | 1,334 | EUR | 1,137 | 12/18/2020 | (8,054 | ) | |||||||||
State Street Bank & Trust Co. | GBP | 50 | USD | 65 | 11/19/2020 | 421 | ||||||||||
State Street Bank & Trust Co. | EUR | 1,100 | USD | 1,284 | 12/18/2020 | 1,987 | ||||||||||
|
| |||||||||||||||
| $ | 2,128,179 | |||||||||||||||
|
| |||||||||||||||
74 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts |
| |||||||||||||||||||||||||||||||
CDX-NAHY Series 34, 5 Year Index, 06/20/2025* | 5.00 | % | Quarterly | 3.96 | % | USD | 27,778 | $ | 1,343,287 | $ | 1,607,166 | $ | (263,879 | ) | ||||||||||||||||||
iTraxx -Xover Series 33, 5 Year Index, 06/20/2025* | 5.00 | Quarterly | 3.54 | EUR | 20,141 | 1,559,174 | (235,457 | ) | 1,794,631 | |||||||||||||||||||||||
Republic of Colombia, 10.375%, 01/28/2033, 06/20/2025* | 1.00 | Quarterly | 1.11 | USD | 5,872 | (30,232 | ) | (327,631 | ) | 297,399 | ||||||||||||||||||||||
Republic of South Africa, 5.875%, 09/16/2025, 06/20/2025* | 1.00 | Quarterly | 2.63 | USD | 6,075 | (432,088 | ) | (748,587 | ) | 316,499 | ||||||||||||||||||||||
Russian Federation, 7.50%, 03/31/2030, 06/20/2025* | 1.00 | Quarterly | 0.95 | USD | 5,872 | 16,016 | (254,519 | ) | 270,535 | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | 2,456,157 | $ | 40,972 | $ | 2,415,185 | |||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
| USD | 109,350 | 04/20/2023 | 2.850% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | $ | (7,093,214 | ) | $ | – 0 | – | $ | (7,093,214 | ) | |||||||||||||||
| USD | 46,860 | 04/02/2024 | 2.851% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | (4,159,092 | ) | –0 | – | (4,159,092 | ) | ||||||||||||||||||
| USD | 30,755 | 02/10/2025 | 2.034% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | (2,286,695 | ) | –0 | – | (2,286,695 | ) | ||||||||||||||||||
| USD | 6,010 | 06/09/2025 | 2.491% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | (630,229 | ) | –0 | – | (630,229 | ) | ||||||||||||||||||
| USD | 10,000 | 01/11/2027 | 2.285% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | (1,123,365 | ) | –0 | – | (1,123,365 | ) | ||||||||||||||||||
| USD | 11,920 | 04/26/2027 | 2.287% | | 3 Month LIBOR | | | Semi- Annual/ Quarterly | (1,299,957 | ) | –0 | – | (1,299,957 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (16,592,552 | ) | $ | –0 | – | $ | (16,592,552 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| abfunds.com | AB INCOME FUND | 75 | |
PORTFOLIO OF INVESTMENTS (continued)
CREDIT DEFAULT SWAPS (see Note D)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts | ||||||||||||||||||||||||||||||||
Barclays Bank PLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | % | Monthly | 25.00 | % | USD | 5,000 | $ | (2,503,139 | ) | $ | (122,372 | ) | $ | (2,380,767 | ) | ||||||||||||||||
Citigroup Global Markets, Inc. |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | Monthly | 25.00 | USD | 4,000 | (2,002,512 | ) | (604,657 | ) | (1,397,855 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,529 | (494,657 | ) | (153,637 | ) | (341,020 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 5,300 | (1,714,639 | ) | (328,193 | ) | (1,386,446 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,557 | (3,091,849 | ) | (954,782 | ) | (2,137,067 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,557 | (3,091,849 | ) | (945,173 | ) | (2,146,676 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,557 | (3,091,849 | ) | (945,173 | ) | (2,146,676 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 5,000 | (1,617,583 | ) | (601,026 | ) | (1,016,557 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 5,000 | (1,617,583 | ) | (499,262 | ) | (1,118,321 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 5,000 | (1,617,584 | ) | (506,591 | ) | (1,110,993 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 12,000 | (3,883,200 | ) | (1,503,699 | ) | (2,379,501 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 3,250 | (1,051,429 | ) | (331,874 | ) | (719,555 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 643 | (208,075 | ) | (71,846 | ) | (136,229 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 13,500 | (4,367,475 | ) | (1,181,148 | ) | (3,186,327 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 162 | (52,491 | ) | (10,120 | ) | (42,371 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,146 | (370,750 | ) | (180,940 | ) | (189,810 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,187 | (384,212 | ) | (316,435 | ) | (67,777 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 2,969 | (961,016 | ) | (725,531 | ) | (235,485 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 2,227 | (720,843 | ) | (544,210 | ) | (176,633 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 2,227 | (720,843 | ) | (549,707 | ) | (171,136 | ) | |||||||||||||||||||||
76 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 9,029 | $ | (2,921,032 | ) | $ | (770,744 | ) | $ | (2,150,288 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 13,543 | (4,381,386 | ) | (1,150,264 | ) | (3,231,122 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,564 | (3,094,114 | ) | (593,558 | ) | (2,500,556 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 11,206 | (3,625,328 | ) | (690,434 | ) | (2,934,894 | ) | |||||||||||||||||||||
Towd Point Mortgage Trust REMIC, 2.750% 04/25/2057* | 0.45 | Monthly | 0.45 | USD | 8,771 | (25,599 | ) | – 0 | – | (25,599 | ) | |||||||||||||||||||||
Credit Suisse International |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 15,000 | (1,873,000 | ) | (418,558 | ) | (1,454,442 | ) | |||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 1,136 | (141,786 | ) | (45,304 | ) | (96,482 | ) | |||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 567 | (70,768 | ) | (22,191 | ) | (48,577 | ) | |||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 2,839 | (354,338 | ) | (111,112 | ) | (243,226 | ) | |||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 6,500 | (811,273 | ) | (346,799 | ) | (464,474 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,220 | (2,982,824 | ) | (1,101,564 | ) | (1,881,260 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 17,343 | (5,612,195 | ) | (2,123,205 | ) | (3,488,990 | ) | |||||||||||||||||||||
Deutsche Bank AG | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 23,700 | (2,958,024 | ) | (1,025,748 | ) | (1,932,276 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 10,000 | (3,235,166 | ) | (1,565,809 | ) | (1,669,357 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 20,000 | (6,470,333 | ) | (2,854,485 | ) | (3,615,848 | ) | |||||||||||||||||||||
Goldman Sachs International |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | Monthly | 25.00 | USD | 16,500 | (8,260,359 | ) | (3,683,994 | ) | (4,576,365 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 13,000 | (4,205,717 | ) | (1,302,841 | ) | (2,902,876 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 32,853 | (10,628,493 | ) | (4,523,434 | ) | (6,105,059 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 14,291 | (4,624,567 | ) | (1,642,424 | ) | (2,982,143 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 11,909 | (3,853,752 | ) | (1,366,069 | ) | (2,487,683 | ) | |||||||||||||||||||||
| abfunds.com | AB INCOME FUND | 77 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 8,827 | $ | (2,855,681 | ) | $ | (1,434,547 | ) | $ | (1,421,134 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 6,323 | (2,045,596 | ) | (1,013,026 | ) | (1,032,570 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,029 | (2,921,032 | ) | (767,065 | ) | (2,153,967 | ) | |||||||||||||||||||||
JPMorgan Chase Bank, NA |
| |||||||||||||||||||||||||||||||
Rolls-Royce PLC, 2.125%,06/18/2021, 06/20/2025* | 1.00 | Quarterly | 4.32 | EUR | 1,638 | (260,862 | ) | (301,826 | ) | 40,964 | ||||||||||||||||||||||
Rolls-Royce PLC, 2.125%,06/18/2021, 06/20/2025* | 1.00 | Quarterly | 4.32 | EUR | 1,742 | (277,423 | ) | (322,809 | ) | 45,386 | ||||||||||||||||||||||
JPMorgan Securities, LLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | Monthly | 25.00 | USD | 3,869 | (1,937,467 | ) | (730,861 | ) | (1,206,606 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | Monthly | 25.00 | USD | 3,748 | (1,876,874 | ) | (718,383 | ) | (1,158,491 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9,543 | (3,087,319 | ) | (1,063,838 | ) | (2,023,481 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 3,000 | (970,550 | ) | (187,112 | ) | (783,438 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 4,514 | (1,460,354 | ) | (383,393 | ) | (1,076,961 | ) | |||||||||||||||||||||
Morgan Stanley & Co. International PLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 293 | (36,576 | ) | (11,886 | ) | (24,690 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 547 | (176,964 | ) | (45,057 | ) | (131,907 | ) | |||||||||||||||||||||
Morgan Stanley Capital Services LLC |
| |||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 7,808 | (2,526,018 | ) | (475,214 | ) | (2,050,804 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (124,126,348 | ) | $ | (43,869,930 | ) | $ | (80,256,418 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
REVERSE REPURCHASE AGREEMENTS (see Note D)
| Broker | Interest Rate | Maturity | U.S. $ Value at October 31, 2020 | |||||||||
Barclays Capital, Inc.† | (1.25 | )%* | — | $ | 2,030,006 | |||||||
HSBC Securities (USA), Inc.† | 0.14 | % | — | 164,958,414 | ||||||||
HSBC Securities (USA), Inc.† | 0.14 | % | — | 88,144,742 | ||||||||
JPMorgan Chase Bank† | 0.09 | % | — | 42,950,277 | ||||||||
JPMorgan Chase Bank† | 0.19 | % | — | 272,543,677 | ||||||||
|
| |||||||||||
| $ | 570,627,116 | |||||||||||
|
| |||||||||||
| * | Interest payment due from counterparty. |
| † | The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on October 31, 2020. |
78 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
The type of underlying collateral and the remaining maturity of open reverse repurchase agreements on the statements of assets and liabilities is as follows:
| Overnight and Continuous | Up to 30 Days | 31-90 Days | Greater than 90 Days | Total | ||||||||||||||||
Corporates—Non-Investment Grade | $ | 2,030,006 | $ | – 0 – | $ | – 0 – | $ | – 0 – | $ | 2,030,006 | ||||||||||
Government-Treasuries | 568,597,110 | – 0 – | – 0 – | – 0 – | 568,597,110 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 570,627,116 | $ | – 0 – | $ | – 0 – | $ | – 0 – | $ | 570,627,116 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| (a) | Position, or a portion thereof, has been segregated to collateralize margin requirements for open centrally cleared swaps. |
| (b) | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (c) | Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements. |
| (d) | Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts. |
| (e) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $1,474,101,876 or 31.9% of net assets. |
| (f) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (g) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (h) | Fair valued by the Adviser. |
| (i) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (j) | Non-income producing security. |
| (k) | Defaulted matured security. |
| (l) | Pay-In-Kind Payments (PIK). The issuer may pay cash interest and/or interest in additional debt securities. Rates shown are the rates in effect at October 31, 2020. |
| (m) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.58% of net assets as of October 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
144A/Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentageof Net Assets | ||||||||||||
Consumer Loan Underlying Bond Certificate Issuer Trust I | 09/27/2018 | $ | 1,548,491 | $ | 1,447,515 | 0.03 | % | |||||||||
Consumer Loan Underlying Bond Certificate Issuer Trust I | 09/04/2019 | 1,568,571 | 1,411,126 | 0.03 | % | |||||||||||
Consumer Loan Underlying Bond Certificate Issuer Trust I | 01/09/2019 | 1,103,058 | 1,042,039 | 0.02 | % | |||||||||||
| abfunds.com | AB INCOME FUND | 79 | |
PORTFOLIO OF INVESTMENTS (continued)
144A/Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentageof Net Assets | ||||||||||||
Digicel Group 0.5 Ltd. | 06/19/2000 | $ | 7,645 | $ | 10,616 | 0.00 | % | |||||||||
Home Re Ltd. | 12/20/2019 | 2,075,860 | 1,813,495 | 0.04 | % | |||||||||||
JP Morgan Madison Avenue Securities Trust | 11/06/2015 | $ | 879,273 | $ | 823,892 | 0.02 | % | |||||||||
JP Morgan Madison Avenue Securities Trust | 09/18/2015 | 1,603,618 | 1,466,820 | 0.03 | % | |||||||||||
Magnetation LLC/Mag Finance Corp. | 02/19/2015 | 861,787 | – 0 | – | 0.00 | % | ||||||||||
PMT Credit Risk Transfer Trust | 03/21/2019 | 2,525,753 | 2,253,152 | 0.05 | % | |||||||||||
PMT Credit Risk Transfer Trust | 06/07/2019 | 3,456,466 | 3,098,799 | 0.07 | % | |||||||||||
PMT Credit Risk Transfer Trust | 01/11/2019 | 1,439,119 | 1,289,022 | 0.03 | % | |||||||||||
PMT Credit Risk Transfer Trust | 02/11/2000 | 6,874,671 | 6,153,420 | 0.13 | % | |||||||||||
Peabody Energy Corp. | 08/22/2017 | 2,394,873 | 1,088,160 | 0.02 | % | |||||||||||
Radnor Re Ltd. | 12/23/2019 | 1,542,318 | 1,357,977 | 0.03 | % | |||||||||||
SoFi Consumer Loan Program LLC | 07/19/2017 | 680,401 | 472,733 | 0.01 | % | |||||||||||
SoFi Consumer Loan Program LLC | 06/23/2017 | 1,275,923 | 401,347 | 0.01 | % | |||||||||||
SoFi Consumer Loan Program LLC | 09/18/2017 | 1,758,337 | 417,975 | 0.01 | % | |||||||||||
SoFi Consumer Loan Program Trust | 02/01/2018 | 3,677,430 | 1,481,640 | 0.03 | % | |||||||||||
Terraform Global Operating LLC | 02/08/2018 | 289,000 | 293,026 | 0.01 | % | |||||||||||
Tonon Luxembourg SA | 07/24/2015 | 1,856,320 | 26,095 | 0.00 | % | |||||||||||
Virgolino de Oliveira Finance SA | 06/19/2013 | 3,510,941 | 41,552 | 0.00 | % | |||||||||||
Virgolino de Oliveira Finance SA | 06/09/2014 | 745,965 | 150,000 | 0.00 | % | |||||||||||
Virgolino de Oliveira Finance SA | 01/31/2014 | 916,308 | 8,471 | 0.00 | % | |||||||||||
Wells Fargo Credit Risk Transfer Securities Trust | 09/06/2016 | 560,065 | 541,897 | 0.01 | % | |||||||||||
80 | AB INCOME FUND | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| (n) | The stated coupon rate represents the greater of the LIBOR or the LIBOR floor rate plus a spread at October 31, 2020. |
| (o) | Defaulted. |
| (p) | Inverse interest only security. |
| (q) | IO – Interest Only. |
| (r) | Affiliated investments. |
| (s) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (t) | The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
AUD – Australian Dollar
BRL – Brazilian Real
CAD – Canadian Dollar
DOP – Dominican Peso
EGP – Egyptian Pound
EUR – Euro
GBP – Great British Pound
IDR – Indonesian Rupiah
MXN – Mexican Peso
RUB – Russian Ruble
USD – United States Dollar
ZAR – South African Rand
Glossary:
ABS – Asset-Backed Securities
BOBL – Bundesobligationen
CBT – Chicago Board of Trade
CDX-CMBX.NA – North American Commercial Mortgage-Backed Index
CDX-NAHY – North American High Yield Credit Default Swap Index
CLO – Collateralized Loan Obligations
CMBS – Commercial Mortgage-Backed Securities
IRS – Interest Rate Swaption
JSC – Joint Stock Company
LIBOR – London Interbank Offered Rate
REIT – Real Estate Investment Trust
REMICs – Real Estate Mortgage Investment Conduits
TBA – To Be Announced
TIPS – Treasury Inflation Protected Security
See notes to financial statements.
| abfunds.com | AB INCOME FUND | 81 | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets |
| |||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $6,040,350,552) | $ | 6,144,820,942 | ||
Affiliated issuers (cost $26,220,252) | 26,220,252 | |||
Cash | 1,104,445 | |||
Cash collateral due from broker | 1,991,000 | |||
Foreign currencies, at value (cost $1,972,572) | 1,965,752 | |||
Receivable for investment securities sold | 123,162,103 | |||
Unaffiliated interest and dividends receivable | 58,355,740 | |||
Receivable for capital stock sold | 12,486,037 | |||
Unrealized appreciation on forward currency exchange contracts | 2,700,897 | |||
Affiliated dividends receivable | 1,215 | |||
|
| |||
Total assets | 6,372,808,383 | |||
|
| |||
| Liabilities |
| |||
Payable for investment securities purchased and foreign currency transactions | 1,037,820,983 | |||
Payable for reverse repurchase agreements | 570,627,116 | |||
Market value on credit default swaps (net premiums received $43,869,930) | 124,126,348 | |||
Payable for capital stock repurchased | 11,023,394 | |||
Advisory fee payable | 1,468,158 | |||
Cash collateral due to broker | 1,210,000 | |||
Dividends payable | 898,721 | |||
Unrealized depreciation on forward currency exchange contracts | 572,718 | |||
Payable for variation margin on futures | 273,197 | |||
Distribution fee payable | 244,860 | |||
Transfer Agent fee payable | 67,239 | |||
Administrative fee payable | 26,759 | |||
Directors’ fees payable | 7,192 | |||
Payable for variation margin on centrally cleared swaps | 3,001 | |||
Accrued expenses and other liabilities | 1,136,576 | |||
|
| |||
Total liabilities | 1,749,506,262 | |||
|
| |||
Net Assets | $ | 4,623,302,121 | ||
|
| |||
| Composition of Net Assets |
| |||
Capital stock, at par | $ | 580,055 | ||
Additional paid-in capital | 4,615,069,570 | |||
Distributable earnings | 7,652,496 | |||
|
| |||
| $ | 4,623,302,121 | |||
|
| |||
Net Asset Value Per Share—33 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 289,618,986 | 36,376,460 | $ | 7.96 | * | ||||||
| ||||||||||||
| C | $ | 217,968,208 | 27,344,023 | $ | 7.97 | |||||||
| ||||||||||||
| Advisor | $ | 4,097,222,596 | 514,013,564 | $ | 7.97 | |||||||
| ||||||||||||
| Z | $ | 18,492,331 | 2,320,560 | $ | 7.97 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $8.31 which reflects a sales charge of 4.25%. |
See notes to financial statements.
82 | AB INCOME FUND | abfunds.com | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest (net of foreign taxes withheld of $557,695) | $ | 175,375,128 | ||||||
Dividends | ||||||||
Unaffiliated issuers | 708,947 | |||||||
Affiliated issuers | 396,925 | |||||||
Other income | 31,830 | $ | 176,512,830 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 18,858,713 | |||||||
Distribution fee—Class A | 678,338 | |||||||
Distribution fee—Class C | 1,972,383 | |||||||
Transfer agency—Class A | 209,621 | |||||||
Transfer agency—Class C | 152,873 | |||||||
Transfer agency—Advisor Class | 3,023,070 | |||||||
Transfer agency—Class Z | 2,092 | |||||||
Registration fees | 373,117 | |||||||
Custody and accounting | 349,475 | |||||||
Printing | 274,057 | |||||||
Audit and tax | 148,683 | |||||||
Legal | 83,890 | |||||||
Administrative | 82,961 | |||||||
Directors’ fees | 73,497 | |||||||
Miscellaneous | 138,005 | |||||||
|
| |||||||
Total expenses before interest expense | 26,420,775 | |||||||
Interest expense | 458,441 | |||||||
|
| |||||||
Total expenses | 26,879,216 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (929,000 | ) | ||||||
|
| |||||||
Net expenses | 25,950,216 | |||||||
|
| |||||||
Net investment income | 150,562,614 | |||||||
|
| |||||||
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions(a) | 38,089,028 | |||||||
Forward currency exchange contracts | 6,875,856 | |||||||
Futures | 42,255,412 | |||||||
Swaps | (43,636,596 | ) | ||||||
Foreign currency transactions | (9,147,825 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments(b) | 40,000,582 | |||||||
Forward currency exchange contracts | 5,464,886 | |||||||
Futures | 102,463 | |||||||
Swaps | (101,193,527 | ) | ||||||
Foreign currency denominated assets and liabilities | 183,670 | |||||||
|
| |||||||
Net loss on investment and foreign currency transactions | (21,006,051 | ) | ||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 129,556,563 | ||||||
|
|
| (a) | Net of foreign capital gains taxes of $359,201. |
| (b) | Net of increase in accrued foreign capital gains taxes of $68,394. |
See notes to financial statements.
| abfunds.com | AB INCOME FUND | 83 | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 150,562,614 | $ | 120,023,768 | ||||
Net realized gain on investment and foreign currency transactions | 34,435,875 | 31,842,411 | ||||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | (55,441,926 | ) | 156,494,849 | |||||
Contributions from Affiliates | – 0 | – | 6,818 | |||||
|
|
|
| |||||
Net increase in net assets from operations | 129,556,563 | 308,367,846 | ||||||
Distributions to Shareholders |
| |||||||
Class A | (10,178,007 | ) | (7,312,426 | ) | ||||
Class C | (5,915,916 | ) | (3,340,007 | ) | ||||
Advisor Class | (156,640,759 | ) | (102,301,258 | ) | ||||
Class Z(a) | (437,740 | ) | – 0 | – | ||||
Return of capital |
| |||||||
Class A | – 0 | – | (1,342,784 | ) | ||||
Class C | – 0 | – | (613,327 | ) | ||||
Advisor Class | – 0 | – | (18,785,630 | ) | ||||
| Capital Stock Transactions |
| |||||||
Net increase | 699,536,203 | 1,255,456,371 | ||||||
|
|
|
| |||||
Total increase | 655,920,344 | 1,430,128,785 | ||||||
| Net Assets |
| |||||||
Beginning of period | 3,967,381,777 | 2,537,252,992 | ||||||
|
|
|
| |||||
End of period | $ | 4,623,302,121 | $ | 3,967,381,777 | ||||
|
|
|
| |||||
| (a) | Commenced distribution on November 20, 2019 |
See notes to financial statements.
84 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of ten portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Income Fund (the “Fund”), a diversified portfolio. The Fund acquired the assets and liabilities of the AllianceBernstein Income Fund, Inc., a closed-end fund (the “Predecessor Fund”), effective at the close of business on April 21, 2016 (the “Reorganization”). The Predecessor Fund was the accounting survivor in the Reorganization and as such, the financial statements and the Advisor Class shares financial highlights reflect the financial information of the Predecessor Fund through April 21, 2016. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Effective November 20, 2019, the Fund commenced offering Class Z shares. Class B, Class K, Class R, Class I, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Advisor Class and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily
| abfunds.com | AB INCOME FUND | 85 | |
NOTES TO FINANCIAL STATEMENTS (continued)
available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
86 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized
| abfunds.com | AB INCOME FUND | 87 | |
NOTES TO FINANCIAL STATEMENTS (continued)
modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss
88 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Bank loan prices are provided by third party pricing services and consist of a composite of the quotes received by the vendor into a consensus price. Certain bank loans are classified as Level 3, as a significant input used in the fair value measurement of these instruments is the market quotes that are received by the vendor and these inputs are not observable.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
| |||||||||||||||
Governments – Treasuries | $ | – 0 | – | $ | 2,416,238,634 | $ | – 0 | – | $ | 2,416,238,634 | ||||||
Mortgage Pass-Throughs | – 0 | – | 1,145,199,086 | – 0 | – | 1,145,199,086 | ||||||||||
Corporates – Investment Grade | – 0 | – | 632,674,236 | – 0 | – | 632,674,236 | ||||||||||
Corporates – Non-Investment Grade | – 0 | – | 572,297,841 | 11,719,860 | (a) | 584,017,701 | ||||||||||
Collateralized Mortgage Obligations | – 0 | – | 388,647,491 | – 0 | – | 388,647,491 | ||||||||||
Emerging Markets – Sovereigns | – 0 | – | 220,183,069 | – 0 | – | 220,183,069 | ||||||||||
Collateralized Loan Obligations | – 0 | – | 117,189,484 | – 0 | – | 117,189,484 | ||||||||||
Commercial Mortgage-Backed Securities | – 0 | – | 107,160,562 | – 0 | – | 107,160,562 | ||||||||||
Bank Loans | – 0 | – | 85,946,433 | 12,342,050 | 98,288,483 | |||||||||||
| abfunds.com | AB INCOME FUND | 89 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Emerging Markets – Corporate Bonds | $ | – 0 | – | $ | 88,166,622 | $ | 26,095 | $ | 88,192,717 | |||||||
Asset-Backed Securities | – 0 | – | 69,862,562 | 2,773,695 | 72,636,257 | |||||||||||
Inflation-Linked Securities | – 0 | – | 64,598,006 | – 0 | – | 64,598,006 | ||||||||||
Governments – Sovereign Bonds | – 0 | – | 49,191,759 | – 0 | – | 49,191,759 | ||||||||||
Agencies | – 0 | – | 42,496,577 | – 0 | – | 42,496,577 | ||||||||||
Quasi-Sovereigns | – 0 | – | 41,371,418 | – 0 | – | 41,371,418 | ||||||||||
Local Governments – Provincial Bonds | – 0 | – | 31,530,089 | – 0 | – | 31,530,089 | ||||||||||
Emerging Markets – Treasuries | – 0 | – | 19,858,152 | – 0 | – | 19,858,152 | ||||||||||
Preferred Stocks | – 0 | – | 4,792,000 | 3,299,961 | 8,091,961 | |||||||||||
Common Stocks | 1,412,552 | – 0 | – | 4,615,979 | (a) | 6,028,531 | ||||||||||
Local Governments – US Municipal Bonds | – 0 | – | 3,235,610 | – 0 | – | 3,235,610 | ||||||||||
Options Purchased – Puts | – 0 | – | 749,423 | – 0 | – | 749,423 | ||||||||||
Warrants | 102,120 | – 0 | – | 0 | (a) | 102,120 | ||||||||||
Whole Loan Trusts | – 0 | – | – 0 | – | 89,129 | 89,129 | ||||||||||
Short-Term Investments: | ||||||||||||||||
Investment Companies | 26,220,252 | – 0 | – | – 0 | – | 26,220,252 | ||||||||||
Governments –Treasuries | – 0 | – | 7,050,447 | – 0 | – | 7,050,447 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 27,734,924 | 6,108,439,501 | 34,866,769 | 6,171,041,194 | ||||||||||||
Other Financial Instruments(b): | ||||||||||||||||
Assets: |
| |||||||||||||||
Futures | 433,825 | – 0 | – | – 0 | – | 433,825 | (c) | |||||||||
Forward Currency Exchange Contracts | – 0 | – | 2,700,897 | – 0 | – | 2,700,897 | ||||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | 2,918,477 | – 0 | – | 2,918,477 | (c) | |||||||||
Liabilities: |
| |||||||||||||||
Futures | (2,554,851 | ) | – 0 | – | – 0 | – | (2,554,851 | )(c) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (572,718 | ) | – 0 | – | (572,718 | ) | ||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | (462,320 | ) | – 0 | – | (462,320 | )(c) | ||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (16,592,552 | ) | – 0 | – | (16,592,552 | )(c) | ||||||||
Credit Default Swaps | – 0 | – | (124,126,348 | ) | – 0 | – | (124,126,348 | ) | ||||||||
Reverse Repurchase Agreements | (570,627,116 | ) | – 0 | – | – 0 | – | (570,627,116 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (545,013,218 | ) | $ | 5,972,304,937 | $ | 34,866,769 | $ | 5,462,158,488 | (d) | ||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | The Fund held securities with zero market value at period end. |
| (b) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
90 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
| (c) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
| (d) | Amounts of $41,088,168, $4,941,724, $51,481,876 and $1,296,862 for Asset-Backed Securities, Bank Loans, Collateralized Loan Obligations and Collateralized Mortgage Olbigations, respectively, were transferred out of Level 3 into Level 2 as improved transparency of price inputs received from pricing vendors has increased the observability during the reporting period. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
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NOTES TO FINANCIAL STATEMENTS (continued)
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion of the Fund’s average daily net assets, .40% of the excess over $2.5 billion up to $5 billion and .35% in excess of $5 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to .77%, 1.52%, .52%, and .52% of daily average net assets for Class A, Class C, Advisor Class, and Class Z shares, respectively. For the year ended October 31, 2020, such
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NOTES TO FINANCIAL STATEMENTS (continued)
reimbursement/waivers amounted to $881,877. The Expense Caps may not be terminated by the Adviser before January 31, 2021. Any fees waived and expenses borne by the Adviser through April 22, 2018 are subject to repayment by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne; such waivers that are subject to repayment amounted to $1,361,441 and $396,862 for the years ended October 31, 2017 and October 31, 2018, respectively. In any case, no reimbursement payment will be made that would cause the Fund’s total annual operating expenses to exceed the Expense Caps’ net fee percentage set forth above.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the reimbursement for such services amounted to $82,961.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $890,005 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $74,341 from the sale of Class A shares and received $84,990 and $103,080 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of ..20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $47,123.
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NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 51,924 | $ | 1,692,251 | $ | 1,717,955 | $ | 26,220 | $ | 397 | ||||||||||
During the year ended October 31, 2019, the Adviser reimbursed the Fund $6,818 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares and 1% of the Fund’s average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Advisor Class and Class Z shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $992,755 for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 1,669,177,487 | $ | 884,733,103 | ||||
U.S. government securities | 13,612,578,676 | 12,742,515,499 | ||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 6,065,740,413 | ||
|
| |||
Gross unrealized appreciation | $ | 332,862,414 | ||
Gross unrealized depreciation | (243,795,115 | ) | ||
|
| |||
Net unrealized appreciation | $ | 89,067,299 | ||
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
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NOTES TO FINANCIAL STATEMENTS (continued)
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended October 31, 2020, the Fund held futures for hedging and non-hedging purposes.
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NOTES TO FINANCIAL STATEMENTS (continued)
| • | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2020, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
| • | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds
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NOTES TO FINANCIAL STATEMENTS (continued)
from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
The Fund may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The Fund’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended October 31, 2020, the Fund held purchased swaptions for hedging and non-hedging purposes.
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NOTES TO FINANCIAL STATEMENTS (continued)
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions.” A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission
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NOTES TO FINANCIAL STATEMENTS (continued)
merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams
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NOTES TO FINANCIAL STATEMENTS (continued)
are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments.
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NOTES TO FINANCIAL STATEMENTS (continued)
The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
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NOTES TO FINANCIAL STATEMENTS (continued)
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
| Asset Derivatives | Liability Derivatives | |||||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 433,825 | * | | Receivable/Payable for variation margin on futures | $ | 2,554,851 | * | |||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | 2,679,064 | * | | Receivable/Payable for variation margin on centrally cleared swaps | | 263,879 | * | ||||||
Interest rate contracts | | Receivable/Payable for variation margin on centrally cleared swaps | | 16,592,552 | * | |||||||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts | 2,700,897 | | Unrealized depreciation on forward currency exchange contracts | | 572,718 | ||||||||
Interest rate contracts | Investments in securities, at value | 749,423 | ||||||||||||
Credit contracts | | Market value on credit default swaps | | 124,126,348 | ||||||||||
|
|
|
| |||||||||||
Total | $ | 6,563,209 | $ | 144,110,348 | ||||||||||
|
|
|
| |||||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | 42,255,412 | $ | 102,463 | |||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | 6,875,856 | 5,464,886 | |||||||
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NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | $ | (805,852 | ) | $ | 141,652 | ||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (2,658,053 | ) | (6,411,354 | ) | |||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (40,978,543 | ) | (94,782,173 | ) | |||||
|
|
|
| |||||||
Total | $ | 4,688,820 | $ | (95,484,526) | ||||||
|
|
|
| |||||||
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Futures: | ||||
Average notional amount of buy contracts | $ | 557,626,419 | ||
Average notional amount of sale contracts | $ | 369,576,970 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 56,117,614 | ||
Average principal amount of sale contracts | $ | 333,034,325 | ||
Purchased Swaptions: | ||||
Average notional amount | $ | 111,248,833 | (a) | |
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 216,059,615 | ||
Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 25,750,000 | (b) | |
Average notional amount of sale contracts | $ | 396,544,656 | ||
Centrally Cleared Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 55,255,529 | (a) | |
Average notional amount of sale contracts | $ | 277,354,713 |
| (a) | Positions were open for six months during the year. |
| (b) | Positions were open for one month during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
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NOTES TO FINANCIAL STATEMENTS (continued)
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Barclays Bank PLC | $ | 100,482 | $ | (100,482 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
BNP Paribas SA | 438,559 | – 0 | – | (380,000 | ) | – 0 | – | 58,559 | ||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 14,399 | (14,399 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 1,585,247 | (1,585,247 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 411,752 | (411,752 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | 897,473 | (897,473 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 2,408 | – 0 | – | – 0 | – | – 0 | – | 2,408 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 3,450,320 | $ | (3,009,353 | ) | $ | (380,000 | ) | $ | – 0 | – | $ | 60,967 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Bank of America, NA | $ | 147,272 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 147,272 | |||||||
Barclays Bank PLC | 2,503,139 | (100,482 | ) | – 0 | – | (2,402,657 | ) | – 0 | – | |||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 45,180,105 | (14,399 | ) | (1,621,000 | ) | (43,544,706 | ) | – 0 | – | |||||||||||
Credit Suisse International | 11,846,184 | – 0 | – | – 0 | – | (11,846,184 | ) | – 0 | – | |||||||||||
Deutsche Bank AG | 12,663,523 | – 0 | – | – 0 | – | (12,663,523 | ) | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 39,481,465 | (1,585,247 | ) | (370,000 | ) | (37,526,218 | ) | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 10,129,766 | (411,752 | ) | – 0 | – | (9,718,014 | ) | – 0 | – | |||||||||||
| abfunds.com | AB INCOME FUND | 105 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | $ | 2,747,612 | $ | (897,473 | ) | $ | – 0 | – | $ | (1,850,139 | ) | $ | – 0 | – | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 124,699,066 | $ | (3,009,353 | ) | $ | (1,991,000 | ) | $ | (119,551,441 | ) | $ | 147,272 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. TBA and Dollar Rolls
The Fund may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.
106 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund may enter into certain TBA transactions known as dollar rolls. Dollar rolls involve sales by the Fund of securities for delivery in the current month and the Fund’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the year ended October 31, 2020, the Fund earned drop income of $4,545,230 which is included in interest income in the accompanying statement of operations.
4. Reverse Repurchase Agreements
The Fund may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Fund is permitted to offset payables and/or receivables with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund in the event of a default. In the event of a default by a MRA counterparty, the Fund may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the year ended October 31, 2020, the average amount of reverse repurchase agreements outstanding was $250,835,986 and the daily weighted average interest rate was .13%. At October 31, 2020, the Fund had reverse repurchase agreements outstanding in the amount of $570,627,116 as reported on the statement of assets and liabilities.
The following table presents the Fund’s RVP liabilities by counterparty net of the related collateral pledged by the Fund as of October 31, 2020:
Counterparty | RVP Liabilities Subject to a MRA | Securities Collateral Pledged†* | Net Amount of RVP Liabilities | |||||||||
Barclays Capital, Inc. | $ | 2,030,006 | $ | (2,030,006 | ) | $ | – 0 | – | ||||
HSBC Securities (USA), Inc. | 253,103,156 | (252,474,351 | ) | 628,805 | ||||||||
JPMorgan Chase Bank | 315,493,954 | (314,730,970 | ) | 762,984 | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 570,627,116 | $ | (569,235,327 | ) | $ | 1,391,789 | |||||
|
|
|
|
|
| |||||||
| abfunds.com | AB INCOME FUND | 107 | |
NOTES TO FINANCIAL STATEMENTS (continued)
| † | Including accrued interest. |
| * | The actual collateral pledged may be more than the amount reported due to overcollateralization. |
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Shares sold | 21,145,246 | 19,499,931 | $ | 167,807,929 | $ | 151,947,171 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 794,985 | 691,103 | 6,292,343 | 5,360,840 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 197,566 | 292,725 | 1,553,543 | 2,325,762 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (15,889,560 | ) | (21,445,308 | ) | (124,259,840 | ) | (163,431,602 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 6,248,237 | (961,549 | ) | $ | 51,393,975 | $ | (3,797,829 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||
Shares sold | 11,945,989 | 12,928,047 | $ | 95,198,555 | $ | 101,302,295 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 508,293 | 331,542 | 4,029,036 | 2,584,334 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (197,320 | ) | (292,359 | ) | (1,553,543 | ) | (2,325,762 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (5,477,623 | ) | (3,371,776 | ) | (42,721,251 | ) | (25,885,420 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 6,779,339 | 9,595,454 | $ | 54,952,797 | $ | 75,675,447 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Advisor Class |
| |||||||||||||||||||||||
Shares sold | 265,870,110 | 243,748,977 | $ | 2,104,021,251 | $ | 1,904,501,801 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 12,977,218 | 9,782,125 | 102,871,686 | 76,229,658 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (210,433,650 | ) | (104,179,175 | ) | (1,630,716,915 | ) | (797,152,706 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 68,413,678 | 149,351,927 | $ | 576,176,022 | $ | 1,183,578,753 | ||||||||||||||||||
| ||||||||||||||||||||||||
108 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class Z(a) |
| |||||||||||||||||||||||
Shares sold | 2,554,455 | – 0 | – | $ | 18,769,036 | $ | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
Share issued in reinvestment of dividends and distributions | 37,721 | – 0 | – | 298,182 | – 0 | – | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (271,616 | ) | – 0 | – | (2,053,809 | ) | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 2,320,560 | – 0 | – | $ | 17,013,409 | $ | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
| (a) | Commenced distribution on November 20, 2019. |
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and may be more difficult to trade than other types of securities.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new
| abfunds.com | AB INCOME FUND | 109 | |
NOTES TO FINANCIAL STATEMENTS (continued)
investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest
110 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
rate environment, when the value and liquidity of fixed-income securities generally decline.
Mortgage-Related and/or Other Asset-Backed Securities Risk—Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related
| abfunds.com | AB INCOME FUND | 111 | |
NOTES TO FINANCIAL STATEMENTS (continued)
investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 173,172,422 | $ | 112,953,691 | ||||
|
|
|
| |||||
Total taxable distributions paid | $ | 173,172,422 | $ | 112,953,691 | ||||
|
|
|
| |||||
Return of capital | – 0 | – | 20,741,741 | |||||
|
|
|
| |||||
Total distributions paid | $ | 173,172,422 | $ | 133,695,432 | ||||
|
|
|
| |||||
112 | AB INCOME FUND | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (71,977,526 | )(a) | |
Unrealized appreciation/(depreciation) | 86,652,003 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 14,674,477 | (c) | |
|
|
| (a) | As of October 31, 2020, the Fund had a net capital loss carryforward of $55,561,127. During the fiscal year, the Fund utilized $20,690,535 of capital loss carry forwards to offset current year net realized gains. As of October 31, 2020, the cumulative deferred loss on straddles was $16,416,399. |
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of grantor trusts, the amortization on callable bonds, the tax treatment of swaps, the tax deferral of losses on wash sales, and the tax treatment of partnership investments. |
| (c) | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the accrual of foreign capital gains tax, the tax treatment of defaulted securities, and dividends payable. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund had a net long-term capital loss carryforward of $55,561,127, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps resulted in a net decrease in accumulated loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
| abfunds.com | AB INCOME FUND | 113 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
114 | AB INCOME FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | April 21, 2016 | |||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 7.98 | $ 7.49 | $ 8.09 | $ 8.08 | $ 7.99 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(b)(c) | .26 | .31 | .29 | .36 | .17† | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .02 | (d) | .53 | (.50 | ) | .05 | .08 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (e) | .00 | (e) | .00 | (e) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .28 | .84 | (.21 | ) | .41 | .25 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.30 | ) | (.30 | ) | (.36 | ) | (.40 | ) | (.16 | ) | ||||||||||
Return of capital | – 0 | – | (.05 | ) | (.03 | ) | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.30 | ) | (.35 | ) | (.39 | ) | (.40 | ) | (.16 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.96 | $ 7.98 | $ 7.49 | $ 8.09 | $ 8.08 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(f) | 3.55 | % | 11.50 | % | (2.71 | )% | 5.17 | % | 3.14 | %† | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $289,619 | $240,567 | $232,931 | $165,294 | $2,104 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(g) | .78 | % | .77 | % | 1.08 | % | 1.03 | % | 1.16 | %^ | ||||||||||
Expenses, before waivers/reimbursements(g) | .80 | % | .83 | % | 1.16 | % | 1.11 | % | 1.37 | %^ | ||||||||||
Net investment income(c) | 3.24 | % | 4.02 | % | 3.73 | % | 4.42 | % | 4.06 | %†^ | ||||||||||
Portfolio turnover rate** | 246 | % | 270 | % | 105 | % | 42 | % | 14 | % | ||||||||||
See footnote summary on page 118-119.
| abfunds.com | AB INCOME FUND | 115 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | April 21, 2016 | |||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | |||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 7.99 | $ 7.50 | $ 8.10 | $ 8.09 | $ 7.99 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(b)(c) | .20 | .25 | .23 | .30 | .14† | |||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .02 | (d) | .53 | (.50 | ) | .05 | .09 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (e) | .00 | (e) | .00 | (e) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .22 | .78 | (.27 | ) | .35 | .23 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.24 | ) | (.25 | ) | (.30 | ) | (.34 | ) | (.13 | ) | ||||||||||
Return of capital | – 0 | – | (.04 | ) | (.03 | ) | – 0 | – | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.24 | ) | (.29 | ) | (.33 | ) | (.34 | ) | (.13 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 7.97 | $ 7.99 | $ 7.50 | $ 8.10 | $ 8.09 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(f) | 2.77 | % | 10.65 | % | (3.43 | )% | 4.37 | % | 2.85 | %† | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $217,968 | $164,413 | $82,283 | $62,121 | $1,133 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(g) | 1.53 | % | 1.52 | % | 1.83 | % | 1.78 | % | 1.90 | %^ | ||||||||||
Expenses, before waivers/reimbursements(g) | 1.55 | % | 1.57 | % | 1.92 | % | 1.87 | % | 2.15 | %^ | ||||||||||
Net investment income(c) | 2.49 | % | 3.21 | % | 2.98 | % | 3.68 | % | 3.34 | %†^ | ||||||||||
Portfolio turnover rate** | 246 | % | 270 | % | 105 | % | 42 | % | 14 | % | ||||||||||
See footnote summary on page 118-119.
116 | AB INCOME FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||||||
| Year Ended October 31, | January 1, 2016 to October 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016(h) | 2015 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 7.99 | $ 7.50 | $ 8.10 | $ 8.09 | $ 7.86 | $ 8.34 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income(b)(c) | .27 | .33 | .31 | .41 | .29† | .38 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .03 | (d) | .53 | (.50 | ) | .02 | .22 | (.41 | ) | |||||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (e) | .00 | (e) | .00 | (e) | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .30 | .86 | (.19 | ) | .43 | .51 | (.03 | ) | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.32 | ) | (.31 | ) | (.38 | ) | (.42 | ) | (.28 | ) | (.46 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.05 | ) | ||||||||||||
Return of capital | – 0 | – | (.06 | ) | (.03 | ) | – 0 | – | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.32 | ) | (.37 | ) | (.41 | ) | (.42 | ) | (.28 | ) | (.51 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Redemption fee | – 0 | – | – 0 | – | – 0 | – | – 0 | – | .00 | (e) | – 0 | – | ||||||||||||
Anti-Dilutive Effect of Share Repurchase Program | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | .06 | |||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 7.97 | $ 7.99 | $ 7.50 | $ 8.10 | $ 8.09 | $ 7.86 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Market value, end of period | N/A | N/A | N/A | N/A | N/A | $ 7.67 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Discount, end of period | N/A | N/A | N/A | N/A | N/A | (2.42 | )% | |||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on: | ||||||||||||||||||||||||
Market value | N/A | N/A | N/A | N/A | N/A | 9.71 | %(i) | |||||||||||||||||
Net asset value(f) | 3.80 | % | 11.76 | % | (2.46 | )% | 5.44 | % | 6.66 | %† | .70 | %(i) | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000,000’s omitted) | $4,097 | $3,562 | $2,222 | $1,806 | $916 | $1,696 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(g) | .53 | % | .52 | % | .83 | % | .81 | % | .88 | %^ | .75 | % | ||||||||||||
Expenses, before waivers/reimbursements(g) | .55 | % | .58 | % | .91 | % | .93 | % | .96 | %^ | .75 | % | ||||||||||||
Net investment income(c) | 3.48 | % | 4.24 | % | 3.98 | % | 5.11 | % | 4.29 | %†^ | 4.57 | % | ||||||||||||
Portfolio turnover rate** | 246 | % | 270 | % | 105 | % | 42 | % | 14 | % | 34 | % | ||||||||||||
See footnote summary on page 118-119.
| abfunds.com | AB INCOME FUND | 117 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class Z | ||||
| November 20, 2019(j)to October 31, 2020 | ||||
|
| |||
Net asset value, beginning of period | $ 7.97 | |||
|
| |||
Income From Investment Operations | ||||
Net investment income(b)(c) | .27 | |||
Net realized and unrealized gain on investment and foreign currency transactions | .03 | (d) | ||
|
| |||
Net increase in net asset value from operations | .30 | |||
|
| |||
Less: Dividends | ||||
Dividends from net investment income | (.30 | ) | ||
|
| |||
Net asset value, end of period | $ 7.97 | |||
|
| |||
Total Return | ||||
Total investment return based on net asset value(f) | 3.89 | % | ||
Ratios/Supplemental Data | ||||
Net assets, end of period (000’s omitted) | $18,492 | |||
Ratio to average net assets of: | ||||
Expenses, net of waivers/reimbursements(g) | .48 | % | ||
Expenses, before waivers/reimbursements(g) | .48 | % | ||
Net investment income(c) | 3.49 | % | ||
Portfolio turnover rate** | 246 | % | ||
| (a) | Inception date. Amount is less than $.005. |
| (b) | Based on average shares outstanding. |
| (c) | Net of expenses waived/reimbursed by the Adviser. |
| (d) | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Fund’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| (e) | Amount is less than $.005. |
| (f) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
See notes to financial statements.
118 | AB INCOME FUND | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (g) | The expense ratios, excluding interest expense are: |
| Year Ended October 31, | January 1, 2016 to December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016(h) | 2015 | |||||||||||||||||||
|
| |||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||
Net of waivers/reimbursements | .77 | % | .77 | % | .77 | % | .77 | % | .88 | %^ | N/A | |||||||||||||
Before waivers/reimbursements | .79 | % | .82 | % | .85 | % | .85 | % | 1.09 | %^ | N/A | |||||||||||||
Class C |
| |||||||||||||||||||||||
Net of waivers/reimbursements | 1.52 | % | 1.52 | % | 1.52 | % | 1.52 | % | 1.63 | %^ | N/A | |||||||||||||
Before waivers/reimbursements | 1.54 | % | 1.57 | % | 1.60 | % | 1.61 | % | 1.87 | %^ | N/A | |||||||||||||
Advisor Class |
| |||||||||||||||||||||||
Net of waivers/reimbursements | .52 | % | .52 | % | .52 | % | .54 | % | .61 | %^ | .61 | % | ||||||||||||
Before waivers/reimbursements | .54 | % | .57 | % | .60 | % | .65 | % | .69 | %^ | .61 | % | ||||||||||||
Class Z |
| |||||||||||||||||||||||
Net of waivers/reimbursements | .46 | % | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
Before waivers/reimbursements | .46 | % | N/A | N/A | N/A | N/A | N/A | |||||||||||||||||
| (h) | The Predecessor Fund’s fiscal year end was December 31 and the Fund’s fiscal year end is October 31. |
| (i) | Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. Total investment return calculated for a period of less than one year is not annualized. |
| (j) | Commencement of distributions. |
| † | For the year ended October 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| Net Investment Income Per Share | Net Investment Income Ratio | Total Return | ||
| $.003 | .04% | .03% |
| ^ | Annualized. |
| ** | The Fund accounts for dollar roll transactions as purchases and sales. |
See notes to financial statements.
| abfunds.com | AB INCOME FUND | 119 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of AB Income Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Income Fund (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the four years in the period then ended, the period from January 1, 2016 to October 31, 2016, and for the year ended December 31, 2015 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the four years in the period then ended, the period from January 1, 2016 to October 31, 2016, and for the year ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
| 120 | AB INCOME FUND | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 29, 2020
| abfunds.com | AB INCOME FUND | 121 | |
2020 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2020. For foreign shareholders, 63.58% of ordinary income dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2021.
| 122 | AB INCOME FUND | abfunds.com | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Scott A. DiMaggio(2), Vice President Gershon M. Distenfeld(2), Douglas J. Peebles(2),* Vice President Matthew S. Sheridan(2), Vice President | Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s U.S. Investment Grade: Core Fixed Income Investment Team. Messrs. DiMaggio, Distenfeld, Peebles and Sheridan are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| * | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
| abfunds.com | AB INCOME FUND | 123 | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | 77 | None | |||||
| 124 | AB INCOME FUND | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS | ||||||||
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
| abfunds.com | AB INCOME FUND | 125 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
126 | AB INCOME FUND | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
Michael J. Downey,## 76 | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
Nancy P. Jacklin,## 72 (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
| abfunds.com | AB INCOME FUND | 127 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
| Jeanette Loeb,## 68 (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
128 | AB INCOME FUND | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 to 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
| abfunds.com | AB INCOME FUND | 129 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
Garry L. Moody,## 68 (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
| 130 | AB INCOME FUND | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
DISINTERESTED DIRECTORS (continued) | ||||||||
Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Dept. Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105 |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to this position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| abfunds.com | AB INCOME FUND | 131 | |
MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE | POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS | ||
Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
Scott A. DiMaggio 49 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also co-Head of Fixed-Income. | ||
| Gershon M. Distenfeld 44 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also co-Head of Fixed Income. | ||
| Douglas J. Peebles^ 55 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer of Fixed Income. | ||
| Matthew S. Sheridan 45 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which has been associated since prior to 2015. | ||
| Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”**), with which he has been associated since prior to 2015. | ||
| Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
| Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com for a free prospectus or SAI.
| 132 | AB INCOME FUND | abfunds.com | |
Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
| abfunds.com | AB INCOME FUND | 133 | |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Income Fund (the “Fund”) at a meeting held on November 4-6, 2019 (the “Meeting”).*
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business
| * | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. |
| 134 | AB INCOME FUND | abfunds.com | |
judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2017 and 2018 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund
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before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1- and 3-year periods ended July 31, 2019 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and noted that it was above the median. The directors took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The Adviser informed the directors that there were no institutional products managed by the Adviser that utilize investment strategies similar to those of the Fund.
| 136 | AB INCOME FUND | abfunds.com | |
The directors noted that the Fund invests in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels and that the Fund’s net assets were above the first breakpoint level. Accordingly, the Fund’s current effective advisory fee rate reflected a reduction due to the breakpoint and would be further reduced to the extent the net assets of the Fund increase. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a
| abfunds.com | AB INCOME FUND | 137 | |
fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s breakpoint arrangements were acceptable and provide a means for sharing economies of scale.
| 138 | AB INCOME FUND | abfunds.com | |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
| abfunds.com | AB INCOME FUND | 139 | |
NOTES
140 | AB INCOME FUND | abfunds.com | |
AB INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
IF-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB TOTAL RETURN BOND PORTFOLIO
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Total Return Bond Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 1 | |
ANNUAL REPORT
December 14, 2020
This report provides management’s discussion of fund performance for AB Total Return Bond Portfolio for the annual reporting period ended October 31, 2020.
The Fund’s investment objective is to maximize long-term total return without assuming what the Adviser considers undue risk.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB TOTAL RETURN BOND PORTFOLIO | ||||||||
| Class A Shares | 7.32% | 4.60% | ||||||
| Class C Shares | 6.84% | 3.83% | ||||||
| Advisor Class Shares1 | 7.35% | 4.86% | ||||||
| Class R Shares1 | 7.09% | 4.33% | ||||||
| Class K Shares1 | 7.31% | 4.59% | ||||||
| Class I Shares1 | 7.44% | 4.93% | ||||||
| Class Z Shares1 | 7.43% | 4.84% | ||||||
| Bloomberg Barclays US Aggregate Bond Index | 1.27% | 6.19% | ||||||
| 1 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays US Aggregate Bond Index, for the six- and 12-month periods ended October 31, 2020.
During the 12-month period, all share classes of the Fund underperformed the benchmark, before sales charges. Security selection was the primary detractor, relative to the benchmark, mostly from losses in commercial mortgage-backed securities (“CMBS”) that were partially offset by gains among investment-grade and emerging-market corporate bonds. Country allocation (a result of bottom-up security analysis combined with fundamental research) also detracted, from losses within non-US exposure primarily in Japan and the eurozone, which were greater than gains from exposure to Canada and South Africa. Sector allocation was a minor detractor, as an allocation to agency risk-sharing transactions was mostly offset by exposure to investment-grade corporates. The Fund’s longer-than-benchmark duration contributed, as did yield-curve positioning mostly in five- and 10-year maturities. Currency decisions also contributed,
2 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
due to gains in various non-US currencies including the Australian dollar, offshore Chinese renminbi and yen, despite a small loss in the South Korean won.
During the six-month period, all share classes of the Fund outperformed the benchmark, before sales charges. Sector allocation was the largest contributor, mostly from exposures to agency risk-sharing transactions, high-yield corporate bonds, CMBS and US agency mortgages. Security selection also contributed, as gains from selections in investment-grade corporates, CMBS and asset-backed securities were greater than a loss in high-yield corporate bonds. Currency decision added to performance, as gains in several non-US currencies including the Australian dollar, offshore Chinese renminbi, yen and Canadian dollar exceeded a loss in the South Korean won. Country allocations outside the US also added to returns, mostly from an allocation to South Korea. The Fund’s longer-than-benchmark duration and yield-curve positioning detracted from performance.
During both periods, the Fund utilized currency forwards to hedge currency risk and actively manage currency positions. Credit default swaps were utilized in the corporate and CMBS sectors for hedging and investment purposes. Total return swaps and written options were utilized in the corporate sectors for hedging and investment purposes. Treasury futures and interest rate swaps were utilized to manage duration, country exposure and yield-curve positioning. Written swaptions were used for duration management.
MARKET REVIEW AND INVESTMENT STRATEGY
Global fixed-income market returns were positive over the 12-month period ended October 31, 2020. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, which set the stage for a rebound in risk assets following the sell-off that started in March. Government bonds rallied as interest rates were slashed. Emerging- and developed-market investment-grade corporate bonds led gains, followed by developed-market high-yield corporate bonds, as investors searched for higher yields in a period of falling interest rates. Corporate bonds in the US outperformed their European counterparts. Securitized assets also advanced, while emerging-market sovereign bonds were slightly positive and emerging-market local bonds fell during the period. The US dollar declined against most major developed-market currencies and gained against a majority of emerging-market currencies. Brent crude oil prices fell almost 34% as demand slowed sharply and the oil industry outlook was uncertain.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 3 | |
INVESTMENT POLICIES
The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund expects to invest in readily marketable fixed-income securities with a range of maturities from short- to long-term and relatively attractive yields that do not involve undue risk of loss of capital. The Fund may invest up to 25% of its net assets in below investment-grade bonds. The Fund may use leverage for investment purposes.
The Fund may invest without limit in US dollar-denominated foreign fixed-income securities and may invest up to 25% of its assets in non-US dollar-denominated foreign fixed-income securities. These investments may include, in each case, developed- and emerging-market debt securities.
The Adviser selects securities for purchase or sale based on its assessment of the securities’ risk and return characteristics as well as the securities’ impact on the overall risk and return characteristics of the Fund. In making this assessment, the Adviser takes into account various factors, including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings.
The Fund may invest in mortgage-related and other asset-backed securities, loan participations and assignments, inflation-indexed securities, variable, floating, and inverse floating-rate instruments and preferred stock, and may use other investment techniques. The Fund intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Fund may invest, without limit, in derivatives, such as options, futures contracts, forwards or swaps.
4 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays US Aggregate Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays US Aggregate Bond Index represents the performance of securities within the US investment-grade fixed-rate bond market, with index components for government and corporate securities, mortgage pass-through securities, asset-backed securities and commercial mortgage-backed securities. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and may be more difficult to trade than other types of securities.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 5 | |
DISCLOSURES AND RISKS (continued)
fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities. The Fund invests in inflation-indexed securities, the value of which may be vulnerable to changes in expectations of inflation or interest rates.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Mortgage-Related and/or Other Asset-Backed Securities Risk: Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
6 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
DISCLOSURES AND RISKS (continued)
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline.
Active Trading Risk: The Fund expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate may greatly exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Fund’s return. In addition, a high rate of portfolio turnover may result in substantial short-term gains, which may have adverse tax consequences for Fund shareholders.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com. Class B shares are no longer being offered. Effective November 7, 2019, all outstanding Class B shares were converted to Class A shares. Please see Note A for more information.
On July 12, 2019, the Fund implemented its current investment policies (the change eliminated the guidelines for the average duration and maturity of the Fund and addressed certain related matters) and also changed its name from AB Intermediate Bond Portfolio to AB Total Return Bond Portfolio. Accordingly, the performance shown for periods prior to July 12, 2019, is based on the Fund’s
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 7 | |
DISCLOSURES AND RISKS (continued)
prior investment strategies and may not be representative of the Fund’s performance under its current investment policies.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
10/31/2010 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Total Return Bond Portfolio Class A shares (from 10/31/2010 to 10/31/2020) as compared to the performance of the Fund’s benchmark. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 9 | |
HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | ||||||||||
| CLASS A SHARES | 2.08% | |||||||||||
| 1 Year | 4.60% | 0.19% | ||||||||||
| 5 Years | 3.86% | 2.97% | ||||||||||
| 10 Years | 3.55% | 3.10% | ||||||||||
| CLASS C SHARES | 1.42% | |||||||||||
| 1 Year | 3.83% | 2.83% | ||||||||||
| 5 Years | 3.08% | 3.08% | ||||||||||
| 10 Years | 2.80% | 2.80% | ||||||||||
| ADVISOR CLASS SHARES2 | 2.42% | |||||||||||
| 1 Year | 4.86% | 4.86% | ||||||||||
| 5 Years | 4.12% | 4.12% | ||||||||||
| 10 Years | 3.82% | 3.82% | ||||||||||
| CLASS R SHARES2 | 1.76% | |||||||||||
| 1 Year | 4.33% | 4.33% | ||||||||||
| 5 Years | 3.59% | 3.59% | ||||||||||
| 10 Years | 3.31% | 3.31% | ||||||||||
| CLASS K SHARES2 | 2.07% | |||||||||||
| 1 Year | 4.59% | 4.59% | ||||||||||
| 5 Years | 3.86% | 3.86% | ||||||||||
| 10 Years | 3.57% | 3.57% | ||||||||||
| CLASS I SHARES2 | 2.46% | |||||||||||
| 1 Year | 4.93% | 4.93% | ||||||||||
| 5 Years | 4.14% | 4.14% | ||||||||||
| 10 Years | 3.83% | 3.83% | ||||||||||
| CLASS Z SHARES2 | 2.50% | |||||||||||
| 1 Year | 4.84% | 4.84% | ||||||||||
| 5 Years | 4.11% | 4.11% | ||||||||||
| Since Inception3 | 3.82% | 3.82% | ||||||||||
The Fund’s prospectus fee table shows the Fund’s total annual operating expense ratios as 1.04%, 1.79%, 0.79%, 1.42%, 1.10%, 0.75% and 0.68% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of interest expense to 0.77%, 1.52%, 0.52%, 1.02%, 0.77%, 0.52% and 0.52% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. These waivers/reimbursements may not be terminated before January 31, 2021 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
(footnotes continued on next page)
10 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
| 1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2020. |
| 2 | These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 3 | Inception date: 4/25/2014. |
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 11 | |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS A SHARES | ||||
| 1 Year | 0.52% | |||
| 5 Years | 3.03% | |||
| 10 Years | 3.17% | |||
| CLASS C SHARES | ||||
| 1 Year | 3.18% | |||
| 5 Years | 3.16% | |||
| 10 Years | 2.88% | |||
| ADVISOR CLASS SHARES1 | ||||
| 1 Year | 5.21% | |||
| 5 Years | 4.20% | |||
| 10 Years | 3.90% | |||
| CLASS R SHARES1 | ||||
| 1 Year | 4.68% | |||
| 5 Years | 3.67% | |||
| 10 Years | 3.39% | |||
| CLASS K SHARES1 | ||||
| 1 Year | 4.94% | |||
| 5 Years | 3.92% | |||
| 10 Years | 3.64% | |||
| CLASS I SHARES1 | ||||
| 1 Year | 5.19% | |||
| 5 Years | 4.20% | |||
| 10 Years | 3.90% | |||
| CLASS Z SHARES1 | ||||
| 1 Year | 5.10% | |||
| 5 Years | 4.18% | |||
| Since Inception2 | 3.89% | |||
| 1 | Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| 2 | Inception date: 4/25/2014. |
12 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 13 | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
| Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,073.20 | $ | 4.01 | 0.77 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.27 | $ | 3.91 | 0.77 | % | ||||||||
| Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,068.40 | $ | 7.90 | 1.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.50 | $ | 7.71 | 1.52 | % | ||||||||
| Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,073.50 | $ | 2.71 | 0.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.52 | $ | 2.64 | 0.52 | % | ||||||||
| Class R | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,070.90 | $ | 5.31 | 1.02 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.01 | $ | 5.18 | 1.02 | % | ||||||||
| Class K | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,073.10 | $ | 4.01 | 0.77 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.27 | $ | 3.91 | 0.77 | % | ||||||||
| Class I | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,074.40 | $ | 2.71 | 0.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.52 | $ | 2.64 | 0.52 | % | ||||||||
| Class Z | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,074.30 | $ | 2.71 | 0.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.52 | $ | 2.64 | 0.52 | % | ||||||||
| * | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
14 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $373.7
TOP TEN SECTORS (including derivatives)1
| Governments–Treasuries2 | 73.34 | % | ||
| Corporates–Investment Grade | 27.98 | |||
| Interest Rate Swaps3 | 17.19 | |||
| Commercial Mortgage-Backed Securities4 | 17.00 | |||
| Collateralized Mortgage Obligations | 16.30 | |||
| Mortgage Pass-Throughs | 12.88 | |||
| Asset-Backed Securities | 4.36 | |||
| Corporates–Non-Investment Grade4 | 3.91 | |||
| U.S. Treasury Bills | 3.07 | |||
| Inflation-Linked Securities | 2.74 | |||
SECTOR BREAKDOWN (excluding derivatives)5
| Corporates–Investment Grade | 26.9 | % | ||
| Collateralized Mortgage Obligations | 15.7 | |||
| Commercial Mortgage-Backed Securities | 15.1 | |||
| Mortgage Pass-Throughs | 12.4 | |||
| Governments–Treasuries | 10.4 | |||
| Asset-Backed Securities | 4.2 | |||
| Inflation-Linked Securities | 2.6 | |||
| Corporates–Non-Investment Grade | 2.6 | |||
| Collateralized Loan Obligations | 1.1 | |||
| Governments–Sovereign Bonds | 1.0 | |||
| Quasi-Sovereigns | 1.0 | |||
| Local Governments–US Municipal Bonds | 1.0 | |||
| Emerging Markets–Treasuries | 0.9 | |||
| Other | 1.2 | |||
| Short-Term | 3.9 | |||
| 100.0 | % | |||
| 1 | All data are as of October 31, 2020. The Fund’s sectors include derivative exposure and are expressed as approximate percentages of the Fund’s total net assets, based on the Adviser’s internal classification. The percentages will vary over time. |
| 2 | Includes Treasury Futures. |
| 3 | Represents the exposure of the Fund’s fixed-rate payments on the Interest Rate Swaps. Interest Rate Swaps involve the exchange by a fund with another party of payments calculated by reference to specified interest rates (e.g., an exchange of floating-rate payments for fixed-rate payments). |
| 4 | Includes Credit Default Swaps. |
| 5 | All data are as of October 31, 2020. The Fund’s sector breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” sector breakdown weightings represent 0.6% or less in the following sector breakdown: Common Stocks, Emerging Markets–Corporate Bonds and Emerging Markets-Sovereigns. |
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 15 | |
PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
CORPORATES – INVESTMENT | ||||||||||||
Industrial – 16.8% | ||||||||||||
Basic – 1.7% | ||||||||||||
Alpek SAB de CV | U.S.$ | 203 | $ | 207,626 | ||||||||
Celulosa Arauco y Constitucion SA | 332 | 353,788 | ||||||||||
DuPont de Nemours, Inc. | 485 | 533,204 | ||||||||||
4.493%, 11/15/2025 | 485 | 559,404 | ||||||||||
Eastman Chemical Co. | 220 | 241,641 | ||||||||||
Fresnillo PLC | 1,126 | 1,144,297 | ||||||||||
Glencore Funding LLC | 516 | 552,801 | ||||||||||
GUSAP III LP | 535 | 561,115 | ||||||||||
Industrias Penoles SAB de CV | 268 | 280,395 | ||||||||||
Inversiones CMPC SA | 490 | 545,431 | ||||||||||
Inversiones CMPC SA/Cayman Islands Branch | 225 | 238,739 | ||||||||||
Nutrition & Biosciences, Inc. | 196 | 196,576 | ||||||||||
Orbia Advance Corp. SAB de CV | 350 | 375,703 | ||||||||||
4.875%, 09/19/2022(a) | 225 | 238,219 | ||||||||||
Suzano Austria GmbH | 145 | 148,205 | ||||||||||
|
| |||||||||||
| 6,177,144 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.0% | ||||||||||||
Westinghouse Air Brake Technologies Corp. | 117 | 124,206 | ||||||||||
|
| |||||||||||
Communications - Media – 1.2% | ||||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital | 48 | 54,288 | ||||||||||
4.80%, 03/01/2050 | 129 | 147,101 | ||||||||||
5.125%, 07/01/2049 | 198 | 231,571 | ||||||||||
Comcast Corp. | 331 | 369,141 | ||||||||||
Cox Communications, Inc. | 233 | 244,655 | ||||||||||
16 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Interpublic Group of Cos., Inc. (The) | U.S.$ | 460 | $ | 552,938 | ||||||||
Prosus NV | 360 | 373,500 | ||||||||||
Tencent Holdings Ltd. | 533 | 542,434 | ||||||||||
3.24%, 06/03/2050(a) | 328 | 329,394 | ||||||||||
ViacomCBS, Inc. | 115 | 132,487 | ||||||||||
4.95%, 01/15/2031 | 189 | 229,104 | ||||||||||
Walt Disney Co. (The) | 380 | 367,228 | ||||||||||
Weibo Corp. | 782 | 784,444 | ||||||||||
|
| |||||||||||
| 4,358,285 | ||||||||||||
|
| |||||||||||
Communications - | ||||||||||||
AT&T, Inc. | 203 | 210,365 | ||||||||||
3.50%, 09/15/2053(a) | 590 | 561,462 | ||||||||||
3.65%, 09/15/2059(a) | 457 | 435,854 | ||||||||||
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC | 740 | 804,350 | ||||||||||
Verizon Communications, Inc. | 460 | 464,862 | ||||||||||
3.00%, 03/22/2027 | 328 | 361,817 | ||||||||||
4.862%, 08/21/2046 | 355 | 471,621 | ||||||||||
5.012%, 04/15/2049 | 44 | 60,707 | ||||||||||
Vodafone Group PLC | 1,249 | 1,362,909 | ||||||||||
|
| |||||||||||
| 4,733,947 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 1.5% | ||||||||||||
General Motors Co. | 196 | 229,510 | ||||||||||
6.80%, 10/01/2027 | 279 | 343,067 | ||||||||||
General Motors Financial Co., Inc. | 525 | 530,854 | ||||||||||
4.30%, 07/13/2025 | 135 | 147,277 | ||||||||||
5.10%, 01/17/2024 | 665 | 730,403 | ||||||||||
5.25%, 03/01/2026 | 165 | 188,319 | ||||||||||
Harley-Davidson Financial Services, Inc. | 1,078 | 1,136,578 | ||||||||||
Lear Corp. | 314 | 326,981 | ||||||||||
3.80%, 09/15/2027 | 97 | 103,675 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Nissan Motor Co., Ltd. | U.S.$ | 1,120 | $ | 1,123,237 | ||||||||
Volkswagen Group of America Finance LLC | 621 | 641,083 | ||||||||||
|
| |||||||||||
| 5,500,984 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.2% | ||||||||||||
Las Vegas Sands Corp. | 507 | 502,508 | ||||||||||
3.20%, 08/08/2024 | 293 | 296,375 | ||||||||||
Marriott International, Inc./MD | 93 | 103,548 | ||||||||||
|
| |||||||||||
| 902,431 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.8% | ||||||||||||
Advance Auto Parts, Inc. | 217 | 215,555 | ||||||||||
3.90%, 04/15/2030 | 249 | 280,942 | ||||||||||
AutoNation, Inc. | 216 | 253,418 | ||||||||||
Ralph Lauren Corp. | 1,081 | 1,121,072 | ||||||||||
Ross Stores, Inc. | 893 | 1,049,543 | ||||||||||
|
| |||||||||||
| 2,920,530 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 2.8% | ||||||||||||
Altria Group, Inc. | 750 | 814,020 | ||||||||||
4.80%, 02/14/2029 | 209 | 245,205 | ||||||||||
Anheuser-Busch InBev Worldwide, Inc. | 616 | 737,364 | ||||||||||
5.55%, 01/23/2049 | 945 | 1,271,951 | ||||||||||
Banner Health | 225 | 223,429 | ||||||||||
Baptist Healthcare System Obligated Group | 524 | 523,162 | ||||||||||
BAT Capital Corp. | 1,125 | 1,124,055 | ||||||||||
2.726%, 03/25/2031 | 220 | 217,857 | ||||||||||
4.70%, 04/02/2027 | 480 | 550,070 | ||||||||||
Cigna Corp. | 168 | 181,853 | ||||||||||
4.125%, 11/15/2025 | 299 | 342,591 | ||||||||||
4.375%, 10/15/2028 | 399 | 472,165 | ||||||||||
Coca-Cola Femsa SAB de CV | 284 | 281,736 | ||||||||||
2.75%, 01/22/2030 | 443 | 473,368 | ||||||||||
18 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
CommonSpirit Health | U.S.$ | 339 | $ | 340,115 | ||||||||
CVS Health Corp. | 124 | 143,809 | ||||||||||
5.05%, 03/25/2048 | 433 | 549,551 | ||||||||||
Kimberly-Clark de Mexico SAB de CV | 270 | 270,928 | ||||||||||
Royalty Pharma PLC | 127 | 126,336 | ||||||||||
Sutter Health | 748 | 748,898 | ||||||||||
Tyson Foods, Inc. | 541 | 602,149 | ||||||||||
Zimmer Biomet Holdings, Inc. | 208 | 230,585 | ||||||||||
|
| |||||||||||
| 10,471,197 | ||||||||||||
|
| |||||||||||
Energy – 4.1% | ||||||||||||
Baker Hughes a GE Co. LLC/Baker Hughes Co-Obligor, Inc. | 433 | 462,708 | ||||||||||
Boardwalk Pipelines LP | 399 | 383,714 | ||||||||||
BP Capital Markets America, Inc. | 685 | 748,383 | ||||||||||
Cenovus Energy, Inc. | 42 | 42,622 | ||||||||||
Energy Transfer Operating LP | 1,150 | 1,130,047 | ||||||||||
4.75%, 01/15/2026 | 1,138 | 1,222,121 | ||||||||||
Eni SpA | 850 | 962,022 | ||||||||||
Exxon Mobil Corp. | 1,065 | 1,094,926 | ||||||||||
2.992%, 03/19/2025 | 881 | 959,524 | ||||||||||
Husky Energy, Inc. | 1,409 | 1,432,911 | ||||||||||
Kinder Morgan, Inc. | 1,700 | 1,781,447 | ||||||||||
Marathon Oil Corp. | 111 | 113,524 | ||||||||||
6.80%, 03/15/2032 | 650 | 688,376 | ||||||||||
Marathon Petroleum Corp. | 255 | 291,682 | ||||||||||
Newfield Exploration Co. | 325 | 314,425 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Oleoducto Central SA | U.S.$ | 429 | $ | 447,318 | ||||||||
ONEOK, Inc. | 425 | 443,781 | ||||||||||
6.35%, 01/15/2031 | 241 | 279,789 | ||||||||||
Sabine Pass Liquefaction LLC | 482 | 541,040 | ||||||||||
5.625%, 03/01/2025 | 396 | 452,917 | ||||||||||
Shell International Finance BV | 698 | 720,336 | ||||||||||
Tengizchevroil Finance Co. International Ltd. | 237 | 240,629 | ||||||||||
Valero Energy Corp. | 674 | 693,600 | ||||||||||
|
| |||||||||||
| 15,447,842 | ||||||||||||
|
| |||||||||||
Other Industrial – 0.1% | ||||||||||||
Alfa SAB de CV | 530 | 564,119 | ||||||||||
|
| |||||||||||
Services – 0.3% | ||||||||||||
Booking Holdings, Inc. | 925 | 1,095,561 | ||||||||||
Expedia Group, Inc. | 75 | 82,469 | ||||||||||
|
| |||||||||||
| 1,178,030 | ||||||||||||
|
| |||||||||||
Technology – 2.0% | ||||||||||||
Analog Devices, Inc. | 58 | 62,985 | ||||||||||
Apple, Inc. | 753 | 733,761 | ||||||||||
Baidu, Inc. | 202 | 221,486 | ||||||||||
Broadcom Corp./Broadcom Cayman Finance Ltd. | 151 | 162,381 | ||||||||||
Broadcom, Inc. | 555 | 618,442 | ||||||||||
4.15%, 11/15/2030 | 1,073 | 1,202,393 | ||||||||||
5.00%, 04/15/2030 | 205 | 241,389 | ||||||||||
Dell International LLC/EMC Corp. | 469 | 555,821 | ||||||||||
Infor, Inc. | 279 | 286,751 | ||||||||||
International Business Machines Corp. | 360 | 363,168 | ||||||||||
Micron Technology, Inc. | 992 | 1,121,198 | ||||||||||
20 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. | U.S.$ | 132 | $ | 140,254 | ||||||||
Oracle Corp. | 1,031 | 1,104,428 | ||||||||||
3.60%, 04/01/2050 | 340 | 373,092 | ||||||||||
Seagate HDD Cayman | 168 | 182,181 | ||||||||||
|
| |||||||||||
| 7,369,730 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.4% | ||||||||||||
Delta Air Lines, Inc./SkyMiles IP Ltd. | 345 | 350,077 | ||||||||||
4.75%, 10/20/2028(a) | 401 | 410,151 | ||||||||||
Southwest Airlines Co. | 639 | 708,989 | ||||||||||
|
| |||||||||||
| 1,469,217 | ||||||||||||
|
| |||||||||||
Transportation - Railroads – 0.1% | ||||||||||||
Lima Metro Line 2 Finance Ltd. | 216 | 237,330 | ||||||||||
5.875%, 07/05/2034(a) | 184 | 220,929 | ||||||||||
|
| |||||||||||
| 458,259 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.3% | ||||||||||||
Aviation Capital Group LLC | 64 | 63,899 | ||||||||||
3.50%, 11/01/2027(a) | 90 | 79,508 | ||||||||||
3.875%, 05/01/2023(a) | 328 | 328,046 | ||||||||||
4.125%, 08/01/2025(a) | 5 | 4,813 | ||||||||||
4.375%, 01/30/2024(a) | 135 | 135,957 | ||||||||||
4.875%, 10/01/2025(a) | 153 | 151,022 | ||||||||||
5.50%, 12/15/2024(a) | 381 | 396,751 | ||||||||||
|
| |||||||||||
| 1,159,996 | ||||||||||||
|
| |||||||||||
| 62,835,917 | ||||||||||||
|
| |||||||||||
Financial Institutions – 10.4% | ||||||||||||
Banking – 8.0% | ||||||||||||
ABN AMRO Bank NV | 200 | 227,024 | ||||||||||
AIB Group PLC | 225 | 244,435 | ||||||||||
American Express Co. | 461 | 431,035 | ||||||||||
Australia & New Zealand Banking Group Ltd. | 510 | 577,203 | ||||||||||
Banco de Credito del Peru | 635 | 641,350 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand | U.S.$ | 443 | $ | 495,606 | ||||||
Banco Santander SA | 1,000 | 1,139,300 | ||||||||
Bank of America Corp. | 185 | 209,498 | ||||||||
Series L | 1,455 | 1,621,874 | ||||||||
Series Z | 289 | 321,244 | ||||||||
Bank of New York Mellon Corp. (The) | 166 | 177,691 | ||||||||
Barclays Bank PLC | 129 | 173,478 | ||||||||
BNP Paribas SA | 1,007 | 1,131,211 | ||||||||
BPCE SA | 230 | 258,301 | ||||||||
Capital One Financial Corp. | 579 | 606,728 | ||||||||
CIT Group, Inc. | 383 | 428,052 | ||||||||
Citigroup, Inc. | 309 | 341,442 | ||||||||
4.45%, 09/29/2027 | 721 | 832,387 | ||||||||
5.95%, 01/30/2023(b) | 216 | 222,906 | ||||||||
Series Q | 575 | 563,920 | ||||||||
Series R | 347 | 344,918 | ||||||||
Commonwealth Bank of Australia | 505 | 569,579 | ||||||||
Cooperatieve Rabobank UA | 1,373 | 1,552,465 | ||||||||
Credit Agricole SA/London | 257 | 277,606 | ||||||||
Danske Bank A/S | 492 | 521,707 | ||||||||
Deutsche Bank AG/New York NY | 288 | 291,217 | ||||||||
3.961%, 11/26/2025 | 265 | 283,195 | ||||||||
Discover Bank | 250 | 262,177 | ||||||||
22 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Fifth Third Bancorp | U.S.$ | 205 | $ | 206,962 | ||||||
Goldman Sachs Group, Inc. (The) | 482 | 473,247 | ||||||||
HSBC Holdings PLC | 462 | 515,130 | ||||||||
4.25%, 03/14/2024 | 282 | 305,460 | ||||||||
4.292%, 09/12/2026 | 536 | 600,969 | ||||||||
6.375%, 03/30/2025(b) | 547 | 572,868 | ||||||||
ING Groep NV | 425 | 439,973 | ||||||||
JPMorgan Chase & Co. | 465 | 486,069 | ||||||||
Series Z | 200 | 197,138 | ||||||||
Mastercard, Inc. | 417 | 472,824 | ||||||||
3.85%, 03/26/2050 | 440 | 549,494 | ||||||||
Morgan Stanley | 476 | 536,176 | ||||||||
5.00%, 11/24/2025 | 396 | 467,363 | ||||||||
Series G | 553 | 641,524 | ||||||||
Series J | 110 | 108,259 | ||||||||
Nationwide Building Society | 950 | 1,030,655 | ||||||||
Natwest Group PLC | 320 | 330,675 | ||||||||
Series U | 700 | 672,630 | ||||||||
Santander Holdings USA, Inc. | 315 | 350,699 | ||||||||
Standard Chartered PLC | 400 | 355,520 | ||||||||
5.20%, 01/26/2024(a) | 350 | 380,891 | ||||||||
7.50%, 04/02/2022(a)(b) | 363 | 374,896 | ||||||||
State Street Corp. | 77 | 83,649 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Truist Financial Corp. | U.S.$ | 692 | $ | 756,141 | ||||||||
UBS AG/Stamford CT | 620 | 689,589 | ||||||||||
UBS Group AG | 312 | 348,258 | ||||||||||
7.125%, 08/10/2021(a)(b) | 578 | 592,444 | ||||||||||
UniCredit SpA | 1,125 | 1,117,541 | ||||||||||
US Bancorp | 380 | 414,401 | ||||||||||
Wells Fargo & Co. | 542 | 564,081 | ||||||||||
Series G | 290 | 332,705 | ||||||||||
|
| |||||||||||
| 29,715,780 | ||||||||||||
|
| |||||||||||
Brokerage – 0.2% | ||||||||||||
Charles Schwab Corp. (The) | 568 | 622,278 | ||||||||||
|
| |||||||||||
Finance – 1.3% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 200 | 202,030 | ||||||||||
4.125%, 07/03/2023 | 233 | 239,428 | ||||||||||
4.50%, 09/15/2023 | 281 | 291,920 | ||||||||||
6.50%, 07/15/2025 | 179 | 197,006 | ||||||||||
Air Lease Corp. | 62 | 64,737 | ||||||||||
4.25%, 02/01/2024 | 251 | 263,369 | ||||||||||
Aircastle Ltd. | 152 | 149,620 | ||||||||||
4.40%, 09/25/2023 | 345 | 347,111 | ||||||||||
5.00%, 04/01/2023 | 31 | 31,609 | ||||||||||
5.25%, 08/11/2025(a) | 268 | 265,939 | ||||||||||
GE Capital European Funding Unlimited Co. | EUR | 150 | 206,844 | |||||||||
GE Capital Funding LLC | U.S.$ | 1,218 | 1,331,152 | |||||||||
GE Capital International Funding Co. Unlimited Co. | 272 | 294,051 | ||||||||||
Synchrony Financial | 1,008 | 1,121,077 | ||||||||||
|
| |||||||||||
| 5,005,893 | ||||||||||||
|
| |||||||||||
24 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Insurance – 0.8% | ||||||||||||
Alleghany Corp. | U.S.$ | 777 | $ | 869,688 | ||||||||
Centene Corp. | 116 | 122,067 | ||||||||||
4.625%, 12/15/2029 | 132 | 143,712 | ||||||||||
Guardian Life Insurance Co. of America (The) | 294 | 373,371 | ||||||||||
MetLife Capital Trust IV | 699 | 963,362 | ||||||||||
Nationwide Mutual Insurance Co. | 246 | 417,305 | ||||||||||
Voya Financial, Inc. | 180 | 185,463 | ||||||||||
|
| |||||||||||
| 3,074,968 | ||||||||||||
|
| |||||||||||
Other Finance – 0.1% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 271 | 273,098 | ||||||||||
|
| |||||||||||
| 38,692,017 | ||||||||||||
|
| |||||||||||
Utility – 0.8% | ||||||||||||
Electric – 0.8% | ||||||||||||
AES Panama Generation Holdings SRL | 274 | 289,114 | ||||||||||
Colbun SA | 400 | 417,010 | ||||||||||
Enel Chile SA | 514 | 600,737 | ||||||||||
Israel Electric Corp., Ltd. | 580 | 655,400 | ||||||||||
Kentucky Utilities Co. | 312 | 335,796 | ||||||||||
NextEra Energy Capital Holdings, Inc. | 211 | 227,684 | ||||||||||
Star Energy Geothermal Darajat II/Star Energy Geothermal Salak | 499 | 513,970 | ||||||||||
|
| |||||||||||
| 3,039,711 | ||||||||||||
|
| |||||||||||
Total Corporates – Investment Grade | 104,567,645 | |||||||||||
|
| |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS – 16.3% | ||||||||||||
Risk Share Floating Rate – 14.2% | ||||||||||||
Bellemeade Re Ltd. | U.S.$ | 445 | $ | 441,623 | ||||||||
Series 2018-3A, Class M2 | 325 | 316,451 | ||||||||||
Series 2019-1A, Class M1B | 1,000 | 998,827 | ||||||||||
Series 2019-2A, Class M1C | 487 | 481,076 | ||||||||||
Series 2019-2A, Class M2 | 325 | 310,547 | ||||||||||
Series 2019-3A, Class M1B | 359 | 351,767 | ||||||||||
Series 2019-3A, Class M1C | 263 | 250,120 | ||||||||||
Series 2019-4A, Class M1B | 885 | 875,406 | ||||||||||
Series 2019-4A, Class M1C | 750 | 731,277 | ||||||||||
Series 2019-4A, Class M2 | 540 | 505,156 | ||||||||||
Series 2020-2A, Class M1B | 335 | 338,035 | ||||||||||
Series 2020-3A, Class M1B | 220 | 219,983 | ||||||||||
Connecticut Avenue Securities Trust | 198 | 196,755 | ||||||||||
Series 2019-HRP1, Class M2 | 651 | 586,331 | ||||||||||
26 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2019-R01, Class 2M2 | U.S.$ | 529 | $ | 523,889 | ||||||
Series 2019-R02, Class 1M2 | 181 | 179,572 | ||||||||
Series 2019-R03, Class 1M2 | 392 | 389,050 | ||||||||
Series 2019-R04, Class 2M2 | 644 | 638,392 | ||||||||
Series 2019-R05, Class 1M2 | 538 | 536,297 | ||||||||
Series 2019-R06, Class 2M2 | 769 | 761,154 | ||||||||
Series 2019-R07, Class 1M2 | 745 | 738,030 | ||||||||
Series 2020-R01, Class 1B1 | 500 | 393,521 | ||||||||
Series 2020-R01, Class 1M2 | 1,100 | 1,077,479 | ||||||||
Series 2020-R02, Class 2M2 | 950 | 921,430 | ||||||||
Series 2020-SBT1, Class 1M2 | 1,000 | 928,666 | ||||||||
Series 2020-SBT1, Class 2M2 | 300 | 284,981 | ||||||||
Eagle Re Ltd. | 325 | 312,284 | ||||||||
Series 2019-1, Class M2 | 325 | 309,752 | ||||||||
Series 2020-1, Class M1A | 950 | 942,773 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2020-2, Class M1B | U.S.$ | 1,579 | $ | 1,579,910 | ||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | 396 | 405,539 | ||||||||
Series 2016-DNA4, Class M3 | 960 | 995,157 | ||||||||
Series 2016-HQA3, Class M3 | 1,162 | 1,202,679 | ||||||||
Series 2017-DNA2, Class B1 | 750 | 778,100 | ||||||||
Series 2017-DNA3, Class M2 | 250 | 252,657 | ||||||||
Series 2017-HQA1, Class M2 | 857 | 870,948 | ||||||||
Series 2017-HQA2, Class B1 | 800 | 788,002 | ||||||||
Series 2017-HQA2, Class M2 | 233 | 231,706 | ||||||||
Series 2017-HQA3, Class B1 | 750 | 728,054 | ||||||||
Series 2017-HQA3, Class M2 | 580 | 585,358 | ||||||||
Series 2018-HQA2, Class B1 | 1,250 | 1,167,106 | ||||||||
Series 2019-DNA1, Class B2 | 750 | 700,909 | ||||||||
Series 2019-DNA1, Class M2 | 931 | 921,853 | ||||||||
Series 2019-DNA3, Class B1 | 600 | 554,821 | ||||||||
28 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2019-DNA3, Class M2 | U.S.$ | 573 | $ | 561,032 | ||||||
Series 2019-DNA4, Class M2 | 743 | 736,949 | ||||||||
Series 2019-FTR2, Class B1 | 750 | 649,451 | ||||||||
Series 2019-FTR2, Class M2 | 895 | 840,814 | ||||||||
Series 2019-FTR3, Class B2 | 700 | 525,078 | ||||||||
Series 2019-HQA1, Class M2 | 579 | 568,927 | ||||||||
Series 2019-HQA2, Class B1 | 750 | 712,883 | ||||||||
Series 2019-HQA3, Class B1 | 500 | 454,981 | ||||||||
Series 2019-HQA3, Class M2 | 252 | 246,632 | ||||||||
Series 2019-HQA4, Class B1 | 750 | 678,626 | ||||||||
Series 2020-DNA1, Class M2 | 890 | 870,181 | ||||||||
Series 2020-DNA2, Class M2 | 690 | 675,048 | ||||||||
Series 2020-DNA5, Class M2 | 620 | 619,612 | ||||||||
Federal National Mortgage Association Connecticut Avenue Securities | 305 | 309,446 | ||||||||
Series 2015-C01, Class 2M2 | 76 | 77,311 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2015-C02, Class 1M2 | U.S.$ | 276 | $ | 278,106 | ||||||
Series 2015-C02, Class 2M2 | 98 | 99,636 | ||||||||
Series 2015-C03, Class 1M2 | 283 | 288,260 | ||||||||
Series 2015-C03, Class 2M2 | 176 | 180,407 | ||||||||
Series 2015-C04, Class 1M2 | 408 | 431,458 | ||||||||
Series 2016-C02, Class 1B | 149 | 179,295 | ||||||||
Series 2016-C03, Class 1B | 99 | 117,447 | ||||||||
Series 2016-C05, Class 2M2 | 607 | 630,225 | ||||||||
Series 2016-C06, Class 1B | 379 | 405,318 | ||||||||
Series 2016-C06, Class 1M2 | 281 | 290,879 | ||||||||
Series 2016-C07, Class 2B | 379 | 404,969 | ||||||||
Series 2017-C01, Class 1B1 | 750 | 770,673 | ||||||||
Series 2017-C01, Class 1M2 | 328 | 336,929 | ||||||||
Series 2017-C02, Class 2B1 | 750 | 772,760 | ||||||||
Series 2017-C03, Class 1M2 | 673 | 677,855 | ||||||||
Series 2017-C04, Class 2M2 | 278 | 277,464 | ||||||||
30 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2017-C06, Class 2B1 | U.S.$ | 750 | $ | 737,932 | ||||||
Series 2017-C07, Class 1B1 | 305 | 286,688 | ||||||||
Series 2017-C07, Class 2B1 | 750 | 728,428 | ||||||||
Home Re Ltd. | 500 | 443,355 | ||||||||
Series 2020-1, Class M1B | 510 | 510,005 | ||||||||
JP Morgan Madison Avenue Securities Trust | 50 | 46,167 | ||||||||
Mortgage Insurance-Linked Notes | 900 | 814,826 | ||||||||
Oaktown Re V Ltd. | 934 | 933,044 | ||||||||
PMT Credit Risk Transfer Trust | 399 | 355,844 | ||||||||
Series 2019-2R, Class A | 477 | 428,057 | ||||||||
Series 2019-3R, Class A | 388 | 347,530 | ||||||||
Series 2020-1R, Class A | 624 | 558,640 | ||||||||
Radnor Re Ltd. | 500 | 452,659 | ||||||||
Series 2019-1, Class M1B | 635 | 635,061 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2019-2, Class M1B | U.S.$ | 351 | $ | 348,671 | ||||||||
Series 2020-1, Class M1A | 900 | 896,692 | ||||||||||
Series 2020-1, Class M2A | 850 | 762,200 | ||||||||||
Series 2020-2, Class M1C | 376 | 376,915 | ||||||||||
Traingle Re Ltd. | 1,075 | 1,073,980 | ||||||||||
Wells Fargo Credit Risk Transfer Securities Trust | 285 | 277,964 | ||||||||||
Series 2015-WF1, Class 2M2 | 82 | 80,881 | ||||||||||
|
| |||||||||||
| 53,067,614 | ||||||||||||
|
| |||||||||||
Agency Floating Rate – 1.0% | ||||||||||||
Federal Home Loan Mortgage Corp. REMICs | 4,321 | 794,489 | ||||||||||
Federal Home Loan Mortgage Corp. REMICs | 1,392 | 236,109 | ||||||||||
Federal National Mortgage Association REMICs | 743 | 175,111 | ||||||||||
Series 2015-90, Class SL | 1,472 | 349,964 | ||||||||||
Series 2016-77, Class DS | 1,308 | 262,651 | ||||||||||
Series 2017-16, Class SG | 1,477 | 297,772 | ||||||||||
32 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2017-26, Class TS | U.S.$ | 1,455 | $ | 330,438 | ||||||||
Series 2017-62, Class AS | 1,476 | 275,597 | ||||||||||
Series 2017-81, Class SA | 1,544 | 344,398 | ||||||||||
Series 2017-97, Class LS | 1,388 | 360,304 | ||||||||||
Government National Mortgage Association | 1,421 | 301,537 | ||||||||||
|
| |||||||||||
| 3,728,370 | ||||||||||||
|
| |||||||||||
Agency Fixed Rate – 0.5% | ||||||||||||
Federal Home Loan Mortgage Corp. REMICs | 3,053 | 493,446 | ||||||||||
Series 5015, Class BI | 2,295 | 373,626 | ||||||||||
Series 5018, Class EI | 1,954 | 277,145 | ||||||||||
Federal National Mortgage Association Grantor Trust | 65 | 61,194 | ||||||||||
Federal National Mortgage Association REMICs | 4,319 | 722,391 | ||||||||||
|
| |||||||||||
| 1,927,802 | ||||||||||||
|
| |||||||||||
Non-Agency Fixed Rate – 0.4% | ||||||||||||
Alternative Loan Trust | 246 | 197,165 | ||||||||||
Series 2006-28CB, Class A14 | 181 | 134,128 | ||||||||||
Series 2006-J1, Class 1A13 | 123 | 110,293 | ||||||||||
Countrywide Home Loan Mortgage Pass-Through Trust | 60 | 40,623 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
First Horizon Alternative Mortgage Securities Trust | U.S.$ | 210 | $ | 145,910 | ||||||||
JP Morgan Alternative Loan Trust | 539 | 453,818 | ||||||||||
Structured Asset Securities Corp. Mortgage Pass-Through Certificates | 452 | 257,751 | ||||||||||
|
| |||||||||||
| 1,339,688 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate – 0.2% | ||||||||||||
Chase Mortgage Reference Notes | 182 | 181,784 | ||||||||||
Deutsche Alt-A Securities Mortgage Loan Trust | 543 | 279,700 | ||||||||||
HomeBanc Mortgage Trust | 136 | 120,617 | ||||||||||
Impac Secured Assets Corp. | 246 | 215,531 | ||||||||||
Residential Accredit Loans, Inc. Trust | 573 | 49,947 | ||||||||||
|
| |||||||||||
| 847,579 | ||||||||||||
|
| |||||||||||
Total Collateralized Mortgage Obligations | 60,911,053 | |||||||||||
|
| |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES – 15.6% | ||||||||||||
Non-Agency Fixed Rate CMBS – 12.3% | ||||||||||||
BAMLL Commercial Mortgage Securities Trust | 960 | 849,037 | ||||||||||
Banc of America Commercial Mortgage Trust | 860 | 945,294 | ||||||||||
34 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
CFCRE Commercial Mortgage Trust | U.S.$ | 735 | $ | 790,989 | ||||||
Series 2016-C4, Class AM | 375 | 407,379 | ||||||||
CGRBS Commercial Mortgage Trust | 1,305 | 1,370,905 | ||||||||
Citigroup Commercial Mortgage Trust | 500 | 521,130 | ||||||||
Series 2013-GC17, Class D | 565 | 469,469 | ||||||||
Series 2015-GC27, Class A5 | 1,223 | 1,314,496 | ||||||||
Series 2015-GC35, Class A4 | 340 | 377,848 | ||||||||
Series 2016-GC36, Class A5 | 425 | 469,490 | ||||||||
Series 2018-B2, Class A4 | 1,050 | 1,211,338 | ||||||||
COMM Mortgage Trust | 1,580 | 1,620,800 | ||||||||
Commercial Mortgage Trust | 187 | 185,238 | ||||||||
Series 2014-LC17, Class B | 800 | 858,158 | ||||||||
Series 2014-UBS6, Class AM | 375 | 408,388 | ||||||||
Series 2015-3BP, Class A | 170 | 181,127 | ||||||||
Series 2015-CR24, Class A5 | 430 | 476,398 | ||||||||
Series 2015-CR25, Class A4 | 1,045 | 1,161,027 | ||||||||
Series 2015-DC1, Class A5 | 765 | 826,394 | ||||||||
Series 2015-PC1, Class A5 | 685 | 756,976 | ||||||||
CSAIL Commercial Mortgage Trust | 332 | 363,790 | ||||||||
Series 2015-C3, Class A4 | 573 | 627,605 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2015-C4, Class A4 | U.S.$ | 1,450 | $ | 1,606,240 | ||||||
DBUBS Mortgage Trust | 730 | 729,899 | ||||||||
GS Mortgage Securities Trust | 1,750 | 1,422,194 | ||||||||
Series 2012-GC6, Class B | 600 | 612,775 | ||||||||
Series 2012-GCJ9, Class AS | 762 | 786,392 | ||||||||
Series 2013-G1, Class A2 | 766 | 757,769 | ||||||||
Series 2014-GC22, Class A5 | 658 | 715,286 | ||||||||
Series 2018-GS9, Class A4 | 1,125 | 1,296,007 | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 127 | 101,796 | ||||||||
Series 2012-C6, Class D | 690 | 589,838 | ||||||||
Series 2012-C6, Class E | 389 | 213,766 | ||||||||
Series 2012-C8, Class AS | 850 | 875,137 | ||||||||
JPMBB Commercial Mortgage Securities Trust | 735 | 800,210 | ||||||||
Series 2014-C24, Class C | 890 | 820,451 | ||||||||
Series 2015-C30, Class A5 | 425 | 471,091 | ||||||||
Series 2015-C31, Class A3 | 1,009 | 1,118,804 | ||||||||
Series 2015-C31, Class B | 948 | 1,035,103 | ||||||||
Series 2015-C33, Class A4 | 1,050 | 1,174,099 | ||||||||
JPMCC Commercial Mortgage Securities Trust | 4,693 | 238,484 | ||||||||
LB-UBS Commercial Mortgage Trust | 131 | 75,596 | ||||||||
36 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
LSTAR Commercial Mortgage Trust | U.S.$ | 548 | $ | 558,025 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust | 730 | 792,872 | ||||||||
Morgan Stanley Capital I Trust | 100 | 100,101 | ||||||||
Series 2016-UB12, Class A4 | 660 | 732,367 | ||||||||
SG Commercial Mortgage Securities Trust | 540 | 551,896 | ||||||||
UBS Commercial Mortgage Trust | 750 | 871,592 | ||||||||
Series 2018-C8, Class A4 | 720 | 828,433 | ||||||||
Series 2018-C9, Class A4 | 1,300 | 1,491,010 | ||||||||
UBS-Barclays Commercial Mortgage Trust | 1,098 | 1,135,814 | ||||||||
Wells Fargo Commercial Mortgage Trust | 1,040 | 1,131,688 | ||||||||
Series 2015-SG1, Class A4 | 723 | 789,437 | ||||||||
Series 2015-SG1, Class C | 516 | 485,569 | ||||||||
Series 2016-C35, Class XA | 3,775 | 308,193 | ||||||||
Series 2016-LC24, Class XA | 8,814 | 640,246 | ||||||||
Series 2016-LC25, Class C | 545 | 524,730 | ||||||||
Series 2016-NXS6, Class C | 600 | 577,699 | ||||||||
Series 2018-C43, Class A4 | 900 | 1,035,438 | ||||||||
Series 2018-C48, Class A5 | 89 | 104,738 | ||||||||
WF-RBS Commercial Mortgage Trust | 480 | 496,545 | ||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 37 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2013-C11, Class XA | U.S.$ | 7,382 | $ | 159,768 | ||||||||
Series 2014-C24, Class AS | 945 | 966,355 | ||||||||||
|
| |||||||||||
| 45,916,729 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate CMBS – 3.3% | ||||||||||||
Ashford Hospitality Trust | 568 | 536,118 | ||||||||||
Series 2018-KEYS, Class A | 1,000 | 942,696 | ||||||||||
Atrium Hotel Portfolio Trust | 750 | 711,940 | ||||||||||
BAMLL Commercial Mortgage Securities Trust | 1,330 | 1,256,827 | ||||||||||
BBCMS Mortgage Trust | 627 | 625,519 | ||||||||||
BHMS | 547 | 521,805 | ||||||||||
Braemar Hotels & Resorts Trust | 700 | 662,362 | ||||||||||
BX Trust | 780 | 710,659 | ||||||||||
CLNY Trust | 540 | 489,267 | ||||||||||
DBWF Mortgage Trust | 541 | 525,735 | ||||||||||
38 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Great Wolf Trust | U.S.$ | 1,019 | $ | 974,278 | ||||||||
GS Mortgage Securities Corp. Trust | 725 | 708,343 | ||||||||||
Series 2019-SMP, Class A | 700 | 678,994 | ||||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 1,000 | 915,080 | ||||||||||
Morgan Stanley Capital I Trust | 173 | 138,765 | ||||||||||
Series 2019-BPR, Class C | 520 | 450,859 | ||||||||||
Natixis Commercial Mortgage Securities Trust | 540 | 534,320 | ||||||||||
Series 2019-MILE, Class A | 379 | 375,298 | ||||||||||
Starwood Retail Property Trust | 1,045 | 773,725 | ||||||||||
|
| |||||||||||
| 12,532,590 | ||||||||||||
|
| |||||||||||
Agency CMBS – 0.0% | ||||||||||||
Government National Mortgage Association | 743 | 7 | ||||||||||
|
| |||||||||||
Total Commercial Mortgage-Backed Securities | 58,449,326 | |||||||||||
|
| |||||||||||
MORTGAGE PASS-THROUGHS – 12.9% | ||||||||||||
Agency Fixed Rate 30-Year – 11.9% | ||||||||||||
Federal Home Loan Mortgage Corp. | 970 | 1,046,158 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 39 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2020 | U.S.$ | 1,176 | $ | 1,287,061 | ||||||
Federal Home Loan Mortgage Corp. Gold | 138 | 159,835 | ||||||||
Series 2007 | 20 | 22,933 | ||||||||
Series 2016 | 956 | 1,060,330 | ||||||||
Series 2017 | 724 | 802,637 | ||||||||
Series 2018 | 1,790 | 1,942,648 | ||||||||
4.50%, 03/01/2048-11/01/2048 | 2,249 | 2,473,111 | ||||||||
5.00%, 11/01/2048 | 442 | 494,772 | ||||||||
Federal National Mortgage Association | 130 | 149,101 | ||||||||
Series 2004 | 438 | 507,943 | ||||||||
Series 2005 | 54 | 62,336 | ||||||||
Series 2007 | 257 | 296,659 | ||||||||
Series 2010 | 439 | 487,241 | ||||||||
Series 2012 | 3,134 | 3,457,684 | ||||||||
Series 2013 | 1,487 | 1,642,134 | ||||||||
4.00%, 10/01/2043 | 997 | 1,104,848 | ||||||||
Series 2016 | 945 | 1,008,500 | ||||||||
Series 2018 | 2,197 | 2,384,160 | ||||||||
4.50%, 09/01/2048 | 2,375 | 2,609,832 | ||||||||
Series 2019 | 2,825 | 3,042,885 | ||||||||
4.00%, 06/01/2049 | 1,405 | 1,538,078 | ||||||||
Series 2020 | 1,175 | 1,277,624 | ||||||||
Government National Mortgage Association | 649 | 681,565 | ||||||||
Uniform Mortgage-Backed Security | 5,590 | 5,627,558 | ||||||||
40 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
2.00%, 11/01/2050, TBA | U.S.$ | 3,645 | $ | 3,759,191 | ||||||||
2.50%, 11/01/2050, TBA | 5,360 | 5,585,287 | ||||||||||
|
| |||||||||||
| 44,512,111 | ||||||||||||
|
| |||||||||||
Agency Fixed Rate 15-Year – 1.0% | ||||||||||||
Federal Home Loan Mortgage Corp. | 1,191 | 1,241,807 | ||||||||||
Federal National Mortgage Association | 1,410 | 1,471,019 | ||||||||||
Series 2017 | 804 | 838,658 | ||||||||||
|
| |||||||||||
| 3,551,484 | ||||||||||||
|
| |||||||||||
Other Agency Fixed Rate Programs – 0.0% | ||||||||||||
Federal Home Loan Mortgage Corp. | 32 | 32,909 | ||||||||||
|
| |||||||||||
Agency ARMs – 0.0% | ||||||||||||
Federal Home Loan Mortgage Corp. | 18 | 19,007 | ||||||||||
|
| |||||||||||
Total Mortgage Pass-Throughs | 48,115,511 | |||||||||||
|
| |||||||||||
GOVERNMENTS – TREASURIES – 10.7% | ||||||||||||
Malaysia – 0.2% | ||||||||||||
Malaysia Government Bond | MYR | 3,708 | 919,366 | |||||||||
|
| |||||||||||
United States – 10.5% | ||||||||||||
U.S. Treasury Bonds | U.S.$ | 2,825 | 2,568,102 | |||||||||
2.25%, 08/15/2046 | 1,378 | 1,577,379 | ||||||||||
2.875%, 08/15/2045-11/15/2046 | 1,556 | 1,989,716 | ||||||||||
3.00%, 05/15/2045 | 80 | 104,025 | ||||||||||
3.125%, 08/15/2044(g) | 7,419 | 9,817,027 | ||||||||||
4.375%, 11/15/2039 | 1,210 | 1,841,469 | ||||||||||
U.S. Treasury Notes | 14,969 | 14,959,644 | ||||||||||
1.75%, 12/31/2024(g) | 2,098 | 2,223,552 | ||||||||||
2.00%, 12/31/2021 | 1,698 | 1,734,613 | ||||||||||
2.25%, 04/30/2021(g) | 2,420 | 2,445,031 | ||||||||||
|
| |||||||||||
| 39,260,558 | ||||||||||||
|
| |||||||||||
Total Governments – Treasuries | 40,179,924 | |||||||||||
|
| |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 41 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
ASSET-BACKED SECURITIES – 4.3% | ||||||||||||
Autos - Fixed Rate – 2.7% | ||||||||||||
Avis Budget Rental Car Funding AESOP LLC Series 2016-1A, Class A | U.S.$ | 418 | $ | 421,550 | ||||||||
Series 2018-1A, Class A | 920 | 966,986 | ||||||||||
Series 2018-2A, Class A | 755 | 807,949 | ||||||||||
CPS Auto Trust | 550 | 569,632 | ||||||||||
Exeter Automobile Receivables Trust | 350 | 358,761 | ||||||||||
Series 2017-1A, Class D | 525 | 540,968 | ||||||||||
Series 2017-3A, Class C | 385 | 392,961 | ||||||||||
First Investors Auto Owner Trust | 1,000 | 1,052,478 | ||||||||||
Series 2020-1A, Class A | 386 | 389,391 | ||||||||||
Flagship Credit Auto Trust | 350 | 359,831 | ||||||||||
Series 2016-4, Class E | 565 | 580,906 | ||||||||||
Series 2018-3, Class B | 675 | 688,964 | ||||||||||
Series 2019-3, Class E | 960 | 967,765 | ||||||||||
Series 2020-1, Class E | 1,000 | 985,576 | ||||||||||
Hertz Vehicle Financing II LP | 54 | 54,269 | ||||||||||
Series 2017-1A, Class A | 295 | 295,036 | ||||||||||
Series 2019-1A, Class A | 211 | 211,325 | ||||||||||
Series 2019-2A, Class A | 155 | 155,845 | ||||||||||
Hertz Vehicle Financing LLC | 321 | 322,197 | ||||||||||
|
| |||||||||||
| 10,122,390 | ||||||||||||
|
| |||||||||||
42 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Other ABS - Fixed Rate – 0.9% | ||||||||||||
Affirm Asset Securitization Trust | U.S.$ | 467 | $ | 468,000 | ||||||||
Marlette Funding Trust | 189 | 189,331 | ||||||||||
Series 2018-4A, Class A | 57 | 57,335 | ||||||||||
Series 2019-3A, Class A | 240 | 241,456 | ||||||||||
Series 2020-1A, Class A | 845 | 851,018 | ||||||||||
Prosper Marketplace Issuance Trust | 79 | 79,732 | ||||||||||
SoFi Consumer Loan Program LLC | 1 | 1,249 | ||||||||||
Series 2017-2, Class A | 14 | 13,992 | ||||||||||
Series 2017-3, Class A | 32 | 32,327 | ||||||||||
Series 2017-4, Class B | 870 | 888,950 | ||||||||||
Series 2017-6, Class A2 | 163 | 163,810 | ||||||||||
SoFi Consumer Loan Program Trust | 148 | 149,737 | ||||||||||
Upstart Securitization Trust | 417 | 417,205 | ||||||||||
|
| |||||||||||
| 3,554,142 | ||||||||||||
|
| |||||||||||
Credit Cards - Fixed Rate – 0.7% | ||||||||||||
World Financial Network Credit Card Master Trust | ||||||||||||
Series 2018-B, Class A | 330 | 338,315 | ||||||||||
Series 2018-B, Class M | 825 | 833,852 | ||||||||||
Series 2019-A, Class M | 780 | 800,586 | ||||||||||
Series 2019-B, Class M | 600 | 618,575 | ||||||||||
|
| |||||||||||
| 2,591,328 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 43 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Home Equity Loans - Floating | ||||||||||||
ABFC Trust | U.S.$ | 19 | $ | 18,736 | ||||||||
|
| |||||||||||
Total Asset-Backed Securities | 16,286,596 | |||||||||||
|
| |||||||||||
INFLATION-LINKED SECURITIES – 2.7% | ||||||||||||
Canada – 0.2% | ||||||||||||
Canadian Government Real Return Bond | CAD | 712 | 651,095 | |||||||||
|
| |||||||||||
Japan – 0.9% | ||||||||||||
Japanese Government CPI Linked Bond | JPY | 377,850 | 3,592,096 | |||||||||
|
| |||||||||||
United States – 1.6% | ||||||||||||
U.S. Treasury Inflation Index | U.S.$ | 1,054 | 1,133,715 | |||||||||
0.375%, 07/15/2025 (TIPS) | 4,518 | 4,865,246 | ||||||||||
|
| |||||||||||
| 5,998,961 | ||||||||||||
|
| |||||||||||
Total Inflation-Linked Securities | 10,242,152 | |||||||||||
|
| |||||||||||
CORPORATES – NON-INVESTMENT GRADE – 2.7% | ||||||||||||
Industrial – 1.7% | ||||||||||||
Basic – 0.2% | ||||||||||||
Ingevity Corp. | 453 | 460,108 | ||||||||||
Sealed Air Corp. | 379 | 396,612 | ||||||||||
|
| |||||||||||
| 856,720 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
TransDigm, Inc. | 362 | 377,497 | ||||||||||
|
| |||||||||||
Communications - Media – 0.1% | ||||||||||||
Cable One, Inc. | 326 | 330,913 | ||||||||||
CSC Holdings LLC | 120 | 125,485 | ||||||||||
|
| |||||||||||
| 456,398 | ||||||||||||
|
| |||||||||||
44 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Consumer Cyclical - Automotive – 0.2% | ||||||||||||
Clarios Global LP/Clarios US Finance Co. | EUR | 130 | $ | 151,930 | ||||||||
Ford Motor Credit Co. LLC | U.S.$ | 360 | 361,980 | |||||||||
|
| |||||||||||
| 513,910 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - | ||||||||||||
Carnival Corp. | 401 | 441,341 | ||||||||||
Royal Caribbean Cruises Ltd. | 364 | 397,044 | ||||||||||
11.50%, 06/01/2025(a) | 655 | 749,267 | ||||||||||
|
| |||||||||||
| 1,587,652 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Restaurants – 0.2% | ||||||||||||
1011778 BC ULC/New Red Finance, Inc. | 685 | 681,068 | ||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.3% | ||||||||||||
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC | 671 | 681,736 | ||||||||||
Spectrum Brands, Inc. | 512 | 527,145 | ||||||||||
|
| |||||||||||
| 1,208,881 | ||||||||||||
|
| |||||||||||
Energy – 0.2% | ||||||||||||
Sunoco LP/Sunoco Finance Corp. | 459 | 461,038 | ||||||||||
Transocean Poseidon Ltd. | 225 | 169,508 | ||||||||||
|
| |||||||||||
| 630,546 | ||||||||||||
|
| |||||||||||
| 6,312,672 | ||||||||||||
|
| |||||||||||
Financial Institutions – 1.0% | ||||||||||||
Banking – 0.7% | ||||||||||||
Credit Suisse Group AG | 1,020 | 1,078,109 | ||||||||||
Discover Financial Services | 1,087 | 1,163,873 | ||||||||||
Intesa Sanpaolo SpA | 288 | 303,944 | ||||||||||
|
| |||||||||||
| 2,545,926 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 45 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Finance – 0.3% | ||||||||||||
Navient Corp. | U.S.$ | 440 | $ | 448,761 | ||||||||
7.25%, 01/25/2022 | 99 | 102,133 | ||||||||||
SLM Corp. | 587 | 595,517 | ||||||||||
|
| |||||||||||
| 1,146,411 | ||||||||||||
|
| |||||||||||
| 3,692,337 | ||||||||||||
|
| |||||||||||
Total Corporates – Non-Investment Grade | 10,005,009 | |||||||||||
|
| |||||||||||
COLLATERALIZED LOAN | ||||||||||||
CLO - Floating Rate – 1.2% | ||||||||||||
Dryden CLO Ltd. | 440 | 441,393 | ||||||||||
Elevation CLO Ltd. | 1,000 | 939,587 | ||||||||||
Goldentree Loan Management US CLO Ltd. | 630 | 631,696 | ||||||||||
Magnetite XXVI Ltd. | 808 | 809,517 | ||||||||||
OCP CLO Ltd. | 632 | 633,430 | ||||||||||
SCFF I Ltd. | 750 | 754,275 | ||||||||||
Voya CLO Ltd. | 210 | 182,775 | ||||||||||
|
| |||||||||||
Total Collateralized Loan Obligations | 4,392,673 | |||||||||||
|
| |||||||||||
46 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GOVERNMENTS – SOVEREIGN | ||||||||||||
Colombia – 0.1% | ||||||||||||
Colombia Government International Bond | U.S.$ | 375 | $ | 384,750 | ||||||||
|
| |||||||||||
Israel – 0.1% | ||||||||||||
Israel Government International Bond | 430 | 498,531 | ||||||||||
|
| |||||||||||
Mexico – 0.1% | ||||||||||||
Mexico Government International Bond | 493 | 538,510 | ||||||||||
|
| |||||||||||
Qatar – 0.1% | ||||||||||||
Qatar Government International Bond | 252 | 276,806 | ||||||||||
|
| |||||||||||
Saudi Arabia – 0.2% | ||||||||||||
Saudi Government International Bond | 692 | 738,710 | ||||||||||
|
| |||||||||||
United Arab Emirates – 0.4% | ||||||||||||
Abu Dhabi Government International Bond | 521 | 511,882 | ||||||||||
2.50%, 04/16/2025(a) | 396 | 419,364 | ||||||||||
3.875%, 04/16/2050(a) | 356 | 422,528 | ||||||||||
|
| |||||||||||
| 1,353,774 | ||||||||||||
|
| |||||||||||
Uruguay – 0.1% | ||||||||||||
Uruguay Government International Bond | 156 | 188,779 | ||||||||||
|
| |||||||||||
Total Governments – Sovereign Bonds | 3,979,860 | |||||||||||
|
| |||||||||||
QUASI-SOVEREIGNS – 1.0% | ||||||||||||
Quasi-Sovereign Bonds – 1.0% | ||||||||||||
Chile – 0.3% | ||||||||||||
Corp. Nacional del Cobre de Chile | 565 | 600,842 | ||||||||||
3.75%, 01/15/2031(a) | 201 | 222,105 | ||||||||||
Empresa de Transporte de Pasajeros Metro SA | 200 | 217,600 | ||||||||||
|
| |||||||||||
| 1,040,547 | ||||||||||||
|
| |||||||||||
Indonesia – 0.3% | ||||||||||||
Indonesia Asahan Aluminium Persero PT | 407 | 442,104 | ||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 47 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Pertamina Persero PT | U.S.$ | 570 | $ | 739,934 | ||||||||
|
| |||||||||||
| 1,182,038 | ||||||||||||
|
| |||||||||||
Malaysia – 0.1% | ||||||||||||
Petronas Capital Ltd. | 332 | 414,225 | ||||||||||
|
| |||||||||||
Mexico – 0.1% | ||||||||||||
Petroleos Mexicanos | 392 | 303,604 | ||||||||||
6.84%, 01/23/2030 | 143 | 127,855 | ||||||||||
|
| |||||||||||
| 431,459 | ||||||||||||
|
| |||||||||||
Peru – 0.2% | ||||||||||||
Corp. Financiera de Desarrollo SA | 808 | 820,928 | ||||||||||
|
| |||||||||||
Total Quasi-Sovereigns | 3,889,197 | |||||||||||
|
| |||||||||||
LOCAL GOVERNMENTS – | ||||||||||||
United States – 1.0% | ||||||||||||
Port Authority of New York & New Jersey | 435 | 439,933 | ||||||||||
State Board of Administration Finance Corp. | 695 | 697,801 | ||||||||||
State of California | 545 | 574,686 | ||||||||||
Series 2010 | 970 | 1,652,996 | ||||||||||
Tobacco Settlement Finance Authority/WV | 500 | 499,605 | ||||||||||
|
| |||||||||||
Total Local Governments – US Municipal Bonds | 3,865,021 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – | ||||||||||||
South Africa – 0.9% | ||||||||||||
Republic of South Africa Government Bond | ZAR | 60,009 | 3,391,186 | |||||||||
|
| |||||||||||
48 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
EMERGING MARKETS – CORPORATE BONDS – 0.6% | ||||||||||||
Industrial – 0.6% | ||||||||||||
Basic – 0.1% | ||||||||||||
Braskem Netherlands Finance BV | U.S.$ | 390 | $ | 361,331 | ||||||||
|
| |||||||||||
Capital Goods – 0.2% | ||||||||||||
Embraer Netherlands Finance BV | 540 | 511,323 | ||||||||||
6.95%, 01/17/2028(a) | 219 | 218,881 | ||||||||||
Odebrecht Finance Ltd. | 341 | 11,935 | ||||||||||
7.125%, 06/26/2042(a)(h)(i) | 394 | 13,790 | ||||||||||
|
| |||||||||||
| 755,929 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.1% | ||||||||||||
Globo Comunicacao e Participacoes SA | 417 | 413,742 | ||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.1% | ||||||||||||
BRF GmbH | 349 | 352,817 | ||||||||||
Virgolino de Oliveira Finance SA | 660 | 5,789 | ||||||||||
|
| |||||||||||
| 358,606 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.1% | ||||||||||||
Rumo Luxembourg SARL | 315 | 329,569 | ||||||||||
|
| |||||||||||
| 2,219,177 | ||||||||||||
|
| |||||||||||
Utility – 0.0% | ||||||||||||
Electric – 0.0% | ||||||||||||
Terraform Global Operating LLC | 60 | 60,836 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Corporate Bonds | 2,280,013 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – | ||||||||||||
Brazil – 0.1% | ||||||||||||
Brazilian Government International Bond | 496 | 501,611 | ||||||||||
|
| |||||||||||
Dominican Republic – 0.2% | ||||||||||||
Dominican Republic International Bond | 763 | 777,545 | ||||||||||
|
| |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 49 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Egypt – 0.1% | ||||||||||||
Egypt Government International Bond | U.S.$ | 235 | $ | 241,462 | ||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 1,520,618 | |||||||||||
|
| |||||||||||
| Shares | ||||||||||||
COMMON STOCKS – 0.2% | ||||||||||||
Financials – 0.2% | ||||||||||||
Insurance – 0.2% | ||||||||||||
Mt Logan Re Ltd. (Preference Shares)(k)(l)(m) | 626 | 651,284 | ||||||||||
|
| |||||||||||
| Principal Amount (000) | ||||||||||||
SHORT-TERM INVESTMENTS – 4.2% | ||||||||||||
U.S. Treasury Bills – 3.1% | ||||||||||||
U.S. Treasury Bill | U.S.$ | 11,485 | 11,484,834 | |||||||||
|
| |||||||||||
| Shares | ||||||||||||
Investment Companies – 1.0% | ||||||||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio – Class AB, | 3,611,550 | 3,611,550 | ||||||||||
|
| |||||||||||
| Principal Amount (000) | ||||||||||||
Short-Term Municipal Notes – 0.1% | ||||||||||||
New York – 0.1% | ||||||||||||
New York State Dormitory Authority | ||||||||||||
Series 2020B | U.S.$ | 185 | 188,656 | |||||||||
|
| |||||||||||
Total Short-Term Investments | 15,285,040 | |||||||||||
|
| |||||||||||
Total Investments – 103.8% | 388,012,108 | |||||||||||
Other assets less liabilities – (3.8)% | (14,343,326 | ) | ||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 373,668,782 | ||||||||||
|
| |||||||||||
50 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
FUTURES (see Note D)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||
Purchased Contracts |
| |||||||||||||
Euro-Bund Futures | 21 | December 2020 | $ | 4,308,215 | $ | 49,381 | ||||||||
U.S. 10 Yr Ultra Futures | 168 | December 2020 | 26,423,250 | (331,139 | ) | |||||||||
U.S. T-Note 2 Yr (CBT) Futures | 837 | December 2020 | 184,846,219 | (59,599 | ) | |||||||||
U.S. T-Note 10 Yr (CBT) Futures | 9 | December 2020 | 1,243,969 | (10,309 | ) | |||||||||
U.S. Ultra Bond (CBT) Futures | 105 | December 2020 | 22,575,000 | (888,234 | ) | |||||||||
Sold Contracts |
| |||||||||||||
10 Yr Canadian Bond Futures | 20 | December 2020 | 2,267,357 | 13,028 | ||||||||||
Japan 10 Yr Bond (OSE) Futures | 3 | December 2020 | 4,352,071 | (3,314 | ) | |||||||||
U.S. T-Note 5 Yr (CBT) Futures | 23 | December 2020 | 2,888,836 | 4,088 | ||||||||||
|
| |||||||||||||
| $ | (1,226,098) | |||||||||||||
|
| |||||||||||||
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Bank of America, NA | ZAR | 107,389 | USD | 6,422 | 11/27/2020 | $ | (158,251 | ) | ||||||||||||
BNP Paribas SA | CAD | 11,436 | USD | 8,609 | 12/10/2020 | 24,126 | ||||||||||||||
Citibank, NA | USD | 575 | GBP | 445 | 11/19/2020 | 1,105 | ||||||||||||||
Citibank, NA | USD | 532 | ZAR | 9,001 | 11/27/2020 | 19,125 | ||||||||||||||
Citibank, NA | USD | 3,815 | JPY | 402,790 | 12/11/2020 | 34,099 | ||||||||||||||
Citibank, NA | CNY | 51,476 | USD | 7,659 | 12/17/2020 | 164 | ||||||||||||||
Citibank, NA | NZD | 11,359 | USD | 7,530 | 12/22/2020 | 18,973 | ||||||||||||||
Goldman Sachs Bank USA | KRW | 3,314,587 | USD | 2,802 | 11/16/2020 | (112,573 | ) | |||||||||||||
Goldman Sachs Bank USA | USD | 2,783 | CNY | 19,408 | 11/16/2020 | 110,642 | ||||||||||||||
Goldman Sachs Bank USA | USD | 1,051 | ZAR | 17,589 | 11/27/2020 | 27,283 | ||||||||||||||
Goldman Sachs Bank USA | USD | 7,327 | AUD | 10,396 | 01/12/2021 | (17,016 | ) | |||||||||||||
HSBC Bank USA | USD | 7,539 | KRW | 8,767,507 | 11/10/2020 | 169,972 | ||||||||||||||
HSBC Bank USA | USD | 1,304 | ZAR | 21,632 | 11/27/2020 | 21,992 | ||||||||||||||
JPMorgan Chase Bank, NA | USD | 13,145 | EUR | 11,179 | 12/18/2020 | (111,410 | ) | |||||||||||||
Morgan Stanley & Co., Inc. | AUD | 21,264 | USD | 15,179 | 01/12/2021 | 227,558 | ||||||||||||||
Morgan Stanley & Co., Inc. | MYR | 4,032 | USD | 968 | 03/25/2021 | 3,351 | ||||||||||||||
Standard Chartered Bank | KRW | 5,515,849 | USD | 4,665 | 11/16/2020 | (185,425 | ) | |||||||||||||
Standard Chartered Bank | USD | 4,636 | CNY | 32,269 | 11/16/2020 | 174,841 | ||||||||||||||
State Street Bank & Trust Co. | GBP | 445 | USD | 574 | 11/19/2020 | (2,546 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 459 | ZAR | 7,610 | 11/27/2020 | 7,556 | ||||||||||||||
State Street Bank & Trust Co. | EUR | 235 | USD | 278 | 12/18/2020 | 3,920 | ||||||||||||||
State Street Bank & Trust Co. | USD | 996 | EUR | 841 | 12/18/2020 | (15,888 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 124 | AUD | 174 | 01/12/2021 | (1,688 | ) | |||||||||||||
State Street Bank & Trust Co. | USD | 5 | SEK | 42 | 01/15/2021 | (48 | ) | |||||||||||||
|
| |||||||||||||||||||
| $ | 239,862 | |||||||||||||||||||
|
| |||||||||||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 51 | |
PORTFOLIO OF INVESTMENTS (continued)
CALL OPTIONS WRITTEN (see Note D)
| Description | Counterparty | Contracts | Exercise Price | Expiration Month | Notional (000) | Premiums Received | U.S. $ Value | |||||||||||||||||||||
iShares 7-10 Year Treasury Bond ETF(q) | Citibank, NA | 247,200 | USD | 121.00 | November 2020 | USD | 29,911 | $ | 223,716 | $ (106,333) | ||||||||||||||||||
CREDIT DEFAULT SWAPTIONS WRITTEN (see Note D)
| Description | Counterparty | Buy/Sell Protection | Strike Rate | Expiration Month | Notional Amount (000) | Premiums Received | Market Value | |||||||||||||||||||||||
Put |
| |||||||||||||||||||||||||||||
CDX-NAHY Series 34, 5 Year Index RTP | Bank of America, NA | Sell | 103.00 | % | | December 2020 | | USD | 18,800 | $ | 419,616 | $ | (385,564 | ) | ||||||||||||||||
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| Description | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts |
| |||||||||||||||||||||||||||||||
CDX-NAHY Series 33, 5 Year Index, 12/20/2024* | 5.00 | % | Quarterly | 3.70 | % | USD | 3,070 | $ | 165,771 | $ | (297,552 | ) | $ | 463,323 | ||||||||||||||||||
CDX-NAHY Series 34, 5 Year Index, 06/20/2025* | 5.00 | Quarterly | 3.96 | USD | 1,335 | 64,575 | 69,415 | (4,840 | ) | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | 230,346 | $ | (228,137 | ) | $ | 458,483 | ||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||
| Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| CAD | 27,650 | 08/27/2021 | 3 Month CDOR | 1.623% | Semi-Annual/ Semi-Annual | $ | 237,706 | $ | 78 | $ | 237,628 | |||||||||||||||
| SEK | 121,200 | 08/30/2024 | 3 Month STIBOR | (0.165)% | Quarterly/Annual | (85,923 | ) | — | (85,923 | ) | ||||||||||||||||
52 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Rate Type | ||||||||||||||||||||||||||
| Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| CAD | 42,660 | 08/10/2025 | 3 Month CDOR | 0.698% | Semi-Annual/ Semi-Annual | $ | (92,046 | ) | $ | — | $ | (92,046 | ) | |||||||||||||
| USD | 2,000 | 12/13/2029 | 1.764% | 3 Month LIBOR | Semi-Annual/ Quarterly | (180,248 | ) | — | (180,248 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | (120,511 | ) | $ | 78 | $ | (120,589 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
CREDIT DEFAULT SWAPS (see Note D)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Buy Contracts |
| |||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | )% | Monthly | 9.62 | % | USD | 461 | $ | 119,346 | $ | 93,797 | $ | 25,549 | |||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 463 | 119,863 | 94,131 | 25,732 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 3,486 | 902,467 | 713,922 | 188,545 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 1,743 | 451,379 | 350,353 | 101,026 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 697 | 180,500 | 138,840 | 41,660 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 692 | 179,031 | 142,616 | 36,415 | |||||||||||||||||||||||
Goldman Sachs International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 433 | 112,096 | 75,932 | 36,164 | |||||||||||||||||||||||
JPMorgan Securities, LLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 368 | 95,207 | 75,060 | 20,147 | |||||||||||||||||||||||
Morgan Stanley & Co. International PLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 462 | 119,604 | 95,346 | 24,258 | |||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 9, 09/17/2058* | (3.00 | ) | Monthly | 9.62 | USD | 231 | 59,802 | 45,314 | 14,488 | |||||||||||||||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 53 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts | ||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 252 | $ | (81,547 | ) | $ | (28,279 | ) | $ | (53,268 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 362 | (117,143 | ) | (40,623 | ) | (76,520 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 504 | (163,094 | ) | (55,309 | ) | (107,785 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 723 | (233,962 | ) | (79,342 | ) | (154,620 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 504 | (163,094 | ) | (54,223 | ) | (108,871 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 857 | (277,325 | ) | (90,045 | ) | (187,280 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 540 | (174,744 | ) | (57,027 | ) | (117,717 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 200 | (64,720 | ) | (21,094 | ) | (43,626 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 180 | (58,248 | ) | (22,386 | ) | (35,862 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 153 | (49,511 | ) | (19,028 | ) | (30,483 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 252 | (81,547 | ) | (31,341 | ) | (50,206 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 178 | (57,601 | ) | (22,867 | ) | (34,734 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 351 | (113,613 | ) | (41,490 | ) | (72,123 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 105 | (33,986 | ) | (12,411 | ) | (21,575 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 107 | (34,616 | ) | (10,668 | ) | (23,948 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 201 | (65,027 | ) | (26,130 | ) | (38,897 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | % | USD | 85 | (27,499 | ) | (11,313 | ) | (16,186 | ) | ||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 297 | (96,085 | ) | (44,693 | ) | (51,392 | ) | |||||||||||||||||||||
54 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 41 | $ | (13,264 | ) | $ | (6,473 | ) | $ | (6,791 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 269 | (87,026 | ) | (39,297 | ) | (47,729 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 36 | (11,650 | ) | (4,545 | ) | (7,105 | ) | |||||||||||||||||||||
Credit Suisse International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 509 | (164,670 | ) | (32,277 | ) | (132,393 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 155 | (50,145 | ) | (10,505 | ) | (39,640 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,882 | (608,798 | ) | (75,418 | ) | (533,380 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 291 | (94,143 | ) | (42,317 | ) | (51,826 | ) | |||||||||||||||||||||
Deutsche Bank AG | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 850 | (106,090 | ) | (16,299 | ) | (89,791 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 745 | (241,020 | ) | (51,181 | ) | (189,839 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 46 | (14,882 | ) | (2,588 | ) | (12,294 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 131 | (42,381 | ) | (10,562 | ) | (31,819 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 52 | (16,823 | ) | (5,975 | ) | (10,848 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 322 | (104,172 | ) | (39,773 | ) | (64,399 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 4 | (1,295 | ) | (449 | ) | (846 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 181 | (58,556 | ) | (20,286 | ) | (38,270 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 530 | (171,463 | ) | (55,968 | ) | (115,495 | ) | |||||||||||||||||||||
Goldman Sachs International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 90 | (29,124 | ) | (11,314 | ) | (17,810 | ) | |||||||||||||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 55 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 760 | $ | (245,873 | ) | $ | (59,308 | ) | $ | (186,565 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 219 | (70,850 | ) | (14,232 | ) | (56,618 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 311 | (100,614 | ) | (26,343 | ) | (74,271 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 26 | (8,411 | ) | (2,284 | ) | (6,127 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 52 | (16,823 | ) | (4,653 | ) | (12,170 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 52 | (16,823 | ) | (5,035 | ) | (11,788 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 104 | (33,645 | ) | (11,005 | ) | (22,640 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 260 | (84,114 | ) | (34,685 | ) | (49,429 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 574 | (185,698 | ) | (74,596 | ) | (111,102 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 356 | (115,172 | ) | (37,179 | ) | (77,993 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 325 | (105,143 | ) | (48,971 | ) | (56,172 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 224 | (72,468 | ) | (35,888 | ) | (36,580 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 313 | (101,261 | ) | (50,868 | ) | (50,393 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 20 | (6,471 | ) | (2,978 | ) | (3,493 | ) | |||||||||||||||||||||
JPMorgan Securities, LLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 61 | (19,734 | ) | (7,630 | ) | (12,104 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 374 | (120,995 | ) | (44,959 | ) | (76,036 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 130 | (42,058 | ) | (15,766 | ) | (26,292 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 131 | (42,380 | ) | (12,493 | ) | (29,887 | ) | |||||||||||||||||||||
56 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 30 | $ | (9,706 | ) | $ | (2,869 | ) | $ | (6,837 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 32 | (10,353 | ) | (3,061 | ) | (7,292 | ) | |||||||||||||||||||||
Morgan Stanley & Co. International PLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 800 | (258,813 | ) | (115,892 | ) | (142,921 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (3,036,974 | ) | $ | 121,120 | $ | (3,158,094 | ) | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
TOTAL RETURN SWAPS (see Note D)
Counterparty & | Rate Paid/ Received | Payment Frequency | Current Notional (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Pay Total Return on |
| |||||||||||||||||||||||
Barclays Bank PLC iBoxx $ Liquid High Yield Index | | 3 Month LIBOR | | Maturity | USD | 13,350 | 12/20/2020 | $ | (246,522 | ) | ||||||||||||||
| (a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $120,303,552 or 32.2% of net assets. |
| (b) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (c) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (d) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 1.18% of net assets as of October 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
| 144A/Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Federal Home Loan Mortgage Corp. | 02/11/2000 | $ | 1,033,171 | $ | 700,909 | 0.19 | % | |||||||||
Federal Home Loan Mortgage Corp. | 10/07/2000 | 733,330 | 525,078 | 0.14 | % | |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 57 | |
PORTFOLIO OF INVESTMENTS (continued)
| 144A/Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Home Re Ltd. | 12/12/2019 | $ | 516,486 | $ | 443,355 | 0.12 | % | |||||||||
JP Morgan Madison Avenue Securities Trust | 11/06/2015 | 49,270 | 46,167 | 0.01 | % | |||||||||||
Morgan Stanley Capital I Trust | 11/16/2015 | 172,236 | 138,765 | 0.04 | % | |||||||||||
PMT Credit Risk Transfer Trust | 03/21/2019 | 398,712 | 355,844 | 0.10 | % | |||||||||||
PMT Credit Risk Transfer Trust Series 2019-2R, Class A | 06/07/2019 | 477,464 | 428,057 | 0.11 | % | |||||||||||
PMT Credit Risk Transfer Trust Series 2019-3R, Class A | 10/11/2019 | 388,085 | 347,530 | 0.09 | % | |||||||||||
PMT Credit Risk Transfer Trust | 02/11/2000 | 624,119 | 558,640 | 0.15 | % | |||||||||||
Radnor Re Ltd. | 01/10/2000 | 517,402 | 452,659 | 0.12 | % | |||||||||||
Terraform Global Operating LLC | 02/08/2018 | 60,000 | 60,836 | 0.02 | % | |||||||||||
Virgolino de Oliveira Finance SA | 01/24/2014 | 365,927 | 5,789 | 0.00 | % | |||||||||||
Wells Fargo Credit Risk Transfer Securities Trust | 09/28/2015 | 290,665 | 277,964 | 0.07 | % | |||||||||||
Wells Fargo Credit Risk Transfer Securities Trust | 09/28/2015 | 83,523 | 80,881 | 0.02 | % | |||||||||||
| (e) | Inverse interest only security. |
| (f) | IO – Interest Only. |
| (g) | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (h) | Defaulted. |
58 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| (i) | Non-income producing security. |
| (j) | Defaulted matured security. |
| (k) | Restricted and illiquid security. |
| Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Mt Logan Re Ltd. (Preference Shares) | 12/30/2014 | $ | 626,000 | $ | 651,284 | 0.17 | % | |||||||||
| (l) | Fair valued by the Adviser. |
| (m) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (n) | Affiliated investments. |
| (o) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (p) | The rate shown represents the 7-day yield as of period end. |
| (q) | One contract relates to 1 share. |
Currency Abbreviations:
AUD – Australian Dollar
CAD – Canadian Dollar
CNY – Chinese Yuan Renminbi
EUR – Euro
GBP – Great British Pound
JPY – Japanese Yen
KRW – South Korean Won
MYR – Malaysian Ringgit
NZD – New Zealand Dollar
SEK – Swedish Krona
USD – United States Dollar
ZAR – South African Rand
Glossary:
ABS – Asset-Backed Securities
ARMs – Adjustable Rate Mortgages
CBT – Chicago Board of Trade
CDOR – Canadian Dealer Offered Rate
CDX-CMBX.NA – North American Commercial Mortgage-Backed Index
CDX-NAHY – North American High Yield Credit Default Swap Index
CLO – Collateralized Loan Obligations
CMBS – Commercial Mortgage-Backed Securities
CPI – Consumer Price Index
LIBOR – London Interbank Offered Rate
OSE – Osaka Securities Exchange
REMICs – Real Estate Mortgage Investment Conduits
RTP – Right To Pay
STIBOR – Stockholm Interbank Offered Rate
TBA – To Be Announced
TIPS – Treasury Inflation Protected Security
See notes to financial statements.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 59 | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $376,503,540) | $ | 384,400,558 | ||
Affiliated issuers (cost $3,611,550) | 3,611,550 | |||
Cash collateral due from broker | 3,957,920 | |||
Foreign currencies, at value (cost $52,055) | 52,442 | |||
Receivable for investment securities sold | 2,461,899 | |||
Market value on credit default swaps (net premiums paid $1,825,311) | 2,339,295 | |||
Interest receivable | 1,922,909 | |||
Unrealized appreciation on forward currency exchange contracts | 844,707 | |||
Receivable for capital stock sold | 431,711 | |||
Affiliated dividends receivable | 148 | |||
|
| |||
Total assets | 400,023,139 | |||
|
| |||
| Liabilities | ||||
Swaptions written, at value (premiums received $419,616) | 385,564 | |||
Options written, at value (premiums received $223,716) | 106,333 | |||
Payable for investment securities purchased | 18,398,620 | |||
Market value on credit default swaps (net premiums received $1,704,191) | 5,376,269 | |||
Unrealized depreciation on forward currency exchange contracts | 604,845 | |||
Payable for capital stock redeemed | 359,027 | |||
Unrealized depreciation on total return swaps | 246,522 | |||
Dividends payable | 214,624 | |||
Payable for variation margin on futures | 213,059 | |||
Advisory fee payable | 100,884 | |||
Distribution fee payable | 58,046 | |||
Administrative fee payable | 26,336 | |||
Transfer Agent fee payable | 20,487 | |||
Payable for variation margin on centrally cleared swaps | 17,957 | |||
Directors’ fees payable | 1,931 | |||
Accrued expenses and other liabilities | 223,853 | |||
|
| |||
Total liabilities | 26,354,357 | |||
|
| |||
Net Assets | $ | 373,668,782 | ||
|
| |||
| Composition of Net Assets | ||||
Capital stock, at par | $ | 32,413 | ||
Additional paid-in capital | 362,293,966 | |||
Distributable earnings | 11,342,403 | |||
|
| |||
| $ | 373,668,782 | |||
|
|
See notes to financial statements.
60 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—27 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 224,484,863 | 19,474,995 | $ | 11.53 | * | ||||||
| ||||||||||||
| C | $ | 10,127,865 | 880,529 | $ | 11.50 | |||||||
| ||||||||||||
| Advisor | $ | 122,107,923 | 10,588,528 | $ | 11.53 | |||||||
| ||||||||||||
| R | $ | 1,802,323 | 156,395 | $ | 11.52 | |||||||
| ||||||||||||
| K | $ | 6,579,522 | 570,311 | $ | 11.54 | |||||||
| ||||||||||||
| I | $ | 2,742,737 | 237,555 | $ | 11.55 | |||||||
| ||||||||||||
| Z | $ | 5,823,549 | 504,215 | $ | 11.55 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $12.04 which reflects a sales charge of 4.25%. |
See notes to financial statements.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 61 | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest | $ | 12,287,408 | ||||||
Dividends—Affiliated issuers | 23,472 | |||||||
Other income | 810 | $ | 12,311,690 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 1,654,114 | |||||||
Distribution fee—Class A | 546,006 | |||||||
Distribution fee—Class B | 78 | |||||||
Distribution fee—Class C | 105,659 | |||||||
Distribution fee—Class R | 12,759 | |||||||
Distribution fee—Class K | 16,858 | |||||||
Transfer agency—Class A | 270,065 | |||||||
Transfer agency—Class B | 16 | |||||||
Transfer agency—Class C | 13,353 | |||||||
Transfer agency—Advisor Class | 145,830 | |||||||
Transfer agency—Class R | 6,267 | |||||||
Transfer agency—Class K | 13,486 | |||||||
Transfer agency—Class I | 2,300 | |||||||
Transfer agency—Class Z | 1,579 | |||||||
Custody and accounting | 179,098 | |||||||
Audit and tax | 109,673 | |||||||
Registration fees | 105,263 | |||||||
Administrative | 79,850 | |||||||
Printing | 67,887 | |||||||
Legal | 34,359 | |||||||
Directors’ fees | 21,607 | |||||||
Miscellaneous | 21,456 | |||||||
|
| |||||||
Total expenses | 3,407,563 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (816,864 | ) | ||||||
|
| |||||||
Net expenses | 2,590,699 | |||||||
|
| |||||||
Net investment income | 9,720,991 | |||||||
|
| |||||||
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions(a) | 11,298,950 | |||||||
Forward currency exchange contracts | (337,756 | ) | ||||||
Futures | 4,555,186 | |||||||
Options written | 223,082 | |||||||
Swaps | (3,000,704 | ) | ||||||
Swaptions written | 116,202 | |||||||
Foreign currency transactions | (101,890 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments(b) | (3,625,095 | ) | ||||||
Forward currency exchange contracts | 295,045 | |||||||
Futures | (1,160,253 | ) | ||||||
Options written | 117,383 | |||||||
Swaps | (2,710,033 | ) | ||||||
Swaptions written | 34,052 | |||||||
Foreign currency denominated assets and liabilities | 20,243 | |||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 5,724,412 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 15,445,403 | ||||||
|
|
| (a) | Net of foreign capital gains taxes of $7,582. |
| (b) | Net of decrease in accrued foreign capital gains taxes of $5,303. |
See notes to financial statements.
62 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 9,720,991 | $ | 10,364,693 | ||||
Net realized gain on investment and foreign currency transactions | 12,753,070 | 3,530,308 | ||||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | (7,028,658 | ) | 19,671,907 | |||||
Contributions from Affiliates (see Note B) | – 0 | – | 3,028 | |||||
|
|
|
| |||||
Net increase in net assets from operations | 15,445,403 | 33,569,936 | ||||||
| Distributions to Shareholders | ||||||||
Class A | (6,405,787 | ) | (7,511,236 | ) | ||||
Class B | (201 | ) | (12,399 | ) | ||||
Class C | (231,596 | ) | (292,422 | ) | ||||
Advisor Class | (3,763,633 | ) | (3,142,500 | ) | ||||
Class R | (68,726 | ) | (97,619 | ) | ||||
Class K | (197,901 | ) | (272,681 | ) | ||||
Class I | (89,863 | ) | (127,077 | ) | ||||
Class Z | (250,502 | ) | (273,970 | ) | ||||
| Capital Stock Transactions | ||||||||
Net increase | 9,467,968 | 11,877,351 | ||||||
|
|
|
| |||||
Total increase | 13,905,162 | 33,717,383 | ||||||
| Net Assets | ||||||||
Beginning of period | 359,763,620 | 326,046,237 | ||||||
|
|
|
| |||||
End of period | $ | 373,668,782 | $ | 359,763,620 | ||||
|
|
|
| |||||
See notes to financial statements.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 63 | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Total Return Bond Portfolio (the “Fund”) (formerly AB Intermediate Bond Portfolio), a diversified portfolio. The Fund offers Class A, Class C, Advisor Class, Class R, Class K, Class I, Class T and Class Z shares. Class B and Class T shares have been authorized but currently are not offered. Effective August 2, 2019, sales of Class B shares were suspended. On November 7, 2019, all remaining outstanding Class B Shares of the Fund were converted to Class A shares. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All nine classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accord-
64 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
ance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 65 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized
66 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
| |||||||||||||||
Corporates – Investment Grade | $ | – 0 | – | $ | 104,567,645 | $ | – 0 | – | $ | 104,567,645 | ||||||
Collateralized Mortgage Obligations | – 0 | – | 60,911,053 | – 0 | – | 60,911,053 | ||||||||||
Commercial Mortgage-Backed Securities | – 0 | – | 58,449,326 | – 0 | – | 58,449,326 | ||||||||||
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NOTES TO FINANCIAL STATEMENTS (continued)
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Mortgage Pass-Throughs | $ | – 0 | – | $ | 48,115,511 | $ | – 0 | – | $ | 48,115,511 | ||||||
Governments – Treasuries | – 0 | – | 40,179,924 | – 0 | – | 40,179,924 | ||||||||||
Asset-Backed Securities | – 0 | – | 16,286,596 | – 0 | – | 16,286,596 | ||||||||||
Inflation-Linked Securities | – 0 | – | 10,242,152 | – 0 | – | 10,242,152 | ||||||||||
Corporates – Non-Investment Grade | – 0 | – | 10,005,009 | – 0 | – | 10,005,009 | ||||||||||
Collateralized Loan Obligations | – 0 | – | 4,392,673 | – 0 | – | 4,392,673 | ||||||||||
Governments – Sovereign Bonds | – 0 | – | 3,979,860 | – 0 | – | 3,979,860 | ||||||||||
Quasi-Sovereigns | – 0 | – | 3,889,197 | – 0 | – | 3,889,197 | ||||||||||
Local Governments – US Municipal Bonds | – 0 | – | 3,865,021 | – 0 | – | 3,865,021 | ||||||||||
Emerging Markets – Treasuries | – 0 | – | 3,391,186 | – 0 | – | 3,391,186 | ||||||||||
Emerging Markets – Corporate Bonds | – 0 | – | 2,280,013 | – 0 | – | 2,280,013 | ||||||||||
Emerging Markets – Sovereigns | – 0 | – | 1,520,618 | – 0 | – | 1,520,618 | ||||||||||
Common Stocks | – 0 | – | – 0 | – | 651,284 | 651,284 | ||||||||||
Short-Term Investments: | ||||||||||||||||
U.S. Treasury Bills | – 0 | – | 11,484,834 | – 0 | – | 11,484,834 | ||||||||||
Investment Companies | 3,611,550 | – 0 | – | – 0 | – | 3,611,550 | ||||||||||
Short-Term Municipal Notes | – 0 | – | 188,656 | – 0 | – | 188,656 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 3,611,550 | 383,749,274 | 651,284 | 388,012,108 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: |
| |||||||||||||||
Futures | 66,497 | – 0 | – | – 0 | – | 66,497 | (b) | |||||||||
Forward Currency Exchange Contracts | – 0 | – | 844,707 | – 0 | – | 844,707 | ||||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | 230,346 | – 0 | – | 230,346 | (b) | |||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 237,706 | – 0 | – | 237,706 | (b) | |||||||||
Credit Default Swaps | – 0 | – | 2,339,295 | – 0 | – | 2,339,295 | ||||||||||
Liabilities: |
| |||||||||||||||
Futures | (1,292,595 | ) | – 0 | – | – 0 | – | (1,292,595 | )(b) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (604,845 | ) | – 0 | – | (604,845 | ) | ||||||||
Call Options Written | – 0 | – | (106,333 | ) | – 0 | – | (106,333 | ) | ||||||||
Credit Default Swaptions Written | – 0 | – | (385,564 | ) | – 0 | – | (385,564 | ) | ||||||||
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NOTES TO FINANCIAL STATEMENTS (continued)
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Centrally Cleared Interest Rate Swaps | $ | – 0 | – | $ | (358,217 | ) | $ | – 0 | – | $ | (358,217 | )(b) | ||||
Credit Default Swaps | – 0 | – | (5,376,269 | ) | – 0 | – | (5,376,269 | ) | ||||||||
Total Return Swaps | – 0 | – | (246,522 | ) | – 0 | – | (246,522 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 2,385,452 | $ | 380,323,578 | $ | 651,284 | $ | 383,360,314 | (c) | |||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
| (c) | Amounts of $62,884 and $4,177,503 for Asset-Backed Securities and Collateralized Mortgage Obligations, respectively, were transferred out of Level 3 into Level 2 as improved transparency of price inputs received from pricing vendors has increased the observability during the reporting period. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital
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NOTES TO FINANCIAL STATEMENTS (continued)
gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
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NOTES TO FINANCIAL STATEMENTS (continued)
.40% of the next $2.5 billion up to $5 billion, .35% of the excess over $5 billion up to $8 billion and .30% in excess of $8 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding interest expense) on an annual basis (the “Expense Caps”) to .77%, 1.52%, .52%, 1.02%, .77%, .52%, and .52% of the daily average net assets for the Class A, Class C, Advisor Class, Class R, Class K, Class I, and Class Z shares, respectively. This waiver extends through January 31, 2021 and then may be extended by the Adviser for additional one year terms. For the year ended October 31, 2020, such reimbursements/waivers amounted to $813,217.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the reimbursement for such services amounted to $79,850.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $181,654 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $5,269 from the sale of Class A shares and received $731, $10 and $1,450 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as
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NOTES TO FINANCIAL STATEMENTS (continued)
an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $3,647.
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 11,000 | $ | 200,508 | $ | 207,896 | $ | 3,612 | $ | 23 | ||||||||||
During the year ended October 31, 2019, the Adviser reimbursed the Fund $3,028 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to both Class B and Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class, Class I and Class Z shares. Payments under the Agreement in respect of Class A shares are currently limited to an annual rate of .25% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $1,207,083, $146,581 and $64,704 for Class C, Class R and Class K shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 157,673,134 | $ | 99,343,906 | ||||
U.S. government securities | 190,403,530 | 198,636,001 | ||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 380,257,304 | ||
|
| |||
Gross unrealized appreciation | $ | 21,977,597 | ||
Gross unrealized depreciation | (14,455,445 | ) | ||
|
| |||
Net unrealized appreciation | $ | 7,522,152 | ||
|
|
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NOTES TO FINANCIAL STATEMENTS (continued)
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
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NOTES TO FINANCIAL STATEMENTS (continued)
During the year ended October 31, 2020, the Fund held futures for hedging and non-hedging purposes.
| • | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2020, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
| • | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the
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NOTES TO FINANCIAL STATEMENTS (continued)
exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
The Fund may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The Fund’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended October 31, 2020, the Fund held written options for hedging and non-hedging purposes. During the year
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NOTES TO FINANCIAL STATEMENTS (continued)
ended October 31, 2020, the Fund held written swaptions for hedging and non-hedging purposes.
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions.” A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
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NOTES TO FINANCIAL STATEMENTS (continued)
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on
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NOTES TO FINANCIAL STATEMENTS (continued)
a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 79 | |
NOTES TO FINANCIAL STATEMENTS (continued)
The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the year ended October 31, 2020, the Fund held total return swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a
80 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 66,497 | * | Receivable/Payable for variation margin on futures | $ | 1,292,595 | * | ||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | 463,323 | * | Receivable/Payable for variation margin on centrally cleared swaps | 4,840 | * | ||||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | 237,628 | * | Receivable/Payable for variation margin on centrally cleared swaps | 358,217 | * | ||||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts | 844,707 | Unrealized depreciation on forward currency exchange contracts | 604,845 | ||||||||
Credit contracts | Swaptions written, at value | 385,564 | ||||||||||
Equity contracts | Options written, at value | 106,333 | ||||||||||
Credit contracts | Market value on credit default swaps | 2,339,295 | Market value on credit default swaps | 5,376,269 | ||||||||
Credit contracts | Unrealized depreciation on total return swaps | 246,522 | ||||||||||
|
|
|
| |||||||||
Total | $ | 3,951,450 | $ | 8,375,185 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 81 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | 4,555,186 | $ | (1,160,253 | ) | ||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | (337,756 | ) | 295,045 | ||||||
Equity contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | 223,082 | 117,383 | |||||||
Credit contracts | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | 116,202 | 34,052 | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 429,240 | 182,449 | |||||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (3,429,944 | ) | (2,892,482 | ) | |||||
|
|
|
| |||||||
Total | $ | 1,556,010 | $ | (3,423,806 | ) | |||||
|
|
|
| |||||||
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Futures: | ||||
Average notional amount of buy contracts | $ | 159,282,005 | ||
Average notional amount of sale contracts | $ | 10,102,415 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 11,784,832 | (a) | |
Average principal amount of sale contracts | $ | 23,134,456 | ||
Options Written: | ||||
Average notional amount | $ | 24,870,340 | (b) |
82 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Swaptions Written: | ||||
Average notional amount | $ | 31,232,667 | (c) | |
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 50,635,795 | ||
Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 8,677,857 | (d) | |
Average notional amount of sale contracts | $ | 22,472,199 | ||
Centrally Cleared Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 17,047,668 | (e) | |
Average notional amount of sale contracts | $ | 8,558,265 | (e) | |
Total Return Swaps: | ||||
Average notional amount | $ | 16,375,000 | (f) |
| (a) | Positions were open for eleven months during the year. |
| (b) | Positions were open for two months during the year. |
| (c) | Positions were open for three months during the year. |
| (d) | Positions were open for six months during the year. |
| (e) | Positions were open for nine months during the year. |
| (f) | Positions were open for four months during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
BNP Paribas SA | $ | 24,126 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 24,126 | |||||||
Citibank, NA/Citigroup Global Markets, Inc. | 2,026,052 | (2,026,052 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 250,021 | (250,021 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
HSBC Bank USA | 191,964 | – 0 | – | – 0 | – | – 0 | – | 191,964 | ||||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 95,207 | (95,207 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 83 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley & Co., Inc. | $ | 410,315 | $ | (258,813 | ) | $ | – 0 | – | $ | – 0 | – | $ | 151,502 | |||||||
Standard Chartered Bank | 174,841 | (174,841 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 11,476 | (11,476 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 3,184,002 | $ | (2,816,410 | ) | $ | – 0 | – | $ | – 0 | – | $ | 367,592 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Bank of America, NA | $ | 543,815 | $ | – 0 | – | $ | – 0 | – | $ | (206,432 | ) | $ | 337,383 | |||||||
Barclays Bank PLC | 246,522 | – 0 | – | – 0 | – | – 0 | – | 246,522 | ||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 2,111,635 | (2,026,052 | ) | (85,583 | ) | – 0 | – | – 0 | – | |||||||||||
Credit Suisse International | 917,756 | – 0 | – | – 0 | – | (753,019 | ) | 164,737 | ||||||||||||
Deutsche Bank AG | 756,682 | – 0 | – | (420,000 | ) | (277,879 | ) | 58,803 | ||||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 1,322,079 | (250,021 | ) | – 0 | – | (1,072,058 | ) | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 356,636 | (95,207 | ) | – 0 | – | (237,661 | ) | 23,768 | ||||||||||||
Morgan Stanley & Co. International PLC/Morgan Stanley & Co., Inc. | 258,813 | (258,813 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Standard Chartered Bank | 185,425 | (174,841 | ) | – 0 | – | – 0 | – | 10,584 | ||||||||||||
State Street Bank & Trust Co. | 20,170 | (11,476 | ) | – 0 | – | – 0 | – | 8,694 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 6,719,533 | $ | (2,816,410 | ) | $ | (505,583 | ) | $ | (2,547,049 | ) | $ | 850,491 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
84 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. TBA and Dollar Rolls
The Fund may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.
The Fund may enter into certain TBA transactions known as dollar rolls. Dollar rolls involve sales by the Fund of securities for delivery in the current month and the Fund’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the year ended October 31, 2020, the Fund earned drop income of $23,569 which is included in interest income in the accompanying statement of operations.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 85 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A |
| |||||||||||||||||||||||
Shares sold | 1,888,650 | 1,757,218 | $ | 21,407,368 | $ | 19,196,029 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 438,046 | 524,378 | 4,969,924 | 5,781,216 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 35,898 | 11,654 | 403,846 | 128,277 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 182,964 | 161,067 | 2,082,073 | 1,793,569 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,549,088 | ) | (3,348,527 | ) | (28,719,237 | ) | (36,976,828 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (3,530 | ) | (894,210 | ) | $ | 143,974 | $ | (10,077,737 | ) | |||||||||||||||
| ||||||||||||||||||||||||
| Class B |
| |||||||||||||||||||||||
Shares sold | 2 | 3,175 | $ | 30 | $ | 34,706 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | – 0 | – | 1,076 | – 0 | – | 11,835 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (35,898 | ) | (11,651 | ) | (403,846 | ) | (128,277 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (132 | ) | (4,565 | ) | (1,602 | ) | (50,676 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (36,028 | ) | (11,965 | ) | $ | (405,418 | ) | $ | (132,412 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class C |
| |||||||||||||||||||||||
Shares sold | 432,800 | 233,063 | $ | 4,849,702 | $ | 2,560,907 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 14,549 | 18,800 | 164,668 | 206,427 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (183,382 | ) | (161,416 | ) | (2,082,073 | ) | (1,793,569 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (316,423 | ) | (224,164 | ) | (3,542,669 | ) | (2,453,077 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (52,456 | ) | (133,717 | ) | $ | (610,372 | ) | $ | (1,479,312 | ) | ||||||||||||||
| ||||||||||||||||||||||||
86 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Advisor Class |
| |||||||||||||||||||||||
Shares sold | 5,154,674 | 5,806,792 | $ | 58,200,348 | $ | 63,820,451 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 155,888 | 165,044 | 1,769,237 | 1,825,673 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (3,956,933 | ) | (3,908,822 | ) | (43,675,272 | ) | (42,732,896 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 1,353,629 | 2,063,014 | $ | 16,294,313 | $ | 22,913,228 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Class R |
| |||||||||||||||||||||||
Shares sold | 42,105 | 60,008 | $ | 468,652 | $ | 659,712 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 6,020 | 8,836 | 68,154 | 97,491 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (182,460 | ) | (42,410 | ) | (1,990,251 | ) | (471,877 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (134,335 | ) | 26,434 | $ | (1,453,445 | ) | $ | 285,326 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class K |
| |||||||||||||||||||||||
Shares sold | 328,822 | 332,303 | $ | 3,745,267 | $ | 3,617,130 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 17,425 | 24,713 | 197,903 | 272,598 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (431,270 | ) | (439,474 | ) | (4,696,457 | ) | (4,827,553 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (85,023 | ) | (82,458 | ) | $ | (753,287 | ) | $ | (937,825 | ) | ||||||||||||||
| ||||||||||||||||||||||||
| Class I |
| |||||||||||||||||||||||
Shares sold | 107,909 | 169,670 | $ | 1,239,855 | $ | 1,880,717 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 7,118 | 10,943 | 81,001 | 121,108 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (238,893 | ) | (90,545 | ) | (2,743,592 | ) | (1,008,280 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (123,866 | ) | 90,068 | $ | (1,422,736 | ) | $ | 993,545 | ||||||||||||||||
| ||||||||||||||||||||||||
| Class Z |
| |||||||||||||||||||||||
Shares sold | 342,251 | 372,346 | $ | 3,852,305 | $ | 4,155,412 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 22,034 | 24,733 | 250,023 | 273,479 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (568,822 | ) | (369,959 | ) | (6,427,389 | ) | (4,116,353 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (204,537 | ) | 27,120 | $ | (2,325,061 | ) | $ | 312,538 | ||||||||||||||||
| ||||||||||||||||||||||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 87 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and may be more difficult to trade than other types of securities.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities. The Fund invests in inflation-indexed securities, the value of which may be vulnerable to changes in expectations of inflation or interest rates.
88 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Mortgage-Related and/or Other Asset-Backed Securities Risk—Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 89 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Active Trading Risk—The Fund expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate may greatly exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Fund’s return. In addition, a high rate of portfolio turnover may result in substantial short-term gains, which may have adverse tax consequences for Fund shareholders.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark
90 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 10,898,767 | $ | 11,729,904 | ||||
Net long-term capital gains… | 109,442 | – 0 | – | |||||
|
|
|
| |||||
Total taxable distributions paid | $ | 11,008,209 | $ | 11,729,904 | ||||
|
|
|
| |||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 91 | |
NOTES TO FINANCIAL STATEMENTS (continued)
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed capital gains | $ | 4,818,070 | (a) | |
Other losses | (184,605 | )(b) | ||
Unrealized appreciation/(depreciation) | 7,418,451 | (c) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 12,051,916 | (d) | |
|
|
| (a) | During the fiscal year, the Fund utilized $3,757,123 of capital loss carry forwards to offset current year net realized gains. |
| (b) | As of October 31, 2020, the cumulative deferred loss on straddles was $184,605. |
| (c) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of Treasury inflation-protected securities, the tax treatment of swaps, the tax deferral of losses on wash sales, and the amortization on callable bonds. |
| (d) | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the accrual of foreign capital gains tax, the tax treatment of defaulted securities, and dividends payable. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund did not have any capital loss carryforwards.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings or additional paid-in capital.
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
92 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.35 | $ 10.65 | $ 11.11 | $ 11.23 | $ 11.06 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .29 | .33 | .25 | .24 | † | .26 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .74 | (.44 | ) | (.06 | ) | .27 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .51 | 1.07 | (.19 | ) | .18 | .53 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.33 | ) | (.37 | ) | (.27 | ) | (.23 | ) | (.36 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.33 | ) | (.37 | ) | (.27 | ) | (.30 | ) | (.36 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.53 | $ 11.35 | $ 10.65 | $ 11.11 | $ 11.23 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 4.60 | % | 10.23 | % | (1.75 | )% | 1.68 | %† | 4.93 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $224,484 | $221,033 | $216,950 | $240,386 | $245,683 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .77 | % | .77 | % | .77 | % | .79 | % | .85 | % | ||||||||||
Expenses, before waivers/reimbursements | .99 | % | 1.04 | % | 1.01 | % | 1.03 | % | 1.03 | % | ||||||||||
Net investment income(b) | 2.58 | % | 2.98 | % | 2.29 | % | 2.16 | %† | 2.35 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 93 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.32 | $ 10.63 | $ 11.08 | $ 11.21 | $ 11.04 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .21 | .25 | .17 | .15 | † | .18 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .73 | (.43 | ) | (.06 | ) | .27 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .43 | .98 | (.26 | ) | .09 | .45 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.25 | ) | (.29 | ) | (.19 | ) | (.16 | ) | (.28 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.02 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.25 | ) | (.29 | ) | (.19 | ) | (.22 | ) | (.28 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.50 | $ 11.32 | $ 10.63 | $ 11.08 | $ 11.21 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 3.83 | % | 9.33 | % | (2.40 | )% | .83 | %† | 4.16 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $10,128 | $10,564 | $11,334 | $15,676 | $41,886 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.52 | % | 1.52 | % | 1.52 | % | 1.55 | % | 1.60 | % | ||||||||||
Expenses, before waivers/reimbursements | 1.75 | % | 1.79 | % | 1.76 | % | 1.78 | % | 1.78 | % | ||||||||||
Net investment income(b) | 1.84 | % | 2.24 | % | 1.54 | % | 1.38 | %† | 1.60 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
94 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.35 | $ 10.65 | $ 11.11 | $ 11.24 | $ 11.06 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .32 | .35 | .28 | .27 | † | .29 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .75 | (.44 | ) | (.07 | ) | .28 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .54 | 1.10 | (.16 | ) | .20 | .57 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.36 | ) | (.40 | ) | (.30 | ) | (.25 | ) | (.39 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.36 | ) | (.40 | ) | (.30 | ) | (.33 | ) | (.39 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.53 | $ 11.35 | $ 10.65 | $ 11.11 | $ 11.24 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | 4.86 | % | 10.50 | % | (1.50 | )% | 1.84 | %† | 5.29 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $122,108 | $104,850 | $76,406 | $67,357 | $56,068 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .52 | % | .52 | % | .52 | % | .54 | % | .60 | % | ||||||||||
Expenses, before waivers/reimbursements | .74 | % | .79 | % | .76 | % | .78 | % | .78 | % | ||||||||||
Net investment income(b) | 2.82 | % | 3.21 | % | 2.55 | % | 2.41 | %† | 2.60 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 95 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class R | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.34 | $ 10.65 | $ 11.10 | $ 11.23 | $ 11.06 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .26 | .30 | .23 | .21 | † | .23 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .74 | (.44 | ) | (.06 | ) | .28 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .48 | 1.04 | (.21 | ) | .15 | .51 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.30 | ) | (.35 | ) | (.24 | ) | (.21 | ) | (.34 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.30 | ) | (.35 | ) | (.24 | ) | (.28 | ) | (.34 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.52 | $ 11.34 | $ 10.65 | $ 11.10 | $ 11.23 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 4.33 | % | 9.86 | % | (1.90 | )% | 1.34 | %† | 4.67 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $1,802 | $3,298 | $2,814 | $2,699 | $3,023 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.02 | % | 1.02 | % | 1.02 | % | 1.04 | % | 1.10 | % | ||||||||||
Expenses, before waivers/reimbursements | 1.37 | % | 1.42 | % | 1.35 | % | 1.39 | % | 1.38 | % | ||||||||||
Net investment income(b) | 2.34 | % | 2.73 | % | 2.07 | % | 1.91 | %† | 2.10 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
96 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class K | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.36 | $ 10.66 | $ 11.11 | $ 11.24 | $ 11.07 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .29 | .33 | .25 | .24 | † | .26 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .74 | (.43 | ) | (.07 | ) | .27 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .51 | 1.07 | (.18 | ) | .17 | .53 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.33 | ) | (.37 | ) | (.27 | ) | (.23 | ) | (.36 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.33 | ) | (.37 | ) | (.27 | ) | (.30 | ) | (.36 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.54 | $ 11.36 | $ 10.66 | $ 11.11 | $ 11.24 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 4.59 | % | 10.22 | % | (1.66 | )% | 1.59 | %† | 4.93 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $6,580 | $7,444 | $7,863 | $5,876 | $5,706 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .77 | % | .77 | % | .77 | % | .79 | % | .85 | % | ||||||||||
Expenses, before waivers/reimbursements | 1.07 | % | 1.10 | % | 1.08 | % | 1.09 | % | 1.09 | % | ||||||||||
Net investment income(b) | 2.59 | % | 2.98 | % | 2.32 | % | 2.15 | %† | 2.34 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 97 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class I | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.36 | $ 10.66 | $ 11.12 | $ 11.24 | $ 11.07 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .32 | .36 | .28 | .27 | † | .28 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .23 | .74 | (.44 | ) | (.06 | ) | .28 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .55 | 1.10 | (.16 | ) | .21 | .56 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||
Dividends from net investment income | (.36 | ) | (.40 | ) | (.30 | ) | (.25 | ) | (.39 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total dividends and distributions | (.36 | ) | (.40 | ) | (.30 | ) | (.33 | ) | (.39 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.55 | $ 11.36 | $ 10.66 | $ 11.12 | $ 11.24 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 4.93 | % | 10.50 | % | (1.50 | )% | 1.93 | %† | 5.20 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $2,743 | $4,107 | $2,894 | $2,729 | $2,613 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .52 | % | .52 | % | .52 | % | .54 | % | .60 | % | ||||||||||
Expenses, before waivers/reimbursements | .70 | % | .75 | % | .72 | % | .75 | % | .76 | % | ||||||||||
Net investment income(b) | 2.85 | % | 3.22 | % | 2.57 | % | 2.41 | %† | 2.56 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
98 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class Z | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.37 | $ 10.67 | $ 11.13 | $ 11.26 | $ 11.08 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .32 | .36 | .27 | .27 | † | .28 | ||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .22 | .74 | (.43 | ) | (.07 | ) | .29 | |||||||||||||
Contributions from Affiliates | – 0 | – | .00 | (c) | – 0 | – | .00 | (c) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .54 | 1.10 | (.16 | ) | .20 | .57 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.36 | ) | (.40 | ) | (.30 | ) | (.25 | ) | (.39 | ) | ||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
Return of capital | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||
|
| |||||||||||||||||||
Total distributions | (.36 | ) | (.40 | ) | (.30 | ) | (.33 | ) | (.39 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 11.55 | $ 11.37 | $ 10.67 | $ 11.13 | $ 11.26 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 4.84 | % | 10.48 | % | (1.49 | )% | 1.84 | %† | 5.28 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $5,824 | $8,059 | $7,274 | $24,653 | $18,134 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .52 | % | .52 | % | .52 | % | .54 | % | .60 | % | ||||||||||
Expenses, before waivers/reimbursements | .64 | % | .68 | % | .64 | % | .66 | % | .66 | % | ||||||||||
Net investment income(b) | 2.82 | % | 3.22 | % | 2.48 | % | 2.42 | % | 2.52 | % | ||||||||||
Portfolio turnover rate** | 83 | % | 74 | % | 195 | % | 209 | % | 128 | % | ||||||||||
See footnote summary on page 100.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 99 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (a) | Based on average shares outstanding. |
| (b) | Net of expenses waived/reimbursed by the Adviser. |
| (c) | Amount is less than $.005. |
| (d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
| † | For the year ended October 31, 2017, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| Net Investment Income Per Share | Net Investment Income Ratio | Total Return | ||
| $.002 | .02% | .02% |
| ** | The Fund accounts for dollar roll transactions as purchases and sales. |
See notes to financial statements.
100 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
of AB Total Return Bond Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Total Return Bond Portfolio, formerly known as AB Intermediate Bond Portfolio (the “Fund”), (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 101 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 28, 2020
102 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
2020 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable year ended October 31, 2020. For foreign shareholders, 85.48% of ordinary income dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2021.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 103 | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Michael Canter(2), Vice President Shawn E. Keegan(2), Vice President Douglas J. Peebles(2),^ Vice President Janaki Rao(2), Vice President Dimitri Silva(2), Vice President | Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
| 2 |
|
| ^ | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
104 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,+ 1345 Avenue of the Americas New York, NY 10105 60 (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | 77 | None | |||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 105 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS | ||||||||
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
106 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## 76 (2005) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 ntil January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 107 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## 72 (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
Jeanette Loeb,## 68 (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
108 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016 and Managing Director of The Crossland Group (consulting) from 2012 to 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 109 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Garry L. Moody,## 68 (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee and as Chairman of the Audit Committees of the AB Funds since 2008. | 77 | None | |||||
110 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS* AND AGE (YEAR FIRST ELECTED**) | PRINCIPAL DURING PAST FIVE YEARS | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department-Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund as defined in the “40 Act”, due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 111 | |
MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is set forth below.
| NAME, ADDRESS* AND AGE | PRINCIPAL POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST 5 YEARS | ||
Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
| Michael Canter 51 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Director of Securitized Assets and U.S. Multi-Sector Income. | ||
| Shawn E. Keegan 49 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Douglas J. Peebles^ 55 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer of Fixed Income. | ||
| Janaki Rao 50 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Dimitri Silva 38 | Vice President | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which has been associated since prior to 2015. | ||
| Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2015. | ||
| Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI.
112 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 113 | |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Total Return Bond Portfolio (formerly AB Intermediate Bond Portfolio) (the “Fund”) at a meeting held on November 4-6, 2019 (the “Meeting”).*
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business
114 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
| * | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. |
judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The Adviser did not request any reimbursements from the Fund in the Fund’s latest fiscal year. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2017 and 2018 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 115 | |
distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2019 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and
116 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
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Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
118 | AB TOTAL RETURN BOND PORTFOLIO | abfunds.com | |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
| abfunds.com | AB TOTAL RETURN BOND PORTFOLIO | 119 | |
NOTES
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NOTES
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NOTES
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NOTES
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NOTES
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AB TOTAL RETURN BOND PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
TRB-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB MUNICIPAL BOND INFLATION STRATEGY
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Municipal Bond Inflation Strategy (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 1 | |
ANNUAL REPORT
December 11, 2020
This report provides management’s discussion of fund performance for AB Municipal Bond Inflation Strategy for the annual period ended October 31, 2020.
The Fund’s investment objective is to maximize real after-tax return for investors subject to federal income taxes, without undue risk to principal.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB MUNICIPAL BOND INFLATION STRATEGY | ||||||||
| Class 1 Shares1 | 8.63% | 3.04% | ||||||
| Class 2 Shares1 | 8.68% | 3.14% | ||||||
| Class A Shares | 8.49% | 2.85% | ||||||
| Class C Shares | 8.08% | 2.16% | ||||||
| Advisor Class Shares2 | 8.72% | 3.19% | ||||||
| Bloomberg Barclays 1-10 Year TIPS Index | 3.81% | 7.00% | ||||||
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. |
| 2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays 1-10 Year Treasury Inflation-Protected Securities (“TIPS”) Index, for the six- and 12-month periods ended October 31, 2020.
All shares of the Fund underperformed the benchmark for the 12-month period, but outperformed for the six-month period, before sales charges. The Fund invests primarily in municipal bonds and uses tax-efficient hedges for inflation protection. Over both periods, the Fund’s lower-than-benchmark interest-rate risk detracted, relative to the benchmark, as rates fell. An overweight to tax-exempt bonds versus taxable bonds added to performance. An overweight to municipal credit detracted for the 12-month period but contributed for the six-month period. The use of consumer price index (“CPI”) swaps, a more tax-efficient way of achieving inflation protection, detracted from returns over the 12-month period and added over the six-month period.
2 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
The Fund utilized derivatives in the form of CPI swaps for hedging purposes, which added to absolute performance for the six-month period but detracted for the 12-month period. Interest rate swaps were utilized for hedging purposes, which detracted for the six-month period and had no material impact on performance for the 12-month period. Credit default swaps were utilized for investment purposes and had no material impact on performance for either period.
MARKET REVIEW AND INVESTMENT STRATEGY
Despite record volatility across most financial markets as the COVID-19 pandemic developed last spring, municipal performance was positive over both the six- and 12-month periods ended October 31, 2020. Following the onset of the virus, the US economy quickly contracted; however, according to the Federal Reserve Bank of New York, the US economy stopped contracting in early May and began a steady recovery through the rest of the summer. With respect to monetary policy, the US Federal Reserve (“the Fed”) Board of Governors stated that short-term interest rates were likely to be held at current low levels for the next few years. Consistent with the improving economy and steady monetary policy, municipals have continued to perform well following the sharp sell-off in March.
While outflows from open-end municipal bond funds and a general lack of liquidity across most markets sparked the sell-off in March, these themes have since largely abated, as investors have taken comfort in the significant federal support provided to state and local governments. On the monetary side, the Fed established the Municipal Liquidity Facility, which can purchase as much as $500 billion in short-term notes directly from municipalities, helping alleviate near-term liquidity concerns for eligible municipalities. The fiscal side brought issuers additional support in the form of the CARES Act, which included $150 billion to state and local governments, $120 billion to hospitals, $31 billion for education, $25 billion for transportation and $10 billion to airports.
The Fund’s Senior Investment Management Team (the “Team”) continues to focus on real after-tax return by investing in municipal bonds that generate income exempt from federal income taxes. In seeking to manage volatility and interest-rate risk, the Team focuses on intermediate-term bonds and seeks to provide inflation protection by entering inflation swap agreements or investing in other inflation-protected instruments.
The Fund may purchase municipal securities that are insured under policies issued by certain insurance companies. Historically, insured municipal securities typically received a higher credit rating, which meant that the issuer of the securities paid a lower interest rate. As a result of declines in the credit quality and associated downgrades of most bond insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality of the issuer of the security with little value given to the insurance feature. In
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 3 | |
purchasing such insured securities, the Adviser evaluates the risk and return of municipal securities through its own research. If an insurance company’s rating is downgraded or the company becomes insolvent, the prices of municipal securities insured by the insurance company may decline. As of October 31, 2020, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity were 2.73% and 0.00%, respectively.
INVESTMENT POLICIES
The Fund seeks real after-tax return for investors subject to federal income taxes. Real return is the rate of return after adjusting for inflation. The Fund pursues its objective by investing principally in high-quality, predominantly investment-grade, municipal securities that pay interest exempt from federal taxation. As a fundamental policy, the Fund will invest at least 80% of its net assets in municipal securities. These securities may be subject to the federal alternative minimum tax for some taxpayers.
The Fund will invest at least 80% of its total assets in fixed-income securities rated A or better or the equivalent by one or more national rating agencies or deemed to be of comparable credit quality by the Adviser. In deciding whether to take direct or indirect exposure, the Fund may invest up to 20% of its total assets in fixed-income securities rated BB or B or the equivalent by one or more national rating agencies (or deemed to be of comparable credit quality by the Adviser), which are not investment grade (“junk bonds”). If the rating of a fixed-income security falls below investment-grade, the Fund will not be obligated to sell the security and may continue to hold it if, in the Adviser’s opinion, the investment is appropriate under the circumstances.
The Fund may invest in fixed-income securities with any maturity and duration.
To provide inflation protection, the Fund will typically enter into inflation swaps. The Fund may use other inflation-indexed instruments. Payments to the Fund pursuant to swaps will result in taxable income, either ordinary income or capital gains, rather than income exempt from federal income taxation. It is expected that the Fund’s primary use of derivatives will be for the purpose of inflation protection.
The Fund may also invest in forward commitments; zero-coupon municipal securities and variable, floating and inverse floating-rate municipal securities; certain types of mortgage-related securities; and derivatives, such as options, futures contracts, forwards and swaps.
(continued on next page)
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The Fund may utilize leverage for investment purposes through the use of tender option bond transactions (“TOBs”). The Adviser considers the impact of TOBs, swaps and other derivatives in making its assessments of the Fund’s risks. The resulting exposures to markets, sectors, issuers or specific securities will be continuously monitored by the Adviser.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 5 | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays 1-10 Year TIPS Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays 1-10 Year TIPS Index represents the performance of inflation-protected securities issued by the US Treasury. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Municipal Market Risk: This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of its assets in a particular state’s municipal securities, the Fund is vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism and catastrophic natural disasters. The Fund’s investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
Congress has previously considered making changes to the municipal securities provisions of the Internal Revenue Code that could change the US federal income tax treatment of certain types of municipal securities.
6 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
DISCLOSURES AND RISKS (continued)
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Leverage Risk: To the extent the Fund uses leveraging techniques, such as TOBs, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally go down.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 7 | |
DISCLOSURES AND RISKS (continued)
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com. For Class 1 shares visit www.bernstein.com, click on “Investments”, then “Mutual Fund and Money Market Information—Mutual Fund Performance at a Glance.”
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 3.00% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Class 1 and 2 shares do not carry sales charges. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
10/31/2010 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Municipal Bond Inflation Strategy Class A shares (from 10/31/2010 to 10/31/2020) as compared to the performance of the Fund’s benchmark. The chart reflects the deduction of the maximum 3.00% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 9 | |
HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | ||||||||||
| CLASS 1 SHARES2 | 0.88% | |||||||||||
| 1 Year | 3.04% | 3.04% | ||||||||||
| 5 Years | 2.58% | 2.58% | ||||||||||
| 10 Years | 2.16% | 2.16% | ||||||||||
| CLASS 2 SHARES2 | 0.98% | |||||||||||
| 1 Year | 3.14% | 3.14% | ||||||||||
| 5 Years | 2.66% | 2.66% | ||||||||||
| 10 Years | 2.26% | 2.26% | ||||||||||
| CLASS A SHARES | 0.69% | |||||||||||
| 1 Year | 2.85% | -0.27% | ||||||||||
| 5 Years | 2.41% | 1.80% | ||||||||||
| 10 Years | 1.98% | 1.68% | ||||||||||
| CLASS C SHARES | -0.02% | |||||||||||
| 1 Year | 2.16% | 1.16% | ||||||||||
| 5 Years | 1.65% | 1.65% | ||||||||||
| 10 Years | 1.24% | 1.24% | ||||||||||
| ADVISOR CLASS SHARES3 | 0.96% | |||||||||||
| 1 Year | 3.19% | 3.19% | ||||||||||
| 5 Years | 2.69% | 2.69% | ||||||||||
| 10 Years | 2.26% | 2.26% | ||||||||||
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 0.67%, 0.57%, 0.86%, 1.61% and 0.61% for Class 1, Class 2, Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of extraordinary expenses, interest expense, and acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest to 0.60%, 0.50%, 0.75%, 1.50% and 0.50% for Class 1, Class 2, Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated prior to January 31, 2021 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2020. |
| 2 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. |
| 3 | This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
10 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS 1 SHARES1 | ||||
| 1 Year | 2.96% | |||
| 5 Years | 2.71% | |||
| 10 Years | 2.18% | |||
| CLASS 2 SHARES1 | ||||
| 1 Year | 3.15% | |||
| 5 Years | 2.83% | |||
| 10 Years | 2.28% | |||
| CLASS A SHARES | ||||
| 1 Year | -0.26% | |||
| 5 Years | 1.97% | |||
| 10 Years | 1.70% | |||
| CLASS C SHARES | ||||
| 1 Year | 1.17% | |||
| 5 Years | 1.82% | |||
| 10 Years | 1.27% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 3.10% | |||
| 5 Years | 2.82% | |||
| 10 Years | 2.29% | |||
| 1 | Class 1 shares are only available to Bernstein Global Wealth Management private client accounts. Class 2 shares are only available to large Bernstein Global Wealth Management private client accounts and the Adviser’s institutional clients or through other limited arrangements. |
| 2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 11 | |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of a mutual fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
12 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
| Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,084.90 | $ | 3.93 | 0.75 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.37 | $ | 3.81 | 0.75 | % | ||||||||
| Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,080.80 | $ | 7.85 | 1.50 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.60 | $ | 7.61 | 1.50 | % | ||||||||
| Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,087.20 | $ | 2.62 | 0.50 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.62 | $ | 2.54 | 0.50 | % | ||||||||
| Class 1 | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,086.30 | $ | 3.15 | 0.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.12 | $ | 3.05 | 0.60 | % | ||||||||
| Class 2 | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,086.80 | $ | 2.62 | 0.50 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.62 | $ | 2.54 | 0.50 | % | ||||||||
| * | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 13 | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $991.3
| 1 | All data are as of October 31, 2020. The Fund’s quality rating breakdown is expressed as a percentage of the Fund’s total investments in municipal securities and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Fund considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment-grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments, such as equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
14 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 105.2% | ||||||||
Long-Term Municipal Bonds – 102.0% | ||||||||
Alabama – 2.1% | ||||||||
Alabama Special Care Facilities Financing Authority-Birmingham AL | $ | 3,905 | $ | 4,539,250 | ||||
Infirmary Health System Special Care Facilities Financing Authority of Mobile | 2,110 | 2,447,242 | ||||||
Special Care Facilities Financing Authority of the City of Pell City Alabama | 11,235 | 11,646,201 | ||||||
Tuscaloosa County Industrial Development Authority | 1,810 | 1,929,677 | ||||||
|
| |||||||
| 20,562,370 | ||||||||
|
| |||||||
American Samoa – 0.2% | ||||||||
American Samoa Economic Development Authority | 295 | 355,006 | ||||||
7.125%, 09/01/2038(a) | 280 | 348,695 | ||||||
Series 2015A | 1,335 | 1,537,039 | ||||||
|
| |||||||
| 2,240,740 | ||||||||
|
| |||||||
Arizona – 2.7% | ||||||||
Arizona Industrial Development Authority | 935 | 1,129,817 | ||||||
5.00%, 11/01/2031-11/01/2033 | 2,350 | 3,018,110 | ||||||
Arizona State University | 7,260 | 7,690,081 | ||||||
City of Phoenix Civic Improvement Corp. | 3,330 | 3,430,566 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 15 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Salt River Project Agricultural Improvement & Power District | $ | 3,140 | $ | 3,299,041 | ||||
State of Arizona Lottery Revenue | 5,000 | 6,522,500 | ||||||
Tempe Industrial Development Authority | 1,200 | 1,195,404 | ||||||
|
| |||||||
| 26,285,519 | ||||||||
|
| |||||||
California – 4.1% | ||||||||
California Pollution Control Financing Authority | 250 | 241,450 | ||||||
California State Public Works Board | 10,000 | 10,532,900 | ||||||
Golden State Tobacco Securitization Corp. | 1,580 | 1,600,114 | ||||||
Los Angeles Unified School District/CA | 6,935 | 8,783,594 | ||||||
State of California | 10,870 | 14,783,852 | ||||||
Series 2014 | 4,250 | 4,832,798 | ||||||
|
| |||||||
| 40,774,708 | ||||||||
|
| |||||||
Colorado – 5.3% | ||||||||
Centerra Metropolitan District No. 1 | 1,510 | 1,585,092 | ||||||
City & County of Denver CO Airport System Revenue | ||||||||
Series 2010A | 375 | 375,596 | ||||||
Series 2012A | 13,395 | 14,485,120 | ||||||
Series 2018A | 16,555 | 20,747,246 | ||||||
Colorado Health Facilities Authority | 2,890 | 3,562,412 | ||||||
16 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Colorado Health Facilities Authority | $ | 1,525 | $ | 1,902,956 | ||||
Denver City & County School District No. 1 | 4,730 | 5,403,174 | ||||||
Denver Urban Renewal Authority | 1,640 | 1,752,160 | ||||||
Plaza Metropolitan District No. 1 | 1,310 | 1,312,502 | ||||||
Regional Transportation District | 440 | 440,506 | ||||||
Sterling Ranch Community Authority Board | 1,050 | 1,049,979 | ||||||
Vauxmont Metropolitan District | 260 | 302,598 | ||||||
|
| |||||||
| 52,919,341 | ||||||||
|
| |||||||
Connecticut – 4.3% | ||||||||
City of New Haven CT | 1,920 | 2,257,728 | ||||||
Connecticut State Health & Educational Facilities Authority | 10,105 | 10,261,830 | ||||||
State of Connecticut | ||||||||
Series 2013A | 5,035 | 5,710,898 | ||||||
Series 2014A | 2,230 | 2,530,604 | ||||||
Series 2014F | 1,275 | 1,489,825 | ||||||
Series 2015B | 7,170 | 8,566,621 | ||||||
Series 2016A | 2,160 | 2,561,026 | ||||||
Series 2018B | 1,440 | 1,845,922 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
State of Connecticut Clean Water Fund—State Revolving Fund | $ | 4,360 | $ | 4,837,115 | ||||
State of Connecticut Special Tax Revenue | 1,960 | 2,487,769 | ||||||
|
| |||||||
| 42,549,338 | ||||||||
|
| |||||||
District of Columbia – 1.0% | ||||||||
Metropolitan Washington Airports Authority | 5,500 | 6,604,235 | ||||||
5.00%, 10/01/2026 | 3,065 | 3,760,571 | ||||||
|
| |||||||
| 10,364,806 | ||||||||
|
| |||||||
Florida – 9.1% | ||||||||
Capital Trust Agency, Inc. | 300 | 315,288 | ||||||
Central Florida Expressway Authority | 6,000 | 7,692,180 | ||||||
5.00%, 07/01/2034(b) | 7,255 | 9,222,266 | ||||||
Citizens Property Insurance, Inc. | 7,315 | 7,850,897 | ||||||
City of Jacksonville FL | ||||||||
Series 2012A | 6,140 | 6,689,530 | ||||||
5.00%, 10/01/2026 | 4,050 | 4,412,475 | ||||||
City of South Miami Health Facilities Authority, Inc. | 4,500 | 5,382,090 | ||||||
City of Tampa FL Water & Wastewater System Revenue | 1,565 | 1,633,046 | ||||||
County of Miami-Dade FL | 18,500 | 21,305,823 | ||||||
18 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Miami-Dade FL | $ | 1,500 | $ | 1,625,985 | ||||
County of Osceola FL Transportation Revenue | ||||||||
Series 2020A | 595 | 422,554 | ||||||
Florida Development Finance Corp. | 6,455 | 6,453,773 | ||||||
Florida Municipal Power Agency | ||||||||
Series 2011B | 2,890 | 3,010,918 | ||||||
Series 2015B | 1,500 | 1,699,755 | ||||||
Greater Orlando Aviation Authority | 4,000 | 4,724,760 | ||||||
Martin County Industrial Development Authority | 1,900 | 1,900,988 | ||||||
Mid-Bay Bridge Authority | 1,000 | 1,152,230 | ||||||
Palm Beach County Health Facilities Authority | 375 | 374,756 | ||||||
Polk County Industrial Development Authority | 1,000 | 1,000,860 | ||||||
State Board of Administration Finance Corp. | ||||||||
Series 2020A | 2,205 | 2,228,020 | ||||||
1.705%, 07/01/2027 | 1,515 | 1,521,105 | ||||||
|
| |||||||
| 90,619,299 | ||||||||
|
| |||||||
Georgia – 3.1% | ||||||||
Augusta Development Authority | 9,555 | 10,962,090 | ||||||
Cobb County Kennestone Hospital Authority | 1,650 | 1,921,029 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Main Street Natural Gas, Inc. | ||||||||
Series 2018A | $ | 9,370 | $ | 10,214,987 | ||||
Series 2018C | 6,850 | 7,516,025 | ||||||
|
| |||||||
| 30,614,131 | ||||||||
|
| |||||||
Guam – 0.5% | ||||||||
Territory of Guam | 155 | 164,664 | ||||||
Territory of Guam | 3,970 | 4,409,016 | ||||||
|
| |||||||
| 4,573,680 | ||||||||
|
| |||||||
Illinois – 6.9% | ||||||||
Chicago Board of Education | ||||||||
Series 2010 | 2,050 | 2,113,079 | ||||||
Series 2018A | 1,200 | 1,342,368 | ||||||
Series 2019A | 525 | 585,540 | ||||||
Series 2019B | 500 | 552,116 | ||||||
Chicago Housing Authority | ||||||||
Series 2018A | 3,500 | 4,190,050 | ||||||
5.00%, 01/01/2037(b) | 5,260 | 6,261,557 | ||||||
Chicago O’Hare International Airport | ||||||||
Series 2015B | 5,000 | 5,804,800 | ||||||
Series 2016C | 5,000 | 5,752,100 | ||||||
Series 2017B | 1,475 | 1,720,012 | ||||||
Chicago O’Hare International Airport | ||||||||
Series 2013 | 2,500 | 2,663,325 | ||||||
5.50%, 01/01/2025 | 2,250 | 2,405,858 | ||||||
Illinois Finance Authority | 1,630 | 1,865,584 | ||||||
20 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Illinois Finance Authority | $ | 800 | $ | 882,927 | ||||
State of Illinois | ||||||||
Series 2013 | 1,670 | 1,777,030 | ||||||
Series 2014 | 4,180 | 4,356,312 | ||||||
Series 2017B | 5,050 | 5,472,079 | ||||||
Series 2017D | 14,515 | 15,348,176 | ||||||
Series 2018A | 2,785 | 2,973,962 | ||||||
Series 2018B | 1,730 | 1,847,381 | ||||||
|
| |||||||
| 67,914,256 | ||||||||
|
| |||||||
Indiana – 0.4% | ||||||||
Indiana Finance Authority | 2,380 | 2,232,940 | ||||||
Indiana Municipal Power Agency | 2,105 | 2,170,423 | ||||||
|
| |||||||
| 4,403,363 | ||||||||
|
| |||||||
Iowa – 0.2% | ||||||||
Iowa Finance Authority | 2,250 | 2,367,945 | ||||||
|
| |||||||
Kentucky – 4.8% |
| |||||||
City of Ashland KY | 650 | 760,856 | ||||||
Kentucky Municipal Power Agency NATL | 4,875 | 5,330,584 | ||||||
Kentucky Public Energy Authority | 7,260 | 8,353,937 | ||||||
Kentucky Public Energy Authority | 20,000 | 20,045,400 | ||||||
Series 2019C | 9,015 | 10,520,325 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Kentucky Turnpike Authority | $ | 2,275 | $ | 2,452,040 | ||||
|
| |||||||
| 47,463,142 | ||||||||
|
| |||||||
Louisiana – 1.3% | ||||||||
Jefferson Sales Tax District AGM | 1,800 | 2,187,090 | ||||||
Parish of St. James LA | 340 | 370,811 | ||||||
6.10%, 06/01/2038-12/01/2040(a) | 845 | 993,839 | ||||||
State of Louisiana Gasoline & Fuels Tax Revenue | ||||||||
Series 2012A | 2,860 | 3,060,743 | ||||||
5.00%, 05/01/2027(b) | 6,225 | 6,650,354 | ||||||
|
| |||||||
| 13,262,837 | ||||||||
|
| |||||||
Maryland – 1.4% | ||||||||
County of Montgomery MD | 5,925 | 7,487,067 | ||||||
State of Maryland | 5,790 | 6,801,976 | ||||||
|
| |||||||
| 14,289,043 | ||||||||
|
| |||||||
Massachusetts – 2.4% | ||||||||
Commonwealth of Massachusetts | 7,380 | 8,647,810 | ||||||
Massachusetts Clean Water Trust (The) | ||||||||
Series 2006 | 3,240 | 3,282,574 | ||||||
3.90% (CPI + 0.99%), 08/01/2023(d) | 2,275 | 2,317,383 | ||||||
Massachusetts Development Finance Agency | 1,655 | 2,117,540 | ||||||
Massachusetts School Building Authority | 2,475 | 2,683,395 | ||||||
22 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Metropolitan Boston Transit Parking Corp. | $ | 5,025 | $ | 5,173,781 | ||||
|
| |||||||
| 24,222,483 | ||||||||
|
| |||||||
Michigan – 3.4% | ||||||||
City of Detroit MI | 1,055 | 1,131,737 | ||||||
City of Detroit MI Sewage Disposal System Revenue | 3,750 | 3,863,512 | ||||||
Michigan Finance Authority | 2,735 | 3,357,476 | ||||||
Michigan Finance Authority | 10,545 | 12,280,918 | ||||||
Michigan Finance Authority | 1,785 | 2,146,730 | ||||||
Michigan Strategic Fund | 9,090 | 11,063,578 | ||||||
|
| |||||||
| 33,843,951 | ||||||||
|
| |||||||
Minnesota – 0.0% | ||||||||
City of Minneapolis MN/St. Paul Housing & Redevelopment Authority | 75 | 72,844 | ||||||
|
| |||||||
Mississippi – 0.2% |
| |||||||
Mississippi Hospital Equipment & Facilities Authority | 1,500 | 1,719,405 | ||||||
|
| |||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Missouri – 0.2% |
| |||||||
Howard Bend Levee District XLCA | $ | 255 | $ | 285,951 | ||||
Lee’s Summit Industrial Development Authority | 1,675 | 1,727,444 | ||||||
|
| |||||||
| 2,013,395 | ||||||||
|
| |||||||
Montana – 0.4% | ||||||||
Montana Facility Finance Authority | 3,275 | 3,924,137 | ||||||
|
| |||||||
Nebraska – 1.7% |
| |||||||
Central Plains Energy Project | 15,000 | 16,804,050 | ||||||
|
| |||||||
Nevada – 0.9% |
| |||||||
City of Sparks NV | 465 | 460,541 | ||||||
State of Nevada Department of Business & Industry | 1,000 | 999,470 | ||||||
Tahoe-Douglas Visitors Authority | 1,200 | 1,288,200 | ||||||
5.00%, 07/01/2029-07/01/2035(c) | 5,465 | 6,141,392 | ||||||
|
| |||||||
| 8,889,603 | ||||||||
|
| |||||||
New Jersey – 9.1% | ||||||||
Federal Home Loan Mortgage Corp. Enhanced Receipt | 12,375 | 14,412,090 | ||||||
New Jersey Economic Development Authority | ||||||||
Series 2014P | 1,150 | 1,254,593 | ||||||
Series 2017B | 1,000 | 1,000,000 | ||||||
24 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New Jersey Economic Development Authority | $ | 3,810 | $ | 4,318,450 | ||||
New Jersey Economic Development Authority | 1,365 | 1,393,952 | ||||||
New Jersey Transportation Trust Fund Authority | ||||||||
Series 2016 | 4,390 | 5,054,207 | ||||||
Series 2018A | 21,670 | 24,987,369 | ||||||
New Jersey Transportation Trust Fund Authority | ||||||||
Series 2012A | 10,000 | 10,258,400 | ||||||
Series 2014C | 2,960 | 3,264,140 | ||||||
New Jersey Turnpike Authority | ||||||||
Series 2013A | 1,600 | 1,762,960 | ||||||
5.00%, 01/01/2023 | 200 | 219,234 | ||||||
Series 2014A | 4,785 | 5,478,729 | ||||||
Series 2014C | 1,590 | 1,742,910 | ||||||
Series 2017A | 7,300 | 8,696,782 | ||||||
Tobacco Settlement Financing Corp/NJ | 4,750 | 5,918,547 | ||||||
|
| |||||||
| 89,762,363 | ||||||||
|
| |||||||
New York – 9.6% | ||||||||
City of New York NY | ||||||||
Series 2011A | 1,030 | 1,066,998 | ||||||
5.00%, 08/01/2023 | 3,220 | 3,325,552 | ||||||
Series 2014J | 6,100 | 6,311,121 | ||||||
Series 2020B | 3,000 | 3,783,330 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Series 2020C | $ | 3,645 | $ | 4,671,067 | ||||
Metropolitan Transportation Authority | 4,000 | 4,378,800 | ||||||
Series 2012C | 4,065 | 4,458,126 | ||||||
5.00%, 11/15/2025 (Pre-refunded/ETM) | 5,000 | 5,483,550 | ||||||
Series 2012F | 3,635 | 3,740,269 | ||||||
Series 2013A | 2,300 | 2,576,345 | ||||||
Series 2013E | 8,510 | 9,727,951 | ||||||
Series 2016B | 1,370 | 1,475,874 | ||||||
Series 2017B | 555 | 599,572 | ||||||
Series 2017C | 1,745 | 1,899,555 | ||||||
New York City Municipal Water Finance Authority | 3,875 | 3,986,639 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue | 6,830 | 7,439,509 | ||||||
New York State Dormitory Authority | ||||||||
Series 2011C | 3,000 | 3,051,060 | ||||||
Series 2014A | 6,565 | 7,483,837 | ||||||
New York State Environmental Facilities Corp. (New York City Municipal Water Finance Authority) | 3,000 | 3,087,360 | ||||||
New York Transportation Development Corp. | 1,500 | 1,537,020 | ||||||
Series 2018 | 9,255 | 10,115,573 | ||||||
New York Transportation Development Corp. | 345 | 369,157 | ||||||
26 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Triborough Bridge & Tunnel Authority | $ | 4,100 | $ | 4,106,437 | ||||
|
| |||||||
| 94,674,702 | ||||||||
|
| |||||||
North Carolina – 0.8% | ||||||||
State of North Carolina | 6,710 | 7,990,738 | ||||||
|
| |||||||
North Dakota – 0.1% |
| |||||||
County of Grand Forks ND | 1,000 | 852,120 | ||||||
|
| |||||||
Ohio – 3.7% |
| |||||||
American Municipal Power, Inc. | 5,000 | 5,867,250 | ||||||
Buckeye Tobacco Settlement Financing Authority | 3,005 | 2,987,301 | ||||||
Series 2020A | 1,000 | 1,158,410 | ||||||
City of Chillicothe OH | 3,385 | 4,000,596 | ||||||
City of Cleveland OH Airport System Revenue | ||||||||
AGM Series 2016B 5.00%, 01/01/2023-01/01/2024 | 2,585 | 2,865,852 | ||||||
City of Cleveland OH Income Tax Revenue | ||||||||
Series 2017B-1 | 7,585 | 9,575,479 | ||||||
Series 2017B-2 | 1,485 | 1,872,837 | ||||||
County of Cuyahoga OH | 5,600 | 6,400,352 | ||||||
Ohio Air Quality Development Authority | 235 | 236,763 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | ||||||||
Series 2016A | $ | 420 | $ | 423,150 | ||||
Series 2016B | 825 | 831,188 | ||||||
|
| |||||||
| 36,219,178 | ||||||||
|
| |||||||
Oklahoma – 0.1% | ||||||||
Oklahoma Development Finance Authority | 500 | 498,205 | ||||||
|
| |||||||
Oregon – 0.8% |
| |||||||
Deschutes County Hospital Facilities Authority | 1,000 | 1,102,030 | ||||||
Tri-County Metropolitan Transportation District of Oregon | ||||||||
Series 2011A | 4,605 | 4,803,061 | ||||||
Series 2018A | 1,910 | 2,416,551 | ||||||
|
| |||||||
| 8,321,642 | ||||||||
|
| |||||||
Other – 0.4% | ||||||||
Federal Home Loan Mortgage Corp. Multifamily VRD Certificates | 3,860 | 4,184,472 | ||||||
|
| |||||||
Pennsylvania – 5.2% |
| |||||||
City of Philadelphia PA | 12,990 | 16,139,685 | ||||||
City of Philadelphia PA Water & Wastewater Revenue | 2,135 | 2,644,125 | ||||||
Montgomery County Higher Education and Health Authority | 1,500 | 1,785,570 | ||||||
Moon Industrial Development Authority | 2,060 | 2,149,528 | ||||||
28 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Pennsylvania Turnpike Commission | ||||||||
Series 2017B | $ | 7,580 | $ | 9,043,555 | ||||
Series 2017S | 3,005 | 3,756,624 | ||||||
Series 2019 | 4,250 | 4,861,915 | ||||||
School District of Philadelphia (The) | 5,000 | 5,961,250 | ||||||
State Public School Building Authority | ||||||||
Series 2012 | 2,400 | 2,559,072 | ||||||
5.00%, 04/01/2026 (Pre-refunded/ETM) | 2,750 | 2,932,270 | ||||||
|
| |||||||
| 51,833,594 | ||||||||
|
| |||||||
Puerto Rico – 0.6% | ||||||||
Puerto Rico Electric Power Authority | 970 | 1,109,699 | ||||||
NATL Series 2007V | 320 | 332,059 | ||||||
Puerto Rico Highway & Transportation Authority | ||||||||
AGC Series 2007N | 2,105 | 2,427,020 | ||||||
AGC Series 2005L | 790 | 904,597 | ||||||
AGM Series 2007C | 100 | 115,259 | ||||||
NATL Series 2007N | 205 | 213,110 | ||||||
Puerto Rico Public Buildings Authority | 100 | 105,298 | ||||||
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue | ||||||||
Zero Coupon, 07/01/2024 | 1,144 | 1,055,271 | ||||||
|
| |||||||
| 6,262,313 | ||||||||
|
| |||||||
South Carolina – 1.3% | ||||||||
Renewable Water Resources | 2,570 | 2,711,761 | ||||||
South Carolina Public Service Authority | ||||||||
Series 2016A | 2,535 | 2,985,969 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Series 2016B | $ | 5,040 | $ | 5,983,639 | ||||
Series 2016C | 930 | 1,109,974 | ||||||
|
| |||||||
| 12,791,343 | ||||||||
|
| |||||||
Tennessee – 0.4% | ||||||||
Bristol Industrial Development Board | 1,410 | 1,366,487 | ||||||
Metropolitan Government of Nashville & Davidson County TN | ||||||||
Series 2012 | 455 | 490,408 | ||||||
5.00%, 07/01/2023 | 1,930 | 2,080,791 | ||||||
|
| |||||||
| 3,937,686 | ||||||||
|
| |||||||
Texas – 5.3% | ||||||||
Birdville Independent School District | 3,825 | 4,058,669 | ||||||
City of Houston TX Airport System Revenue | 2,465 | 2,520,832 | ||||||
City of Houston TX Combined Utility System Revenue | ||||||||
Series 2014C | 1,100 | 1,280,422 | ||||||
Series 2020C | 4,330 | 4,745,030 | ||||||
Dallas Area Rapid Transit | 6,425 | 7,182,864 | ||||||
Lewisville Independent School District | 4,725 | 5,447,474 | ||||||
New Hope Cultural Education Facilities Finance Corp. | 1,000 | 1,113,400 | ||||||
North Texas Tollway Authority | 3,625 | 3,774,459 | ||||||
30 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
North Texas Tollway Authority | $ | 3,000 | $ | 3,230,460 | ||||
Port Beaumont Navigation District | 240 | 236,458 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | 900 | 585,000 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | 13,405 | 16,853,984 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | ||||||||
Series 2015A | 50 | 49,981 | ||||||
5.00%, 11/15/2025 | 1,105 | 1,080,966 | ||||||
|
| |||||||
| 52,159,999 | ||||||||
|
| |||||||
Virginia – 0.4% | ||||||||
Fairfax County Economic Development Authority | 3,040 | 3,924,432 | ||||||
|
| |||||||
Washington – 4.1% |
| |||||||
Central Puget Sound Regional Transit Authority | 7,815 | 8,267,491 | ||||||
Chelan County Public Utility District No. 1 | 3,305 | 3,408,744 | ||||||
City of Seattle WA Water System Revenue | 4,020 | 4,539,183 | ||||||
Port of Seattle WA | 3,000 | 3,655,270 | ||||||
Series 2013 | 4,820 | 5,323,304 | ||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
State of Washington | $ | 13,325 | $ | 15,877,803 | ||||
|
| |||||||
| 41,071,795 | ||||||||
|
| |||||||
West Virginia – 0.3% | ||||||||
Tobacco Settlement Finance Authority/WV | 2,600 | 2,592,200 | ||||||
|
| |||||||
Wisconsin – 3.2% | ||||||||
State of Wisconsin | 11,850 | 15,073,396 | ||||||
UMA Education, Inc. | 2,535 | 2,729,070 | ||||||
Wisconsin Department of Transportation | ||||||||
Series 20131 | 5,500 | 6,188,930 | ||||||
5.00%, 07/01/2024 (Pre-refunded/ETM) | 2,480 | 2,787,297 | ||||||
5.00%, 07/01/2024 | 4,020 | 4,509,837 | ||||||
|
| |||||||
| 31,288,530 | ||||||||
|
| |||||||
Total Long-Term Municipal Bonds | 1,011,059,698 | |||||||
|
| |||||||
Short-Term Municipal Notes – 3.2% | ||||||||
Pennsylvania – 1.1% | ||||||||
School District of Philadelphia/The | ||||||||
Series 2020A | 11,335 | 11,613,274 | ||||||
|
| |||||||
Texas – 2.1% | ||||||||
City of Houston TX | 10,200 | 10,383,804 | ||||||
State of Texas | 10,000 | 10,306,600 | ||||||
|
| |||||||
| 20,690,404 | ||||||||
|
| |||||||
Total Short-Term Municipal Notes | 32,303,678 | |||||||
|
| |||||||
Total Municipal Obligations | 1,043,363,376 | |||||||
|
| |||||||
GOVERNMENTS – TREASURIES – 0.6% | ||||||||
United States – 0.6% | ||||||||
U.S. Treasury Notes | 5,000 | 5,756,250 | ||||||
|
| |||||||
32 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS – 0.3% | ||||||||
Risk Share Floating Rate – 0.3% | ||||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | ||||||||
Series 2013-DN2, Class M2 | $ | 186 | $ | 170,920 | ||||
Series 2014-DN3, Class M3 | 116 | 116,886 | ||||||
Series 2014-HQ2, Class M3 | 250 | 255,203 | ||||||
Series 2015-HQ1, Class M3 | 39 | 38,835 | ||||||
Series 2016-DNA4, Class M3 | 240 | 248,789 | ||||||
Series 2017-DNA3, Class M2 | 270 | 272,869 | ||||||
Federal National Mortgage Association Connecticut Avenue Securities | ||||||||
Series 2014-C03, Class 2M2 | 184 | 182,851 | ||||||
Series 2015-C02, Class 1M2 | 151 | 152,272 | ||||||
Series 2016-C03, Class 2M2 | 181 | 191,340 | ||||||
Series 2017-C01, Class 1M2 | 317 | 326,061 | ||||||
Series 2017-C02, Class 2M2 | 151 | 152,468 | ||||||
Series 2017-C03, Class 1M2 | 458 | 461,126 | ||||||
|
| |||||||
Total Collateralized Mortgage Obligations | 2,569,620 | |||||||
|
| |||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
SHORT-TERM INVESTMENTS – 2.1% | ||||||||
U.S. Treasury Bills – 1.6% | ||||||||
US Treasury Bills | ||||||||
Zero Coupon, 12/17/2020(b) | $ | 16,000 | $ | 15,998,200 | ||||
|
| |||||||
| Shares | ||||||||
Investment Companies – 0.5% | ||||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio –Class AB, 0.03%(h)(i)(j) | 4,637,256 | 4,637,256 | ||||||
|
| |||||||
Total Short-Term Investments | 20,635,456 | |||||||
|
| |||||||
Total Investments – 108.2% | 1,072,324,702 | |||||||
Other assets less liabilities – (8.2)% | (81,068,574 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 991,256,128 | ||||||
|
| |||||||
CENTRALLY CLEARED INFLATION (CPI) SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||
| Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
USD | 19,310 | 01/15/2028 | 1.230 | % | CPI | # | Maturity | $ | 909,450 | $ | — | $ | 909,450 | |||||||||||||||||||
USD | 14,770 | 01/15/2028 | 0.735 | % | CPI | # | Maturity | 1,301,911 | — | 1,301,911 | ||||||||||||||||||||||
USD | 12,000 | 08/29/2029 | 1.748 | % | CPI | # | Maturity | 161,635 | — | 161,635 | ||||||||||||||||||||||
USD | 15,000 | 12/23/2029 | 1.979 | % | CPI | # | Maturity | (175,745 | ) | — | (175,745 | ) | ||||||||||||||||||||
USD | 4,825 | 01/15/2030 | 1.572 | % | CPI | # | Maturity | 156,612 | — | 156,612 | ||||||||||||||||||||||
USD | 4,825 | 01/15/2030 | 1.587 | % | CPI | # | Maturity | 148,742 | — | 148,742 | ||||||||||||||||||||||
USD | 1,670 | 01/15/2030 | 1.714 | % | CPI | # | Maturity | 28,274 | — | 28,274 | ||||||||||||||||||||||
USD | 1,670 | 01/15/2030 | 1.731 | % | CPI | # | Maturity | 25,148 | — | 25,148 | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | 2,556,027 | $ | — | $ | 2,556,027 | |||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
34 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
| USD | 45,150 | 06/17/2021 | 3 Month LIBOR | 1.907 | % | Quarterly/Semi-Annual | $ | 783,156 | $ | — | $ | 783,156 | ||||||||||||||||
| USD | 32,000 | 09/10/2024 | 3 Month LIBOR | 1.341 | % | Quarterly/Semi-Annual | 1,276,210 | — | 1,276,210 | |||||||||||||||||||
| USD | 11,180 | 01/15/2025 | 3 Month LIBOR | 1.566 | % | Quarterly/Semi-Annual | 608,091 | — | 608,091 | |||||||||||||||||||
| USD | 3,172 | 02/05/2025 | 3 Month LIBOR | 1.361 | % | Quarterly/Semi-Annual | 140,511 | — | 140,511 | |||||||||||||||||||
| USD | 7,128 | 02/06/2025 | 3 Month LIBOR | 1.419 | % | Quarterly/Semi-Annual | 334,063 | — | 334,063 | |||||||||||||||||||
| USD | 8,235 | 10/09/2029 | 3 Month LIBOR | 1.470 | % | Quarterly/Semi-Annual | 485,836 | — | 485,836 | |||||||||||||||||||
| USD | 8,235 | 10/09/2029 | 3 Month LIBOR | 1.473 | % | Quarterly/ Semi-Annual | 488,023 | — | 488,023 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
| $ | 4,115,890 | $ | — | $ | 4,115,890 | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
CREDIT DEFAULT SWAPS (see Note D)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts | ||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 598 | $ | (193,513 | ) | $ | (75,490 | ) | $ | (118,023 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 69 | (22,329 | ) | (6,752 | ) | (15,577 | ) | |||||||||||||||||||||
Credit Suisse International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 40 | (12,944 | ) | (4,897 | ) | (8,047 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 38 | (12,297 | ) | (3,753 | ) | (8,544 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 471 | (152,377 | ) | (46,569 | ) | (105,808 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 708 | (229,108 | ) | (68,203 | ) | (160,905 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,216 | (393,497 | ) | (147,881 | ) | (245,616 | ) | |||||||||||||||||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Goldman Sachs International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 231 | $ | (74,752 | ) | $ | (29,039 | ) | $ | (45,713 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 614 | (198,691 | ) | (57,411 | ) | (141,280 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (1,289,508 | ) | $ | (439,995 | ) | $ | (849,513 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
INFLATION (CPI) SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||
| Swap Counterparty | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Bank of America, N.A. | USD | 25,000 | 02/02/2032 | 2.403 | % | CPI# | Maturity | $ | (2,052,855 | ) | $ | — | $ | (2,052,855 | ) | |||||||||||||||||
Barclays Bank PLC | USD | 2,000 | 11/10/2020 | 2.500 | % | CPI# | Maturity | (178,424 | ) | — | (178,424 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 1,000 | 05/04/2021 | 2.845 | % | CPI# | Maturity | (146,937 | ) | — | (146,937 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 3,000 | 05/12/2021 | 2.815 | % | CPI# | Maturity | (434,682 | ) | — | (434,682 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 14,000 | 04/03/2022 | 2.663 | % | CPI# | Maturity | (1,931,942 | ) | — | (1,931,942 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 16,700 | 10/05/2022 | 2.765 | % | CPI# | Maturity | (2,466,736 | ) | — | (2,466,736 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 25,000 | 08/07/2024 | 2.573 | % | CPI# | Maturity | (3,121,783 | ) | — | (3,121,783 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 19,000 | 05/05/2025 | 2.125 | % | CPI# | Maturity | (804,697 | ) | — | (804,697 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 5,400 | 03/06/2027 | 2.695 | % | CPI# | Maturity | (1,092,640 | ) | — | (1,092,640 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 20,000 | 06/06/2032 | 2.145 | % | CPI# | Maturity | (655,575 | ) | — | (655,575 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 14,000 | 09/01/2032 | 2.128 | % | CPI# | Maturity | (365,775 | ) | — | (365,775 | ) | ||||||||||||||||||||
Barclays Bank PLC | USD | 22,000 | 08/29/2033 | 2.368 | % | CPI# | Maturity | (1,712,144 | ) | — | (1,712,144 | ) | ||||||||||||||||||||
Citibank, NA | USD | 15,600 | 12/14/2020 | 1.548 | % | CPI# | Maturity | 218,576 | — | 218,576 | ||||||||||||||||||||||
Citibank, NA | USD | 35,000 | 07/03/2021 | 2.283 | % | CPI# | Maturity | (805,238 | ) | — | (805,238 | ) | ||||||||||||||||||||
Citibank, NA | USD | 9,000 | 06/29/2022 | 2.398 | % | CPI# | Maturity | (990,523 | ) | — | (990,523 | ) | ||||||||||||||||||||
Citibank, NA | USD | 5,400 | 07/19/2022 | 2.400 | % | CPI# | Maturity | (584,855 | ) | — | (584,855 | ) | ||||||||||||||||||||
Citibank, NA | USD | 4,000 | 08/10/2022 | 2.550 | % | CPI# | Maturity | (498,175 | ) | — | (498,175 | ) | ||||||||||||||||||||
Citibank, NA | USD | 15,500 | 12/07/2022 | 2.748 | % | CPI# | Maturity | (2,376,039 | ) | — | (2,376,039 | ) | ||||||||||||||||||||
Citibank, NA | USD | 47,000 | 05/24/2023 | 2.533 | % | CPI# | Maturity | (5,837,470 | ) | — | (5,837,470 | ) | ||||||||||||||||||||
Citibank, NA | USD | 30,000 | 10/29/2023 | 2.524 | % | CPI# | Maturity | (3,536,375 | ) | — | (3,536,375 | ) | ||||||||||||||||||||
Citibank, NA | USD | 30,000 | 09/19/2024 | 2.070 | % | CPI# | Maturity | (632,711 | ) | — | (632,711 | ) | ||||||||||||||||||||
Citibank, NA | USD | 25,000 | 07/03/2025 | 2.351 | % | CPI# | Maturity | (1,278,133 | ) | — | (1,278,133 | ) | ||||||||||||||||||||
Citibank, NA | USD | 15,800 | 02/08/2028 | 2.940 | % | CPI# | Maturity | (3,938,487 | ) | — | (3,938,487 | ) | ||||||||||||||||||||
Citibank, NA | USD | 12,000 | 11/05/2033 | 2.273 | % | CPI# | Maturity | (693,802 | ) | — | (693,802 | ) | ||||||||||||||||||||
Deutsche Bank AG | USD | 11,000 | 06/20/2021 | 2.655 | % | CPI# | Maturity | (1,446,177 | ) | — | (1,446,177 | ) | ||||||||||||||||||||
36 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Rate Type | ||||||||||||||||||||||||||||||||||||
| Swap Counterparty | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||||
Deutsche Bank AG | USD | 9,800 | 09/07/2021 | 2.400 | % | CPI# | Maturity | $ | (1,004,734 | ) | $ | — | $ | (1,004,734 | ) | |||||||||||||||||||||
Deutsche Bank AG | USD | 25,000 | 09/02/2025 | 1.880 | % | CPI# | Maturity | (462,772 | ) | — | (462,772 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 19,000 | 08/17/2022 | 2.523 | % | CPI# | Maturity | (2,286,870 | ) | — | (2,286,870 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 1,400 | 06/30/2026 | 2.890 | % | CPI# | Maturity | (348,396 | ) | — | (348,396 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 3,300 | 07/21/2026 | 2.935 | % | CPI# | Maturity | (860,320 | ) | — | (860,320 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 2,400 | 10/03/2026 | 2.485 | % | CPI# | Maturity | (387,795 | ) | — | (387,795 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 5,400 | 11/14/2026 | 2.488 | % | CPI# | Maturity | (882,274 | ) | — | (882,274 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 4,850 | 12/23/2026 | 2.484 | % | CPI# | Maturity | (777,733 | ) | — | (777,733 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 13,000 | 03/01/2027 | 2.279 | % | CPI# | Maturity | (680,700 | ) | — | (680,700 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 21,350 | 02/20/2028 | 2.899 | % | CPI# | Maturity | (5,114,547 | ) | — | (5,114,547 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 12,000 | 03/26/2028 | 2.880 | % | CPI# | Maturity | (2,806,088 | ) | — | (2,806,088 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 10,000 | 07/03/2028 | 2.356 | % | CPI# | Maturity | (610,442 | ) | — | (610,442 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 25,000 | 11/05/2028 | 2.234 | % | CPI# | Maturity | (1,144,847 | ) | — | (1,144,847 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 18,000 | 04/17/2030 | 2.378 | % | CPI# | Maturity | (1,277,052 | ) | — | (1,277,052 | ) | ||||||||||||||||||||||||
JPMorgan Chase Bank, NA | USD | 24,000 | 11/17/2032 | 2.183 | % | CPI# | Maturity | (921,607 | ) | — | (921,607 | ) | ||||||||||||||||||||||||
Morgan Stanley Capital Services LLC | USD | 13,000 | 05/23/2021 | 2.680 | % | CPI# | Maturity | (1,690,056 | ) | — | (1,690,056 | ) | ||||||||||||||||||||||||
Morgan Stanley Capital Services LLC | USD | 10,000 | 04/16/2023 | 2.690 | % | CPI# | Maturity | (1,425,978 | ) | — | (1,425,978 | ) | ||||||||||||||||||||||||
Morgan Stanley Capital Services LLC | USD | 5,000 | 08/15/2026 | 2.885 | % | CPI# | Maturity | (1,244,195 | ) | — | (1,244,195 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| $ | (61,290,005 | ) | $ | — | $ | (61,290,005 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 37 | |
PORTFOLIO OF INVESTMENTS (continued)
INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||||||
| Swap Counterparty | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||||||
Citibank, NA | USD | 11,075 | 10/09/2029 | 1.120 | % | SIFMA* | | Quarterly/ Quarterly |
| $ | (464,760 | ) | $ | — | $ | (464,760 | ) | |||||||||||||||||||
Citibank, NA | USD | 11,075 | 10/09/2029 | 1.125 | % | SIFMA* | | Quarterly/ Quarterly |
| (470,156 | ) | — | (470,156 | ) | ||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| $ | (934,916 | ) | $ | — | $ | (934,916 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
| * | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
| (a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $23,759,050 or 2.4% of net assets. |
| (b) | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (c) | When-Issued or delayed delivery security. |
| (d) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (e) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of October 31, 2020 and the aggregate market value of this security amounted to $72,844 or 0.01% of net assets. |
| (f) | Non-income producing security. |
| (g) | Defaulted. |
| (h) | Affiliated investments. |
| (i) | The rate shown represents the 7-day yield as of period end. |
| (j) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of October 31, 2020, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 2.7% and 0.0%, respectively.
Glossary:
AGC – Assured Guaranty Corporation
AGM – Assured Guaranty Municipal
CCRC – Congregate Care Retirement Center
CDX-CMBX. NA – North American Commercial Mortgage-Backed Index
COP – Certificate of Participation
CPI – Consumer Price Index
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rate
NATL – National Interstate Corporation
SRF – State Revolving Fund
XLCA – XL Capital Assurance Inc.
See notes to financial statements.
38 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets |
| |||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $1,020,521,530) | $ | 1,067,687,446 | ||
Affiliated issuers (cost $4,637,256) | 4,637,256 | |||
Cash | 323,500 | |||
Cash collateral due from broker | 6,802,882 | |||
Interest receivable | 12,645,173 | |||
Receivable for investment securities sold | 6,129,221 | |||
Receivable for capital stock sold | 582,717 | |||
Unrealized appreciation on inflation swaps | 218,576 | |||
Affiliated dividends receivable | 459 | |||
|
| |||
Total assets | 1,099,027,230 | |||
|
| |||
| Liabilities |
| |||
Unrealized depreciation on inflation swaps | 61,508,581 | |||
Payable for investment securities purchased | 40,233,815 | |||
Payable for capital stock redeemed | 3,100,115 | |||
Market value on credit default swaps (net premiums received $439,995) | 1,289,508 | |||
Unrealized depreciation on interest rate swaps | 934,916 | |||
Advisory fee payable | 377,998 | |||
Distribution fee payable | 72,942 | |||
Payable for variation margin on centrally cleared swaps | 70,077 | |||
Administrative fee payable | 25,674 | |||
Transfer Agent fee payable | 10,668 | |||
Directors’ fees payable | 2,649 | |||
Accrued expenses | 144,159 | |||
|
| |||
Total liabilities | 107,771,102 | |||
|
| |||
Net Assets | $ | 991,256,128 | ||
|
| |||
| Composition of Net Assets |
| |||
Capital stock, at par | $ | 96,538 | ||
Additional paid-in capital | 1,023,571,119 | |||
Accumulated loss | (32,411,529 | ) | ||
|
| |||
| $ | 991,256,128 | |||
|
| |||
Net Asset Value Per Share—30 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 138,454,132 | 13,440,188 | $ | 10.30 | * | ||||||
| ||||||||||||
| C | $ | 6,709,562 | 651,883 | $ | 10.29 | |||||||
| ||||||||||||
| Advisor | $ | 185,828,848 | 18,027,493 | $ | 10.31 | |||||||
| ||||||||||||
| 1 | $ | 444,500,748 | 43,377,314 | $ | 10.25 | |||||||
| ||||||||||||
| 2 | $ | 215,762,838 | 21,041,278 | $ | 10.25 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $10.62 which reflects a sales charge of 3.00%. |
See notes to financial statements.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 39 | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest | $ | 28,661,809 | ||||||
Dividends—Affiliated issuers | 229,075 | $ | 28,890,884 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 4,938,717 | |||||||
Distribution fee—Class A | 231,028 | |||||||
Distribution fee—Class C | 70,303 | |||||||
Distribution fee—Class 1 | 469,202 | |||||||
Transfer agency—Class A | 38,045 | |||||||
Transfer agency—Class C | 3,059 | |||||||
Transfer agency—Advisor Class | 81,235 | |||||||
Transfer agency—Class 1 | 23,018 | |||||||
Transfer agency—Class 2 | 11,062 | |||||||
Custody and accounting | 188,737 | |||||||
Registration fees | 104,777 | |||||||
Audit and tax | 88,411 | |||||||
Administrative | 77,318 | |||||||
Legal | 38,201 | |||||||
Printing | 37,111 | |||||||
Directors’ fees | 29,250 | |||||||
Miscellaneous | 50,142 | |||||||
|
| |||||||
Total expenses | 6,479,616 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (776,967 | ) | ||||||
|
| |||||||
Net expenses | 5,702,649 | |||||||
|
| |||||||
Net investment income | 23,188,235 | |||||||
|
| |||||||
| Realized and Unrealized Gain (Loss) on Investment Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions | 702,686 | |||||||
Swaps | (8,664,335 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | (4,529,066 | ) | ||||||
Swaps | 7,717,323 | |||||||
|
| |||||||
Net loss on investment transactions | (4,773,392 | ) | ||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 18,414,843 | ||||||
|
|
See notes to financial statements.
40 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 23,188,235 | $ | 25,207,711 | ||||
Net realized loss on investment transactions | (7,961,649 | ) | (2,507,015 | ) | ||||
Net change in unrealized appreciation/depreciation of investments | 3,188,257 | 23,007,434 | ||||||
|
|
|
| |||||
Net increase in net assets from operations | 18,414,843 | 45,708,130 | ||||||
Distributions to Shareholders |
| |||||||
Class A | (2,027,901 | ) | (1,289,741 | ) | ||||
Class C | (102,182 | ) | (137,912 | ) | ||||
Advisor Class | (4,764,682 | ) | (5,312,312 | ) | ||||
Class 1 | (11,346,428 | ) | (12,623,500 | ) | ||||
Class 2 | (5,676,606 | ) | (6,307,648 | ) | ||||
| Capital Stock Transactions |
| |||||||
Net decrease | (7,977,474 | ) | (43,748,072 | ) | ||||
|
|
|
| |||||
Total decrease | (13,480,430 | ) | (23,711,055 | ) | ||||
| Net Assets |
| |||||||
Beginning of period | 1,004,736,558 | 1,028,447,613 | ||||||
|
|
|
| |||||
End of period | $ | 991,256,128 | $ | 1,004,736,558 | ||||
|
|
|
| |||||
See notes to financial statements.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 41 | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Municipal Bond Inflation Strategy (the “Fund”), a diversified portfolio. The Fund offers Class A, Class C, Advisor Class, Class 1 and Class 2 shares. Class 1 shares are sold only to the private clients of Sanford C. Bernstein & Co. LLC by its registered representatives. Class B, Class R, Class K, Class I and Class T shares have been authorized but currently are not offered. Class A shares are sold with a front-end sales charge of up to 3.0% for purchases not exceeding $500,000. With respect to purchases of $500,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Advisor Class and Class 2 shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. Class 1 shares are sold without an initial or contingent deferred sales charge, but are subject to ongoing distribution expenses. All ten classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
42 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 43 | |
NOTES TO FINANCIAL STATEMENTS (continued)
contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rates, coupon rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which is then
44 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 1,011,059,698 | $ | – 0 | – | $ | 1,011,059,698 | ||||||
Short-Term Municipal Notes | – 0 | – | 32,303,678 | – 0 | – | 32,303,678 | ||||||||||
Governments – Treasuries | – 0 | – | 5,756,250 | – 0 | – | 5,756,250 | ||||||||||
Collateralized Mortgage Obligations | – 0 | – | 2,569,620 | – 0 | – | 2,569,620 | ||||||||||
Short-Term Investments: | ||||||||||||||||
U.S. Treasury Bills | – 0 | – | 15,998,200 | – 0 | – | 15,998,200 | ||||||||||
Investment Companies | 4,637,256 | – 0 | – | – 0 | – | 4,637,256 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 4,637,256 | 1,067,687,446 | – 0 | – | 1,072,324,702 | |||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Centrally Cleared Inflation (CPI) Swaps | – 0 | – | 2,731,772 | – 0 | – | 2,731,772 | (b) | |||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 4,115,890 | – 0 | – | 4,115,890 | (b) | |||||||||
Inflation (CPI) Swaps | – 0 | – | 218,576 | – 0 | – | 218,576 | ||||||||||
Liabilities: |
| |||||||||||||||
Centrally Cleared Inflation (CPI) Swaps | — | (175,745 | ) | – 0 | – | (175,745 | )(b) | |||||||||
Credit Default Swaps | — | (1,289,508 | ) | – 0 | – | (1,289,508 | ) | |||||||||
Inflation (CPI) Swaps | — | (61,508,581 | ) | – 0 | – | (61,508,581 | ) | |||||||||
Interest Rate Swaps | — | (934,916 | ) | – 0 | – | (934,916 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 4,637,256 | $ | 1,010,844,934 | $ | – 0 | – | $ | 1,015,482,190 | |||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 45 | |
NOTES TO FINANCIAL STATEMENTS (continued)
3. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes original issue and market discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
5. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
46 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .50% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding extraordinary expenses, interest expense, and acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest) on an annual basis (the “Expense Caps”) to .75%, 1.50%, .50%, .60% and .50% of the daily average net assets for the Class A, Class C, Advisor Class, Class 1 and Class 2 shares, respectively. This fee waiver and/or expense reimbursement agreement will remain in effect until January 31, 2021 and then may be extended by the Adviser for additional one-year terms. For the year ended October 31, 2020, such reimbursements/waivers amounted to $749,918.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the reimbursement for such services amounted to $77,318.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $57,188 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $0 from the sale of Class A shares and received $86,323 and $257 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of ..20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 47 | |
NOTES TO FINANCIAL STATEMENTS (continued)
investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $27,049.
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 3,714 | $ | 424,147 | $ | 423,224 | $ | 4,637 | $ | 229 | ||||||||||
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
48 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares and .10% of the Fund’s average daily net assets attributable to Class 1 shares. There are no distribution and servicing fees on the Advisor Class and Class 2 shares. Payments under the Agreement in respect of Class A shares are currently limited to an annual rate of .25% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $431,867 and $1,798,478 for Class C and Class 1 shares, respectively. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 270,533,474 | $ | 274,022,678 | ||||
U.S. government securities | 21,382,324 | 15,015,000 | ||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 1,025,158,786 | ||
|
| |||
Gross unrealized appreciation | $ | 56,452,996 | ||
Gross unrealized depreciation | (65,273,094 | ) | ||
|
| |||
Net unrealized depreciation | $ | (8,820,098 | ) | |
|
|
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 49 | |
NOTES TO FINANCIAL STATEMENTS (continued)
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal type of derivative utilized by the Fund, as well as the methods in which they may be used are:
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates or credit risk. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
50 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 51 | |
NOTES TO FINANCIAL STATEMENTS (continued)
a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging purposes.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Fund against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the year ended October 31, 2020, the Fund held inflation (CPI) swaps for hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
52 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 53 | |
NOTES TO FINANCIAL STATEMENTS (continued)
terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | $ | 6,847,662 | * | Receivable/Payable for variation margin on centrally cleared swaps | $ | 175,745 | * | ||||
Interest rate contracts | Unrealized depreciation on interest rate swaps |
| 934,916 |
| ||||||||
Interest rate contracts | Unrealized appreciation on inflation swaps |
| 218,576 |
| Unrealized depreciation on inflation swaps |
| 61,508,581 |
| ||||
Credit contracts | Market value on credit default swaps |
| 1,289,508 |
| ||||||||
|
|
|
| |||||||||
Total | $ | 7,066,238 | $ | 63,908,750 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (8,796,246 | ) | $ | 8,677,716 | ||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 131,911 | (960,393 | ) | ||||||
|
|
|
| |||||||
Total | $ | (8,664,335 | ) | $ | 7,717,323 | |||||
|
|
|
| |||||||
54 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Interest Rate Swaps: | ||||
Average notional amount | $ | 22,150,000 | ||
Inflation Swaps: | ||||
Average notional amount | $ | 795,710,308 | ||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 124,515,385 | ||
Centrally Cleared Inflation Swaps: | ||||
Average notional amount | $ | 91,983,308 | ||
Credit Default Swaps: | ||||
Average notional amount of sale contracts | $ | 3,985,000 |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | $ | 218,576 | $ | (218,576 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 218,576 | $ | (218,576 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Bank of America, N.A. | $ | 2,052,855 | $ | – 0 | – | $ | (1,956,384 | ) | $ | (57,563 | ) | $ | 38,908 | |||||||
Barclays Bank PLC | 12,911,335 | – 0 | – | – 0 | – | (12,911,335 | ) | – 0 | – | |||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 22,322,566 | (218,576 | ) | – 0 | – | (22,103,990 | ) | – 0 | – | |||||||||||
Credit Suisse International | 800,223 | – 0 | – | – 0 | – | (674,624 | ) | 125,599 | ||||||||||||
Deutsche Bank AG | 2,913,683 | – 0 | – | – 0 | – | (2,913,683 | ) | – 0 | – | |||||||||||
Goldman Sachs International | 273,443 | – 0 | – | – 0 | – | (273,443 | ) | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA | 18,098,671 | – 0 | – | – 0 | – | (18,098,671 | ) | – 0 | – | |||||||||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 55 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Morgan Stanley Capital Services LLC | $ | 4,360,229 | $ | – 0 | – | $ | – 0 | – | $ | (4,360,229 | ) | $ | – 0 | – | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 63,733,005 | $ | (218,576 | ) | $ | (1,956,384 | ) | $ | (61,393,538 | ) | $ | 164,507 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for Class A, Class C, Advisor Class, Class 1 and Class 2 were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A |
| |||||||||||||||||||||||
Shares sold | 11,006,167 | 1,771,451 | $ | 112,859,024 | $ | 18,033,736 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 137,840 | 86,462 | 1,399,084 | 879,985 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 103,132 | 133,994 | 1,038,373 | 1,380,472 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (3,113,475 | ) | (4,179,787 | ) | (30,512,727 | ) | (42,207,147 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 8,133,664 | (2,187,880 | ) | $ | 84,783,754 | $ | (21,912,954 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
| Class C |
| |||||||||||||||||||||||
Shares sold | 124,879 | 177,607 | $ | 1,270,546 | $ | 1,807,733 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 8,149 | 10,536 | 82,474 | 107,230 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (103,270 | ) | (134,210 | ) | (1,038,373 | ) | (1,380,472 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (132,691 | ) | (366,478 | ) | (1,341,016 | ) | (3,715,959 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (102,933 | ) | (312,545 | ) | $ | (1,026,369 | ) | $ | (3,181,468 | ) | ||||||||||||||
| ||||||||||||||||||||||||
56 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Advisor Class |
| |||||||||||||||||||||||
Shares sold | 10,882,277 | 9,621,301 | $ | 111,180,666 | $ | 98,239,600 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 347,975 | 371,721 | 3,533,343 | 3,789,340 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (13,275,084 | ) | (12,466,466 | ) | (129,905,882 | ) | (126,710,398 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (2,044,832 | ) | (2,473,444 | ) | $ | (15,191,873 | ) | $ | (24,681,458 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class 1 |
| |||||||||||||||||||||||
Shares sold | 5,864,797 | 7,527,585 | $ | 59,213,283 | $ | 76,245,783 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 844,734 | 996,866 | 8,522,724 | 10,112,533 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (12,308,849 | ) | (8,166,935 | ) | (121,433,030 | ) | (82,786,584 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (5,599,318 | ) | 357,516 | $ | (53,697,023 | ) | $ | 3,571,732 | ||||||||||||||||
| ||||||||||||||||||||||||
Class 2 |
| |||||||||||||||||||||||
Shares sold | 2,839,197 | 3,121,484 | $ | 28,434,563 | $ | 31,553,791 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 411,526 | 483,312 | 4,153,907 | 4,906,067 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (5,591,380 | ) | (3,357,173 | ) | (55,434,433 | ) | (34,003,782 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (2,340,657 | ) | 247,623 | $ | (22,845,963 | ) | $ | 2,456,076 | ||||||||||||||||
| ||||||||||||||||||||||||
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 57 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Municipal Market Risk—This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of its assets in a particular state’s municipal securities, the Fund is vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism and catastrophic natural disasters. The Fund’s investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
Congress has previously considered making changes to the municipal securities provisions of the Internal Revenue Code that could change the U.S. federal income tax treatment of certain types of municipal securities.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in
58 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR,
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 59 | |
NOTES TO FINANCIAL STATEMENTS (continued)
increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 1,229,449 | $ | 927,242 | ||||
|
|
|
| |||||
Total taxable distributions | | 1,229,449 | | 927,242 | ||||
Tax-exempt distributions | 22,688,350 | 24,743,871 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 23,917,799 | $ | 25,671,113 | ||||
|
|
|
| |||||
60 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (23,591,743 | )(a) | |
Unrealized appreciation/(depreciation) | (8,819,786 | )(b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | (32,411,529 | ) | |
|
| |||
|
|
| (a) | As of October 31, 2020, the Fund had a net capital loss carryforward of $23,591,743. |
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of swaps. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund had a net short-term capital loss carryforward of $8,055,266 and a net long-term capital loss carryforward of $15,536,477, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps and taxable overdistributions resulted in a net decrease in accumulated loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 61 | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.24 | $ 10.02 | $ 10.28 | $ 10.29 | $ 10.14 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .22 | .24 | .22 | .19 | .18 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .07 | (c) | .21 | (.26 | ) | (.01 | ) | .16 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .29 | .45 | (.04 | ) | .18 | .34 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.23 | ) | (.23 | ) | (.22 | ) | (.19 | ) | (.19 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.30 | $ 10.24 | $ 10.02 | $ 10.28 | $ 10.29 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 2.85 | % | 4.58 | % | (.42 | )% | 1.75 | % | 3.38 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period | $138,454 | $54,316 | $75,127 | $58,270 | $37,345 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .75 | % | .75 | % | .75 | % | .75 | % | .75 | % | ||||||||||
Expenses, before waivers/reimbursements | .85 | % | .86 | % | .86 | % | .86 | % | .86 | % | ||||||||||
Net investment income(b) | 2.14 | % | 2.32 | % | 2.13 | % | 1.90 | % | 1.78 | % | ||||||||||
Portfolio turnover rate | 29 | % | 12 | % | 15 | % | 9 | % | 9 | % | ||||||||||
See footnote summary on page 66.
62 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.22 | $ 10.01 | $ 10.26 | $ 10.27 | $ 10.12 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .14 | .16 | .14 | .12 | .10 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .08 | (c) | .20 | (.25 | ) | (.02 | ) | .16 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .22 | .36 | (.11 | ) | .10 | .26 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.15 | ) | (.14 | ) | (.11 | ) | (.11 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.29 | $ 10.22 | $ 10.01 | $ 10.26 | $ 10.27 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 2.16 | % | 3.63 | % | (1.09 | )% | .99 | % | 2.61 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period | $6,710 | $7,717 | $10,681 | $12,693 | $10,805 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | 1.50 | % | ||||||||||
Expenses, before waivers/reimbursements | 1.61 | % | 1.61 | % | �� | 1.61 | % | 1.61 | % | 1.61 | % | |||||||||
Net investment income(b) | 1.43 | % | 1.57 | % | 1.37 | % | 1.15 | % | 1.03 | % | ||||||||||
Portfolio turnover rate | 29 | % | 12 | % | 15 | % | 9 | % | 9 | % | ||||||||||
See footnote summary on page 66.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 63 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.24 | $ 10.03 | $ 10.29 | $ 10.30 | $ 10.14 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .25 | .26 | .24 | .22 | .21 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .07 | (c) | .21 | (.26 | ) | (.02 | ) | .17 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .32 | .47 | (.02 | ) | .20 | .38 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.25 | ) | (.26 | ) | (.24 | ) | (.21 | ) | (.22 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.31 | $ 10.24 | $ 10.03 | $ 10.29 | $ 10.30 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 3.19 | % | 4.76 | % | (.17 | )% | 2.00 | % | 3.74 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period | $185,829 | $205,541 | $226,145 | $199,635 | $152,275 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Expenses, before waivers/reimbursements | .60 | % | .61 | % | .61 | % | .61 | % | .61 | % | ||||||||||
Net investment income(b) | 2.43 | % | 2.57 | % | 2.37 | % | 2.15 | % | 2.03 | % | ||||||||||
Portfolio turnover rate | 29 | % | 12 | % | 15 | % | 9 | % | 9 | % | ||||||||||
See footnote summary on page 66.
64 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 1 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.19 | $ 9.98 | $ 10.25 | $ 10.26 | $ 10.11 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .23 | .25 | .23 | .21 | .20 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .07 | (c) | .22 | (.26 | ) | (.01 | ) | .16 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .30 | .47 | (.03 | ) | .20 | .36 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.24 | ) | (.26 | ) | (.24 | ) | (.21 | ) | (.21 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.25 | $ 10.19 | $ 9.98 | $ 10.25 | $ 10.26 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 3.04 | % | 4.72 | % | (.32 | )% | 1.94 | % | 3.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period | $444,500 | $498,857 | $485,386 | $424,291 | $333,311 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .60 | % | .60 | % | .60 | % | .60 | % | .60 | % | ||||||||||
Expenses, before waivers/reimbursements | .67 | % | .67 | % | .67 | % | .67 | % | .68 | % | ||||||||||
Net investment income(b) | 2.33 | % | 2.47 | % | 2.27 | % | 2.05 | % | 1.93 | % | ||||||||||
Portfolio turnover rate | 29 | % | 12 | % | 15 | % | 9 | % | 9 | % | ||||||||||
See footnote summary on page 66.
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 65 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class 2 | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 10.19 | $ 9.99 | $ 10.25 | $ 10.26 | $ 10.12 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .24 | .26 | .24 | .22 | .21 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | .07 | (c) | .21 | (.25 | ) | (.01 | ) | .15 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .31 | .47 | (.01 | ) | .21 | .36 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.25 | ) | (.27 | ) | (.25 | ) | (.22 | ) | (.22 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.25 | $ 10.19 | $ 9.99 | $ 10.25 | $ 10.26 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | 3.14 | % | 4.73 | % | (.12 | )% | 2.04 | % | 3.58 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period | $215,763 | $238,306 | $231,109 | $213,880 | $170,155 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements | .50 | % | .50 | % | .50 | % | .50 | % | .50 | % | ||||||||||
Expenses, before waivers/reimbursements | .57 | % | .57 | % | .57 | % | .57 | % | .58 | % | ||||||||||
Net investment income(b) | 2.43 | % | 2.57 | % | 2.37 | % | 2.14 | % | 2.03 | % | ||||||||||
Portfolio turnover rate. | 29 | % | 12 | % | 15 | % | 9 | % | 9 | % | ||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Net of expenses waived/reimbursed by the Adviser. |
| (c) | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Fund’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| (d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
See notes to financial statements.
66 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AB Municipal Bond Inflation Strategy
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Municipal Bond Inflation Strategy (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 67 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 23, 2020
| 68 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
R.B. (Guy) Davidson III(2),* Vice President Terrance T. Hults(2), Vice President Matthew J. Norton(2), Vice President Andrew D. Potter(2), Vice President | Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s Municipal Bond Investment Team. Messrs. Davidson, Hults, Norton and Potter are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| * | Mr. Davidson is expected to retire from the Adviser effective December 30, 2020. |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 69 | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business with which he had been associated since prior to 2004. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS | ||||||||
| Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 71 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## (2005) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
| Jeanette Loeb,## 68 (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 73 | |
MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Garry L. Moody,## (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
| NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
| Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund as defined in the “40 Act,” due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
76 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE | PRINCIPAL POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST 5 YEARS | ||
| Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
| R.B. (Guy) Davidson III^ 59 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer—Municipal Business. | ||
| Terrance T. Hults 54 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Co-Head—Municipal Portfolio Management. | ||
| Matthew J. Norton 37 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Co-Head—Municipal Portfolio Management. | ||
Andrew D. Potter 35 | Vice President | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
| Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2015. | ||
| Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
| Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | Mr. Davidson is expected to retire from the Adviser effective December 30, 2020. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI.
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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
78 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Municipal Bond Inflation Strategy (the “Fund”) at a meeting held on November 4-6, 2019 (the “Meeting”).*
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
| * | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. |
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Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2017 and 2018 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
| 80 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended July 31, 2019 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and noted that it was above the median. The directors took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The Adviser informed the directors that there were no institutional products managed by the Adviser that utilize investment strategies similar to those of the Fund.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 81 | |
in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the medians. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
| abfunds.com | AB MUNICIPAL BOND INFLATION STRATEGY | 83 | |
NOTES
84 | AB MUNICIPAL BOND INFLATION STRATEGY | abfunds.com | |
AB MUNICIPAL BOND INFLATION STRATEGY
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
MBIS-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB SHORT DURATION INCOME PORTFOLIO
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Short Duration Income Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 1 | |
ANNUAL REPORT
December 9, 2020
This report provides management’s discussion of fund performance for AB Short Duration Income Portfolio for the annual reporting period ended October 31, 2020.
The Fund’s investment objective is to seek high current income consistent with preservation of capital.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB SHORT DURATION INCOME PORTFOLIO | ||||||||
| Class A Shares | 7.21% | 1.17% | ||||||
| Class C Shares | 5.22% | 0.51% | ||||||
| Advisor Class Shares1 | 5.86% | 1.34% | ||||||
| Bloomberg Barclays 1-5 Year US Government/Credit Index | 1.22% | 4.47% | ||||||
| 1 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays 1-5 Year US Government/Credit Index, for the six- and 12-month periods ended October 31, 2020.
During the 12-month period, all share classes of the Fund underperformed the benchmark, before sales charges. Sector allocation was the primary detractor, relative to the benchmark, mostly from exposure to commercial mortgage-backed securities (“CMBS”), high-yield corporate bonds and credit default swaps, as well as agency risk-sharing transactions that were partially offset by exposure to investment-grade corporate bonds. Security selection in investment-grade and high-yield corporate bonds contributed to returns. Country allocation to a variety of emerging markets also contributed, while allocation to eurozone countries detracted. Yield-curve positioning and currency decisions did not materially impact performance during the period.
During the six-month period, all share classes of the Fund outperformed the benchmark, before sales charges. Sector allocation contributed most, due to exposure in agency risk-sharing transactions, high-yield corporate bonds and credit default swaps, and CMBS that more than offset losses in investment-grade corporate bonds and US agency mortgages. Security
2 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
selection in investment-grade corporate bonds also contributed, as did country allocation to the eurozone. Yield-curve positioning in the US detracted, while currency decisions did not have a meaningful impact on results.
During both periods, the Fund utilized derivatives in the form of futures, interest rate swaps and interest rate swaptions to manage and hedge duration risk and to take active yield-curve positioning. Currency forwards were used to hedge foreign currency exposure and to take active currency risk. Credit default swaps, both single name and index, were used to take active exposure and to hedge investment-grade and high-yield credit risk. Total return swaps were used to create synthetic high-yield exposure in the Fund. The utilization of government-agency-related To Be Announced mortgage short-term positions was a significant contributor to the Fund’s turnover rate of 336%.
MARKET REVIEW AND INVESTMENT STRATEGY
Global fixed-income market returns were positive over the 12-month period ended October 31, 2020. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, which set the stage for a rebound in risk assets following the sell-off that started in March. Government bonds rallied as interest rates were slashed. Emerging- and developed-market investment-grade corporate bonds led gains, followed by developed-market high-yield corporate bonds, as investors searched for higher yields in a period of falling interest rates. Corporate bonds in the US outperformed their European counterparts. Securitized assets also advanced, while emerging-market sovereign bonds were slightly positive and emerging-market local bonds fell during the period. The US dollar declined against most major developed-market currencies and gained against a majority of emerging-market currencies. Brent crude oil prices fell almost 34% as demand slowed sharply and the oil industry outlook was uncertain.
The Fund’s Senior Investment Management Team (the “Team”) continues to pursue high income, while preserving capital by investing primarily in government bonds from both US and non-US issuers as well as corporate bonds, with scope to invest a select amount in below investment-grade bonds. The Team manages the Fund with a core fixed-income strategy through a global, multi-sector approach that seeks an attractive risk/return profile.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 3 | |
INVESTMENT POLICIES
The Fund pursues its objective by investing, under normal circumstances, primarily in income-producing securities. The Fund also normally invests at least 65% of its total assets in securities of US and foreign governments and their agencies and instrumentalities (including mortgage-backed securities), derivatives related to such securities, and repurchase agreements relating to US government securities. Under normal circumstances, the Fund will maintain a dollar-weighted average duration of less than three years, although it may invest in securities of any duration or maturity.
The Fund may invest in non-government fixed-income securities, including corporate debt securities, non-government mortgage-backed and other asset-backed securities, certificates of deposit and commercial paper. The Fund may invest up to 35% of its net assets in below investment-grade securities (commonly known as “junk bonds”). The Fund’s investments in foreign securities may include both government and corporate securities, and securities of emerging-market countries or of issuers in emerging markets.
The Adviser selects securities for purchase or sale based on its assessment of the securities’ risks and return characteristics as well as the securities’ impact on the overall risks and return characteristics of the Fund. In making this assessment, the Adviser takes into account various factors, including the credit quality and sensitivity to interest rates of the securities under consideration and of the Fund’s other holdings.
The Fund may utilize derivatives, such as options, futures contracts, forwards and swaps. The Fund may, for example, use interest rate futures contracts and swaps to establish exposure to the fixed-income markets or particular fixed-income securities. Derivatives may provide a more efficient and economical exposure to market segments than direct investments, and may also be a more efficient way to alter the Fund’s exposure. The Fund may also enter into transactions such as reverse repurchase agreements that are similar to borrowings for investment purposes. The Fund’s use of derivatives and these borrowing transactions may create aggregate exposure that is substantially in excess of its net assets, effectively leveraging the Fund.
The Adviser may hedge the foreign currency exposure resulting from the Fund’s security positions, and may take long or short positions in currencies, through the use of currency-related derivatives. The Fund is “non-diversified”.
4 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays 1-5 Year US Government/Credit Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays 1-5 Year US Government/Credit Index is a broad-based benchmark that measures the nonsecuritized component of the Bloomberg Barclays US Aggregate Index. It includes investment-grade, US dollar-denominated, fixed-rate Treasuries and government-related and corporate securities that have a remaining maturity of greater than or equal to one year and less than five years. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and less may be more difficult to trade than other types of securities.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 5 | |
DISCLOSURES AND RISKS (continued)
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline.
6 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
DISCLOSURES AND RISKS (continued)
Non-Diversification Risk: The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s NAV.
Mortgage-Related and/or Other Asset-Backed Securities Risk: Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com. The Fund has been in operation only for a short period of time, and therefore has a very limited historical performance period. This limited performance period is unlikely to be representative of the performance the Portfolio will achieve over a longer period.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 7 | |
DISCLOSURES AND RISKS (continued)
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
12/12/20181 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Short Duration Income Portfolio Class A shares (from 12/12/20181 to 10/31/2020) as compared to the performance of the Fund’s benchmark. The chart reflects the deduction of the maximum 4.25% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
| 1 | Inception date: 12/12/2018. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 9 | |
HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | ||||||||||
| CLASS A SHARES | 1.15% | |||||||||||
| 1 Year | 1.17% | -3.13% | ||||||||||
| Since Inception2 | 4.34% | 1.98% | ||||||||||
| CLASS C SHARES | 0.40% | |||||||||||
| 1 Year | 0.51% | -0.45% | ||||||||||
| Since Inception2 | 3.54% | 3.54% | ||||||||||
| ADVISOR CLASS SHARES3 | 1.40% | |||||||||||
| 1 Year | 1.34% | 1.34% | ||||||||||
| Since Inception2 | 4.52% | 4.52% | ||||||||||
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 3.18%, 4.02% and 2.99% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses and brokerage commissions and other transaction costs to 0.65%, 1.45% and 0.45% for Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before January 31, 2021. Any fees waived and expenses borne by the Adviser may be reimbursed by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne, provided that no reimbursement payment will be made that would cause the Fund’s total operating expenses to exceed the applicable expense limitations. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended October 31, 2020. |
| 2 | Inception date: 12/12/2018. |
| 3 | This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of and certain other persons associated with, the Adviser and its affiliates or the Fund. |
10 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
| SEC Returns (reflects applicable sales charges) | ||||
| CLASS A SHARES | ||||
| 1 Year | -2.51% | |||
| Since Inception1 | 2.18% | |||
| CLASS C SHARES | ||||
| 1 Year | 0.10% | |||
| Since Inception1 | 3.85% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 1.99% | |||
| Since Inception1 | 4.83% | |||
| 1 | Inception date: 12/12/2018. |
| 2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 11 | |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
| Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,072.10 | $ | 3.49 | 0.67 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.77 | $ | 3.40 | 0.67 | % | ||||||||
| Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,052.20 | $ | 7.58 | 1.47 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.75 | $ | 7.46 | 1.47 | % | ||||||||
| Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,058.60 | $ | 2.43 | 0.47 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.77 | $ | 2.39 | 0.47 | % | ||||||||
| * | Expenses are equal to the Fund’s annualized expense ratio (interest expense incurred) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). The Fund’s operating expenses are borne by the Adviser or its affiliates. |
| ** | Assumes 5% annual return before expenses. |
12 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $42.8
| 1 | All data are as of October 31, 2020. The Fund’s security type breakdown is expressed as a percentage of total investments and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). “Other” security type weightings represent 0.2% or less in the following security types: Emerging Markets–Corporate Bonds and Emerging Markets–Treasuries. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 13 | |
PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GOVERNMENTS – TREASURIES – 54.0% | ||||||||||||
Indonesia – 0.2% | ||||||||||||
Indonesia Treasury Bond | ||||||||||||
Series FR56 | IDR | 227,000 | $ | 17,330 | ||||||||
Series FR77 | 168,000 | 12,498 | ||||||||||
Series FR78 | 916,000 | 69,146 | ||||||||||
|
| |||||||||||
| 98,974 | ||||||||||||
|
| |||||||||||
Mexico – 0.4% | ||||||||||||
Mexican Bonos | MXN | 3,550 | 183,889 | |||||||||
|
| |||||||||||
Peru – 0.7% | ||||||||||||
Peru Government Bond | PEN | 950 | 308,419 | |||||||||
|
| |||||||||||
United States – 52.7% | ||||||||||||
U.S. Treasury Bonds | U.S.$ | 155 | 147,444 | |||||||||
1.25%, 05/15/2050 | 147 | 133,450 | ||||||||||
6.125%, 11/15/2027(a) | 859 | 1,184,872 | ||||||||||
U.S. Treasury Notes | 3,285 | 3,215,975 | ||||||||||
1.125%, 02/28/2022(b) | 335 | 339,648 | ||||||||||
1.50%, 10/31/2024(a) | 1,118 | 1,172,223 | ||||||||||
1.625%, 10/31/2026 | 1,427 | 1,520,201 | ||||||||||
1.625%, 08/15/2029(b) | 4,477 | 4,800,291 | ||||||||||
2.00%, 05/31/2024 | 2,060 | 2,188,428 | ||||||||||
2.125%, 05/31/2026 | 1,245 | 1,359,190 | ||||||||||
2.25%, 11/15/2024 | 791 | 853,044 | ||||||||||
2.875%, 08/15/2028(a) | 435 | 506,057 | ||||||||||
3.125%, 11/15/2028(a) | 4,298 | 5,105,099 | ||||||||||
|
| |||||||||||
| 22,525,922 | ||||||||||||
|
| |||||||||||
Total Governments – Treasuries | 23,117,204 | |||||||||||
|
| |||||||||||
MORTGAGE PASS-THROUGHS – 28.0% | ||||||||||||
Agency Fixed Rate 30-Year – 28.0% | ||||||||||||
Federal National Mortgage Association | 1,491 | 1,580,804 | ||||||||||
Government National Mortgage Association | 652 | 680,870 | ||||||||||
14 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Uniform Mortgage-Backed Security | U.S.$ | 490 | $ | 505,587 | ||||||||
3.00%, 11/01/2050, TBA | 1,927 | 2,014,426 | ||||||||||
3.50%, 11/01/2050, TBA | 6,830 | 7,211,320 | ||||||||||
|
| |||||||||||
Total Mortgage Pass-Throughs | 11,993,007 | |||||||||||
|
| |||||||||||
COLLATERALIZED MORTGAGE OBLIGATIONS – 15.6% | ||||||||||||
Risk Share Floating Rate – 14.9% | ||||||||||||
Bellemeade Re Ltd. | 150 | 149,824 | ||||||||||
Series 2019-1A, Class M2 | 152 | 142,739 | ||||||||||
Series 2019-3A, Class M1B | 150 | 146,968 | ||||||||||
Series 2019-4A, Class M2 | 150 | 140,321 | ||||||||||
Series 2020-2A, Class M1C | 150 | 150,750 | ||||||||||
Connecticut Avenue Securities Trust | 16 | 16,081 | ||||||||||
Series 2019-R03, Class 1M2 | 25 | 24,868 | ||||||||||
Series 2019-R05, Class 1M2 | 21 | 21,064 | ||||||||||
Series 2019-R06, Class 2M2 | 43 | 42,761 | ||||||||||
Series 2020-R02, Class 2M1 | 39 | 39,125 | ||||||||||
Eagle RE Ltd. | 150 | 150,089 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 15 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Federal Home Loan Mortgage Corp. | U.S.$ | 10 | $ | 10,240 | ||||||
Series 2019-DNA4, Class M2 | 28 | 28,256 | ||||||||
Series 2019-HQA1, Class M2 | 14 | 13,916 | ||||||||
Series 2020-DNA1, Class M2 | 145 | 141,383 | ||||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | 157 | 159,664 | ||||||||
Series 2015-DNA3, Class M3 | 235 | 244,696 | ||||||||
Series 2015-HQA1, Class M3 | 184 | 191,209 | ||||||||
Series 2016-DNA4, Class M3 | 240 | 248,789 | ||||||||
Series 2017-DNA1, Class M2 | 242 | 248,840 | ||||||||
Series 2017-DNA2, Class M2 | 400 | 411,035 | ||||||||
Series 2018-DNA1, Class M2 | 77 | 74,753 | ||||||||
Series 2018-HQA1, Class M2 | 112 | 109,429 | ||||||||
Federal National Mortgage Association Connecticut Avenue Securities | 203 | 210,727 | ||||||||
Series 2015-C02, Class 1M2 | 49 | 49,108 | ||||||||
16 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2015-C02, Class 2M2 | U.S.$ | 30 | $ | 30,123 | ||||||
Series 2015-C03, Class 1M2 | 60 | 60,600 | ||||||||
Series 2015-C04, Class 2M2 | 4 | 3,848 | ||||||||
Series 2016-C01, Class 1M2 | 118 | 125,449 | ||||||||
Series 2016-C01, Class 2M2 | 15 | 16,608 | ||||||||
Series 2016-C04, Class 1M2 | 265 | 273,672 | ||||||||
Series 2016-C05, Class 2M2 | 115 | 119,819 | ||||||||
Series 2017-C02, Class 2B1 | 24 | 24,728 | ||||||||
Series 2017-C02, Class 2M2 | 356 | 359,061 | ||||||||
Series 2017-C04, Class 2M2 | 63 | 63,296 | ||||||||
Series 2017-C05, Class 1M2 | 55 | 54,370 | ||||||||
Series 2017-C07, Class 2M2 | 107 | 106,356 | ||||||||
Series 2018-C01, Class 1B1 | 180 | 166,475 | ||||||||
Series 2018-C04, Class 2M2 | 106 | 104,130 | ||||||||
Home Re Ltd. | 44 | 43,829 | ||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2020-1, Class M2 | U.S.$ | 150 | $ | 149,998 | ||||||||
Mortgage Insurance-Linked Notes | 160 | 158,718 | ||||||||||
Series 2019-1, Class M2 | 150 | 135,804 | ||||||||||
Oaktown Re II Ltd. | 31 | 30,892 | ||||||||||
Oaktown Re III Ltd. | 150 | 148,170 | ||||||||||
PMT Credit Risk Transfer Trust | 57 | 50,734 | ||||||||||
Radnor Re Ltd. | 96 | 95,738 | ||||||||||
Series 2019-2, Class M1B | 305 | 302,661 | ||||||||||
Series 2020-1, Class M1A | 150 | 149,449 | ||||||||||
Series 2020-1, Class M1B | 150 | 145,280 | ||||||||||
Series 2020-1, Class M1C | 150 | 140,642 | ||||||||||
Traingle Re Ltd. | 150 | 149,890 | ||||||||||
|
| |||||||||||
| 6,376,975 | ||||||||||||
|
| |||||||||||
Agency Fixed Rate – 0.4% | ||||||||||||
Federal Home Loan Mortgage Corp. REMICs | 127 | 27,352 | ||||||||||
18 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Federal National Mortgage Association REMICs | U.S.$ | 359 | $ | 19,144 | ||||||||
Series 2016-26, Class IO | 284 | 49,597 | ||||||||||
Series 2016-31, Class IO | 357 | 59,738 | ||||||||||
Series 2016-64, Class BI | 47 | 8,027 | ||||||||||
|
| |||||||||||
| 163,858 | ||||||||||||
|
| |||||||||||
Agency Floating Rate – 0.3% | ||||||||||||
Federal Home Loan Mortgage Corp. REMICs | 169 | 34,185 | ||||||||||
Series 4906, Class SA | 166 | 32,841 | ||||||||||
Federal National Mortgage Association REMICs | 122 | 1,799 | ||||||||||
Series 2012-17, Class ES | 145 | 20,514 | ||||||||||
Series 2012-17, Class SE | 94 | 23,993 | ||||||||||
Series 2019-25, Class SA | 80 | 18,079 | ||||||||||
Series 2019-42, Class SQ | 95 | 15,968 | ||||||||||
|
| |||||||||||
| 147,379 | ||||||||||||
|
| |||||||||||
Total Collateralized Mortgage Obligations | 6,688,212 | |||||||||||
|
| |||||||||||
CORPORATES – INVESTMENT GRADE – 9.4% | ||||||||||||
Financial Institutions – 5.1% | ||||||||||||
Banking – 4.0% | ||||||||||||
AIB Group PLC | 200 | 217,276 | ||||||||||
Banco de Credito del Peru | 39 | 39,390 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand | U.S.$ | 150 | $ | 167,813 | ||||||||
Banco Santander SA | 200 | 227,860 | ||||||||||
Bank of America Corp. | 33 | 33,171 | ||||||||||
CIT Group, Inc. | 15 | 15,624 | ||||||||||
Danske Bank A/S | 200 | 224,494 | ||||||||||
ING Groep NV | 200 | 207,046 | ||||||||||
Morgan Stanley | 125 | 142,106 | ||||||||||
Nationwide Building Society | 200 | 207,818 | ||||||||||
Santander Holdings USA, Inc. | 98 | 105,526 | ||||||||||
4.40%, 07/13/2027 | 12 | 13,360 | ||||||||||
Truist Financial Corp. | 107 | 114,306 | ||||||||||
|
| |||||||||||
| 1,715,790 | ||||||||||||
|
| |||||||||||
Finance – 0.7% | ||||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 150 | 156,919 | ||||||||||
Aircastle Ltd. | 8 | 7,875 | ||||||||||
4.40%, 09/25/2023 | 13 | 13,079 | ||||||||||
5.00%, 04/01/2023 | 3 | 3,059 | ||||||||||
5.25%, 08/11/2025(d) | 52 | 51,600 | ||||||||||
Synchrony Financial | 23 | 23,725 | ||||||||||
4.375%, 03/19/2024 | 15 | 16,417 | ||||||||||
4.50%, 07/23/2025 | 21 | 23,356 | ||||||||||
|
| |||||||||||
| 296,030 | ||||||||||||
|
| |||||||||||
Insurance – 0.4% | ||||||||||||
Centene Corp. | 40 | 41,105 | ||||||||||
Voya Financial, Inc. | 101 | 104,066 | ||||||||||
|
| |||||||||||
| 145,171 | ||||||||||||
|
| |||||||||||
20 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
REITS – 0.0% | ||||||||||||
Sabra Health Care LP | U.S.$ | 11 | $ | 11,620 | ||||||||
|
| |||||||||||
| 2,168,611 | ||||||||||||
|
| |||||||||||
Industrial – 4.3% | ||||||||||||
Basic – 0.0% | ||||||||||||
Arconic Corp. | 15 | 15,871 | ||||||||||
Vale Overseas Ltd. | 2 | 2,091 | ||||||||||
|
| |||||||||||
| 17,962 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.4% | ||||||||||||
General Electric Co. | 133 | 140,896 | ||||||||||
Westinghouse Air Brake Technologies Corp. | 7 | 7,431 | ||||||||||
4.40%, 03/15/2024 | 8 | 8,730 | ||||||||||
|
| |||||||||||
| 157,057 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.4% | ||||||||||||
Charter Communications Operating LLC/Charter Communications Operating Capital | 130 | 137,750 | ||||||||||
ViacomCBS, Inc. | 26 | 28,341 | ||||||||||
|
| |||||||||||
| 166,091 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 0.8% | ||||||||||||
General Motors Financial Co., Inc. | 75 | 77,768 | ||||||||||
3.70%, 05/09/2023 | 84 | 88,275 | ||||||||||
Harley-Davidson Financial Services, Inc. | 18 | 18,978 | ||||||||||
Hyundai Capital America | 121 | 141,126 | ||||||||||
Nissan Motor Acceptance Corp. | 7 | 7,077 | ||||||||||
2.80%, 01/13/2022(d) | 4 | 4,055 | ||||||||||
3.45%, 03/15/2023(d) | 6 | 6,166 | ||||||||||
|
| |||||||||||
| 343,445 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.0% | ||||||||||||
Marriott International, Inc./MD | 14 | 15,588 | ||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.1% | ||||||||||||
Ross Stores, Inc. | 26 | 30,558 | ||||||||||
|
| |||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Consumer Non-Cyclical – 0.2% | ||||||||||||
BAT Capital Corp. | U.S.$ | 32 | $ | 36,672 | ||||||||
Cigna Corp. | 60 | 63,694 | ||||||||||
|
| |||||||||||
| 100,366 | ||||||||||||
|
| |||||||||||
Energy – 0.9% | ||||||||||||
Cenovus Energy, Inc. | 28 | 29,538 | ||||||||||
Ecopetrol SA | 4 | 4,341 | ||||||||||
6.875%, 04/29/2030 | 45 | 54,090 | ||||||||||
Energy Transfer Operating LP | 80 | 88,723 | ||||||||||
ONEOK, Inc. | 17 | 16,774 | ||||||||||
5.85%, 01/15/2026 | 73 | 83,118 | ||||||||||
PBF Holding Co. LLC/PBF Finance Corp. | 40 | 35,741 | ||||||||||
Plains All American Pipeline LP/PAA Finance Corp. | 16 | 16,990 | ||||||||||
4.65%, 10/15/2025 | 41 | 43,750 | ||||||||||
Sunoco Logistics Partners Operations LP | 8 | 8,278 | ||||||||||
|
| |||||||||||
| 381,343 | ||||||||||||
|
| |||||||||||
Services – 0.1% | ||||||||||||
Booking Holdings, Inc. | 31 | 34,742 | ||||||||||
Expedia Group, Inc. | 8 | 8,797 | ||||||||||
|
| |||||||||||
| 43,539 | ||||||||||||
|
| |||||||||||
Technology – 0.7% | ||||||||||||
Broadcom, Inc. | 80 | 89,980 | ||||||||||
4.70%, 04/15/2025 | 59 | 67,049 | ||||||||||
NXP BV/NXP Funding LLC/NXP USA, Inc. | 120 | 135,288 | ||||||||||
|
| |||||||||||
| 292,317 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.4% | ||||||||||||
Delta Air Lines, Inc. | 42 | 45,829 | ||||||||||
Delta Air Lines, Inc./SkyMiles IP Ltd. | 24 | 24,364 | ||||||||||
22 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Southwest Airlines Co. | U.S.$ | 92 | $ | 102,077 | ||||||||
|
| |||||||||||
| 172,270 | ||||||||||||
|
| |||||||||||
Transportation - Services – 0.3% | ||||||||||||
Aviation Capital Group LLC | 4 | 3,534 | ||||||||||
3.875%, 05/01/2023(d) | 11 | 11,002 | ||||||||||
4.125%, 08/01/2025(d) | 16 | 15,401 | ||||||||||
4.375%, 01/30/2024(d) | 26 | 26,184 | ||||||||||
5.50%, 12/15/2024(d) | 77 | 80,183 | ||||||||||
|
| |||||||||||
| 136,304 | ||||||||||||
|
| |||||||||||
| 1,856,840 | ||||||||||||
|
| |||||||||||
Total Corporates – Investment Grade | 4,025,451 | |||||||||||
|
| |||||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES – 9.1% | ||||||||||||
Non-Agency Fixed Rate CMBS – 8.2% | ||||||||||||
BAMLL Commercial Mortgage Securities Trust | 100 | 88,441 | ||||||||||
Barclays Commercial Mortgage Trust | 996 | 91,338 | ||||||||||
Bbcms Mortgage Trust | 1,526 | 107,416 | ||||||||||
CD Mortgage Trust | 1,773 | 105,492 | ||||||||||
CFCRE Commercial Mortgage Trust | 95 | 6,704 | ||||||||||
Citigroup Commercial Mortgage Trust | 2,512 | 99,888 | ||||||||||
Series 2016-P3, Class XA | 1,096 | 73,344 | ||||||||||
Series 2017-P7, Class XA | 983 | 53,086 | ||||||||||
Commercial Mortgage Trust | 100 | 97,437 | ||||||||||
Series 2013-CR6, Class C | 112 | 108,374 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Series 2014-CR16, Class D | U.S.$ | 100 | $ | 88,193 | ||||||
Series 2015-CR27, Class XA | 1,323 | 50,451 | ||||||||
Series 2016-DC2, Class XA | 3,151 | 128,092 | ||||||||
CSAIL Commercial Mortgage Trust | 100 | 66,300 | ||||||||
GS Mortgage Securities Trust | 85 | 68,101 | ||||||||
Series 2013-GC13, Class D | 100 | 77,963 | ||||||||
Series 2014-GC22, Class D | 40 | 26,786 | ||||||||
Series 2016-GS3, Class XA | 1,506 | 78,117 | ||||||||
Series 2017-GS5, Class XA | 1,580 | 68,957 | ||||||||
Series 2017-GS7, Class XA | 3,426 | 195,295 | ||||||||
Series 2019-GC39, Class XA | 4,690 | 335,531 | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | 235 | 234,641 | ||||||||
Series 2012-C8, Class E | 100 | 58,691 | ||||||||
Series 2012-LC9, Class G | 100 | 64,795 | ||||||||
Series 2013-LC11, Class B | 110 | 107,247 | ||||||||
JPMBB Commercial Mortgage Securities Trust | ||||||||||
Series 2013-C14, Class D | 75 | 53,729 | ||||||||
Series 2014-C21, Class D | 100 | 87,743 | ||||||||
Morgan Stanley Bank of America Merrill Lynch Trust | 110 | 112,594 | ||||||||
UBS Commercial Mortgage Trust | 125 | 91,710 | ||||||||
Series 2017-C1, Class XA | 1,366 | 103,901 | ||||||||
24 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Series 2017-C2, Class XA | U.S.$ | 2,784 | $ | 142,140 | ||||||||
UBS-Barclays Commercial Mortgage Trust | 81 | 52,665 | ||||||||||
Wells Fargo Commercial Mortgage Trust | 930 | 46,023 | ||||||||||
Series 2016-C35, Class XA | 1,227 | 100,163 | ||||||||||
Series 2016-LC24, Class XA | 928 | 67,394 | ||||||||||
Series 2019-C52, Class XA | 993 | 106,350 | ||||||||||
WF-RBS Commercial Mortgage Trust | 60 | 51,623 | ||||||||||
WFRBS Commercial Mortgage Trust | 25 | 15,039 | ||||||||||
|
| |||||||||||
| 3,511,754 | ||||||||||||
|
| |||||||||||
Non-Agency Floating Rate CMBS – 0.9% | ||||||||||||
BFLD | 59 | 54,675 | ||||||||||
Series 2019-DPLO, Class E | 10 | 9,012 | ||||||||||
CLNY Trust | 120 | 108,726 | ||||||||||
Great Wolf Trust | 45 | 40,780 | ||||||||||
Morgan Stanley Capital I Trust | 133 | 105,212 | ||||||||||
Starwood Retail Property Trust | 89 | 65,614 | ||||||||||
|
| |||||||||||
| 384,019 | ||||||||||||
|
| |||||||||||
Total Commercial Mortgage-Backed Securities | 3,895,773 | |||||||||||
|
| |||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
CORPORATES – NON-INVESTMENT GRADE – 7.0% | ||||||||||||
Industrial – 6.2% | ||||||||||||
Basic – 0.4% | ||||||||||||
Arconic Corp. | U.S.$ | 6 | $ | 6,322 | ||||||||
Cleveland-Cliffs, Inc. | 35 | 40,020 | ||||||||||
Graphic Packaging International LLC | 6 | 6,518 | ||||||||||
Hecla Mining Co. | 29 | 31,175 | ||||||||||
Kaiser Aluminum Corp. | 11 | 11,684 | ||||||||||
United States Steel Corp. | 54 | 59,933 | ||||||||||
WR Grace & Co-Conn | 19 | 19,801 | ||||||||||
|
| |||||||||||
| 175,453 | ||||||||||||
|
| |||||||||||
Capital Goods – 0.5% | ||||||||||||
Bombardier, Inc. | 28 | 20,572 | ||||||||||
Cleaver-Brooks, Inc. | 7 | 6,782 | ||||||||||
Energizer Holdings, Inc. | 16 | 16,524 | ||||||||||
Gates Global LLC/Gates Corp. | 23 | 23,805 | ||||||||||
GFL Environmental, Inc. | 10 | 10,046 | ||||||||||
5.125%, 12/15/2026(d) | 2 | 2,099 | ||||||||||
7.00%, 06/01/2026(d) | 7 | 7,309 | ||||||||||
Mauser Packaging Solutions Holding Co. | 12 | 12,012 | ||||||||||
SPX FLOW, Inc. | 35 | 36,542 | ||||||||||
TransDigm, Inc. | 35 | 37,897 | ||||||||||
Triumph Group, Inc. | 17 | 18,098 | ||||||||||
Wesco Distribution, Inc. | 16 | 17,263 | ||||||||||
|
| |||||||||||
| 208,949 | ||||||||||||
|
| |||||||||||
Communications - Media – 0.2% | ||||||||||||
DISH DBS Corp. | 8 | 8,062 | ||||||||||
26 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Meredith Corp. | U.S.$ | 10 | $ | 8,289 | ||||||||
TEGNA, Inc. | 25 | 25,818 | ||||||||||
Univision Communications, Inc. | 4 | 3,932 | ||||||||||
9.50%, 05/01/2025(d) | 20 | 21,843 | ||||||||||
|
| |||||||||||
| 67,944 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 0.8% | ||||||||||||
Adient US LLC | 40 | 43,977 | ||||||||||
Clarios Global LP/Clarios US Finance Co. | 3 | 3,123 | ||||||||||
8.50%, 05/15/2027(d) | 8 | 8,350 | ||||||||||
Ford Motor Co. | 90 | 99,325 | ||||||||||
9.00%, 04/22/2025 | 27 | 31,809 | ||||||||||
Jaguar Land Rover Automotive PLC | EUR | 116 | 124,088 | |||||||||
Meritor, Inc. | U.S.$ | 5 | 5,117 | |||||||||
Truck Hero, Inc. | 5 | 5,276 | ||||||||||
|
| |||||||||||
| 321,065 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Entertainment – 1.0% | ||||||||||||
Carnival Corp. | 88 | 96,853 | ||||||||||
Cedar Fair LP/Canada’s Wonderland Co./Magnum Management Corp./Millennium Op | 89 | 90,105 | ||||||||||
Royal Caribbean Cruises Ltd. | 47 | 51,267 | ||||||||||
11.50%, 06/01/2025(d) | 78 | 89,226 | ||||||||||
SeaWorld Parks & Entertainment, Inc. | 20 | 21,010 | ||||||||||
9.50%, 08/01/2025(d) | 32 | 33,588 | ||||||||||
Six Flags Theme Parks, Inc. | 21 | 22,236 | ||||||||||
Vail Resorts, Inc. | 11 | 11,611 | ||||||||||
Viking Cruises Ltd. | 12 | 9,268 | ||||||||||
|
| |||||||||||
| 425,164 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.3% | ||||||||||||
Adams Homes, Inc. | 13 | 13,096 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Boyd Gaming Corp. | U.S.$ | 6 | $ | 6,563 | ||||||||
Caesars Entertainment, Inc. | 18 | 18,515 | ||||||||||
Five Point Operating Co. LP/Five Point Capital Corp. | 10 | 9,988 | ||||||||||
Forterra Finance LLC/FRTA Finance Corp. | 11 | 11,641 | ||||||||||
Hilton Domestic Operating Co., Inc. | 7 | 7,272 | ||||||||||
Marriott Ownership Resorts, Inc. | 24 | 25,017 | ||||||||||
Shea Homes LP/Shea Homes Funding Corp. | 11 | 11,176 | ||||||||||
Taylor Morrison Communities, Inc. | 15 | 16,635 | ||||||||||
Wyndham Destinations, Inc. | 20 | 21,285 | ||||||||||
|
| |||||||||||
| 141,188 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Restaurants – 0.2% | ||||||||||||
1011778 BC ULC/New Red Finance, Inc. | 25 | 26,659 | ||||||||||
IRB Holding Corp. | 26 | 27,723 | ||||||||||
Yum! Brands, Inc. | 41 | 45,028 | ||||||||||
|
| |||||||||||
| 99,410 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.6% | ||||||||||||
Burlington Coat Factory Warehouse Corp. | 6 | 6,304 | ||||||||||
Dufry One BV | EUR | 100 | 105,281 | |||||||||
L Brands, Inc. | U.S.$ | 7 | 7,501 | |||||||||
9.375%, 07/01/2025(d) | 10 | 11,605 | ||||||||||
Penske Automotive Group, Inc. | 20 | 20,057 | ||||||||||
Rite Aid Corp. | 15 | 15,004 | ||||||||||
Specialty Building Products Holdings LLC/SBP Finance Corp. | 30 | 30,666 | ||||||||||
Staples, Inc. | 15 | 14,007 | ||||||||||
28 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
William Carter Co. (The) | U.S.$ | 22 | $ | 23,105 | ||||||||
|
| |||||||||||
| 233,530 | ||||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.4% | ||||||||||||
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC | 21 | 21,336 | ||||||||||
CD&R Smokey Buyer, Inc. | 5 | 5,315 | ||||||||||
CHS/Community Health Systems, Inc. | 8 | 7,929 | ||||||||||
6.625%, 02/15/2025(d) | 11 | 10,792 | ||||||||||
Legacy LifePoint Health LLC | 25 | 26,465 | ||||||||||
LifePoint Health, Inc. | 23 | 22,772 | ||||||||||
Par Pharmaceutical, Inc. | 24 | 25,421 | ||||||||||
Providence Service Corp. (The) | 9 | 9,160 | ||||||||||
RegionalCare Hospital Partners Holdings, Inc./LifePoint Health, Inc. | 7 | 7,541 | ||||||||||
Tenet Healthcare Corp. | 9 | 9,127 | ||||||||||
7.50%, 04/01/2025(d) | 29 | 31,242 | ||||||||||
|
| |||||||||||
| 177,100 | ||||||||||||
|
| |||||||||||
Energy – 0.7% | ||||||||||||
Apache Corp. | 6 | 5,681 | ||||||||||
4.875%, 11/15/2027 | 12 | 11,246 | ||||||||||
CITGO Petroleum Corp. | 28 | 26,947 | ||||||||||
7.00%, 06/15/2025(d) | 33 | 30,564 | ||||||||||
EnLink Midstream Partners LP | 5 | 4,559 | ||||||||||
EQT Corp. | 31 | 38,508 | ||||||||||
Genesis Energy LP/Genesis Energy Finance Corp. | 15 | 12,454 | ||||||||||
Nabors Industries Ltd. | 15 | 6,239 | ||||||||||
New Fortress Energy, Inc. | 60 | 61,861 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Occidental Petroleum Corp. | U.S.$ | 40 | $ | 35,837 | ||||||||
5.875%, 09/01/2025 | 10 | 8,797 | ||||||||||
8.00%, 07/15/2025 | 18 | 17,555 | ||||||||||
Range Resources Corp. | 3 | 2,915 | ||||||||||
Transocean, Inc. | 23 | 6,341 | ||||||||||
Western Midstream Operating LP | 5 | 4,631 | ||||||||||
4.75%, 08/15/2028 | 24 | 22,512 | ||||||||||
5.05%, 02/01/2030 | 20 | 18,970 | ||||||||||
|
| |||||||||||
| 315,617 | ||||||||||||
|
| |||||||||||
Other Industrial – 0.1% | ||||||||||||
Avient Corp. | 16 | 16,807 | ||||||||||
IAA, Inc. | 5 | 5,248 | ||||||||||
|
| |||||||||||
| 22,055 | ||||||||||||
|
| |||||||||||
Services – 0.3% | ||||||||||||
Allied Universal Holdco LLC/Allied Universal Finance Corp. | 24 | 25,134 | ||||||||||
APX Group, Inc. | 30 | 31,418 | ||||||||||
Aramark Services, Inc. | 42 | 44,079 | ||||||||||
Sabre GLBL, Inc. | 18 | 19,924 | ||||||||||
TripAdvisor, Inc. | 12 | 12,480 | ||||||||||
|
| |||||||||||
| 133,035 | ||||||||||||
|
| |||||||||||
Technology – 0.4% | ||||||||||||
Boxer Parent Co., Inc. | 6 | 6,428 | ||||||||||
CDW LLC/CDW Finance Corp. | 14 | 14,519 | ||||||||||
CommScope, Inc. | 20 | 20,424 | ||||||||||
Dell International LLC/EMC Corp. | 36 | 37,308 | ||||||||||
Microchip Technology, Inc. | 9 | 9,329 | ||||||||||
NCR Corp. | 18 | 19,791 | ||||||||||
30 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Presidio Holdings, Inc. | U.S.$ | 2 | $ | 2,054 | ||||||||
8.25%, 02/01/2028(d) | 2 | 2,122 | ||||||||||
Science Applications International Corp. | 4 | 4,190 | ||||||||||
Veritas US, Inc./Veritas Bermuda Ltd. | 60 | 60,812 | ||||||||||
|
| |||||||||||
| 176,977 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.2% | ||||||||||||
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd. | 68 | 71,568 | ||||||||||
|
| |||||||||||
Transportation - Services – 0.1% | ||||||||||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc. | 2 | 1,886 | ||||||||||
10.50%, 05/15/2025(d) | 38 | 43,784 | ||||||||||
XPO Logistics, Inc. | 10 | 10,576 | ||||||||||
|
| |||||||||||
| 56,246 | ||||||||||||
|
| |||||||||||
| 2,625,301 | ||||||||||||
|
| |||||||||||
Financial Institutions – 0.8% | ||||||||||||
Banking – 0.3% | ||||||||||||
Alliance Data Systems Corp. | 35 | 32,584 | ||||||||||
7.00%, 01/15/2026(d) | 16 | 16,053 | ||||||||||
HSBC Finance Corp. | 61 | 61,584 | ||||||||||
|
| |||||||||||
| 110,221 | ||||||||||||
|
| |||||||||||
Brokerage – 0.0% | ||||||||||||
NFP Corp. | 18 | 19,127 | ||||||||||
|
| |||||||||||
Finance – 0.3% | ||||||||||||
Navient Corp. | 14 | 14,379 | ||||||||||
SLM Corp. | 103 | 104,495 | ||||||||||
|
| |||||||||||
| 118,874 | ||||||||||||
|
| |||||||||||
Insurance – 0.0% | ||||||||||||
Acrisure LLC/Acrisure Finance, Inc. | 7 | 7,329 | ||||||||||
|
| |||||||||||
Other Finance – 0.0% | ||||||||||||
Tempo Acquisition LLC/Tempo Acquisition Finance Corp. | 8 | 8,120 | ||||||||||
|
| |||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
REITS – 0.2% | ||||||||||||
Diversified Healthcare Trust | U.S.$ | 36 | $ | 39,556 | ||||||||
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc. | 31 | 31,564 | ||||||||||
|
| |||||||||||
| 71,120 | ||||||||||||
|
| |||||||||||
| 334,791 | ||||||||||||
|
| |||||||||||
Utility – 0.0% | ||||||||||||
Electric – 0.0% | ||||||||||||
Calpine Corp. | 8 | 8,251 | ||||||||||
Talen Energy Supply LLC | 5 | 4,940 | ||||||||||
|
| |||||||||||
| 13,191 | ||||||||||||
|
| |||||||||||
Total Corporates – Non-Investment Grade | 2,973,283 | |||||||||||
|
| |||||||||||
COLLATERALIZED LOAN OBLIGATIONS – 1.5% | ||||||||||||
CLO - Floating Rate – 1.5% | ||||||||||||
Ballyrock CLO Ltd. | 250 | 248,011 | ||||||||||
Signal Peak Clo 2 LLC | 390 | 386,163 | ||||||||||
|
| |||||||||||
Total Collateralized Loan Obligations | 634,174 | |||||||||||
|
| |||||||||||
ASSET-BACKED SECURITIES – 1.4% | ||||||||||||
Other ABS - Fixed Rate – 1.0% | ||||||||||||
Consumer Loan Underlying Bond Certificate Issuer Trust I | 9 | 8,740 | ||||||||||
Series 2019-HP1, Class B | ||||||||||||
3.48%, 12/15/2026(d) | 100 | 100,611 | ||||||||||
Consumer Loan Underlying Bond CLUB Credit Trust | 100 | 99,595 | ||||||||||
32 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Marlette Funding Trust | U.S.$ | 100 | $ | 101,298 | ||||||||
SoFi Consumer Loan Program Trust | 100 | 99,645 | ||||||||||
|
| |||||||||||
| 409,889 | ||||||||||||
|
| |||||||||||
Autos - Fixed Rate – 0.4% | ||||||||||||
Exeter Automobile Receivables Trust | 115 | 119,521 | ||||||||||
Series 2019-1A, Class E | ||||||||||||
5.20%, 01/15/2026(d) | 40 | 41,935 | ||||||||||
Series 2019-2A, Class E | ||||||||||||
4.68%, 05/15/2026(d) | 15 | 15,617 | ||||||||||
Westlake Automobile Receivables Trust | 14 | 14,283 | ||||||||||
|
| |||||||||||
| 191,356 | ||||||||||||
|
| |||||||||||
Total Asset-Backed Securities | 601,245 | |||||||||||
|
| |||||||||||
GOVERNMENTS – SOVEREIGN AGENCIES – 1.4% | ||||||||||||
Canada – 1.4% | ||||||||||||
Canada Housing Trust No. 1 | CAD | 690 | 588,165 | |||||||||
|
| |||||||||||
BANK LOANS – 1.0% | ||||||||||||
Industrial – 0.8% | ||||||||||||
Basic – 0.1% | ||||||||||||
Illuminate Buyer, LLC | U.S.$ | 50 | 49,102 | |||||||||
|
| |||||||||||
Capital Goods – 0.1% | ||||||||||||
BWay Holding Company | 28 | 25,843 | ||||||||||
Garrett Motion SARL (fka Garrett Motion Inc.) | 23 | 22,141 | ||||||||||
|
| |||||||||||
| 47,984 | ||||||||||||
|
| |||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Communications - Media – 0.0% | ||||||||||||
Nielsen Finance LLC | U.S.$ | 10 | $ | 9,910 | ||||||||
Univision Communications Inc. | 9 | 8,496 | ||||||||||
|
| |||||||||||
| 18,406 | ||||||||||||
|
| |||||||||||
Consumer Cyclical - Automotive – 0.1% | ||||||||||||
Navistar, Inc. | 23 | 22,510 | ||||||||||
|
| |||||||||||
Consumer Cyclical - Other – 0.1% | ||||||||||||
Playtika Holding Corp. | 22 | 22,122 | ||||||||||
|
| |||||||||||
Consumer Cyclical - Retailers – 0.0% | ||||||||||||
PetSmart, Inc. | 17 | 17,213 | ||||||||||
|
| |||||||||||
Consumer Non-Cyclical – 0.1% | ||||||||||||
Froneri International Limited | 8 | 7,693 | ||||||||||
U.S. Renal Care, Inc. | 28 | 26,602 | ||||||||||
|
| |||||||||||
| 34,295 | ||||||||||||
|
| |||||||||||
Other Industrial – 0.0% | ||||||||||||
Rockwood Service Corporation | 3 | 3,100 | ||||||||||
|
| |||||||||||
Services – 0.1% | ||||||||||||
Amentum Government Services Holdings LLC | 3 | 2,866 | ||||||||||
Parexel International Corporation | 13 | 11,983 | ||||||||||
Team Health Holdings, Inc. | 20 | 16,001 | ||||||||||
|
| |||||||||||
| 30,850 | ||||||||||||
|
| |||||||||||
34 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Technology – 0.2% | ||||||||||||
athenahealth, Inc. | U.S.$ | 19 | $ | 18,381 | ||||||||
Avaya Inc. | 1 | 879 | ||||||||||
Boxer Parent Company Inc. (fka BMC Software, Inc.) | 28 | 26,896 | ||||||||||
Pitney Bowes Inc. | 11 | 10,559 | ||||||||||
Presidio Holdings Inc. | 9 | 9,255 | ||||||||||
Solera, LLC (Solera Finance, Inc.) | 23 | 22,116 | ||||||||||
|
| |||||||||||
| 88,086 | ||||||||||||
|
| |||||||||||
Transportation - Airlines – 0.0% | ||||||||||||
Delta Air Lines, Inc. | 10 | 9,919 | ||||||||||
|
| |||||||||||
| 343,587 | ||||||||||||
|
| |||||||||||
Financial Institutions – 0.1% | ||||||||||||
Finance – 0.0% | ||||||||||||
Jefferies Finance LLC | 8 | 7,695 | ||||||||||
|
| |||||||||||
Insurance – 0.1% | ||||||||||||
Cross Financial Corp. | 50 | 49,750 | ||||||||||
Sedgwick Claims Management Services, Inc. (Lightning Cayman Merger Sub, Ltd.) | 11 | 10,519 | ||||||||||
|
| |||||||||||
| 60,269 | ||||||||||||
|
| |||||||||||
| 67,964 | ||||||||||||
|
| |||||||||||
Utility – 0.1% | ||||||||||||
Electric – 0.1% | ||||||||||||
Granite Generation LLC | 23 | 22,580 | ||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
4.750% (LIBOR 3 Month + 3.75%), 11/09/2026(i) | U.S.$ | 4 | $ | 4,151 | ||||||||
|
| |||||||||||
| 26,731 | ||||||||||||
|
| |||||||||||
Total Bank Loans | 438,282 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – SOVEREIGNS – 0.6% | ||||||||||||
Egypt – 0.5% | ||||||||||||
Egypt Government International Bond | 212 | 216,902 | ||||||||||
|
| |||||||||||
Lebanon – 0.0% | ||||||||||||
Lebanon Government International Bond | 16 | 2,195 | ||||||||||
|
| |||||||||||
Nigeria – 0.1% | ||||||||||||
Nigeria Government International Bond | 40 | 40,575 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 259,672 | |||||||||||
|
| |||||||||||
GOVERNMENTS – SOVEREIGN BONDS – 0.5% | ||||||||||||
United Arab Emirates – 0.5% | ||||||||||||
Abu Dhabi Government International Bond | 200 | 211,800 | ||||||||||
|
| |||||||||||
QUASI-SOVEREIGNS – 0.4% | ||||||||||||
Quasi-Sovereign Bonds – 0.4% | ||||||||||||
Mexico – 0.4% | ||||||||||||
Petroleos Mexicanos | 101 | 86,273 | ||||||||||
5.95%, 01/28/2031 | 53 | 44,305 | ||||||||||
6.49%, 01/23/2027 | 22 | 20,466 | ||||||||||
|
| |||||||||||
Total Quasi-Sovereigns | 151,044 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – CORPORATE BONDS – 0.3% | ||||||||||||
Industrial – 0.3% | ||||||||||||
Basic – 0.0% | ||||||||||||
Eldorado Gold Corp. | 15 | 16,389 | ||||||||||
|
| |||||||||||
36 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Capital Goods – 0.2% | ||||||||||||
Embraer Netherlands Finance BV | U.S.$ | 91 | $ | 86,167 | ||||||||
|
| |||||||||||
Energy – 0.1% | ||||||||||||
Leviathan Bond Ltd. | 23 | 23,578 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Corporate Bonds | 126,134 | |||||||||||
|
| |||||||||||
EMERGING MARKETS –TREASURIES – 0.2% | ||||||||||||
Brazil – 0.2% | ||||||||||||
Brazil Notas do Tesouro Nacional | BRL | 487 | 92,975 | |||||||||
|
| |||||||||||
| Shares | ||||||||||||
SHORT-TERM INVESTMENTS – 1.1% | ||||||||||||
Investment Companies – 1.0% | ||||||||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio – Class AB, 0.03%(m)(n)(o) | 430,320 | 430,320 | ||||||||||
|
| |||||||||||
| Principal Amount (000) | ||||||||||||
Governments – Treasuries – 0.1% | ||||||||||||
Egypt – 0.1% | ||||||||||||
Egypt Treasury Bills | EGP | 125 | 7,566 | |||||||||
Series 273D | 200 | 12,670 | ||||||||||
|
| |||||||||||
Total Governments – Treasuries | 20,236 | |||||||||||
|
| |||||||||||
Total Short-Term Investments | 450,556 | |||||||||||
|
| |||||||||||
Total Investments – 131.5% | 56,246,977 | |||||||||||
Other assets less liabilities – (31.5)% | (13,465,266 | ) | ||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 42,781,711 | ||||||||||
|
| |||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 37 | |
PORTFOLIO OF INVESTMENTS (continued)
FUTURES (see Note D)
| Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||
Purchased Contracts |
| |||||||||||||
U.S. 10 Yr Ultra Futures | 2 | December 2020 | $ | 314,562 | $ | (5,878 | ) | |||||||
Sold Contracts |
| |||||||||||||
10 Yr Canadian Bond Futures | 4 | December 2020 | 453,472 | 2,606 | ||||||||||
10 Yr Mini Japan Government Bond Futures | 3 | December 2020 | 435,207 | (723 | ) | |||||||||
Euro-Schatz Futures | 3 | December 2020 | 392,946 | (702 | ) | |||||||||
U.S. T-Note 2 Yr (CBT) Futures | 3 | December 2020 | 662,531 | 200 | ||||||||||
U.S. T-Note 5 Yr (CBT) Futures | 4 | December 2020 | 502,407 | 1,089 | ||||||||||
U.S. T-Note 10 Yr (CBT) Futures | 104 | December 2020 | 14,374,750 | 117,785 | ||||||||||
|
| |||||||||||||
| $ | 114,377 | |||||||||||||
|
| |||||||||||||
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||
BNP Paribas SA | BRL | 597 | USD | 108 | 11/04/2020 | $ | 3,675 | |||||||||||||||||
BNP Paribas SA | USD | 103 | BRL | 597 | 11/04/2020 | 610 | ||||||||||||||||||
BNP Paribas SA | CAD | 841 | USD | 633 | 12/10/2020 | 1,774 | ||||||||||||||||||
Citibank, NA | BRL | 597 | USD | 103 | 11/04/2020 | (610 | ) | |||||||||||||||||
Citibank, NA | USD | 104 | BRL | 597 | 11/04/2020 | (90 | ) | |||||||||||||||||
Citibank, NA | BRL | 597 | USD | 104 | 12/02/2020 | 141 | ||||||||||||||||||
Deutsche Bank AG | PEN | 1,109 | USD | 313 | 11/13/2020 | 6,032 | ||||||||||||||||||
Goldman Sachs Bank USA | IDR | 1,234,755 | USD | 82 | 01/15/2021 | (519 | ) | |||||||||||||||||
State Street Bank & Trust Co. | JPY | 2,145 | USD | 20 | 12/11/2020 | (183 | ) | |||||||||||||||||
State Street Bank & Trust Co. | MXN | 3,565 | USD | 166 | 12/11/2020 | (1,165 | ) | |||||||||||||||||
State Street Bank & Trust Co. | EUR | 260 | USD | 306 | 12/18/2020 | 3,075 | ||||||||||||||||||
|
| |||||||||||||||||||||||
| $ | 12,740 | |||||||||||||||||||||||
|
| |||||||||||||||||||||||
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Buy Contracts |
| |||||||||||||||||||||||||||||||
CDX-NAHY Series 34, 5 Year Index, 06/20/2025* | (5.00 | )% | Quarterly | 3.96 | % | USD | 186 | $ | (8,990 | ) | $ | (172 | ) | $ | (8,818 | ) | ||||||||||||||||
Sale Contracts |
| |||||||||||||||||||||||||||||||
CDX-NAHY Series 33, 5 Year Index, 12/20/2024* | 5.00 | Quarterly | 3.70 | USD | 698 | 37,874 | (59,174 | ) | 97,048 | |||||||||||||||||||||||
CDX-NAHY Series 35, 5 Year Index, 12/20/2025* | 5.00 | Quarterly | 4.23 | USD | 1,537 | 61,463 | 86,359 | (24,896 | ) | |||||||||||||||||||||||
38 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Ford Motor Company 4.346% 12/08/2026, 6/20/2024* | 5.00 | % | Quarterly | 2.87 | % | USD | 40 | $ | 3,094 | $ | 4,087 | $ | (993 | ) | ||||||||||||||||||
iTraxx -Xover Series 34, 5 Year Index, 12/20/2025* | 5.00 | Quarterly | 3.67 | EUR | 1,560 | 119,677 | 113,268 | 6,409 | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | 213,118 | $ | 144,368 | $ | 68,750 | |||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| USD | 670 | 05/24/2021 | 2.288% | 3 Month LIBOR | Semi-Annual/Quarterly | $ | (14,136 | ) | $ | — | $ | (14,136 | ) | |||||||||||||
| CAD | 680 | 05/22/2024 | 3 Month CDOR | 1.985% | Semi-Annual/ Semi-Annual | 27,262 | — | 27,262 | ||||||||||||||||||
| USD | 260 | 05/24/2024 | 2.206% | 3 Month LIBOR | Semi-Annual/Quarterly | (19,769 | ) | — | (19,769 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | (6,643 | ) | $ | — | $ | (6,643 | ) | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
CREDIT DEFAULT SWAPS (see Note D)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Sale Contracts | ||||||||||||||||||||||||||||||||
Citigroup Global Markets, Inc. | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 500 | $ | (161,800 | ) | $ | (184,899 | ) | $ | 23,099 | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 10 | (3,237 | ) | (2,666 | ) | (571 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 18 | (5,826 | ) | (4,443 | ) | (1,383 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 19 | (6,150 | ) | (4,643 | ) | (1,507 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 26 | (8,416 | ) | (6,354 | ) | (2,062 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 24 | (7,765 | ) | (2,049 | ) | (5,716 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 36 | (11,647 | ) | (3,058 | ) | (8,589 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 53 | (17,146 | ) | (3,289 | ) | (13,857 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 79 | (25,557 | ) | (4,867 | ) | (20,690 | ) | |||||||||||||||||||||
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 39 | |
PORTFOLIO OF INVESTMENTS (continued)
| Swap Counterparty & Referenced Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||||
Credit Suisse International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | % | Monthly | 9.67 | % | USD | 360 | $ | (44,932 | ) | $ | (11,407 | ) | $ | (33,525 | ) | ||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 555 | (179,552 | ) | (76,453 | ) | (103,099 | ) | |||||||||||||||||||||
Goldman Sachs International | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 24 | (7,764 | ) | (2,039 | ) | (5,725 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 156 | (50,469 | ) | (33,834 | ) | (16,635 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 400 | (129,407 | ) | (49,793 | ) | (79,614 | ) | |||||||||||||||||||||
JPMorgan Chase Bank, NA | ||||||||||||||||||||||||||||||||
Rolls-Royce PLC, 2.125%,06/18/2021, 06/20/2025* | 1.00 | Quarterly | 4.32 | EUR | 15 | (2,389 | ) | (2,780 | ) | 391 | ||||||||||||||||||||||
Rolls-Royce PLC, 2.125%,06/18/2021, 06/20/2025* | 1.00 | Quarterly | 4.32 | EUR | 15 | (2,389 | ) | (2,764 | ) | 375 | ||||||||||||||||||||||
JPMorgan Securities, LLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 12 | (3,882 | ) | (1,019 | ) | (2,863 | ) | |||||||||||||||||||||
CDX-CMBX.NA.BB Series 6, 05/11/2063* | 5.00 | Monthly | 25.00 | USD | 196 | (98,123 | ) | (38,301 | ) | (59,822 | ) | |||||||||||||||||||||
Morgan Stanley Capital Services LLC | ||||||||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 3 | (971 | ) | (183 | ) | (788 | ) | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (767,422 | ) | $ | (434,841 | ) | $ | (332,581 | ) | ||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Termination date |
TOTAL RETURN SWAPS (see Note D)
Counterparty & | Rate Paid/ Received | Payment Frequency | Current Notional (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
Receive Total Return on Reference Obligation | ||||||||||||||||||||||||
Goldman Sachs International | | 3 Month LIBOR | | Maturity | USD | 209 | 12/20/2020 | $ | 58,659 | |||||||||||||||
REVERSE REPURCHASE AGREEMENTS (see Note D)
| Broker | Interest Rate | Maturity | U.S. $ Value at October 31, 2020 | |||||||||
HSBC Bank USA† | 0.14 | % | — | $ | 847,192 | |||||||
HSBC Bank USA† | 0.14 | % | — | 1,289,871 | ||||||||
HSBC Bank USA† | 0.14 | % | — | 1,213,215 | ||||||||
|
| |||||||||||
| $ | 3,350,278 | |||||||||||
|
| |||||||||||
| † | The reverse repurchase agreement matures on demand. Interest rate resets daily and the rate shown is the rate in effect on October 31, 2020 |
40 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
The type of underlying collateral and the remaining maturity of open reverse repurchase agreements on the statements of assets and liabilities is as follows:
| Overnight and Continuous | Up to 30 Days | 31-90 Days | Greater than 90 Days | Total | ||||||||||||||||
Governments – Treasuries | $ | 3,350,278 | $ | 0 | $ | 0 | $ | 0 | $ | 3,350,278 | ||||||||||
| (a) | Position, or a portion thereof, has been segregated to collateralize reverse repurchase agreements. |
| (b) | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (c) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (d) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $10,914,886 or 25.5% of net assets. |
| (e) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.14% of net assets as of October 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
144A/Restricted & | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Consumer Loan Underlying Bond | 10/09/2019 | $ | 9,246 | $ | 8,740 | 0.02 | % | |||||||||
PMT Credit Risk Transfer Trust | 10/11/2019 | 56,642 | 50,734 | 0.12 | % | |||||||||||
| (f) | IO – Interest Only. |
| (g) | Inverse interest only security. |
| (h) | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (i) | The stated coupon rate represents the greater of the LIBOR or the LIBOR floor rate plus a spread at October 31, 2020. |
| (j) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (k) | Non-income producing security. |
| (l) | Defaulted. |
| (m) | Affiliated investments. |
| (n) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (o) | The rate shown represents the 7-day yield as of period end. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 41 | |
PORTFOLIO OF INVESTMENTS (continued)
Currency Abbreviations:
BRL – Brazilian Real
CAD – Canadian Dollar
EGP – Egyptian Pound
EUR – Euro
IDR – Indonesian Rupiah
JPY – Japanese Yen
MXN – Mexican Peso
PEN – Peruvian Sol
USD – United States Dollar
Glossary:
ABS – Asset-Backed Securities
CBT – Chicago Board of Trade
CDOR – Canadian Dealer Offered Rate
CDX-CMBX.NA – North American Commercial Mortgage-Backed Index
CDX-NAHY – North American High Yield Credit Default Swap Index
CLO – Collateralized Loan Obligations
CMBS – Commercial Mortgage-Backed Securities
LIBOR – London Interbank Offered Rate
REIT – Real Estate Investment Trust
REMICs – Real Estate Mortgage Investment Conduits
TBA – To Be Announced
See notes to financial statements.
42 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets |
| |||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $55,136,672) | $ | 55,816,657 | ||
Affiliated issuers (cost $430,320) | 430,320 | |||
Cash | 41,056 | |||
Cash collateral due from broker | 511,446 | |||
Foreign currencies, at value (cost $16,406) | 16,317 | |||
Unaffiliated interest and dividends receivable | 352,938 | |||
Receivable for variation margin on futures | 114,549 | |||
Receivable for capital stock sold | 101,816 | |||
Unrealized appreciation on total return swaps | 58,659 | |||
Receivable for investment securities sold | 37,645 | |||
Receivable due from Adviser | 16,034 | |||
Unrealized appreciation on forward currency exchange contracts | 15,307 | |||
Affiliated dividends receivable | 12 | |||
|
| |||
Total assets | 57,512,756 | |||
|
| |||
| Liabilities | ||||
Payable for investment securities purchased | 10,439,080 | |||
Payable for reverse repurchase agreements | 3,350,278 | |||
Market value on credit default swaps (net premiums received $434,841) | 767,422 | |||
Dividends payable | 56,394 | |||
Payable for capital stock redeemed | 26,124 | |||
Unrealized depreciation on forward currency exchange contracts | 2,567 | |||
Payable for variation margin on centrally cleared swaps | 1,976 | |||
Directors’ fees payable | 1,512 | |||
Transfer Agent fee payable | 1,452 | |||
Distribution fee payable | 534 | |||
Accrued expenses and other liabilities | 83,706 | |||
|
| |||
Total liabilities | 14,731,045 | |||
|
| |||
Net Assets | $ | 42,781,711 | ||
|
| |||
| Composition of Net Assets | ||||
Capital stock, at par | $ | 4,300 | ||
Additional paid-in capital | 42,638,291 | |||
Distributable earnings | 139,120 | |||
|
| |||
| $ | 42,781,711 | |||
|
| |||
Net Asset Value Per Share—33 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 371,181 | 37,295 | $ | 9.95 | * | ||||||
| ||||||||||||
| C | $ | 730,333 | 73,376 | $ | 9.95 | |||||||
| ||||||||||||
| Advisor | $ | 41,680,197 | 4,189,822 | $ | 9.95 | |||||||
| ||||||||||||
| * | The maximum offering price per share for Class A shares was $10.39 which reflects a sales charge of 4.25%. |
See notes to financial statements.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 43 | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest (net of foreign taxes withheld of $1,158) | $ | 836,101 | ||||||
Dividends—Affiliated issuers | 1,965 | $ | 838,066 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 112,090 | |||||||
Distribution fee—Class A | 403 | |||||||
Distribution fee—Class C | 3,074 | |||||||
Transfer agency—Class A | 125 | |||||||
Transfer agency—Class C | 204 | |||||||
Transfer agency—Advisor Class | 20,824 | |||||||
Custody and accounting | 111,789 | |||||||
Administrative | 75,556 | |||||||
Registration fees | 72,277 | |||||||
Audit and tax | 62,385 | |||||||
Legal | 26,420 | |||||||
Directors’ fees | 16,413 | |||||||
Printing | 12,740 | |||||||
Amortization of offering expenses | 7,032 | |||||||
Miscellaneous | 7,862 | |||||||
|
| |||||||
Total expenses before interest expense | 529,194 | |||||||
Interest expense | 11,241 | |||||||
|
| |||||||
Total expenses | 540,435 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (381,984 | ) | ||||||
|
| |||||||
Net expenses | 158,451 | |||||||
|
| |||||||
Net investment income | 679,615 | |||||||
|
| |||||||
| Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions(a) | 759,388 | |||||||
Securities sold short | 1,310 | |||||||
Forward currency exchange contracts | 59,629 | |||||||
Futures | (551,079 | ) | ||||||
Swaps | (298,724 | ) | ||||||
Foreign currency transactions | (45,740 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments(b) | 404,345 | |||||||
Securities sold short | (377 | ) | ||||||
Forward currency exchange contracts | 23,002 | |||||||
Futures | 101,512 | |||||||
Swaps | (280,043 | ) | ||||||
Foreign currency denominated assets and liabilities | 499 | |||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 173,722 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 853,337 | ||||||
|
|
| (a) | Net of foreign capital gains taxes of $2,692. |
| (b) | Net of increase in accrued foreign capital gains taxes of $545. |
See notes to financial statements.
44 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 679,615 | $ | 448,633 | ||||
Net realized gain (loss) on investment and foreign currency transactions | (75,216 | ) | 271,185 | |||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | 248,938 | 345,304 | ||||||
|
|
|
| |||||
Net increase in net assets from operations | 853,337 | 1,065,122 | ||||||
Distributions to Shareholders | ||||||||
Class A | (7,576 | ) | (349 | ) | ||||
Class C | (8,867 | ) | (277 | ) | ||||
Advisor Class | (1,417,004 | ) | (546,416 | ) | ||||
| Capital Stock Transactions | ||||||||
Net increase | 27,840,328 | 15,000,000 | ||||||
| Capital Contributions | ||||||||
Proceeds from third party vendor (see Note E) | 3,413 | – 0 | – | |||||
|
|
|
| |||||
Total increase | 27,263,631 | 15,518,080 | ||||||
| Net Assets | ||||||||
Beginning of period | 15,518,080 | – 0 | – | |||||
|
|
|
| |||||
End of period | $ | 42,781,711 | $ | 15,518,080 | ||||
|
|
|
| |||||
| (a) | Commencement of operations. |
See notes to financial statements.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 45 | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Short Duration Income Portfolio (the “Fund”), a non-diversified portfolio. The Fund commenced operations on December 12, 2018. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Class B, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national
46 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 47 | |
NOTES TO FINANCIAL STATEMENTS (continued)
or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows
48 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 49 | |
NOTES TO FINANCIAL STATEMENTS (continued)
data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Bank loan prices are provided by third party pricing services and consist of a composite of the quotes received by the vendor into a consensus price. Certain bank loans are classified as Level 3, as a significant input used in the fair value measurement of these instruments is the market quotes that are received by the vendor and these inputs are not observable.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
| |||||||||||||||
Governments – Treasuries | $ | – 0 | – | $ | 23,117,204 | $ | –0 | – | $ | 23,117,204 | ||||||
Mortgage Pass – Throughs | – 0 | – | 11,993,007 | – 0 | – | 11,993,007 | ||||||||||
Collateralized Mortgage Obligations | – 0 | – | 6,688,212 | – 0 | – | 6,688,212 | ||||||||||
Corporates – Investment Grade | – 0 | – | 4,025,451 | – 0 | – | 4,025,451 | ||||||||||
Commercial Mortgage-Backed Securities | – 0 | – | 3,895,773 | – 0 | – | 3,895,773 | ||||||||||
Corporates – Non-Investment Grade | – 0 | – | 2,973,283 | – 0 | – | 2,973,283 | ||||||||||
Collateralized Loan Obligations | – 0 | – | 634,174 | – 0 | – | 634,174 | ||||||||||
Asset-Backed Securities | – 0 | – | 601,245 | – 0 | – | 601,245 | ||||||||||
Governments – Sovereign Agencies | – 0 | – | 588,165 | – 0 | – | 588,165 | ||||||||||
Bank Loans | – 0 | – | 337,217 | 101,065 | 438,282 | |||||||||||
Emerging Markets – Sovereigns | – 0 | – | 259,672 | – 0 | – | 259,672 | ||||||||||
Governments – Sovereign Bonds | – 0 | – | 211,800 | – 0 | – | 211,800 | ||||||||||
Quasi-Sovereigns | – 0 | – | 151,044 | – 0 | – | 151,044 | ||||||||||
Emerging Markets – Corporate Bonds | – 0 | – | 126,134 | – 0 | – | 126,134 | ||||||||||
50 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Emerging Markets –Treasuries | $ | – 0 | – | $ | 92,975 | $ | – 0 | – | $ | 92,975 | ||||||
Short-Term Investments: | ||||||||||||||||
Investment Companies | 430,320 | – 0 | – | – 0 | – | 430,320 | ||||||||||
Governments – Treasuries | – 0 | – | 20,236 | – 0 | – | 20,236 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 430,320 | 55,715,592 | 101,065 | 56,246,977 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Futures | 121,680 | – 0 | – | – 0 | – | 121,680 | (b) | |||||||||
Forward Currency Exchange Contracts | – 0 | – | 15,307 | – 0 | – | 15,307 | ||||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | 222,108 | – 0 | – | 222,108 | (b) | |||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 27,262 | – 0 | – | 27,262 | (b) | |||||||||
Total Return Swaps | – 0 | – | 58,659 | – 0 | – | 58,659 | ||||||||||
Liabilities: | ||||||||||||||||
Futures | (7,303 | ) | – 0 | – | – 0 | – | (7,303 | )(b) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (2,567 | ) | – 0 | – | (2,567 | ) | ||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | (8,990 | ) | – 0 | – | (8,990 | )(b) | ||||||||
Centrally Cleared Interest Rate Swaps | | – 0 | – | (33,905 | ) | – 0 | – | (33,905 | )(b) | |||||||
Credit Default Swaps | – 0 | – | (767,422 | ) | – 0 | – | (767,422 | ) | ||||||||
Reverse Repurchase Agreements | (3,350,278 | ) | – 0 | – | – 0 | – | (3,350,278 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (2,805,581 | ) | $ | 55,226,044 | $ | 101,065 | $ | 52,521,528 | |||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed
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NOTES TO FINANCIAL STATEMENTS (continued)
income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for the current tax year and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and
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NOTES TO FINANCIAL STATEMENTS (continued)
losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
8. Repurchase Agreements
It is the Fund’s policy that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Fund may be delayed or limited.
9. Offering Expenses
Offering expenses of $61,122 were deferred and amortized on a straight line basis over a one year period starting from December 12, 2018 (commencement of operations).
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .35% of the first $2.5 billion of the Fund’s average daily net assets and .30% of the excess over $2.5 billion of the Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs), on an annual basis (the “Expense Caps”) to .65%, 1.45% and .45% of daily average net assets for Class A, Class C, and Advisor Class shares, respectively. For the year ended October 31, 2020, such reimbursement/waivers amounted to $306,046. The Expense Caps may not be terminated by the Adviser before January 31, 2021. Any fees waived and expenses borne by the Adviser through January 20, 2021 may be reimbursed by Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne; such
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NOTES TO FINANCIAL STATEMENTS (continued)
waivers that are subject to repayment amounted to $265,740 and $306,046 for the years ended October 31, 2019 and October 31, 2020, respectively. In any case, no reimbursement payment will be made that would cause the Fund’s total annual operating expenses to exceed the Expense Caps’ net fee percentage set forth above.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the Adviser voluntarily agreed to waive such fees in the amount of $75,556.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $17,574 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $0 from the sale of Class A shares and received $0 and $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $382.
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NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 57 | $ | 33,617 | $ | 33,244 | $ | 430 | $ | 2 | ||||||||||
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing
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NOTES TO FINANCIAL STATEMENTS (continued)
fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares and 1% of the Fund’s average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Advisor Class shares. Payments under the Agreement in respect of Class A shares are currently limited to an annual rate of .20% of Class A shares’ average daily net assets. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $-0- for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | Securities Sold Short | Covers on Securities Sold Short | |||||||||||||
Investment securities (excluding U.S. government securities) | $ | 16,234,246 | $ | 5,896,423 | $ | – 0 | – | $ | – 0 | – | ||||||
U.S. government securities | 160,043,905 | 134,341,133 | – 0 | – | 781,924 | |||||||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 55,571,427 | ||
|
| |||
Gross unrealized appreciation | $ | 1,943,038 | ||
Gross unrealized depreciation | (1,203,157 | ) | ||
|
| |||
Net unrealized appreciation | $ | 739,881 | ||
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
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NOTES TO FINANCIAL STATEMENTS (continued)
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Fund to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Fund to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended October 31, 2020, the Fund held futures for hedging and non-hedging purposes.
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NOTES TO FINANCIAL STATEMENTS (continued)
| • | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the year ended October 31, 2020, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
| • | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
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NOTES TO FINANCIAL STATEMENTS (continued)
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
The Fund may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties. The Fund’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended October 31, 2020, the Fund held purchased swaptions for hedging and non-hedging purposes.
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 59 | |
NOTES TO FINANCIAL STATEMENTS (continued)
market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions.” A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on
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NOTES TO FINANCIAL STATEMENTS (continued)
requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging and non-hedging purposes.
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NOTES TO FINANCIAL STATEMENTS (continued)
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and
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NOTES TO FINANCIAL STATEMENTS (continued)
greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the year ended October 31, 2020, the Fund held total return swaps for non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
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NOTES TO FINANCIAL STATEMENTS (continued)
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 121,680 | * | Receivable/Payable for variation margin on futures | $ | 7,303 | * | ||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | 103,457 | * | Receivable/Payable for variation margin on centrally cleared swaps | 34,707 | * | ||||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | 27,262 | * | Receivable/Payable for variation margin on centrally cleared swaps | 33,905 | * | ||||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts | 15,307 | Unrealized depreciation on forward currency exchange contracts | 2,567 | ||||||||
Credit contracts | Market value on credit default swaps | 767,422 | ||||||||||
Credit contracts | Unrealized appreciation on total return swaps | 58,659 | ||||||||||
|
|
|
| |||||||||
Total | $ | 326,365 | $ | 845,904 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | (551,079 | ) | $ | 101,512 | ||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | 59,629 | 23,002 | |||||||
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NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | $ | (3,773 | ) | $ | – 0 | – | |||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (5,988 | ) | 9,264 | ||||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (292,736 | ) | (289,307 | ) | |||||
|
|
|
| |||||||
Total | $ | (793,947 | ) | $ | (155,529 | ) | ||||
|
|
|
| |||||||
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Futures: | ||||
Average notional amount of buy contracts | $ | 437,303 | (a) | |
Average notional amount of sale contracts | $ | 11,301,981 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 501,803 | ||
Average principal amount of sale contracts | $ | 2,501,800 | ||
Purchased Swaptions: | ||||
Average notional amount | $ | 760,000 | (b) | |
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 1,446,068 | ||
Credit Default Swaps: | ||||
Average notional amount of sale contracts | $ | 1,922,458 | ||
Centrally Cleared Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 927,628 | (c) | |
Average notional amount of sale contracts | $ | 4,706,343 | ||
Total Return Swaps: | ||||
Average notional amount | $ | 150,000 |
| (a) | Positions were open for six months during the year. |
| (b) | Positions were open for three months during the year. |
| (c) | Positions were open for eight months during the year. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 65 | |
NOTES TO FINANCIAL STATEMENTS (continued)
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
BNP Paribas SA | $ | 6,059 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 6,059 | |||||||
Citibank, NA/Citigroup Global Markets, Inc. | 141 | (141 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Deutsche Bank AG | 6,032 | – 0 | – | – 0 | – | – 0 | – | 6,032 | ||||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 58,659 | (58,659 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 3,075 | (1,348 | ) | – 0 | – | – 0 | – | 1,727 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 73,966 | $ | (60,148 | ) | $ | – 0 | – | $ | – 0 | – | $ | 13,818 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | 248,244 | (141 | ) | – 0 | – | (248,103 | ) | – 0 | – | |||||||||||
Credit Suisse International | 224,484 | – 0 | – | – 0 | – | (224,484 | ) | – 0 | – | |||||||||||
Goldman Sachs Bank USA/Goldman Sachs International | 188,159 | (58,659 | ) | – 0 | – | – 0 | – | 129,500 | ||||||||||||
JPMorgan Chase Bank, NA/JPMorgan Securities, LLC | 106,783 | – 0 | – | – 0 | – | – 0 | – | 106,783 | ||||||||||||
Morgan Stanley Capital Services LLC | 971 | – 0 | – | – 0 | – | – 0 | – | 971 | ||||||||||||
State Street Bank & Trust Co. | 1,348 | (1,348 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 769,989 | $ | (60,148 | ) | $ | – 0 | – | $ | (472,587 | ) | $ | 237,254 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
66 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. Short Sales
The Fund may sell securities short. A short sale is a transaction in which the Fund sells securities it does not own, but has borrowed, in anticipation of a decline in the market price of the securities. The Fund is obligated to replace the borrowed securities at their market price at the time of settlement. The Fund’s obligation to replace the securities borrowed in connection with a short sale will be fully secured by collateral deposited with the broker. The Fund is liable to the buyer for any dividends/interest payable on securities while those securities are in a short position. These dividends/interest are recorded as an expense of the Fund. Short sales by the Fund involve certain risks and special considerations. Possible losses from short sales differ from losses that could be incurred from a purchase of a security because losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested.
4. TBA and Dollar Rolls
The Fund may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.
The Fund may enter into certain TBA transactions known as dollar rolls. Dollar rolls involve sales by the Fund of securities for delivery in the current month
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 67 | |
NOTES TO FINANCIAL STATEMENTS (continued)
and the Fund’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Fund forgoes principal and interest paid on the securities. The Fund is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the year ended October 31, 2020, the Fund earned drop income of $32,940 which is included in interest income in the accompanying statement of operations.
5. Reverse Repurchase Agreements
The Fund may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Fund enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Fund is permitted to offset payables and/or receivables with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund in the event of a default. In the event of a default by a MRA counterparty, the Fund may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the year ended October 31, 2020, the average amount of reverse repurchase agreements outstanding was $1,759,618.94 and the daily weighted average interest rate was 0.38%. At October 31, 2020, the Fund had reverse repurchase agreements outstanding in the amount of $3,350,278 as reported on the statement of assets and liabilities.
The following table presents the Fund’s RVP liabilities by counterparty net of the related collateral pledged by the Fund as of October 31, 2020:
Counterparty | RVP Liabilities Subject to a MRA | Securities Collateral Pledged†* | Net Amount of RVP Liabilities | |||||||||
HSBC Bank USA | $ | 3,350,278 | $ | (3,318,807 | ) | $ | 31,471 | |||||
|
|
|
|
|
| |||||||
| † | Including accrued interest. |
| * | The actual collateral pledged may be more than the amount reported due to overcollateralization. |
68 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Shares sold | 73,345 | 1,000 | $ | 720,666 | $ | 10,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 271 | – 0 | – | 2,684 | – 0 | – | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (37,321 | ) | – 0 | – | (372,260 | ) | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 36,295 | 1,000 | $ | 351,090 | $ | 10,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||
Shares sold | 74,937 | 1,000 | $ | 734,576 | $ | 10,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 845 | – 0 | – | 8,352 | – 0 | – | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (3,406 | ) | – 0 | – | (34,020 | ) | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 72,376 | 1,000 | $ | 708,908 | $ | 10,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Advisor Class | ||||||||||||||||||||||||
Shares sold | 3,398,430 | 1,498,000 | $ | 33,761,871 | $ | 14,980,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 13,829 | – 0 | – | 136,589 | – 0 | – | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (720,437 | ) | – 0 | – | (7,118,130 | ) | – 0 | – | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 2,691,822 | 1,498,000 | $ | 26,780,330 | $ | 14,980,000 | ||||||||||||||||||
| ||||||||||||||||||||||||
| (a) | Commencement of operations. |
At October 31, 2020, the Adviser owns approximately 58% of the Fund’s outstanding shares. Significant transactions by such shareholder, if any, may impact the Fund’s performance.
During the year ended October 31, 2020, a third party vendor reimbursed the Fund $3,413 for losses incurred due to a pricing error. This amount is presented in the Fund’s statement of changes in net assets.
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The market value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 69 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments and negative perceptions of the junk bond market generally and may be more difficult to trade than other types of securities.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
70 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Fund shares. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Non-Diversification Risk—The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.
Mortgage-Related and/or Other Asset-Backed Securities Risk—Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Fund to a lower rate of return upon
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 71 | |
NOTES TO FINANCIAL STATEMENTS (continued)
reinvestment of principal. Mortgage-backed securities offered by non-governmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
72 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal year ended October 31, 2020 and the period ended October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 1,419,417 | $ | 547,042 | ||||
Net long-term capital gains | 14,030 | – 0 | – | |||||
|
|
|
| |||||
Total taxable distributions paid | $ | 1,433,447 | $ | 547,042 | ||||
|
|
|
| |||||
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (538,834 | )(a) | |
Unrealized appreciation/(depreciation) | 738,836 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 200,002 | (c) | |
|
|
| (a) | As of October 31, 2020, the cumulative deferred loss on straddles was $538,834. |
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of swaps, the tax deferral of losses on wash sales, and the amortization on callable bonds. |
| (c) | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the accrual of foreign capital gains tax, the tax treatment of defaulted securities, and dividends payable. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward realized
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 73 | |
NOTES TO FINANCIAL STATEMENTS (continued)
capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to non-deductible excise tax paid and the tax treatment of swaps resulted in a net decrease in accumulated loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
74 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||
|
| |||||||
Net asset value, beginning of period | $ 10.35 | $ 10.00 | ||||||
|
| |||||||
Income From Investment Operations | ||||||||
Net investment income(b)(c) | .23 | .28 | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.28 | )(d) | .42 | |||||
Capital Contributions | .16 | – 0 | – | |||||
|
| |||||||
Net increase in net asset value from operations | .11 | .70 | ||||||
|
| |||||||
Less: Dividends and Distributions | ||||||||
Dividends from net investment income | (.38 | ) | (.35 | ) | ||||
Distributions from net realized gain on investment transactions | (.13 | ) | – 0 | – | ||||
|
| |||||||
Total dividends and distributions | (.51 | ) | (.35 | ) | ||||
|
| |||||||
Net asset value, end of period | $ 9.95 | $ 10.35 | ||||||
|
| |||||||
Total Return | ||||||||
Total investment return based on net asset value(e) | 1.17 | % | 7.09 | % | ||||
Ratios/Supplemental Data | ||||||||
Net assets, end of period (000’s omitted) | $371 | $10 | ||||||
Ratio to average net assets of: | ||||||||
Expenses, net of waivers/reimbursements(f) | .68 | % | .70 | %^ | ||||
Expenses, before waivers/reimbursements(f) | 1.77 | % | 3.18 | %^ | ||||
Net investment income(c) | 2.28 | % | 3.14 | %^ | ||||
Portfolio turnover rate** | 336 | % | 178 | % | ||||
Portfolio turnover rate (including securities sold short)** | 336 | % | 181 | % | ||||
| See | footnote summary on page 78. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 75 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||
|
| |||||||
Net asset value, beginning of period | $ 10.34 | $ 10.00 | ||||||
|
| |||||||
Income From Investment Operations | ||||||||
Net investment income(b)(c) | .09 | .21 | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.04 | )(d) | .41 | |||||
|
| |||||||
Net increase in net asset value from operations | .05 | .62 | ||||||
|
| |||||||
Less: Dividends and Distributions | ||||||||
Dividends from net investment income | (.31 | ) | (.28 | ) | ||||
Distributions from net realized gain on investment transactions | (.13 | ) | – 0 | – | ||||
|
| |||||||
Total dividends and distributions | (.44 | ) | (.28 | ) | ||||
|
| |||||||
Net asset value, end of period | $ 9.95 | $ 10.34 | ||||||
|
| |||||||
Total Return | ||||||||
Total investment return based on net asset value(e) | .51 | % | 6.23 | % | ||||
Ratios/Supplemental Data | ||||||||
Net assets, end of period (000’s omitted) | $730 | $10 | ||||||
Ratio to average net assets of: | ||||||||
Expenses, net of waivers/reimbursements(f) | 1.48 | % | 1.49 | %^ | ||||
Expenses, before waivers/reimbursements(f) | 2.57 | % | 4.02 | %^ | ||||
Net investment income(c) | .93 | % | 2.34 | %^ | ||||
Portfolio turnover rate** | 336 | % | 178 | % | ||||
Portfolio turnover rate (including securities sold short)** | 336 | % | 181 | % | ||||
| See | footnote summary on page 78. |
76 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||
|
| |||||||
Net asset value, beginning of period | $ 10.35 | $ 10.00 | ||||||
|
| |||||||
Income From Investment Operations | ||||||||
Net investment income(b)(c) | .21 | .30 | ||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.08 | )(d) | .41 | |||||
|
| |||||||
Net increase in net asset value from operations | .13 | .71 | ||||||
|
| |||||||
Less: Dividends and Distributions | ||||||||
Dividends from net investment income | (.40 | ) | (.36 | ) | ||||
Distributions from net realized gain on investment transactions | (.13 | ) | – 0 | – | ||||
|
| |||||||
Total dividends and distributions | (.53 | ) | (.36 | ) | ||||
|
| |||||||
Net asset value, end of period | $ 9.95 | $ 10.35 | ||||||
|
| |||||||
Total Return | ||||||||
Total investment return based on net asset value(e) | 1.34 | % | 7.25 | % | ||||
Ratios/Supplemental Data | ||||||||
Net assets, end of period (000’s omitted) | $41,681 | $15,498 | ||||||
Ratio to average net assets of: | ||||||||
Expenses, net of waivers/reimbursements(f) | .48 | % | .49 | %^ | ||||
Expenses, before waivers/reimbursements(f) | 1.68 | % | 2.99 | %^ | ||||
Net investment income(c) | 2.13 | % | 3.31 | %^ | ||||
Portfolio turnover rate** | 336 | % | 178 | % | ||||
Portfolio turnover rate (including securities sold short)** | 336 | % | 181 | % | ||||
| See | footnote summary on page 78. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 77 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Net of expenses waived/reimbursed by the Adviser. |
| (d) | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Fund’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| (e) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
| (f) | The expense ratios presented below exclude interest expense: |
| Year Ended October 31, 2020 | December 12, 2018(a) to October 31, 2019 | |||||||
Class A | ||||||||
Net of waivers/reimbursements | .65 | % | .65 | %^ | ||||
Before waivers/reimbursements | 1.73 | % | 3.13 | %^ | ||||
Class C | ||||||||
Net of waivers/reimbursements | 1.45 | % | 1.45 | %^ | ||||
Before waivers/reimbursements | 2.54 | % | 3.97 | %^ | ||||
Advisor Class | ||||||||
Net of waivers/reimbursements | .45 | % | .45 | %^ | ||||
Before waivers/reimbursements | 1.64 | % | 2.95 | % | ||||
| ^ | Annualized. |
| ** | The Fund accounts for dollar roll transactions as purchases and sales. |
See notes to financial statements.
78 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AB Short Duration Income Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Short Duration Income Portfolio (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year ended October 31, 2020 and the period from December 12, 2018 (commencement of operations) through October 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations for the year then ended, the changes in its net assets and its financial highlights for the year ended October 31, 2020 and the period from December 12, 2018 (commencement of operations) through October 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 79 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 23, 2020
80 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
2020 FEDERAL TAX INFORMATION
(unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during the taxable period ended October 31, 2020. For foreign shareholders, 79.42% of ordinary income dividends paid may be considered to be qualifying to be taxed as interest-related dividends.
Shareholders should not use the above information to prepare their income tax returns. The information necessary to complete your income tax returns will be included with your Form 1099-DIV which will be sent to you separately in January 2021.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 81 | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
Scott A. DiMaggio(2), Vice President Gershon M. Distenfeld(2), Douglas J. Peebles(2),* Vice President Matthew S. Sheridan(2), Vice President | Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s Short Duration Income Investment team. Messrs. DiMaggio, Distenfeld, Peebles and Sheridan are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| * | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
82 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# (2018) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business with which he had been associated since prior to 2004. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS | ||||||||
Marshall C. Turner, Jr.,## (2018) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
84 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## (2018) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## (2018) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
Jeanette Loeb,## 68 (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
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MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2018) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Garry L. Moody,## (2018) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
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MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC HELD BY DIRECTOR | |||||
| DISINTERESTED DIRECTORS (continued) | ||||||||
Earl D. Weiner,## (2018) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Dept.—Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund as defined in the “40 Act”, due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 89 | |
MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is set forth below.
NAME, ADDRESS* AND AGE | PRINCIPAL POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS | ||
Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
Scott A. DiMaggio 49 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also co-Head of Fixed-Income. | ||
Gershon M. Distenfeld 45 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also co-Head of Fixed-Income. | ||
Douglas J. Peebles^ 55 | Senior Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer of Fixed Income. | ||
Matthew S. Sheridan 45 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”**), with which he has been associated since prior to 2015. | ||
Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | Mr. Peebles is expected to retire from the Adviser effective December 30, 2020. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com for a free prospectus or SAI.
90 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
| abfunds.com | AB SHORT DURATION INCOME PORTFOLIO | 91 | |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement and New Advisory Agreements
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the Company’s Advisory Agreement with the Adviser in respect of AB Short Duration Income Portfolio (the “Fund”) for an initial two-year period at a meeting held on July 31-August 2, 2018 (the “Meeting”), as well as new Advisory Agreements with the same terms (together with the Advisory Agreement, the “Advisory Agreements”) in connection with the plans of AXA S.A. to sell its remaining interest in AXA Equitable Holdings, Inc. (the indirect holder of a majority of the partnership interests in the Adviser and the indirect parent of AllianceBernstein Corporation, the general partner of the Adviser), subject to market conditions, in one or more transactions that may be deemed to involve an “assignment” of one or more advisory agreements between the Adviser and the Company in respect of the Fund.*
Prior to approval of the Advisory Agreements, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed Advisory Agreements with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including materials from an outside consultant, who acted as their independent fee consultant, and comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed approval in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services to be provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the AB Funds.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their
| * | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. |
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deliberations, the directors evaluated, among other things, the reasonableness of the proposed advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreements, including the proposed advisory fee, were fair and reasonable in light of the services to be performed, expenses to be incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services to be Provided
The directors considered the scope and quality of services to be provided by the Adviser under the Advisory Agreements, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the AB Funds. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreements provide that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements will be subject to the directors’ approval on a quarterly basis and, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreements. The directors noted that the methodology to be used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Company’s former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services to be provided to the Fund under the Advisory Agreements.
Costs of Services to be Provided and Profitability
Because the Fund had not yet commenced operations, the directors were unable to consider historical information about the profitability of the Fund. However, the Adviser agreed to provide the directors with profitability information in connection with future proposed continuances of the Advisory Agreements. They also considered the costs to be borne by the Adviser in providing services to the Fund and that the Fund was unlikely to be profitable to the Adviser unless it achieves a material level of net assets.
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Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their proposed relationships with the Fund, including, but not limited to, benefits relating to 12b-1 fees and sales charges to be received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees to be paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s future profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
Since the Fund had not yet commenced operations, no performance or other historical information for the Fund was available. Based on the Adviser’s written and oral presentations regarding the proposed management of the Fund and their general knowledge and confidence in the Adviser’s expertise in managing mutual funds, the directors concluded that they were satisfied that the Adviser was capable of providing high quality Fund management services to the Fund.
Advisory Fees and Other Expenses
The directors considered the proposed advisory fee rate payable by the Fund to the Adviser and information prepared by an independent service provider (the “15(c) service provider”), concerning advisory fee rates payable by other funds in the same category as the Fund, based on the Fund’s projected net assets of $250 million. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors considered the Fund’s proposed contractual effective advisory fee rate against a peer group median.
The directors recognized that the Adviser’s total compensation from the Fund pursuant to the Advisory Agreements would be increased by amounts paid pursuant to the expense reimbursement provision in the Advisory Agreements, and that the impact of such expense reimbursement would depend on the size of the Fund and the extent to which the Adviser requests reimbursements pursuant to this provision.
The directors also considered the Adviser’s fee schedule for other clients pursuing a similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s proposed fee schedule, on the one hand, and the Adviser’s institutional fee schedule, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had
94 | AB SHORT DURATION INCOME PORTFOLIO | abfunds.com | |
previously discussed with the Adviser its policies in respect of such arrangements. The directors also discussed these matters with their independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it will provide to the Fund relative to institutional clients. In this regard, the Adviser noted, among other things, that, compared to institutional accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The directors concluded, based on the Adviser’s explanation of how it may use ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the proposed advisory fee would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
The directors also considered the projected total expense ratio of the Class A shares of the Fund in comparison to a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”) selected by the 15(c) service provider. The directors also considered the Adviser’s proposed expense cap for the Fund for a one year period. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the projected expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s projected expense ratio was acceptable.
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Economies of Scale
The directors noted that the proposed advisory fee schedule for the Fund contains a breakpoint that reduces the fee rate on assets above a specified level. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed the breakpoint in the future.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
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NOTES
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NOTES
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NOTES
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AB SHORT DURATION INCOME PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
SDI-0151-1020 
OCT 10.31.20
ANNUAL REPORT
AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO
Beginning January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically at any time by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling the Fund at (800) 221 5672.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
| Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed | |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| FROM THE PRESIDENT |  |
Dear Shareholder,
We are pleased to provide this report for AB Tax-Aware Fixed Income Opportunities Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
| + | Transforming uncommon insights into uncommon knowledge with a global research scope |
| + | Navigating markets with seasoned investment experience and sophisticated solutions |
| + | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 1 | |
ANNUAL REPORT
December 11, 2020
This report provides management’s discussion of fund performance for AB Tax-Aware Fixed Income Opportunities Portfolio for the annual reporting period ended October 31, 2020. Prior to February 5, 2020, the Fund was named AB Tax-Aware Fixed Income Portfolio.
The investment objective of the Fund is to seek to maximize after-tax return and income.
NAV RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| 6 Months | 12 Months | |||||||
| AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | ||||||||
| Class A Shares | 11.84% | 0.63% | ||||||
| Class C Shares1 | 11.42% | -0.13% | ||||||
| Advisor Class Shares2 | 12.08% | 0.97% | ||||||
| Bloomberg Barclays Municipal Bond Index | 4.99% | 3.59% | ||||||
| 1 | The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the Financial Highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America. |
| 2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Bloomberg Barclays Municipal Bond Index, for the six- and 12-month periods ended October 31, 2020.
All share classes of the Fund underperformed the benchmark during the 12-month period, before sales charges. Credit positioning detracted, relative to the benchmark, as credit spreads widened in a flight to quality. An overweight to the securitized sector detracted, while an overweight to consumer price index (“CPI”) swaps contributed. An overweight to municipals also contributed.
All share classes of the Fund outperformed the benchmark during the six-month period, before sales charges. Credit positioning contributed, as credit spreads tightened. An overweight to the securitized sector detracted, while an overweight to CPI swaps contributed. An underweight to interest rate swaps and an overweight to municipals also contributed. There were no other noteworthy detractors over the six-month period.
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The Fund utilized derivatives in the form of credit default swaps for hedging and investment purposes, which detracted from absolute performance for both periods. CPI swaps were utilized for hedging purposes and added over both periods. Interest rate swaps were utilized for hedging purposes and detracted from performance over the 12-month period and had no material impact over the six-month period.
MARKET REVIEW AND INVESTMENT STRATEGY
Despite record volatility across most financial markets as the COVID-19 pandemic developed last spring, municipal performance was positive over both the six- and 12-month periods ended October 31, 2020. Following the onset of the virus, the US economy quickly contracted; however, according to the Federal Reserve Bank of New York, the US economy stopped contracting in early May and began a steady recovery through the rest of the summer. With respect to monetary policy, the US Federal Reserve (“the Fed”) Board of Governors stated that short-term interest rates were likely to be held at current low levels for the next few years. Consistent with the improving economy and steady monetary policy, municipals have continued to perform well following the sharp sell-off in March.
While outflows from open-end municipal bond funds and a general lack of liquidity across most markets sparked the sell-off in March, these themes have since largely abated, as investors have taken comfort in the significant federal support provided to state and local governments. On the monetary side, the Fed established the Municipal Liquidity Facility, which can purchase as much as $500 billion in short-term notes directly from municipalities, helping alleviate near-term liquidity concerns for eligible municipalities. The fiscal side brought issuers additional support in the form of the CARES Act, which included $150 billion to state and local governments, $120 billion to hospitals, $31 billion for education, $25 billion for transportation and $10 billion to airports.
The Fund’s Senior Investment Management Team (the “Team”) continues to seek investments in attractive after-tax returns such as municipal and taxable fixed-income and selective below investment-grade bonds. The Team seeks to manage interest-rate exposure by focusing on lower-rated municipal and corporate bonds.
The Fund may purchase municipal securities that are insured under policies issued by certain insurance companies. Historically, insured municipal securities typically received a higher credit rating, which meant that the issuer of the securities paid a lower interest rate. As a result of declines in the credit quality and associated downgrades of most bond insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality of the issuer of the security with little value given to the insurance feature. In purchasing such insured securities, the Adviser evaluates the risk and
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return of municipal securities through its own research. If an insurance company’s rating is downgraded or the company becomes insolvent, the prices of municipal securities insured by the insurance company may decline. As of October 31, 2020, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity were 2.59% and 0.00%, respectively.
INVESTMENT POLICIES
The Fund pursues its objective by investing principally in a national portfolio of both municipal and taxable fixed-income securities. The Fund invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Fund also invests, under normal circumstances, at least 65% of its total assets in municipal securities that pay interest that is exempt from federal income tax. These securities may pay interest that is subject to the federal alternative minimum tax for certain taxpayers. The income earned and distributed to shareholders on non-municipal securities would not be exempt from federal income tax. The Fund may invest in fixed-income securities rated below investment-grade (commonly known as “junk bonds”), although such securities are not expected to be the Fund’s primary focus.
The Adviser selects securities for the Fund based on a variety of factors, including credit quality, maturity, diversification benefits, and the relative expected after-tax returns of taxable and municipal securities (considering federal tax rates and without regard to state and local income taxes). As the objective is to increase the after-tax return of the Fund, an investor in the Fund may incur a tax liability that will generally be greater than the same investor would have in a fund investing exclusively in municipal securities, and that will be higher if the investor is in a higher tax bracket. In addition, the tax implications of the Fund’s trading activity, such as realizing taxable gains, are considered in making purchase and sale decisions for the Fund. The Fund may invest in fixed-income securities of any maturity from short- to long-term.
The Fund may also invest in forward commitments, zero-coupon municipal securities and variable, floating and inverse floating-rate municipal securities.
The Fund may use derivatives, such as swaps, options, futures contracts and forwards, to achieve its investment strategies. For example, the Fund may enter into tender option bonds and credit default and interest rate swaps relating to municipal and taxable fixed-income securities or securities indices. Derivatives may provide more efficient and economical exposure to fixed-income securities markets than direct investments.
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DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays Municipal Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays Municipal Bond Index represents the performance of the long-term tax-exempt bond market consisting of investment-grade bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that, including public health crises (including the occurrence of a contagious disease or illness), affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific municipal or corporate developments and negative performance of the junk bond market generally and may be more difficult to trade than other types of securities.
Municipal Market Risk: This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of its assets in a particular state’s municipal securities, the Fund may be vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism and catastrophic natural disasters, such as hurricanes or earthquakes. The Fund’s investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting
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DISCLOSURES AND RISKS (continued)
the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
Congress has previously considered making changes to the municipal securities provisions of the Internal Revenue Code that could change the US federal income tax treatment of certain types of municipal securities.
The Fund may invest in the municipal securities of Puerto Rico or other US territories and their governmental agencies and municipalities, which are exempt from federal, state, and, where applicable, local income taxes. These municipal securities may have more risks than those of other US issuers of municipal securities. Like many US states and municipalities, Puerto Rico experienced a significant downturn during the recent recession. Puerto Rico’s downturn was particularly severe, and Puerto Rico continues to face a very challenging economic and fiscal environment. If the general economic situation in Puerto Rico continues to persist or worsens, the volatility and credit quality of Puerto Rican municipal securities could continue to be adversely affected, and the market for such securities may experience continued volatility.
Tax Risk: From time to time, the US government and the US Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s net asset value (“NAV”) could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds. Actions or anticipated actions affecting the tax-exempt status of municipal bonds could also result in significant shareholder redemptions of Fund shares as investors anticipate adverse effects on the Fund or seek higher yields to offset the potential loss of the tax deduction. As a result, the Fund would be required to maintain higher levels of cash to meet the redemptions, which would negatively affect the Fund’s yield.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
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DISCLOSURES AND RISKS (continued)
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Municipal securities may have more illiquid investments risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
Leverage Risk: To the extent the Fund uses leveraging techniques, its NAV may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These and other risks are more fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
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DISCLOSURES AND RISKS (continued)
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns and the Fund’s returns shown in the line graphs reflect the applicable sales charges for each share class: a 3% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to their different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
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HISTORICAL PERFORMANCE
GROWTH OF A $10,000 INVESTMENT IN THE FUND (unaudited)
12/11/20131 TO 10/31/2020
This chart illustrates the total value of an assumed $10,000 investment in AB Tax-Aware Fixed Income Opportunities Portfolio Class A shares (from 12/11/20131 to 10/31/2020) as compared to the performance of its benchmark. The chart reflects the deduction of the maximum 3.00% sales charge from the initial $10,000 investment in the Fund and assumes the reinvestment of dividends and capital gains distributions.
| 1 | Inception date: 12/11/2013. |
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HISTORICAL PERFORMANCE (continued)
AVERAGE ANNUAL RETURNS AS OF OCTOBER 31, 2020 (unaudited)
| NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
| CLASS A SHARES | ||||||||
| 1 Year | 0.63% | -2.37% | ||||||
| 5 Years | 2.94% | 2.31% | ||||||
| Since Inception1 | 3.45% | 2.99% | ||||||
| CLASS C SHARES | ||||||||
| 1 Year | -0.13% | -1.10% | ||||||
| 5 Years | 2.17% | 2.17% | ||||||
| Since Inception1 | 2.69% | 2.69% | ||||||
| ADVISOR CLASS SHARES2 | ||||||||
| 1 Year | 0.97% | 0.97% | ||||||
| 5 Years | 3.22% | 3.22% | ||||||
| Since Inception1 | 3.73% | 3.73% | ||||||
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.30%, 2.06% and 1.05% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of expenses associated with securities sold short, acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, brokerage commissions and other transaction costs to 0.75%, 1.50% and 0.50% for Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated prior to January 31, 2021 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
| 1 | Inception date: 12/11/2013. |
| 2 | This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
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HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
SEPTEMBER 30, 2020 (unaudited)
SEC Returns (reflects applicable | ||||
| CLASS A SHARES | ||||
| 1 Year | -2.65% | |||
| 5 Years | 2.35% | |||
| Since Inception1 | 2.98% | |||
| CLASS C SHARES | ||||
| 1 Year | -1.39% | |||
| 5 Years | 2.19% | |||
| Since Inception1 | 2.68% | |||
| ADVISOR CLASS SHARES2 | ||||
| 1 Year | 0.58% | |||
| 5 Years | 3.22% | |||
| Since Inception1 | 3.71% | |||
| 1 | Inception date: 12/11/2013. |
| 2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 11 | |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
12 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
EXPENSE EXAMPLE (continued)
| Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
| Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,118.40 | $ | 4.21 | 0.79 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.17 | $ | 4.01 | 0.79 | % | ||||||||
| Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,114.20 | $ | 8.18 | 1.54 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.39 | $ | 7.81 | 1.54 | % | ||||||||
| Advisor Class |
| |||||||||||||||
Actual | $ | 1,000 | $ | 1,120.80 | $ | 2.88 | 0.54 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.42 | $ | 2.75 | 0.54 | % | ||||||||
| * | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| ** | Assumes 5% annual return before expenses. |
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 13 | |
PORTFOLIO SUMMARY
October 31, 2020 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $75.4
| 1 | All data are as of October 31, 2020. The Fund’s quality rating and state breakdowns are expressed as a percentage of the Fund’s total investments in municipal securities and may vary over time. The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Fund considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the Pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment-grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments, such as equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
| 2 | “Other” represents less than 2.3% in 23 different states, American Samoa, District of Columbia and Guam. |
14 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS
October 31, 2020
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 96.1% |
| |||||||
Long-Term Municipal Bonds – 96.1% |
| |||||||
Alabama – 1.0% |
| |||||||
County of Jefferson AL Sewer Revenue | $ | 110 | $ | 127,413 | ||||
Tuscaloosa County Industrial Development Authority | 595 | 652,156 | ||||||
|
| |||||||
| 779,569 | ||||||||
|
| |||||||
American Samoa – 0.2% |
| |||||||
American Samoa Economic Development Authority | 135 | 168,121 | ||||||
|
| |||||||
Arizona – 0.8% |
| |||||||
Arizona Industrial Development Authority | 202 | 210,291 | ||||||
Arizona Industrial Development Authority | 200 | 200,910 | ||||||
Arizona Industrial Development Authority | 100 | 95,637 | ||||||
Industrial Development Authority of the City of Phoenix (The) | 100 | 105,337 | ||||||
|
| |||||||
| 612,175 | ||||||||
|
| |||||||
California – 3.4% |
| |||||||
Alameda Corridor Transportation Authority | 175 | 201,047 | ||||||
California Housing Finance | 158 | 173,654 | ||||||
California Municipal Finance Authority | 250 | 294,625 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 15 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
California Pollution Control Financing Authority | $ | 250 | $ | 259,105 | ||||
California Statewide Communities Development Authority | 250 | 282,535 | ||||||
Golden State Tobacco Securitization Corp. | 1,305 | 1,342,140 | ||||||
|
| |||||||
| 2,553,106 | ||||||||
|
| |||||||
Colorado – 3.4% |
| |||||||
City & County of Denver CO | 615 | 622,810 | ||||||
Colorado Health Facilities Authority | 540 | 638,528 | ||||||
Colorado Health Facilities Authority | 200 | 227,292 | ||||||
Copper Ridge Metropolitan District | 500 | 469,545 | ||||||
Vauxmont Metropolitan District | 480 | 566,760 | ||||||
|
| |||||||
| 2,524,935 | ||||||||
|
| |||||||
Connecticut – 1.0% |
| |||||||
City of New Haven CT | 615 | 716,432 | ||||||
|
| |||||||
District of Columbia – 0.2% |
| |||||||
District of Columbia | 100 | 109,827 | ||||||
|
| |||||||
Florida – 6.3% |
| |||||||
Bexley Community Development District | 100 | 103,579 | ||||||
16 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Citizens Property Insurance, Inc. | $ | 310 | $ | 325,528 | ||||
City of Tampa FL | 1,000 | 278,980 | ||||||
County of Lake FL | 100 | 100,090 | ||||||
County of Miami-Dade FL | 780 | 914,269 | ||||||
County of Miami-Dade FL Aviation Revenue | 265 | 303,067 | ||||||
County of Osceola FL Transportation Revenue | ||||||||
Zero Coupon, 10/01/2036 | 230 | 139,017 | ||||||
North Broward Hospital District | 270 | 305,704 | ||||||
Pinellas County Industrial Development Authority | 505 | 567,736 | ||||||
State Board of Administration Finance Corp. | ||||||||
Series 2020A | 175 | 176,827 | ||||||
1.705%, 07/01/2027 | 120 | 120,484 | ||||||
Town of Davie FL | 655 | 739,574 | ||||||
Village Community Development District No. 13 | 635 | 653,840 | ||||||
|
| |||||||
| 4,728,695 | ||||||||
|
| |||||||
Georgia – 1.7% |
| |||||||
City of Atlanta GA Department of Aviation | 310 | 324,226 | ||||||
Main Street Natural Gas, Inc. | 760 | 828,537 | ||||||
Municipal Electric Authority of Georgia | 100 | 121,497 | ||||||
|
| |||||||
| 1,274,260 | ||||||||
|
| |||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 17 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Guam – 0.3% |
| |||||||
Territory of Guam | $ | 225 | $ | 239,029 | ||||
|
| |||||||
Illinois – 10.5% |
| |||||||
Chicago Board of Education | ||||||||
Series 2010 | 325 | 335,000 | ||||||
Series 2012A | 240 | 242,868 | ||||||
Series 2019A | 200 | 222,991 | ||||||
Series 2019B | 100 | 109,255 | ||||||
Chicago O’Hare International Airport | ||||||||
Series 2015C | 335 | 380,560 | ||||||
Series 2017B | 725 | 845,430 | ||||||
Illinois Finance Authority | 100 | 102,389 | ||||||
Illinois Finance Authority | ||||||||
Series 2016A | 85 | 72,250 | ||||||
Series 2016C | 15 | 750 | ||||||
Illinois Finance Authority | 100 | 101,934 | ||||||
Illinois Finance Authority | 250 | 281,550 | ||||||
Metropolitan Pier & Exposition Authority | ||||||||
5.00%, 06/15/2050 | 640 | 701,952 | ||||||
Series 2015B | 600 | 637,734 | ||||||
State of Illinois | ||||||||
Series 2013 | 270 | 287,769 | ||||||
Series 2016 | 375 | 401,719 | ||||||
Series 2017D | 930 | 1,008,111 | ||||||
18 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Series 2018A | $ | 1,000 | $ | 1,097,370 | ||||
Series 2019B | 1,000 | 1,078,350 | ||||||
|
| |||||||
| 7,907,982 | ||||||||
|
| |||||||
Indiana – 0.9% |
| |||||||
Indiana Finance Authority | 190 | 204,269 | ||||||
Indiana Finance Authority | 100 | 106,483 | ||||||
Indiana Finance Authority | 350 | 328,373 | ||||||
|
| |||||||
| 639,125 | ||||||||
|
| |||||||
Iowa – 0.5% |
| |||||||
Iowa Finance Authority | 325 | 342,755 | ||||||
|
| |||||||
Kentucky – 3.0% |
| |||||||
City of Ashland KY | 385 | 407,676 | ||||||
Kentucky Economic Development Finance Authority | 175 | 205,749 | ||||||
Kentucky Economic Development Finance Authority | 160 | 178,477 | ||||||
Kentucky Economic Development Finance Authority | 65 | 65,005 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 19 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Kentucky Economic Development Finance Authority | $ | 425 | $ | 466,395 | ||||
Kentucky Public Energy Authority | 600 | 690,408 | ||||||
Louisville/Jefferson County Metropolitan Government | 225 | 263,642 | ||||||
|
| |||||||
| 2,277,352 | ||||||||
|
| |||||||
Louisiana – 3.7% |
| |||||||
City of New Orleans LA Water System Revenue | 100 | 114,281 | ||||||
Louisiana Local Government Environmental Facilities & Community Development Auth | 675 | 799,936 | ||||||
Louisiana Public Facilities Authority | 250 | 2 | ||||||
Louisiana Public Facilities Authority | 1,335 | 1,528,815 | ||||||
New Orleans Aviation Board | 215 | 241,540 | ||||||
Parish of St. James LA | 100 | 118,280 | ||||||
|
| |||||||
| 2,802,854 | ||||||||
|
| |||||||
Maine – 0.4% |
| |||||||
Finance Authority of Maine | 100 | 110,301 | ||||||
20 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Maine Health & Higher Educational Facilities Authority | $ | 165 | $ | 169,734 | ||||
|
| |||||||
| 280,035 | ||||||||
|
| |||||||
Maryland – 2.5% |
| |||||||
City of Baltimore MD | 150 | 156,960 | ||||||
Maryland Economic Development Corp. | 600 | 649,494 | ||||||
Maryland Economic Development Corp. | 1,000 | 1,060,410 | ||||||
|
| |||||||
| 1,866,864 | ||||||||
|
| |||||||
Massachusetts – 1.4% |
| |||||||
Massachusetts Development Finance Agency | 620 | 652,568 | ||||||
Massachusetts Development Finance Agency | ||||||||
Series 2017 | 325 | 277,365 | ||||||
Series 2017A | 140 | 118,559 | ||||||
|
| |||||||
| 1,048,492 | ||||||||
|
| |||||||
Michigan – 0.3% |
| |||||||
City of Detroit MI | 75 | 80,043 | ||||||
City of Detroit MI Sewage Disposal System Revenue | 115 | 123,788 | ||||||
Michigan Finance Authority | 100 | 11,386 | ||||||
|
| |||||||
| 215,217 | ||||||||
|
| |||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 21 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Minnesota – 0.7% |
| |||||||
City of Minneapolis MN/St. Paul Housing & Redevelopment Authority | $ | 400 | $ | 388,500 | ||||
City of Wayzata MN | 105 | 109,569 | ||||||
|
| |||||||
| 498,069 | ||||||||
|
| |||||||
Mississippi – 0.4% |
| |||||||
Mississippi Hospital Equipment & Facilities Authority | 250 | 286,568 | ||||||
|
| |||||||
Missouri – 0.2% |
| |||||||
Kansas City Industrial Development Authority | 190 | 178,541 | ||||||
|
| |||||||
Nebraska – 0.1% |
| |||||||
Central Plains Energy Project | 100 | 107,131 | ||||||
|
| |||||||
New Hampshire – 0.5% |
| |||||||
New Hampshire Business Finance Authority | 213 | 231,771 | ||||||
New Hampshire Health and Education Facilities Authority Act | 115 | 118,821 | ||||||
|
| |||||||
| 350,592 | ||||||||
|
| |||||||
New Jersey – 5.0% |
| |||||||
New Jersey Economic Development Authority | 200 | 218,190 | ||||||
New Jersey Economic Development Authority | 210 | 214,454 | ||||||
22 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New Jersey Educational Facilities Authority | $ | 100 | $ | 114,956 | ||||
New Jersey Health Care Facilities Financing Authority | 280 | 335,151 | ||||||
New Jersey Transportation Trust Fund Authority | 550 | 633,215 | ||||||
New Jersey Transportation Trust Fund Authority | 340 | 386,604 | ||||||
New Jersey Turnpike Authority | 540 | 660,960 | ||||||
Tobacco Settlement Financing Corp./NJ | 1,045 | 1,181,916 | ||||||
|
| |||||||
| 3,745,446 | ||||||||
|
| |||||||
New York – 7.8% |
| |||||||
Metropolitan Transportation Authority | 1,155 | 1,185,330 | ||||||
Series 2020C | 1,000 | 1,080,250 | ||||||
Monroe County Industrial Development Corp./NY | 550 | 570,482 | ||||||
New York City Transitional Finance Authority Building Aid Revenue | 865 | 1,077,479 | ||||||
New York Counties Tobacco Trust V | 350 | 41,643 | ||||||
New York State Dormitory Authority | 200 | 229,426 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 23 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New York State Dormitory Authority | $ | 425 | $ | 484,483 | ||||
New York State Thruway Authority | 365 | 387,652 | ||||||
New York Transportation Development Corp. | 575 | 581,463 | ||||||
New York Transportation Development Corp. | 150 | 161,060 | ||||||
Ulster County Capital Resource Corp. | 120 | 112,200 | ||||||
|
| |||||||
| 5,911,468 | ||||||||
|
| |||||||
North Carolina – 0.8% |
| |||||||
North Carolina Turnpike Authority | 500 | 587,855 | ||||||
|
| |||||||
North Dakota – 0.1% |
| |||||||
County of Grand Forks ND | 100 | 85,212 | ||||||
|
| |||||||
Ohio – 8.3% |
| |||||||
Buckeye Tobacco Settlement Financing Authority | 300 | 298,233 | ||||||
Series 2020B | 3,045 | 3,257,693 | ||||||
City of Akron OH | 445 | 475,260 | ||||||
City of Chillicothe/OH | 175 | 202,653 | ||||||
County of Cuyahoga OH | 365 | 403,442 | ||||||
24 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Cuyahoga/OH | $ | 205 | $ | 230,922 | ||||
County of Marion OH | 100 | 101,702 | ||||||
County of Montgomery OH | 100 | 44,210 | ||||||
Dayton-Montgomery County Port Authority | 100 | 84,143 | ||||||
Ohio Air Quality Development Authority | 145 | 146,088 | ||||||
Ohio Air Quality Development Authority | 100 | 100,750 | ||||||
Ohio Air Quality Development Authority | 580 | | 584,744 | |||||
Ohio Air Quality Development Authority | 185 | 197,029 | ||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | 140 | 141,050 | ||||||
|
| |||||||
| 6,267,919 | ||||||||
|
| |||||||
Oklahoma – 2.4% |
| |||||||
Norman Regional Hospital Authority | 505 | 513,408 | ||||||
Oklahoma Development Finance Authority | 1,180 | 1,286,283 | ||||||
|
| |||||||
| 1,799,691 | ||||||||
|
| |||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 25 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Other – 0.5% |
| |||||||
Federal Home Loan Mortgage Corp. Multifamily VRD Certificates | $ | 375 | $ | 406,522 | ||||
|
| |||||||
Pennsylvania – 3.7% |
| |||||||
Beaver County Industrial Development Authority | 130 | 130,975 | ||||||
Lancaster County Hospital Authority/PA | 100 | 104,566 | ||||||
Moon Industrial Development Authority | 100 | 103,454 | ||||||
Pennsylvania Economic Development Financing Authority | 510 | 471,322 | ||||||
Pennsylvania Economic Development Financing Authority | 100 | 112,966 | ||||||
Pennsylvania Turnpike Commission | 200 | 236,818 | ||||||
School District of Philadelphia (The) | 1,350 | 1,629,896 | ||||||
|
| |||||||
| 2,789,997 | ||||||||
|
| |||||||
Puerto Rico – 6.8% |
| |||||||
Commonwealth of Puerto Rico | 30 | 20,475 | ||||||
Series 2011A | 40 | 25,700 | ||||||
Series 2012A | 100 | 62,125 | ||||||
Series 2014A | 135 | 80,663 | ||||||
26 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
GDB Debt Recovery Authority of Puerto Rico | ||||||||
Series 2018 | $ | 149 | $ | 102,706 | ||||
Puerto Rico Commonwealth Aqueduct & Sewer Authority | ||||||||
Series 2008A | 175 | 177,188 | ||||||
6.125%, 07/01/2024 | 120 | 126,900 | ||||||
Series 2012A | 215 | 222,462 | ||||||
5.125%, 07/01/2037 | 25 | 25,750 | ||||||
5.25%, 07/01/2029-07/01/2042 | 200 | 207,000 | ||||||
5.50%, 07/01/2028 | 75 | 78,469 | ||||||
5.75%, 07/01/2037 | 50 | 52,063 | ||||||
6.00%, 07/01/2047 | 50 | 52,313 | ||||||
Puerto Rico Electric Power Authority | ||||||||
Series 2007T | 85 | 58,863 | ||||||
5.00%, 07/01/2037(b)(c) | 245 | 169,662 | ||||||
Series 2010A | 100 | 69,375 | ||||||
5.25%, 07/01/2030 | 15 | 10,406 | ||||||
Series 2010C | 25 | 17,313 | ||||||
Series 2010D | 15 | 10,388 | ||||||
Series 2010X | 150 | 104,062 | ||||||
5.75%, 07/01/2036(b)(c) | 125 | 87,656 | ||||||
Series 2010Z | 40 | 27,750 | ||||||
Series 2012A | 50 | 34,625 | ||||||
5.00%, 07/01/2042(b)(c) | 10 | 6,925 | ||||||
AGM Series 2007V | 375 | 429,007 | ||||||
NATL Series 2007V | 100 | 103,714 | ||||||
Puerto Rico Highway & Transportation Authority | ||||||||
AGC Series 2005L | 125 | 143,132 | ||||||
AGC Series 2007N | 110 | 126,758 | ||||||
NATL Series 2007N | 100 | 103,956 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 27 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Puerto Rico Industrial Tourist Educational Medical & Environmental Control Facilities Financing Auth | ||||||||
Series 2000 | $ | 390 | $ | 402,675 | ||||
Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue | ||||||||
Series 2018A | ||||||||
Zero Coupon, 07/01/2024-07/01/2046 | 2,154 | 643,342 | ||||||
Series 2019A | 440 | 451,563 | ||||||
5.00%, 07/01/2058 | 867 | 921,491 | ||||||
|
| |||||||
| 5,156,477 | ||||||||
|
| |||||||
South Carolina – 1.2% |
| |||||||
South Carolina Public Service Authority | ||||||||
Series 2014A | 220 | 243,280 | ||||||
Series 2014C | 325 | 364,601 | ||||||
Series 2016A | 265 | 311,407 | ||||||
|
| |||||||
| 919,288 | ||||||||
|
| |||||||
Tennessee – 2.2% |
| |||||||
Bristol Industrial Development Board | ||||||||
Series 2016A | 370 | 358,582 | ||||||
Chattanooga Health Educational & Housing Facility Board | ||||||||
Series 2019A | 130 | 145,838 | ||||||
5.00%, 08/01/2044-08/01/2049 | 740 | 873,456 | ||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board | ||||||||
Series 2018A | 135 | 59,684 | ||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facilities Board | ||||||||
Series 2016 | 215 | 251,010 | ||||||
|
| |||||||
| 1,688,570 | ||||||||
|
| |||||||
28 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Texas – 6.1% |
| |||||||
Austin Convention Enterprises, Inc. | ||||||||
Series 2017A | $ | 500 | $ | 507,810 | ||||
Central Texas Regional Mobility Authority | ||||||||
Series 2013 | 100 | 109,842 | ||||||
City of Houston TX | ||||||||
Series 2015 | 160 | 166,717 | ||||||
Dallas Area Rapid Transit | ||||||||
Series 2014A | 580 | 686,703 | ||||||
Dallas County Flood Control District No. 1 | ||||||||
Series 2015 | 100 | 104,710 | ||||||
Love Field Airport Modernization Corp. | ||||||||
Series 2015 | 500 | 571,070 | ||||||
Mission Economic Development Corp. | ||||||||
Series 2018 | 450 | 476,712 | ||||||
New Hope Cultural Education Facilities Finance Corp. | ||||||||
5.00%, 01/01/2055 | 100 | 101,533 | ||||||
North Texas Tollway Authority | ||||||||
Series 2015B | 250 | 288,912 | ||||||
Port Beaumont Navigation District | ||||||||
4.00%, 01/01/2050(a) | 100 | 99,825 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | ||||||||
Series 2015A | 675 | 660,319 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | ||||||||
Series 2020A | 456 | 469,875 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 29 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Tarrant County Cultural Education Facilities Finance Corp. | ||||||||
Series 2014A-1 | $ | 100 | $ | 104,062 | ||||
Texas Private Activity Bond Surface Transportation Corp. | ||||||||
5.00%, 06/30/2058 | 235 | 267,139 | ||||||
|
| |||||||
| 4,615,229 | ||||||||
|
| |||||||
Utah – 1.5% |
| |||||||
Salt Lake City Corp. Airport Revenue | ||||||||
Series 2018A | 1,000 | 1,154,870 | ||||||
|
| |||||||
Virginia – 0.2% |
| |||||||
Tobacco Settlement Financing Corp./VA | ||||||||
Series 2007B1 | 165 | 165,696 | ||||||
|
| |||||||
Washington – 2.1% |
| |||||||
Pend Oreille County Public Utility District No. 1 Box Canyon | ||||||||
Series 2018 | 280 | 304,447 | ||||||
Port of Seattle WA | ||||||||
Series 2015C | 510 | 570,216 | ||||||
State of Washington | ||||||||
5.00%, 06/01/2037-06/01/2040(g) | 200 | 257,211 | ||||||
Washington Health Care Facilities Authority | ||||||||
Series 2019A | 205 | 242,404 | ||||||
Washington State Housing Finance Commission | ||||||||
Series 2012A | 100 | 102,214 | ||||||
Washington State Housing Finance Commission | ||||||||
Series 2014A | 100 | 106,555 | ||||||
|
| |||||||
| 1,583,047 | ||||||||
|
| |||||||
West Virginia – 2.2% |
| |||||||
Tobacco Settlement Finance Authority/WV | ||||||||
3.00%, 06/01/2035 | 1,000 | 999,210 | ||||||
30 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Series 2007A | $ | 640 | $ | 692,384 | ||||
|
| |||||||
| 1,691,594 | ||||||||
|
| |||||||
Wisconsin – 1.8% |
| |||||||
UMA Education, Inc. | ||||||||
5.00%, 10/01/2025-10/01/2029(a) | 330 | 357,139 | ||||||
Wisconsin Health & Educational Facilities Authority | ||||||||
5.00%, 11/01/2054 | 100 | 99,836 | ||||||
Wisconsin Public Finance Authority | ||||||||
5.00%, 04/01/2030(a) | 260 | 284,120 | ||||||
Wisconsin Public Finance Authority | ||||||||
3.75%, 06/01/2030(a) | 350 | 334,211 | ||||||
Wisconsin Public Finance Authority | ||||||||
Series 2016C | 100 | 108,866 | ||||||
Wisconsin Public Finance Authority | ||||||||
Series 2017A | 130 | 136,891 | ||||||
|
| |||||||
| 1,321,063 | ||||||||
|
| |||||||
Total Municipal Obligations | 72,397,670 | |||||||
|
| |||||||
COLLATERALIZED MORTGAGE |
| |||||||
Risk Share Floating Rate – 2.8% |
| |||||||
Bellemeade Re Ltd. | ||||||||
Series 2019-3A, Class M1B | 252 | 246,416 | ||||||
Federal Home Loan Mortgage Corp. | ||||||||
Series 2019-DNA3, Class M2 | 36 | 35,065 | ||||||
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | ||||||||
Series 2016-DNA4, Class M3 | 259 | 268,692 | ||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 31 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Federal National Mortgage Association Connecticut Avenue Securities | ||||||||
Series 2014-C01, Class M2 | $ | 184 | $ | 174,713 | ||||
Series 2014-C03, Class 2M2 | 112 | 111,223 | ||||||
Series 2015-C01, Class 2M2 | 22 | 22,451 | ||||||
Series 2015-C02, Class 1M2 | 95 | 95,170 | ||||||
Series 2016-C01, Class 1M2 | 172 | 183,059 | ||||||
Series 2016-C02, Class 1M2 | 235 | 247,641 | ||||||
Series 2016-C04, Class 1M2 | 119 | 123,153 | ||||||
Series 2017-C01, Class 1M2 | 176 | 181,145 | ||||||
Series 2017-C02, Class 2M2 | 189 | 190,585 | ||||||
Series 2017-C04, Class 2M2 | 243 | 242,781 | ||||||
|
| |||||||
| 1,875,678 | ||||||||
|
| |||||||
Total Collateralized Mortgage Obligations | 2,122,094 | |||||||
|
| |||||||
COMMERCIAL MORTGAGE-BACKED |
| |||||||
Non-Agency Fixed Rate CMBS – 0.0% |
| |||||||
Citigroup Commercial Mortgage Trust | ||||||||
Series 2015-GC29, Class A2 | 1 | 763 | ||||||
|
| |||||||
32 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Non-Agency Floating Rate CMBS – 0.7% |
| |||||||
BAMLL Commercial Mortgage Securities Trust | ||||||||
Series 2017-SCH, Class AF | $ | 250 | $ | 236,246 | ||||
DBWF Mortgage Trust | ||||||||
Series 2018-GLKS, Class A | 275 | 267,264 | ||||||
|
| |||||||
| 503,510 | ||||||||
|
| |||||||
Total Commercial Mortgage-Backed Securities | 504,273 | |||||||
|
| |||||||
ASSET-BACKED SECURITIES – 0.5% |
| |||||||
Credit Cards - Fixed Rate – 0.4% |
| |||||||
World Financial Network Credit Card Master Trust | ||||||||
Series 2018-B, Class A | 335 | 343,441 | ||||||
|
| |||||||
Other ABS - Fixed Rate – 0.1% |
| |||||||
SoFi Consumer Loan Program Trust | ||||||||
Series 2018-3, Class A2 | 75 | 75,527 | ||||||
|
| |||||||
Total Asset-Backed Securities | 418,968 | |||||||
|
| |||||||
CORPORATES – INVESTMENT GRADE – 0.4% |
| |||||||
Financial Institutions – 0.3% |
| |||||||
Insurance – 0.3% |
| |||||||
Centene Corp. | ||||||||
4.25%, 12/15/2027 | 232 | 244,134 | ||||||
|
| |||||||
Industrial – 0.1% |
| |||||||
Transportation - Services – 0.1% |
| |||||||
Aviation Capital Group LLC | ||||||||
3.50%, 11/01/2027(a) | 55 | 48,588 | ||||||
|
| |||||||
Total Corporates – Investment Grade | 292,722 | |||||||
|
| |||||||
COLLATERALIZED LOAN OBLIGATIONS – 0.3% |
| |||||||
CLO - Floating Rate – 0.3% |
| |||||||
THL Credit Wind River CLO Ltd. | ||||||||
Series 2014-2A, Class AR | 250 | 245,985 | ||||||
|
| |||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 33 | |
PORTFOLIO OF INVESTMENTS (continued)
| Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
CORPORATES – NON-INVESTMENT GRADE – 0.2% | ||||||||
Industrial – 0.2% |
| |||||||
Communications - Telecommunications – 0.2% |
| |||||||
Intelsat Jackson Holdings SA | ||||||||
5.50%, 08/01/2023(b)(c) | $ | 275 | $ | 161,807 | ||||
|
| |||||||
| Shares | ||||||||
SHORT-TERM INVESTMENTS – 0.6% |
| |||||||
Investment Companies – 0.6% |
| |||||||
AB Fixed Income Shares, Inc. – AB Government Money Market Portfolio – Class AB, 0.03%(i)(j)(k) | 456,179 | 456,179 | ||||||
|
| |||||||
Total Investments – 101.6% | 76,599,698 | |||||||
Other assets less liabilities – (1.6)% | (1,233,072 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 75,366,626 | ||||||
|
| |||||||
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
Description | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Buy Contracts |
| |||||||||||||||||||||||||||
CDX-NAHY Series 35, 5 Year Index, 12/20/2025* | (5.00 | )% | Quarterly | 4.23 | % | USD | 1,630 | $ | (65,276 | ) | $ | (66,075 | ) | $ | 799 | |||||||||||||
CDX-NAIG Series 34, 5 Year Index, 06/20/2025* | (1.00 | ) | Quarterly | 0.91 | USD | 2,000 | (10,583 | ) | 3,862 | (14,445 | ) | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
| $ | (75,859 | ) | $ | (62,213 | ) | $ | (13,646 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
| * | Termination date |
34 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
CENTRALLY CLEARED INFLATION (CPI) SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| USD | 650 | 01/15/2028 | 0.735% | CPI# | Maturity | $ | 57,295 | $ | — | $ | 57,295 | |||||||||||||||
| USD | 1,110 | 01/15/2028 | 1.230% | CPI# | Maturity | 52,278 | — | 52,278 | ||||||||||||||||||
| USD | 525 | 01/15/2030 | 1.572% | CPI# | Maturity | 17,041 | — | 17,041 | ||||||||||||||||||
| USD | 1,600 | 01/15/2030 | 1.585% | CPI# | Maturity | 49,672 | — | 49,672 | ||||||||||||||||||
| USD | 525 | 01/15/2030 | 1.587% | CPI# | Maturity | 16,184 | — | 16,184 | ||||||||||||||||||
| USD | 3,315 | 01/15/2030 | 1.714% | CPI# | Maturity | 56,125 | — | 56,125 | ||||||||||||||||||
| USD | 3,315 | 01/15/2030 | 1.731% | CPI# | Maturity | 49,919 | — | 49,919 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | 298,514 | $ | — | $ | 298,514 | |||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| # | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
| USD | 7,720 | 04/01/2022 | 3 Month LIBOR | 1.863% | Quarterly/Semi-Annual | $ | 190,426 | $ | — | $ | 190,426 | |||||||||||||||
| USD | 1,195 | 02/05/2025 | 3 Month LIBOR | 1.361% | Quarterly/Semi-Annual | 52,935 | — | 52,935 | ||||||||||||||||||
| USD | 2,685 | 02/06/2025 | 3 Month LIBOR | 1.419% | Quarterly/Semi-Annual | 125,836 | — | 125,836 | ||||||||||||||||||
| USD | 2,020 | 02/07/2030 | 3 Month LIBOR | 1.624% | Quarterly/Semi-Annual | 150,707 | — | 150,707 | ||||||||||||||||||
| USD | 1,200 | 04/01/2039 | 0.780% | 3 Month LIBOR | Semi-Annual/ Quarterly | 87,247 | (47 | ) | 87,294 | |||||||||||||||||
| USD | 1,000 | 04/01/2039 | 0.774% | 3 Month LIBOR | Semi-Annual/ Quarterly | 73,828 | — | 73,828 | ||||||||||||||||||
| USD | 1,100 | 04/01/2039 | 0.932% | 3 Month LIBOR | Semi-Annual/ Quarterly | 51,183 | — | 51,183 | ||||||||||||||||||
| USD | 5,500 | 04/01/2044 | 3 Month LIBOR | 2.013% | Quarterly/Semi-Annual | 875,350 | — | 875,350 | ||||||||||||||||||
| USD | 3,850 | 04/01/2054 | 1.583% | 3 Month LIBOR | Semi-Annual/ Quarterly | (311,800 | ) | — | (311,800 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| $ | 1,295,712 | $ | (47 | ) | $ | 1,295,759 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 35 | |
PORTFOLIO OF INVESTMENTS (continued)
CREDIT DEFAULT SWAPS (see Note D)
Swap Obligation | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at October 31, 2020 | Notional Amount (000) | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Sale Contracts |
| |||||||||||||||||||||||||||
Citigroup Global Markets, Inc. |
| |||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | % | Monthly | 25.00 | % | USD | 17 | $ | (5,501 | ) | $ | (1,663 | ) | $ | (3,838 | ) | ||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 515 | (166,610 | ) | (60,252 | ) | (106,358 | ) | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,000 | (323,600 | ) | (128,525 | ) | (195,075 | ) | |||||||||||||||||
Credit Suisse International |
| |||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 9 | (2,913 | ) | (889 | ) | (2,024 | ) | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 114 | (36,880 | ) | (11,271 | ) | (25,609 | ) | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 171 | (55,336 | ) | (16,473 | ) | (38,863 | ) | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 1,000 | (323,600 | ) | (130,764 | ) | (192,836 | ) | |||||||||||||||||
Goldman Sachs International |
| |||||||||||||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 149 | (48,216 | ) | (13,932 | ) | (34,284 | ) | |||||||||||||||||
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | 3.00 | Monthly | 25.00 | USD | 750 | (242,637 | ) | (71,060 | ) | (171,577 | ) | |||||||||||||||||
JP Morgan Securities, LLC |
| |||||||||||||||||||||||||||
CDX-CMBX.NA.A Series 6, 05/11/2063* | 2.00 | Monthly | 9.67 | USD | 2,750 | (343,536 | ) | 44,738 | (388,274 | ) | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
| $ | (1,548,829 | ) | $ | (390,091 | ) | $ | (1,158,738 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
| * | Termination date |
INTEREST RATE SWAPS (see Note D)
| Rate Type | ||||||||||||||||||||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Citibank, NA | USD | 2,220 | 10/09/2029 | 1.120% | SIFMA* | | Quarterly/ Quarterly | $ | (93,196 | ) | $ | — | $ | (93,196 | ) | |||||||||||||||||
Citibank, NA | USD | 2,220 | 10/09/2029 | 1.125% | SIFMA* | | Quarterly/ Quarterly | (94,278 | ) | — | (94,278 | ) | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| $ | (187,474 | ) | $ | — | $ | (187,474 | ) | |||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
| * | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
36 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
PORTFOLIO OF INVESTMENTS (continued)
| (a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2020, the aggregate market value of these securities amounted to $7,714,126 or 10.2% of net assets. |
| (b) | Non-income producing security. |
| (c) | Defaulted. |
| (d) | Restricted and illiquid security. |
| Restricted & Illiquid Securities | Acquisition Date | Cost | Market Value | Percentage of Net Assets | ||||||||||||
Louisiana Public Facilities Authority (Louisiana Pellets, Inc.) |
| 07/31/2014 |
| $ | 173,773 | $ | 2 | 0.00 | % | |||||||
| (e) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of October 31, 2020 and the aggregate market value of this security amounted to $388,500 or 0.52% of net assets. |
| (f) | Security represents the underlying municipal obligation of an inverse floating rate obligation held by the Fund (see Note I). |
| (g) | When-Issued or delayed delivery security. |
| (h) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at October 31, 2020. |
| (i) | Affiliated investments. |
| (j) | The rate shown represents the 7-day yield as of period end. |
| (k) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of October 31, 2020, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 2.6% and 0.0%, respectively.
Glossary:
ABS – Asset-Backed Securities
AGC – Assured Guaranty Corporation
AGM – Assured Guaranty Municipal
CDX-CMBX.NA – North American Commercial Mortgage-Backed Index
CDX-NAHY – North American High Yield Credit Default Swap Index
CDX-NAIG – North American Investment Grade Credit Default Swap Index
CLO – Collateralized Loan Obligations
CMBS – Commercial Mortgage-Backed Securities
CPI – Consumer Price Index
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rate
NATL – National Interstate Corporation
See notes to financial statements.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 37 | |
STATEMENT OF ASSETS & LIABILITIES
October 31, 2020
| Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $75,187,562) | $ | 76,143,519 | ||
Affiliated issuers (cost $456,179) | 456,179 | |||
Cash collateral due from broker | 2,718,948 | |||
Interest receivable | 1,005,172 | |||
Receivable for investment securities sold | 15,000 | |||
Receivable for capital stock sold | 11,035 | |||
Receivable due from Adviser | 9,972 | |||
Receivable for variation margin on centrally cleared swaps | 5,086 | |||
Affiliated dividends receivable | 21 | |||
|
| |||
Total assets | 80,364,932 | |||
|
| |||
| Liabilities | ||||
Payable for floating rate notes issued(a) | 1,600,000 | |||
Market value on credit default swaps (net premiums received $390,091) | 1,548,829 | |||
Payable for investment securities purchased | 1,417,060 | |||
Unrealized depreciation on interest rate swaps | 187,474 | |||
Payable for capital stock redeemed | 121,646 | |||
Distribution fee payable | 5,035 | |||
Directors’ fees payable | 1,560 | |||
Transfer Agent fee payable | 1,452 | |||
Other liabilities | 3,582 | |||
Accrued expenses | 111,668 | |||
|
| |||
Total liabilities | 4,998,306 | |||
|
| |||
Net Assets | $ | 75,366,626 | ||
|
| |||
| Composition of Net Assets | ||||
Capital stock, at par | $ | 6,962 | ||
Additional paid-in capital | 74,819,388 | |||
Distributable earnings | 540,276 | |||
|
| |||
| $ | 75,366,626 | |||
|
|
Net Asset Value Per Share—21 billion shares of capital stock authorized, $.001 par value
| Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
| A | $ | 16,462,900 | 1,520,847 | $ | 10.82 | * | ||||||
| ||||||||||||
| C | $ | 1,793,949 | 165,718 | $ | 10.83 | |||||||
| ||||||||||||
| Advisor | $ | 57,109,777 | 5,275,367 | $ | 10.83 | |||||||
| ||||||||||||
| (a) | Represents short-term floating rate certificates issued by tender option bond trusts (see Note I). |
| * | The maximum offering price per share for Class A shares was $11.15 which reflects a sales charge of 3.00%. |
See notes to financial statements.
38 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
STATEMENT OF OPERATIONS
Year Ended October 31, 2020
| Investment Income | ||||||||
Interest | $ | 2,833,636 | ||||||
Dividends | ||||||||
Affiliated issuers | 20,209 | |||||||
Unaffiliated issuers | 9,712 | $ | 2,863,557 | |||||
|
| |||||||
| Expenses | ||||||||
Advisory fee (see Note B) | 378,391 | |||||||
Distribution fee—Class A | 41,055 | |||||||
Distribution fee—Class C | 16,597 | |||||||
Transfer agency—Class A | 8,763 | |||||||
Transfer agency—Class C | 873 | |||||||
Transfer agency—Advisor Class | 32,969 | |||||||
Custody and accounting | 100,871 | |||||||
Administrative | 73,172 | |||||||
Audit and tax | 62,553 | |||||||
Registration fees | 60,196 | |||||||
Legal | 45,686 | |||||||
Printing | 23,410 | |||||||
Directors’ fees | 17,987 | |||||||
Miscellaneous | 10,062 | |||||||
|
| |||||||
Total expenses before interest/bank overdraft expense | 872,585 | |||||||
Interest/bank overdraft expense | 18,693 | |||||||
|
| |||||||
Total expenses | 891,278 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (396,568 | ) | ||||||
|
| |||||||
Net expenses | 494,710 | |||||||
|
| |||||||
Net investment income | 2,368,847 | |||||||
|
| |||||||
| Realized and Unrealized Loss on Investment Transactions | ||||||||
Net realized loss on: | ||||||||
Investment transactions | (405,896 | ) | ||||||
Swaps | (73,782 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments(a) | (2,566,640 | ) | ||||||
Swaps | (595,745 | ) | ||||||
|
| |||||||
Net loss on investment transactions | (3,642,063 | ) | ||||||
|
| |||||||
Net Decrease in Net Assets from Operations | $ | (1,273,216 | ) | |||||
|
|
| (a) | Net of decrease in accrued foreign capital gains taxes of $4,129. |
| See | notes to financial statements. |
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 39 | |
STATEMENT OF CHANGES IN NET ASSETS
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||
| Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 2,368,847 | $ | 2,028,913 | ||||
Net realized loss on investment transactions | (479,678 | ) | (480,905 | ) | ||||
Net change in unrealized appreciation/depreciation of investments | (3,162,385 | ) | 4,204,994 | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | (1,273,216 | ) | 5,753,002 | |||||
Distributions to Shareholders | ||||||||
Class A | (516,141 | ) | (220,518 | ) | ||||
Class C | (38,826 | ) | (24,277 | ) | ||||
Advisor Class | (2,154,981 | ) | (1,854,885 | ) | ||||
| Capital Stock Transactions |
| |||||||
Net increase (decrease) | (1,296,763 | ) | 13,126,054 | |||||
|
|
|
| |||||
Total increase (decrease) | (5,279,927 | ) | 16,779,376 | |||||
| Net Assets | ||||||||
Beginning of period | 80,646,553 | 63,867,177 | ||||||
|
|
|
| |||||
End of period | $ | 75,366,626 | $ | 80,646,553 | ||||
|
|
|
| |||||
See notes to financial statements.
40 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS
October 31, 2020
NOTE A
Significant Accounting Policies
AB Bond Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 10 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Tax-Aware Fixed Income Opportunities Portfolio (the “Fund”) (formerly known as AB Tax-Aware Fixed Income Portfolio), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class T, Class 1 and Class 2 shares. Class B, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 3.0% for purchases not exceeding $500,000. With respect to purchases of $500,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All seven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 41 | |
NOTES TO FINANCIAL STATEMENTS (continued)
securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements
42 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | Level 1—quoted prices in active markets for identical investments |
| • | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 43 | |
NOTES TO FINANCIAL STATEMENTS (continued)
which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2020:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: |
| |||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 72,397,670 | $ | – 0 | – | $ | 72,397,670 | ||||||
Collateralized Mortgage Obligations | – 0 | – | 2,122,094 | – 0 | – | 2,122,094 | ||||||||||
Commercial Mortgage-Backed Securities | – 0 | – | 504,273 | – 0 | – | 504,273 | ||||||||||
Asset-Backed Securities | – 0 | – | 418,968 | – 0 | – | 418,968 | ||||||||||
Corporates – Investment Grade | – 0 | – | 292,722 | – 0 | – | 292,722 | ||||||||||
Collateralized Loan Obligations | – 0 | – | 245,985 | – 0 | – | 245,985 | ||||||||||
Corporates – Non-Investment Grade | – 0 | – | 161,807 | – 0 | – | 161,807 | ||||||||||
Short-Term Investments | 456,179 | – 0 | – | – 0 | – | 456,179 | ||||||||||
Liabilities: |
| |||||||||||||||
Floating Rate Notes(a) | (1,600,000 | ) | – 0 | – | – 0 | – | (1,600,000 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | (1,143,821 | ) | 76,143,519 | – 0 | – | 74,999,698 | ||||||||||
44 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Other Financial Instruments(b): | ||||||||||||||||
Assets: |
| |||||||||||||||
Centrally Cleared Inflation (CPI) Swaps | $ | – 0 | – | $ | 298,514 | $ | – 0 | – | $ | 298,514 | (c) | |||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 1,607,512 | – 0 | – | 1,607,512 | (c) | |||||||||
Liabilities: |
| |||||||||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | (75,859 | ) | – 0 | – | (75,859 | )(c) | ||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (311,800 | ) | – 0 | – | (311,800 | )(c) | ||||||||
Credit Default Swaps | – 0 | – | (1,548,829 | ) | – 0 | – | (1,548,829 | ) | ||||||||
Interest Rate Swaps | – 0 | – | (187,474 | ) | – 0 | – | (187,474 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | (1,143,821 | ) | $ | 75,925,583 | $ | – 0 | – | $ | 74,781,762 | ||||||
|
|
|
|
|
|
|
| |||||||||
| (a) | The Fund may hold liabilities in which the fair value approximates the carrying amount for financial statement purposes. |
| (b) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (c) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 45 | |
NOTES TO FINANCIAL STATEMENTS (continued)
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each fund or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital
46 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the excess over $2.5 billion up to $5 billion and .35% in excess of $5 billion of the Fund’s average daily net assets. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding expenses associated with securities sold short, acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs), on an annual basis (the “Expense Caps”) to .75%, 1.50% and .50%, of average daily net assets for Class A, Class C and Advisor Class shares, respectively. For the year ended October 31, 2020, such reimbursements/waivers amounted to $321,326. The Expense Caps may not be terminated before January 31, 2021.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the year ended October 31, 2020, the Adviser voluntarily agreed to waive such fees in the amount of $73,172.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $17,956 for the year ended October 31, 2020.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $35 from the sale of Class A shares and received $7,538 and $783 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the year ended October 31, 2020.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 47 | |
NOTES TO FINANCIAL STATEMENTS (continued)
.10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the year ended October 31, 2020, such waiver amounted to $2,070.
A summary of the Fund’s transactions in AB mutual funds for the year ended October 31, 2020 is as follows:
Fund | Market Value 10/31/19 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 10/31/20 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | – 0 | – | $ | 61,517 | $ | 61,061 | $ | 456 | $ | 20 | |||||||||
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and
48 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to 0.30% of the Fund’s average daily net assets attributable to Class A shares and 1% of the Fund’s average daily net assets attributable to Class C shares. The fees are accrued daily and paid monthly. Payments under the Agreement in respect of Class A shares are currently limited to an annual rate of .25% of Class A shares’ average daily net assets. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $15,872 for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended October 31, 2020 were as follows:
| Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 42,407,278 | $ | 38,665,920 | ||||
U.S. government securities | 8,906,710 | 12,353,489 | ||||||
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
Cost | $ | 74,051,260 | ||
|
| |||
Gross unrealized appreciation | $ | 5,682,845 | ||
Gross unrealized depreciation | (3,358,463 | ) | ||
|
| |||
Net unrealized appreciation | $ | 2,324,382 | ||
|
|
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 49 | |
NOTES TO FINANCIAL STATEMENTS (continued)
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
| • | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates or credit risk. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
50 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 51 | |
NOTES TO FINANCIAL STATEMENTS (continued)
a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended October 31, 2020, the Fund held interest rate swaps for hedging purposes.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Fund against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the year ended October 31, 2020, the Fund held inflation (CPI) swaps for hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
52 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the year ended October 31, 2020, the Fund held credit default swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 53 | |
NOTES TO FINANCIAL STATEMENTS (continued)
terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended October 31, 2020, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | $ | 799 | * | Receivable/Payable for variation margin on centrally cleared swaps | $ | 14,445 | * | ||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | | 1,906,073 | * | Receivable/Payable for variation margin on centrally cleared swaps | | 311,800 | * | ||||
Interest rate contracts | Unrealized depreciation on interest rate swaps | | 187,474 | |||||||||
Credit contracts | Market value on credit default swaps | 1,548,829 | ||||||||||
|
|
|
| |||||||||
Total | $ | 1,906,872 | $ | 2,062,548 | ||||||||
|
|
|
| |||||||||
| * | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of Gain or (Loss) on Derivatives Within Statement | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (339,264 | ) | $ | 660,873 | ||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 265,482 | (1,256,618 | ) | ||||||
|
|
|
| |||||||
Total | $ | (73,782 | ) | $ | (595,745 | ) | ||||
|
|
|
| |||||||
54 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table represents the average monthly volume of the Fund’s derivative transactions during the year ended October 31, 2020:
Interest Rate Swaps: | ||||
Average notional amount | $ | 4,440,000 | ||
Inflation Swaps: | ||||
Average notional amount | $ | 9,804,100 | (a) | |
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 36,463,077 | ||
Centrally Cleared Inflation Swaps: | ||||
Average notional amount | $ | 18,970,769 | ||
Credit Default Swaps: | ||||
Average notional amount of sale contracts | $ | 5,840,385 | ||
Centrally Cleared Credit Default Swaps: | ||||
Average notional amount of buy contracts | $ | 3,372,035 |
| (a) | Positions were open for nine months during the year. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of October 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Citibank, NA/Citigroup Global Markets, Inc. | $ | 683,185 | $ | – 0 | – | $ | (683,185 | ) | $ | – 0 | – | $ | – 0 | – | ||||||
Credit Suisse International | 418,729 | – 0 | – | (256,000 | ) | – 0 | – | 162,729 | ||||||||||||
Goldman Sachs International | 290,853 | – 0 | – | (256,000 | ) | – 0 | – | 34,853 | ||||||||||||
JP Morgan Securities, LLC | 343,536 | – 0 | – | (343,536 | ) | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,736,303 | $ | – 0 | – | $ | (1,538,721 | ) | $ | – 0 | – | $ | 197,582 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 55 | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| Shares | Amount | |||||||||||||||||||||||
| Year Ended October 31, 2020 | Year Ended October 31, 2019 | Year Ended October 31, 2020 | Year Ended October 31, 2019 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
| Class A | ||||||||||||||||||||||||
Shares sold | 1,063,656 | 640,376 | $ | 11,231,752 | $ | 7,042,277 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 20,938 | 8,294 | 223,947 | 90,705 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 16,357 | 0 | (a) | 166,789 | 1 | |||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (656,125 | ) | (114,410 | ) | (6,848,767 | ) | (1,235,112 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 444,826 | 534,260 | $ | 4,773,721 | $ | 5,897,871 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Class C | ||||||||||||||||||||||||
Shares sold | 63,704 | 70,443 | $ | 708,055 | $ | 764,808 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 2,452 | 1,618 | 26,233 | 17,669 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (16,357 | ) | 0 | (a) | (166,789 | ) | (1 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (27,959 | ) | (1,705 | ) | (286,256 | ) | (18,666 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 21,840 | 70,356 | $ | 281,243 | $ | 763,810 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Advisor Class | ||||||||||||||||||||||||
Shares sold | 6,370,236 | 4,278,940 | $ | 68,728,672 | $ | 46,722,768 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 83,044 | 68,832 | 891,901 | 750,101 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (7,230,083 | ) | (3,786,542 | ) | (75,972,300 | ) | (41,008,496) | |||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (776,803 | ) | 561,230 | $ | (6,351,727 | ) | $ | 6,464,373 | ||||||||||||||||
| ||||||||||||||||||||||||
| (a) | Amount is less than one share. |
NOTE F
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
56 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Credit Risk—An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) are subject to a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific municipal or corporate developments and negative performance of the junk bond market generally and may be more difficult to trade than other types of securities.
Municipal Market Risk—This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Fund’s investments in municipal securities. These factors include economic conditions, political or legislative changes, public health crises, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Fund invests more of its assets in a particular state’s municipal securities, the Fund may be vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism, public health crises (including the occurrence of a contagious disease or illness) and catastrophic natural disasters, such as hurricanes, fires or earthquakes. For example, the novel coronavirus (COVID-19) pandemic has significantly stressed the financial resources of many issuers of municipal securities, which could impair any such issuer’s ability to meet its financial obligations when due and adversely impact the value of its securities held by the Fund. As the full effects of the COVID-19 pandemic on state and local economies and on issuers of municipal securities are still uncertain, the financial difficulties of issuers of municipal securities may continue or worsen, adversely affecting the performance of the Fund. The Fund’s investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 57 | |
NOTES TO FINANCIAL STATEMENTS (continued)
Congress has previously considered making changes to the municipal securities provisions of the Internal Revenue Code that could change the U.S. federal income tax treatment of certain types of municipal securities
The Fund may invest in the municipal securities of Puerto Rico or other U.S. territories and their governmental agencies and municipalities, which are exempt from federal, state, and, where applicable, local income taxes. These municipal securities may have more risks than those of other U.S. issuers of municipal securities. Like many U.S. states and municipalities, Puerto Rico experienced a significant downturn during the recent recession. Puerto Rico’s downturn was particularly severe, and Puerto Rico continues to face a very challenging economic and fiscal environment. If the general economic situation in Puerto Rico continues to persist or worsens, the volatility and credit quality of Puerto Rican municipal securities could continue to be adversely affected, and the market for such securities may experience continued volatility.
Tax Risk—From time to time, the U.S. Government and the U.S. Congress consider changes in federal tax law that could limit or eliminate the federal tax exemption for municipal bond income, which would in effect reduce the income received by shareholders from the Fund by increasing taxes on that income. In such event, the Fund’s NAV could also decline as yields on municipal bonds, which are typically lower than those on taxable bonds, would be expected to increase to approximately the yield of comparable taxable bonds. Actions or anticipated actions affecting the tax exempt status of municipal bonds could also result in significant shareholder redemptions of Fund shares as investors anticipate adverse effects on the Fund or seek higher yields to offset the potential loss of the tax deduction. As a result, the Fund would be required to maintain higher levels of cash to meet the redemptions, which would negatively affect the Fund’s yield.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk—Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise.
58 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Municipal securities may have more illiquid investments risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
LIBOR Risk—The Fund may invest in certain debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as European Interbank Offer Rate (“EURIBOR”), Sterling Overnight Interbank Average Rate (“SONIA”) and Secured Overnight Financing Rate (“SOFR”), global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 59 | |
NOTES TO FINANCIAL STATEMENTS (continued)
LIBOR is underway but remains unclear. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect the Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, adversely affecting the Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the year ended October 31, 2020.
60 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended October 31, 2020 and October 31, 2019 were as follows:
| 2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 526,813 | $ | 563,591 | ||||
|
|
|
| |||||
Total taxable distributions | 526,813 | 563,591 | ||||||
Tax-exempt distributions | 2,183,135 | 1,536,089 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 2,709,948 | $ | 2,099,680 | ||||
|
|
|
| |||||
As of October 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Accumulated capital and other losses | $ | (1,779,558 | )(a) | |
Unrealized appreciation/(depreciation) | 2,324,382 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 544,824 | (c) | |
|
|
| (a) | As of October 31, 2020, the Fund had a net capital loss carryforward of $1,779,558. |
| (b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of swaps, the tax deferral of losses on wash sales, and the tax treatment of tender option bonds. |
| (c) | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to dividends payable. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of October 31, 2020, the Fund had a net short-term capital loss carryforward of $1,631,007 and a net long-term capital loss carryforward of $148,551, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps resulted in a net decrease in accumulated loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE I
Floating Rate Notes Issued in Connection with Securities Held
The Fund may engage in tender option bond (“TOB”) transactions in which the Fund transfers a fixed rate bond (“Fixed Rate Bond”) into a Special Purpose Vehicle (the “SPV”, which is generally organized as a trust). The Fund buys a residual interest in the assets and cash flows of the SPV, often referred to as an inverse floating rate obligation (“Inverse Floater”). The SPV also issues floating rate notes (“Floating Rate Notes”) which are sold to third parties. The Floating Rate Notes pay interest at rates that generally reset weekly and their holders have the option to tender their
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 61 | |
NOTES TO FINANCIAL STATEMENTS (continued)
notes to a liquidity provider for redemption at par. The Inverse Floater held by the Fund gives the Fund the right (1) to cause the holders of the Floating Rate Notes to tender their notes at par, and (2) to have the trustee transfer the Fixed Rate Bond held by the SPV to the Fund, thereby collapsing the SPV. The SPV may also be collapsed in certain other circumstances. In accordance with U.S. GAAP requirements regarding accounting for transfers and servicing of financial assets and extinguishments of liabilities, the Fund accounts for the transaction described above as a secured borrowing by including the Fixed Rate Bond in its portfolio of investments and the Floating Rate Notes as a liability under the caption “Payable for floating rate notes issued” in its statement of assets and liabilities. Interest expense related to the Fund’s liability with respect to Floating Rate Notes is recorded as incurred. The interest expense is also included in the Fund’s expense ratio. At October 31, 2020, the amount of the Fund’s Floating Rate Notes outstanding was $1,600,000 and the related interest rate was 0.16% to 0.39%. For the year ended October 31, 2020, the average amount of Floating Rate Notes outstanding and the daily weighted average interest rate were $307,377 and 2.33%, respectively.
The Fund may also purchase Inverse Floaters in the secondary market without first owning the underlying bond. Such an Inverse Floater is included in the Fund’s portfolio of investments but is not required to be treated as a secured borrowing and reflected in the Fund’s financial statements as a secured borrowing.
NOTE J
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. ASU 2017-08 does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Fund has adopted ASU 2017-08, which did not have a material impact on the Fund’s financial position or the results of its operations, and had no impact on the Fund’s net assets.
62 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE K
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
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FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class A | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | $ 10.59 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .29 | .30 | .24 | .21 | .22 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.23 | ) | .65 | (.30 | ) | (.10 | )(c) | .28 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .06 | .95 | (.06 | ) | .11 | .50 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.33 | ) | (.32 | ) | (.25 | ) | (.21 | ) | (.22 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.82 | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | .63 | % | 9.15 | % | (.55 | )% | 1.09 | % | 4.69 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $16,463 | $11,932 | $5,666 | $8,065 | $6,385 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f) | .77 | % | .76 | % | .75 | % | .75 | % | .80 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f) | 1.26 | % | 1.30 | % | 1.27 | % | 1.40 | % | 1.72 | % | ||||||||||
Net investment income(b) | 2.68 | % | 2.78 | % | 2.26 | % | 2.01 | % | 1.98 | % | ||||||||||
Portfolio turnover rate | 63 | % | 52 | % | 68 | % | 34 | % | 36 | % | ||||||||||
See footnote summary on page 67.
64 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Class C | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | $ 10.59 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .20 | .22 | .16 | .13 | .13 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.21 | ) | .65 | (.30 | ) | (.10 | )(c) | .28 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | (.01 | ) | .87 | (.14 | ) | .03 | .41 | |||||||||||||
|
| |||||||||||||||||||
Less: Dividends |
| |||||||||||||||||||
Dividends from net investment income | (.25 | ) | (.24 | ) | (.17 | ) | (.13 | ) | (.13 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.83 | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | |||||||||||||||
|
| |||||||||||||||||||
Total Return | ||||||||||||||||||||
Total investment return based on net asset value(d) | (.03 | )%+ | 8.33 | % | (1.29 | )% | .33 | % | 3.91 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $1,794 | $1,596 | $769 | $1,056 | $2,022 | |||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f) | 1.52 | % | 1.51 | % | 1.50 | % | 1.50 | % | 1.55 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f) | 2.00 | % | 2.06 | % | 2.02 | % | 2.18 | % | 2.47 | % | ||||||||||
Net investment income(b) | 1.91 | % | 2.05 | % | 1.52 | % | 1.25 | % | 1.23 | % | ||||||||||
Portfolio turnover rate | 63 | % | 52 | % | 68 | % | 34 | % | 36 | % | ||||||||||
See footnote summary on page 67.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 65 | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| Advisor Class | ||||||||||||||||||||
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
| |||||||||||||||||||
Net asset value, beginning of period | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | $ 10.59 | |||||||||||||||
|
| |||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||
Net investment income(a)(b) | .31 | .33 | .27 | .24 | .24 | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.21 | ) | .64 | (.30 | ) | (.10 | )(c) | .28 | ||||||||||||
|
| |||||||||||||||||||
Net increase (decrease) in net asset value from operations | .10 | .97 | (.03 | ) | .14 | .52 | ||||||||||||||
|
| |||||||||||||||||||
Less: Dividends | ||||||||||||||||||||
Dividends from net investment income | (.36 | ) | (.34 | ) | (.28 | ) | (.24 | ) | (.24 | ) | ||||||||||
|
| |||||||||||||||||||
Net asset value, end of period | $ 10.83 | $ 11.09 | $ 10.46 | $ 10.77 | $ 10.87 | |||||||||||||||
|
| |||||||||||||||||||
Total Return |
| |||||||||||||||||||
Total investment return based on net asset value(d) | .97 | % | 9.42 | % | (.30 | )% | 1.34 | % | 4.96 | % | ||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||
Net assets, end of period (000’s omitted) | $57,110 | $67,119 | $57,432 | $59,782 | $33,667 | |||||||||||||||
Ratio to average net assets of: |
| |||||||||||||||||||
Expenses, net of waivers/reimbursements(e)(f) | .52 | % | .51 | % | .50 | % | .50 | % | .55 | % | ||||||||||
Expenses, before waivers/reimbursements(e)(f) | .99 | % | 1.05 | % | 1.02 | % | 1.15 | % | 1.47 | % | ||||||||||
Net investment income(b) | 2.87 | % | 3.04 | % | 2.52 | % | 2.26 | % | 2.24 | % | ||||||||||
Portfolio turnover rate | 63 | % | 52 | % | 68 | % | 34 | % | 36 | % | ||||||||||
See footnote summary on page 67.
66 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| (a) | Based on average shares outstanding. |
| (b) | Net of expenses waived/reimbursed by the Adviser. |
| (c) | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Fund’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| (d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
| + | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
| (e) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the year ended October 31, 2017, such waiver amounted to .01%. |
| (f) | The expense ratios presented below exclude interest/bank overdraft: |
| Year Ended October 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Class A |
| |||||||||||||||||||
Net of waivers/reimbursements | .75% | .75% | N/A | N/A | N/A | |||||||||||||||
Before waivers/reimbursements | 1.23% | 1.29% | N/A | N/A | N/A | |||||||||||||||
Class C |
| |||||||||||||||||||
Net of waivers/reimbursements | 1.50% | 1.50% | N/A | N/A | N/A | |||||||||||||||
Before waivers/reimbursements | 1.98% | 2.04% | N/A | N/A | N/A | |||||||||||||||
Advisor Class |
| |||||||||||||||||||
Net of waivers/reimbursements | .50% | .50% | N/A | N/A | N/A | |||||||||||||||
Before waivers/reimbursements | .96% | 1.04% | N/A | N/A | N/A | |||||||||||||||
See notes to financial statements.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 67 | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AB Tax-Aware Fixed Income Opportunities Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Tax-Aware Fixed Income Opportunities Portfolio, formerly known as AB Tax-Aware Fixed Income Portfolio (the “Fund”) (one of the portfolios constituting AB Bond Fund, Inc. (the “Company”)), including the portfolio of investments, as of October 31, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the portfolios constituting AB Bond Fund, Inc.) at October 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
68 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (continued)
the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
December 23, 2020
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 69 | |
BOARD OF DIRECTORS
Marshall C. Turner, Jr(1), Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | Robert M. Keith, President and Chief Executive Officer Jeanette Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
R.B. (Guy) Davidson III(2),*, Vice President Terrance T. Hults(2), Vice President Shawn E. Keegan(2), Vice President Matthew J. Norton(2), Vice President Andrew D. Potter(2), Vice President Emilie D. Wrapp, Secretary | Michael B. Reyes, Senior Analyst Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| 1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
| 2 | The day-to-day management of, and investment decisions for, the Fund are made by its Tax-Aware Investment Team. Messrs. Davidson, Hults, Keegan, Norton and Potter are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| * | Mr. Davidson is expected to retire from the Adviser effective December 30, 2020. |
70 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INTERESTED DIRECTOR | ||||||||
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (2010) | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business with which he had been associated since prior to 2004. | 77 | None | |||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 71 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS | ||||||||
| Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | Private Investor since prior to 2015. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semi-conductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all AB Funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such AB Funds since February 2014. | 77 | None | |||||
72 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Jorge A. Bermudez,## 69 (2020) | Private Investor since prior to 2015. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | 77 | Moody’s Corporation since April 2011 | |||||
Michael J. Downey,## (2005) | Private Investor since prior to 2015. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2015 until January 2019. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities, Inc. He has served as a director or trustee of the AB Funds since 2005. | 77 | None | |||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 73 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Nancy P. Jacklin,## (2006) | Private Investor since prior to 2015. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | 77 | None | |||||
Jeanette Loeb,## (2020) | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | 77 | Apollo Investment Corp. (business development company) since August 2011 | |||||
74 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Carol C. McMullen,## 65 (2016) | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | 77 | None | |||||
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 75 | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
Garry L. Moody,## (2008) | Private Investor since prior to 2015. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | 77 | None | |||||
76 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
MANAGEMENT OF THE FUND (continued)
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND INFORMATION*** | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD | |||||
| INDEPENDENT DIRECTORS (continued) | ||||||||
| Earl D. Weiner,## 81 (2007) | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | 77 | None | |||||
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 1345 Avenue of the Americas, New York, NY 10105. |
| ** | There is no stated term of office for the Fund’s Directors. |
| *** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
| # | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 77 | |
MANAGEMENT OF THE FUND (continued)
Officer Information
Certain information concerning the Fund’s Officers is listed below.
| NAME, ADDRESS* AND AGE | POSITION(S) HELD WITH FUND | PRINCIPAL OCCUPATION DURING PAST 5 YEARS | ||
Robert M. Keith 60 | President and Chief Executive Officer | See biography above. | ||
R.B. (Guy) III^ 59 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Chief Investment Officer – Municipal Business. | ||
Terrance T. Hults 54 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Co-Head – Municipal Portfolio Management. | ||
Shawn E. Keegan 49 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Matthew Norton 37 | Vice President | Senior Vice President of the Adviser**, with which he has been associated since prior to 2015. He is also Co-Head –Municipal Portfolio Management. | ||
Andrew D. Potter 35 | Vice President | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Emilie D. Wrapp 65 | Secretary | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2015. | ||
Michael B. Reyes 44 | Senior Analyst | Vice President of the Adviser**, with which he has been associated since prior to 2015. | ||
Joseph J. Mantineo 61 | Treasurer and Chief Financial Officer | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2015. | ||
Phyllis J. Clarke 59 | Controller | Vice President of ABIS**, with which she has been associated since prior to 2015. | ||
Vincent S. Noto 56 | Chief Compliance Officer | Senior Vice President since 2015 and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2015. |
| * | The address for the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | Mr. Davidson is expected to retire from the Adviser effective December 30, 2020. |
The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus of SAI.
78 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 79 | |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Bond Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Tax-Aware Fixed Income Portfolio (the “Fund”) at a meeting held on November 4-6, 2019 (the “Meeting”).1
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters
| 1 | Following transactions completed on November 13, 2019 that may have been deemed to have been an “assignment” causing termination of the Fund’s investment advisory agreement, a new investment advisory agreement, having the same terms as the prior one, was entered into by the Fund and the Adviser. Effective February 5, 2020, the Fund was renamed AB Tax-Aware Fixed Income Opportunities Portfolio. |
80 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. The Adviser did not request any reimbursements from the Fund in the Fund’s latest fiscal year. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2017 and 2018 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in the periods reviewed.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 81 | |
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended July 31, 2019 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median.
The Adviser informed the directors that there were no institutional products managed by the Adviser that utilize investment strategies similar to those of the Fund.
The directors noted that the Fund invests in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory
82 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
| abfunds.com | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | 83 | |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL EQUITY (continued)
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities Portfolio1
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
FIXED INCOME (continued)
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
| 1 | Prior to February 5, 2020, Tax-Aware Fixed Income Opportunities Portfolio was named Tax-Aware Fixed Income Portfolio. |
84 | AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO | abfunds.com | |
AB TAX-AWARE FIXED INCOME OPPORTUNITIES PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
TAFIO-0151-1020 
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant’s Board of Directors has determined that independent directors Garry L. Moody, Marshall C. Turner, Jr. and Jorge A. Bermudez qualify as audit committee financial experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund’s last two fiscal years for professional services rendered for: (i) the audit of the Fund’s annual financial statements included in the Fund’s annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under (i), which include advice and education related to accounting and auditing issues and quarterly press release review (for those Funds which issue press releases), and preferred stock maintenance testing (for those Funds that issue preferred stock); and (iii) tax compliance, tax advice and tax return preparation.
| Audit Fees | Audit-Related Fees | Tax Fees | ||||||||||||||
AB Total Return Bond Portfolio | 2019 | $ | 84,906 | $ | - | $ | 19,659 | |||||||||
| 2020 | $ | 84,906 | $ | 1,020 | $ | 11,114 | ||||||||||
AB Bond Inflation Strategy | 2019 | $ | 96,097 | $ | - | $ | 18,878 | |||||||||
| 2020 | $ | 96,097 | $ | - | $ | 11,114 | ||||||||||
AB Municipal Bond Inflation Strategy | 2019 | $ | 69,532 | $ | - | $ | 19,707 | |||||||||
| 2020 | $ | 69,532 | $ | - | $ | 9,367 | ||||||||||
| ‘ | ||||||||||||||||
AB All Market Real Return | 2019 | $ | 87,794 | $ | - | $ | 46,285 | |||||||||
| 2020 | $ | 87,794 | $ | - | $ | 33,887 | ||||||||||
AB Short Duration Income | 2019 | $ | 30,961 | $ | - | $ | 11,484 | |||||||||
| 2020 | $ | 30,961 | $ | - | $ | 9,445 | ||||||||||
AB Tax Aware Fixed Income | 2019 | $ | 36,060 | $ | - | $ | 24,944 | |||||||||
| 2020 | $ | 36,060 | $ | - | $ | 15,550 | ||||||||||
AB Income | 2019 | $ | 121,160 | $ | - | $ | 26,671 | |||||||||
| 2020 | $ | 121,160 | $ | - | $ | 16,391 | ||||||||||
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund’s Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund’s independent registered public accounting firm. The Fund’s Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) – (c) are for services pre-approved by the Fund’s Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund’s Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund:
| All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates | Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees) | |||||||||||
AB Total Return Bond Portfolio | 2019 | $ | 757,414 | $ | 19,659 | |||||||
| $ | — | |||||||||||
| $ | (19,659 | ) | ||||||||||
| 2020 | $ | 1,025,571 | $ | 12,134 | ||||||||
| $ | (1,020 | ) | ||||||||||
| $ | (11,114 | ) | ||||||||||
AB Bond Inflation Strategy | 2019 | $ | 756,633 | $ | 18,878 | |||||||
| $ | — | |||||||||||
| $ | (18,878 | ) | ||||||||||
| 2020 | $ | 1,024,551 | $ | 11,114 | ||||||||
| $ | — | |||||||||||
| $ | (11,114 | ) | ||||||||||
AB Municipal Bond Inflation Strategy | 2019 | $ | 757,462 | $ | 19,707 | |||||||
| $ | — | |||||||||||
| $ | (19,707 | ) | ||||||||||
| 2020 | $ | 1,022,804 | $ | 9,367 | ||||||||
| $ | — | |||||||||||
| $ | (9,367 | ) | ||||||||||
AB All Market Real Return | 2019 | $ | 784,040 | $ | 46,285 | |||||||
| $ | — | |||||||||||
| $ | (46,285 | ) | ||||||||||
| 2020 | $ | 1,047,324 | $ | 33,887 | ||||||||
| $ | — | |||||||||||
| $ | (33,887 | ) | ||||||||||
AB Short Duration Income | 2019 | $ | 749,239 | $ | 11,484 | |||||||
| $ | — | |||||||||||
| $ | (11,484 | ) | ||||||||||
| 2020 | $ | 1,022,882 | $ | 9,445 | ||||||||
| $ | — | |||||||||||
| $ | (9,445 | ) | ||||||||||
AB Tax Aware Fixed Income | 2019 | $ | 762,699 | $ | 24,944 | |||||||
| $ | — | |||||||||||
| $ | (24,944 | ) | ||||||||||
| 2020 | $ | 1,028,987 | $ | 15,550 | ||||||||
| $ | — | |||||||||||
| $ | (15,550 | ) | ||||||||||
AB Income | 2019 | $ | 764,426 | $ | 26,671 | |||||||
| $ | — | |||||||||||
| $ | (26,671 | ) | ||||||||||
| 2020 | $ | 1,029,828 | $ | 16,391 | ||||||||
| $ | — | |||||||||||
| $ | (16,391 | ) | ||||||||||
(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund’s independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditor’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3 (c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 13. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant): AB Bond Fund, Inc. | ||
| By: | /s/ Robert M. Keith | |
| Robert M. Keith | ||
| President | ||
| Date: | December 30, 2020 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Robert M. Keith | |
| Robert M. Keith | ||
| President | ||
| Date: | December 30, 2020 | |
| By: | /s/ Joseph J. Mantineo | |
| Joseph J. Mantineo | ||
| Treasurer and Chief Financial Officer | ||
| Date: | December 30, 2020 | |