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: 811-05088
THE AB PORTFOLIOS
(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: July 31, 2018
Date of reporting period: January 31, 2018
ITEM 1. REPORTS TO STOCKHOLDERS.
JAN 01.31.18
SEMI-ANNUAL REPORT
AB GROWTH FUND
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| 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 on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q 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.
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| FROM THE PRESIDENT | |  |
Dear Shareholder,
We are pleased to provide this report for AB Growth 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
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| abfunds.com | | AB GROWTH FUND | 1 |
SEMI-ANNUAL REPORT
March 13, 2018
This report provides management’s discussion of fund performance for AB Growth Fund for the semi-annual reporting period ended January 31, 2018.
The Fund’s investment objective is long-term growth of capital.
NAV RETURNS AS OF JANUARY 31, 2018 (unaudited)
| | | | | | | | |
| | | 6 Months | | | 12 Months | |
| AB GROWTH FUND1 | | | | | | | | |
| Class A Shares | | | 19.36% | | | | 36.84% | |
| Class B Shares2 | | | 18.88% | | | | 35.80% | |
| Class C Shares | | | 18.89% | | | | 35.80% | |
| Advisor Class Shares3 | | | 19.49% | | | | 37.18% | |
| Class R Shares3 | | | 19.14% | | | | 36.37% | |
| Class K Shares3 | | | 19.32% | | | | 36.77% | |
| Class I Shares3 | | | 19.60% | | | | 37.37% | |
| Russell 3000 Growth Index | | | 18.79% | | | | 34.11% | |
| 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 January 31, 2018, by 0.01% and 0.06%, respectively. Also includes the impact of proceeds recorded and credited to the Fund in connection with regulatory settlements, which enhanced performance for the six- and 12-month periods ended January 31, 2018, by 0.14% and 0.14%, respectively. |
| 2 | Effective January 31, 2009, Class B shares are no longer available for purchase to new investors. Please see Note A for more information. |
| 3 | 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. |
Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions.
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its benchmark, the Russell 3000 Growth Index, for the six- and 12-month periods ended January 31, 2018.
During the six-month period, all share classes outperformed the benchmark, before sales charges. Security selection in the health care, consumer staples and technology sectors contributed to performance relative to the benchmark, as did underweights in real estate and materials. Security selection within the consumer discretionary, financials and
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| 2 | AB GROWTH FUND | | abfunds.com |
materials sectors detracted. Underweights in the consumer discretionary and industrials sectors and an overweight in health care also negatively affected performance.
For the 12-month period, all shares classes outperformed the benchmark, before sales charges. Security selection in the technology, health care and consumer staples sectors added to returns. An overweight position in technology and underweights in the real estate, materials and energy sectors also contributed. Security selection and an underweight position within the consumer discretionary sector detracted.
The Fund did not utilize derivatives during the six- or 12-month periods.
MARKET REVIEW AND INVESTMENT STRATEGY
Equity markets looked past geopolitical tensions, focused on strong corporate earnings and rallied strongly over the six-month period ended January 31, 2018. Emerging-market equities increased the most, followed by US stocks. In terms of style, growth stocks outperformed value stocks, and large-cap equities outperformed their small-cap peers. US tax reform was a major tailwind to stocks, with the Tax Cuts and Jobs Act ultimately signed into law in late December. Volatility, as measured by the Chicago Board Options Exchange Volatility Index, remained at historic lows during the period, and oil prices advanced past three-year highs.
The US Federal Reserve (the “Fed”) raised its benchmark interest rate in December and left it unchanged in January. However, the Fed began to communicate increased inflation expectations, signaling that a rate hike could come in March, driving yields higher. US president Donald Trump appointed a new Fed chair, who was well received by markets.
The Fund continues to be built from the bottom up, with emphasis on companies that are expected to deliver fundamental outperformance in terms of growth and returns on invested capital. Valuations for companies with this profile remain below the long-term average. Reflecting the Fund’s bottom-up investment process, the Fund’s Senior Investment Management Team continues to find opportunities across most sectors.
INVESTMENT POLICIES
The Fund invests primarily in a domestic portfolio of equity securities of companies selected by the Fund’s Adviser for their growth potential within various market sectors. When selecting securities, the Adviser looks for companies that have experienced management teams, strong market positions, and the potential to deliver greater-than-expected earnings growth rates.
(continued on next page)
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| abfunds.com | | AB GROWTH FUND | 3 |
In managing the Fund, the Adviser allocates investments among broad sector groups and selects specific investments based on the fundamental company research conducted by the Adviser’s internal research staff, assessing the current and forecasted investment opportunities and conditions, as well as diversification and risk considerations. The Adviser’s research focus is on companies with high sustainable growth prospects, high or improving return on invested capital, transparent business models and competitive advantages.
The Fund has the flexibility to invest across the capitalization spectrum. The Fund is designed for those seeking exposure to companies of various sizes, and typically has substantial investments in both large-capitalization companies and mid-capitalization companies, and may also invest in small-capitalization companies.
The Fund may enter into derivatives transactions, such as options, futures contracts, forwards and swaps. The Fund may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds. These transactions may be used, for example, in an effort to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Fund’s portfolio from a decline in value.
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DISCLOSURES AND RISKS
Benchmark Disclosure
The Russell 3000® Growth Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 3000 Growth Index represents the performance of the broad growth market measuring the 3,000 largest companies within the US. 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 that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
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.
Focused Portfolio Risk: Investments in a limited number of companies may have more risk because 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 (“NAV”).
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.
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
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| abfunds.com | | AB GROWTH FUND | 5 |
DISCLOSURES AND RISKS (continued)
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; the applicable contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2% year 3, 1% year 4) 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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| 6 | AB GROWTH FUND | | abfunds.com |
HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF JANUARY 31, 2018 (unaudited)
| | | | | | | | |
| | | NAV Returns | | | SEC Returns
(reflects applicable
sales charges) | |
| CLASS A SHARES | | | | | | | | |
| 1 Year | | | 36.84% | | | | 31.03% | |
| 5 Years | | | 17.85% | | | | 16.83% | |
| 10 Years | | | 10.55% | | | | 10.07% | |
| CLASS B SHARES | | | | | | | | |
| 1 Year | | | 35.80% | | | | 31.80% | |
| 5 Years | | | 16.91% | | | | 16.91% | |
| 10 Years1 | | | 9.83% | | | | 9.83% | |
| CLASS C SHARES | | | | | | | | |
| 1 Year | | | 35.80% | | | | 34.80% | |
| 5 Years | | | 16.97% | | | | 16.97% | |
| 10 Years | | | 9.73% | | | | 9.73% | |
| ADVISOR CLASS SHARES2 | | | | | | | | |
| 1 Year | | | 37.18% | | | | 37.18% | |
| 5 Years | | | 18.17% | | | | 18.17% | |
| 10 Years | | | 10.86% | | | | 10.86% | |
| CLASS R SHARES2 | | | | | | | | |
| 1 Year | | | 36.37% | | | | 36.37% | |
| 5 Years | | | 17.52% | | | | 17.52% | |
| 10 Years | | | 10.34% | | | | 10.34% | |
| CLASS K SHARES2 | | | | | | | | |
| 1 Year | | | 36.77% | | | | 36.77% | |
| 5 Years | | | 17.89% | | | | 17.89% | |
| 10 Years | | | 10.70% | | | | 10.70% | |
| CLASS I SHARES2 | | | | | | | | |
| 1 Year | | | 37.37% | | | | 37.37% | |
| 5 Years | | | 18.32% | | | | 18.32% | |
| 10 Years | | | 11.07% | | | | 11.07% | |
The Fund’s current prospectus fee table shows the Fund’s total annual expense ratios as 1.26%, 2.02%, 2.03%, 1.01%, 1.59%, 1.28% and 0.86% for Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares, respectively. 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 | Assumes conversion of Class B shares into Class A shares after eight years. |
| 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. |
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| abfunds.com | | AB GROWTH FUND | 7 |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
| | | | |
| | | SEC Returns
(reflects applicable
sales charges) | |
| CLASS A SHARES | | | | |
| 1 Year | | | 28.15% | |
| 5 Years | | | 16.33% | |
| 10 Years | | | 7.93% | |
| CLASS B SHARES | | | | |
| 1 Year | | | 28.81% | |
| 5 Years | | | 16.42% | |
| 10 Years1 | | | 7.70% | |
| CLASS C SHARES | | | | |
| 1 Year | | | 31.84% | |
| 5 Years | | | 16.47% | |
| 10 Years | | | 7.60% | |
| ADVISOR CLASS SHARES2 | | | | |
| 1 Year | | | 34.19% | |
| 5 Years | | | 17.66% | |
| 10 Years | | | 8.71% | |
| CLASS R SHARES2 | | | | |
| 1 Year | | | 33.37% | |
| 5 Years | | | 17.02% | |
| 10 Years | | | 8.20% | |
| CLASS K SHARES2 | | | | |
| 1 Year | | | 33.79% | |
| 5 Years | | | 17.39% | |
| 10 Years | | | 8.55% | |
| CLASS I SHARES2 | | | | |
| 1 Year | | | 34.37% | |
| 5 Years | | | 17.81% | |
| 10 Years | | | 8.91% | |
| 1 | Assumes conversion of Class B shares into Class A shares after eight years. |
| 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. |
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| 8 | AB GROWTH FUND | | 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.
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| | | Beginning
Account
Value
August 1,
2017 | | | Ending
Account
Value
January 31,
2018 | | | Expenses
Paid
During
Period* | | | Annualized
Expense
Ratio* | | | Total
Expenses
Paid
During
Period+ | | | Total
Annualized
Expense
Ratio+ | |
| Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,193.60 | | | $ | 6.69 | | | | 1.21 | % | | $ | 6.75 | | | | 1.22 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,019.11 | | | $ | 6.16 | | | | 1.21 | % | | $ | 6.21 | | | | 1.22 | % |
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| abfunds.com | | AB GROWTH FUND | 9 |
EXPENSE EXAMPLE (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Beginning
Account
Value
August 1,
2017 | | | Ending
Account
Value
January 31,
2018 | | | Expenses
Paid
During
Period* | | | Annualized
Expense
Ratio* | | | Total
Expenses
Paid
During
Period+ | | | Total
Annualized
Expense
Ratio+ | |
| Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,188.80 | | | $ | 10.98 | | | | 1.99 | % | | $ | 11.03 | | | | 2.00 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,015.17 | | | $ | 10.11 | | | | 1.99 | % | | $ | 10.16 | | | | 2.00 | % |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,188.90 | | | $ | 10.87 | | | | 1.97 | % | | $ | 10.92 | | | | 1.98 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,015.27 | | | $ | 10.01 | | | | 1.97 | % | | $ | 10.06 | | | | 1.98 | % |
| Advisor Class | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,194.90 | | | $ | 5.31 | | | | 0.96 | % | | $ | 5.37 | | | | 0.97 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,020.37 | | | $ | 4.89 | | | | 0.96 | % | | $ | 4.94 | | | | 0.97 | % |
| Class R | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,191.40 | | | $ | 8.56 | | | | 1.55 | % | | $ | 8.67 | | | | 1.57 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,017.39 | | | $ | 7.88 | | | | 1.55 | % | | $ | 7.98 | | | | 1.57 | % |
| Class K | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,193.20 | | | $ | 6.91 | | | | 1.25 | % | | $ | 6.97 | | | | 1.26 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,018.90 | | | $ | 6.36 | | | | 1.25 | % | | $ | 6.41 | | | | 1.26 | % |
| Class I | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,196.00 | | | $ | 4.54 | | | | 0.82 | % | | $ | 4.59 | | | | 0.83 | % |
Hypothetical** | | $ | 1,000 | | | $ | 1,021.07 | | | $ | 4.18 | | | | 0.82 | % | | $ | 4.23 | | | | 0.83 | % |
| * | Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 184/365 (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 184/365 (to reflect the one-half year period). |
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PORTFOLIO SUMMARY
January 31, 2018 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $883.6
TEN LARGEST HOLDINGS2
| | | | | | | | |
| Company | | U.S. $ Value | | | Percent of
Net Assets | |
| Alphabet, Inc. – Class C | | $ | 65,979,936 | | | | 7.5 | % |
| Facebook, Inc. – Class A | | | 48,727,830 | | | | 5.5 | |
| Visa, Inc. – Class A | | | 38,158,238 | | | | 4.3 | |
| UnitedHealth Group, Inc. | | | 36,838,232 | | | | 4.2 | |
| Biogen, Inc. | | | 33,944,169 | | | | 3.8 | |
| Costco Wholesale Corp. | | | 33,157,130 | | | | 3.8 | |
| Adobe Systems, Inc. | | | 30,261,642 | | | | 3.4 | |
| Edwards Lifesciences Corp. | | | 28,718,470 | | | | 3.2 | |
| Home Depot, Inc. (The) | | | 27,471,066 | | | | 3.1 | |
| Constellation Brands, Inc. – Class A | | | 26,378,099 | | | | 3.0 | |
| | $ | 369,634,812 | | | | 41.8 | % |
| 1 | All data are as of January 31, 2018. The Fund’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.
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| abfunds.com | | AB GROWTH FUND | 11 |
PORTFOLIO OF INVESTMENTS
January 31, 2018 (unaudited)
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| |
| | | | | | | | |
COMMON STOCKS – 96.2% | | | | | | | | |
Information Technology – 34.5% | | | | | | | | |
Communications Equipment – 0.5% | | | | | | | | |
Arista Networks, Inc.(a) | | | 16,700 | | | $ | 4,606,194 | |
| | | | | | | | |
| | |
Internet Software & Services – 14.0% | | | | | | | | |
Alphabet, Inc. – Class C(a) | | | 56,396 | | | | 65,979,936 | |
Facebook, Inc. – Class A(a) | | | 260,730 | | | | 48,727,830 | |
Trade Desk, Inc. (The) – Class A(a)(b) | | | 190,010 | | | | 9,211,685 | |
| | | | | | | | |
| | | | | | | 123,919,451 | |
| | | | | | | | |
IT Services – 6.7% | | | | | | | | |
Fiserv, Inc.(a) | | | 58,090 | | | | 8,181,396 | |
PayPal Holdings, Inc.(a) | | | 147,450 | | | | 12,580,434 | |
Visa, Inc. – Class A | | | 307,158 | | | | 38,158,238 | |
| | | | | | | | |
| | | | | | | 58,920,068 | |
| | | | | | | | |
Semiconductors & Semiconductor Equipment – 3.5% | | | | | | | | |
NVIDIA Corp. | | | 28,330 | | | | 6,963,514 | |
Xilinx, Inc. | | | 319,340 | | | | 23,318,207 | |
| | | | | | | | |
| | | | | | | 30,281,721 | |
| | | | | | | | |
Software – 7.5% | | | | | | | | |
Activision Blizzard, Inc. | | | 99,580 | | | | 7,381,865 | |
Adobe Systems, Inc.(a) | | | 151,490 | | | | 30,261,642 | |
Electronic Arts, Inc.(a) | | | 101,060 | | | | 12,830,578 | |
HubSpot, Inc.(a) | | | 83,290 | | | | 8,083,294 | |
Red Hat, Inc.(a) | | | 20,710 | | | | 2,720,880 | |
Splunk, Inc.(a) | | | 56,000 | | | | 5,172,720 | |
| | | | | | | | |
| | | | | | | 66,450,979 | |
| | | | | | | | |
Technology Hardware, Storage &
Peripherals – 2.3% | | | | | | | | |
Apple, Inc. | | | 121,500 | | | | 20,342,745 | |
| | | | | | | | |
| | | | | | | 304,521,158 | |
| | | | | | | | |
Health Care – 20.4% | | | | | | | | |
Biotechnology – 3.9% | | | | | | | | |
Biogen, Inc.(a) | | | 97,594 | | | | 33,944,169 | |
| | | | | | | | |
| | |
Health Care Equipment & Supplies – 7.3% | | | | | | | | |
Align Technology, Inc.(a) | | | 18,686 | | | | 4,895,732 | |
Edwards Lifesciences Corp.(a) | | | 226,880 | | | | 28,718,470 | |
Intuitive Surgical, Inc.(a) | | | 48,623 | | | | 20,989,091 | |
Nevro Corp.(a) | | | 124,570 | | | | 9,997,988 | |
| | | | | | | | |
| | | | | | | 64,601,281 | |
| | | | | | | | |
Health Care Providers & Services – 4.2% | | | | | | | | |
UnitedHealth Group, Inc. | | | 155,580 | | | | 36,838,232 | |
| | |
Health Care Technology – 2.3% | | | | | | | | |
Cerner Corp.(a) | | | 170,010 | | | | 11,752,792 | |
Teladoc, Inc.(a)(b) | | | 237,313 | | | | 8,875,506 | |
| | | | | | | | |
| | | | | | | 20,628,298 | |
| | | | | | | | |
| | |
| 12 | AB GROWTH FUND | | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| |
| | | | | | | | |
Pharmaceuticals – 2.7% | | | | | | | | |
Zoetis, Inc. | | | 310,990 | | | $ | 23,862,263 | |
| | | | | | | | |
| | | | | | | 179,874,243 | |
| | | | | | | | |
Consumer Discretionary – 15.4% | | | | | | | | |
Diversified Consumer Services – 3.0% | | | | | | | | |
Bright Horizons Family Solutions, Inc.(a) | | | 140,550 | | | | 13,802,010 | |
Grand Canyon Education, Inc.(a) | | | 140,140 | | | | 13,031,619 | |
| | | | | | | | |
| | | | | | | 26,833,629 | |
| | | | | | | | |
Hotels, Restaurants & Leisure – 3.4% | | | | | | | | |
Planet Fitness, Inc.(a) | | | 678,940 | | | | 22,921,014 | |
Starbucks Corp. | | | 129,570 | | | | 7,360,872 | |
| | | | | | | | |
| | | | | | | 30,281,886 | |
| | | | | | | | |
Internet & Direct Marketing Retail – 1.1% | | | | | | | | |
Priceline Group, Inc. (The)(a) | | | 5,075 | | | | 9,703,654 | |
| | | | | | | | |
| | |
Multiline Retail – 1.9% | | | | | | | | |
Dollar Tree, Inc.(a) | | | 145,010 | | | | 16,676,150 | |
| | | | | | | | |
| | |
Specialty Retail – 4.3% | | | | | | | | |
Home Depot, Inc. (The) | | | 136,740 | | | | 27,471,066 | |
Ulta Salon Cosmetics & Fragrance, Inc.(a) | | | 45,090 | | | | 10,014,489 | |
| | | | | | | | |
| | | | | | | 37,485,555 | |
| | | | | | | | |
Textiles, Apparel & Luxury Goods – 1.7% | | | | | | | | |
NIKE, Inc. – Class B | | | 222,150 | | | | 15,155,073 | |
| | | | | | | | |
| | | | | | | 136,135,947 | |
| | | | | | | | |
Consumer Staples – 10.2% | | | | | | | | |
Beverages – 5.3% | | | | | | | | |
Constellation Brands, Inc. – Class A | | | 120,190 | | | | 26,378,099 | |
Monster Beverage Corp.(a) | | | 293,938 | | | | 20,055,390 | |
| | | | | | | | |
| | | | | | | 46,433,489 | |
| | | | | | | | |
Food & Staples Retailing – 3.7% | | | | | | | | |
Costco Wholesale Corp. | | | 170,150 | | | | 33,157,130 | |
| | | | | | | | |
| | |
Food Products – 1.2% | | | | | | | | |
Blue Buffalo Pet Products, Inc.(a) (b) | | | 320,710 | | | | 10,897,726 | |
| | | | | | | | |
| | | | | | | 90,488,345 | |
| | | | | | | | |
Industrials – 10.0% | | | | | | | | |
Building Products – 3.2% | | | | | | | | |
Allegion PLC | | | 102,830 | | | | 8,854,691 | |
AO Smith Corp. | | | 163,880 | | | | 10,943,906 | |
Lennox International, Inc. | | | 37,560 | | | | 8,184,700 | |
| | | | | | | | |
| | | | | | | 27,983,297 | |
| | | | | | | | |
Commercial Services & Supplies – 1.7% | | | | | | | | |
Copart, Inc.(a) | | | 348,140 | | | | 15,342,530 | |
| | | | | | | | |
| | |
Industrial Conglomerates – 1.7% | | | | | | | | |
Roper Technologies, Inc. | | | 55,070 | | | | 15,452,091 | |
| | | | | | | | |
| | |
| abfunds.com | | AB GROWTH FUND | 13 |
PORTFOLIO OF INVESTMENTS (continued)
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| |
| | | | | | | | |
Machinery – 2.4% | | | | | | | | |
IDEX Corp. | | | 70,600 | | | $ | 10,129,688 | |
WABCO Holdings, Inc.(a) | | | 70,540 | | | | 10,890,671 | |
| | | | | | | | |
| | | | | | | 21,020,359 | |
| | | | | | | | |
Trading Companies & Distributors – 1.0% | | | | | | | | |
Fastenal Co. | | | 160,000 | | | | 8,793,600 | |
| | | | | | | | |
| | | | | | | 88,591,877 | |
| | | | | | | | |
Financials – 2.9% | | | | | | | | |
Capital Markets – 2.9% | | | | | | | | |
MarketAxess Holdings, Inc. | | | 63,120 | | | | 12,384,775 | |
S&P Global, Inc. | | | 70,940 | | | | 12,847,234 | |
| | | | | | | | |
| | | | | | | 25,232,009 | |
| | | | | | | | |
Materials – 2.8% | | | | | | | | |
Chemicals – 2.8% | | | | | | | | |
Ecolab, Inc. | | | 30,460 | | | | 4,193,733 | |
PolyOne Corp. | | | 277,110 | | | | 12,043,200 | |
Sherwin-Williams Co. (The) | | | 21,400 | | | | 8,926,154 | |
| | | | | | | | |
| | | | | | | 25,163,087 | |
| | | | | | | | |
Total Common Stocks
(cost $522,392,370) | | | | | | | 850,006,666 | |
| | | | | | | | |
| | |
SHORT-TERM INVESTMENTS – 3.8% | | | | | | | | |
Investment Companies – 3.8% | | | | | | | | |
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 1.17%(c)(d)(e)
(cost $33,810,039) | | | 33,810,039 | | | | 33,810,039 | |
| | | | | | | | |
Total Investments Before Security
Lending Collateral for Securities
Loaned – 100.0%
(cost $556,202,409) | | | | | | | 883,816,705 | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 2.1% | | | | | | | | |
Investment Companies – 2.1% | | | | | | | | |
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 1.17%(c)(d)(e)
(cost $18,225,335) | | | 18,225,335 | | | | 18,225,335 | |
| | | | | | | | |
| | |
Total Investments – 102.1%
(cost $574,427,744) | | | | | | | 902,042,040 | |
Other assets less liabilities – (2.1)% | | | | | | | (18,480,292 | ) |
| | | | | | | | |
| | |
Net Assets – 100.0% | | | | | | $ | 883,561,748 | |
| | | | | | | | |
| | |
| 14 | AB GROWTH FUND | | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
| (a) | Non-income producing security. |
| (b) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (c) | Affiliated investments. |
| (d) | The rate shown represents the 7-day yield as of period end. |
| (e) | 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. |
See notes to financial statements.
| | |
| abfunds.com | | AB GROWTH FUND | 15 |
STATEMENT OF ASSETS & LIABILITIES
January 31, 2018 (unaudited)
| | | | |
| Assets | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $522,392,370) | | $ | 850,006,666 | (a) |
Affiliated issuers (cost $52,035,374—including investment of cash collateral for securities loaned of $18,225,335) | | | 52,035,374 | |
Foreign currencies, at value (cost $1,003) | | | 949 | |
Receivable from regulatory settlement | | | 763,412 | |
Receivable for shares of beneficial interest sold | | | 270,274 | |
Unaffiliated dividends and interest receivable | | | 136,285 | |
Affiliated dividends receivable | | | 30,144 | |
| | | | |
Total assets | | | 903,243,104 | |
| | | | |
| Liabilities | |
Payable for collateral received on securities loaned | | | 18,225,335 | |
Advisory fee payable | | | 545,323 | |
Payable for shares of beneficial interest redeemed | | | 458,272 | |
Distribution fee payable | | | 195,356 | |
Transfer Agent fee payable | | | 134,970 | |
Trustees’ fees payable | | | 2,692 | |
Accrued expenses | | | 119,408 | |
| | | | |
Total liabilities | | | 19,681,356 | |
| | | | |
Net Assets | | $ | 883,561,748 | |
| | | | |
| Composition of Net Assets | |
Shares of beneficial interest, at par | | $ | 116 | |
Additional paid-in capital | | | 514,037,839 | |
Accumulated net investment loss | | | (4,935,643 | ) |
Accumulated net realized gain on investment and foreign currency transactions | | | 46,845,194 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 327,614,242 | |
| | | | |
| | $ | 883,561,748 | |
| | | | |
Net Asset Value Per Share—unlimited shares authorized, $.00001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| |
| A | | $ | 769,600,360 | | | | 9,809,202 | | | $ | 78.46 | * |
| |
| B | | $ | 11,714,858 | | | | 281,326 | | | $ | 41.64 | |
| |
| C | | $ | 28,002,493 | | | | 662,732 | | | $ | 42.25 | |
| |
| Advisor | | $ | 54,957,575 | | | | 644,946 | | | $ | 85.21 | |
| |
| R | | $ | 2,080,652 | | | | 27,167 | | | $ | 76.59 | |
| |
| K | | $ | 1,602,529 | | | | 19,921 | | | $ | 80.44 | |
| |
| I | | $ | 15,603,281 | | | | 183,964 | | | $ | 84.82 | |
| |
| (a) | Includes securities on loan with a value of $17,799,809 (see Note E). |
| * | The maximum offering price per share for Class A shares was $81.94 which reflects a sales charge of 4.25%. |
See notes to financial statements.
| | |
| 16 | AB GROWTH FUND | | abfunds.com |
STATEMENT OF OPERATIONS
Six Months Ended January 31, 2018 (unaudited)
| | | | | | | | |
| Investment Income | | | | | | | | |
Dividends | | | | | | | | |
Unaffiliated issuers | | $ | 2,108,015 | | | | | |
Affiliated issuers | | | 273,602 | | | $ | 2,381,617 | |
| | | | | | | | |
| Expenses | | | | | | | | |
Advisory fee (see Note B) | | | 3,068,487 | | | | | |
Distribution fee—Class A | | | 896,078 | | | | | |
Distribution fee—Class B | | | 56,260 | | | | | |
Distribution fee—Class C | | | 132,168 | | | | | |
Distribution fee—Class R | | | 6,966 | | | | | |
Distribution fee—Class K | | | 1,850 | | | | | |
Transfer agency—Class A | | | 572,760 | | | | | |
Transfer agency—Class B | | | 11,040 | | | | | |
Transfer agency—Class C | | | 22,567 | | | | | |
Transfer agency—Advisor Class | | | 36,103 | | | | | |
Transfer agency—Class R | | | 3,622 | | | | | |
Transfer agency—Class K | | | 1,480 | | | | | |
Transfer agency—Class I | | | 1,414 | | | | | |
Custodian | | | 74,598 | | | | | |
Registration fees | | | 53,944 | | | | | |
Printing | | | 45,180 | | | | | |
Audit and tax | | | 24,163 | | | | | |
Legal | | | 19,895 | | | | | |
Trustees’ fees | | | 14,754 | | | | | |
Miscellaneous | | | 13,105 | | | | | |
| | | | | | | | |
Total expenses | | | 5,056,434 | | | | | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (56,797 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 4,999,637 | |
| | | | | | | | |
Net investment loss | | | | | | | (2,618,020 | ) |
| | | | | | | | |
| Realized and Unrealized Gain on Investment and Foreign Currency Transactions | | | | | | | | |
Net realized gain on investment transactions | | | | | | | 50,895,302 | |
Net change in unrealized appreciation/depreciation of: | | | | | | | | |
Investments | | | | | | | 96,187,562 | |
Foreign currency denominated assets and liabilities | | | | | | | 44 | |
| | | | | | | | |
Net gain on investment and foreign currency transactions | | | | | | | 147,082,908 | |
| | | | | | | | |
Net Increase in Net Assets from Operations | | | | | | $ | 144,464,888 | |
| | | | | | | | |
See notes to financial statements.
| | |
| abfunds.com | | AB GROWTH FUND | 17 |
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | |
| | | Six Months Ended
January 31, 2018
(unaudited) | | | Year Ended
July 31,
2017 | |
| Increase (Decrease) in Net Assets from Operations | | | | | | | | |
Net investment loss | | $ | (2,618,020 | ) | | $ | (3,855,840 | ) |
Net realized gain on investment and foreign currency transactions | | | 50,895,302 | | | | 71,627,475 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 96,187,606 | | | | 47,356,403 | |
| | | | | | | | |
Net increase in net assets from operations | | | 144,464,888 | | | | 115,128,038 | |
| Distributions to Shareholders from | |
Net realized gain on investment transactions | |
Class A | | | (62,947,401 | ) | | | (5,601,552 | ) |
Class B | | | (1,680,026 | ) | | | (204,916 | ) |
Class C | | | (3,982,617 | ) | | | (1,138,982 | ) |
Advisor Class | | | (3,789,207 | ) | | | (239,736 | ) |
Class R | | | (257,243 | ) | | | (23,295 | ) |
Class K | | | (127,914 | ) | | | (23,863 | ) |
Class I | | | (1,158,257 | ) | | | (103,491 | ) |
| Transactions in Shares of Beneficial Interest | |
Net increase (decrease) | | | 45,808,478 | | | | (33,587,635 | ) |
| Capital Contributions | |
Proceeds from regulatory settlement (see Note F) | | | 1,148,654 | | | | – 0 | – |
| | | | | | | | |
Total increase | | | 117,479,355 | | | | 74,204,568 | |
| Net Assets | |
Beginning of period | | | 766,082,393 | | | | 691,877,825 | |
| | | | | | | | |
End of period (including accumulated net investment loss of ($4,935,643) and ($2,317,623), respectively) | | $ | 883,561,748 | | | $ | 766,082,393 | |
| | | | | | | | |
| | |
| 18 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
January 31, 2018 (unaudited)
NOTE A
Significant Accounting Policies
The AB Portfolios (the “Trust”) was organized as a Massachusetts Business Trust on March 26, 1987 and is registered under the Investment Company Act of 1940 as a diversified, open end management investment company. The Trust operates as a series company currently comprised of six series. Each series is considered to be a separate entity for financial reporting and tax purposes. This report relates only to AB Growth Fund (the “Fund”). The Fund offers Class A, Class B, Class C, Advisor Class, Class R, Class K and Class I shares. 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 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 B shares are currently sold with a contingent deferred sales charge which declines from 4% to zero depending on the period of time the shares are held. Effective January 31, 2009, sales of Class B shares of the Fund to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AB mutual fund, (ii) for purposes of dividend reinvestment, (iii) through the Fund’s Automatic Investment Program (the “Program”) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. Class B shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. 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. Effective April 10, 2017, 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 and Class I shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eight 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. Each 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.
| | |
| abfunds.com | | AB GROWTH FUND | 19 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 Trust’s Board of Trustees (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
| | |
| 20 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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 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) |
| | |
| abfunds.com | | AB GROWTH FUND | 21 |
NOTES TO FINANCIAL STATEMENTS (continued)
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.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of January 31, 2018:
| | | | | | | | | | | | | | | | |
Investments in
Securities: | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks(a) | | $ | 850,006,666 | | | $ | – 0 | – | | $ | – 0 | – | | $ | 850,006,666 | |
Short-Term Investments | | | 33,810,039 | | | | – 0 | – | | | – 0 | – | | | 33,810,039 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 18,225,335 | | | | – 0 | – | | | – 0 | – | | | 18,225,335 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 902,042,040 | | | | – 0 | – | | | – 0 | – | | | 902,042,040 | |
Other Financial Instruments(b) | | | – 0 | – | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | |
Total(c) | | $ | 902,042,040 | | | $ | – 0 | – | | $ | – 0 | – | | $ | 902,042,040 | |
| | | | | | | | | | | | | | | | |
| (a) | See Portfolio of Investments for sector classifications. |
| (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) | There were no transfers between any levels during the reporting period. |
The Fund recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser established the Committee to oversee the pricing and valuation of all securities held in the Fund. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for
| | |
| 22 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and any third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
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 GROWTH FUND | 23 |
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.
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 Trust are charged proportionately to each series 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.
| | |
| 24 | AB GROWTH FUND | | 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 .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Fund’s average daily net assets. The fee is accrued daily and paid monthly.
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 $304,678 for the six months ended January 31, 2018.
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 $8,669 from the sale of Class A shares and received $449, $3,761 and $467 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares, respectively, for the six months ended January 31, 2018.
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. In connection with the investment by the Fund in the 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 six months ended January 31, 2018, such waiver amounted to $49,639.
A summary of the Fund’s transactions in AB mutual funds for the six months ended January 31, 2018 is as follows:
| | | | | | | | | | | | | | | | | | | | |
| Fund | | Market Value
7/31/17
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
1/31/18
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 41,036 | | | $ | 88,998 | | | $ | 96,224 | | | $ | 33,810 | | | $ | 226 | |
Government Money Market Portfolio* | | | 5,439 | | | | 48,757 | | | | 35,971 | | | | 18,225 | | | | 48 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 52,035 | | | $ | 274 | |
| | | | | | | | | | | | | | | | | | | | |
| * | Investments of cash collateral for securities lending transactions (see Note E). |
| | |
| abfunds.com | | AB GROWTH FUND | 25 |
NOTES TO FINANCIAL STATEMENTS (continued)
Brokerage commissions paid on investment transactions for the six months ended January 31, 2018 amounted to $53,746, of which $139 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
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 and Class I shares. Effective October 31, 2014, payments under the Agreement in respect of Class A shares are limited to an annual rate of .25% of Class A shares’ average daily net assets. The Fund is not obligated under the Agreement to pay any distribution services fee in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Agreement is to compensate the Distributor for its distribution services with respect to the sale of the Fund’s shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Agreement during any year may be more or less than its actual expenses. For this reason, the Agreement is characterized by the staff of the Securities Exchange Commission as being a “compensation” plan.
In the event that the Agreement is terminated or not continued, no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Fund to the Distributor with respect to the relevant class. 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 six months ended January 31, 2018 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding
U.S. government securities) | | $ | 154,925,281 | | | $ | 163,342,523 | |
U.S. government securities | | | – 0 | – | | | – 0 | – |
| | |
| 26 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Gross unrealized appreciation | | $ | 327,916,969 | |
Gross unrealized depreciation | | | (302,673 | ) |
| | | | |
Net unrealized appreciation | | $ | 327,614,296 | |
| | | | |
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 Fund did not engage in derivatives transactions for the six months ended January 31, 2018.
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. 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. It is the policy of the Fund to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Fund will have the right to call a loan and obtain
| | |
| abfunds.com | | AB GROWTH FUND | 27 |
NOTES TO FINANCIAL STATEMENTS (continued)
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. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower. 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 statement of assets and liabilities. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At January 31, 2018, the Fund had securities on loan with a value of $17,799,809 and had received cash collateral which has been invested into Government Money Market Portfolio of $18,225,335. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Fund earned securities lending income of $0 and $48,114 from the borrowers and Government Money Market Portfolio, respectively, for the six months ended January 31, 2018; these amounts are reflected in the statement of operations. In connection with the cash collateral investment by the Fund in the 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. For the six months ended January 31, 2018, such waiver amounted to $7,158. 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.
| | |
| 28 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE F
Shares of Beneficial Interest
Transactions in shares of beneficial interest for each class were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Shares | | | | | | Amount | | | | |
| | | Six Months Ended
January 31, 2018
(unaudited) | | | Year Ended
July 31,
2017 | | | | | | Six Months Ended
January 31, 2018
(unaudited) | | | Year Ended
July 31,
2017 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 248,611 | | | | 277,940 | | | | | | | $ | 18,944,067 | | | $ | 18,089,068 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 780,393 | | | | 84,074 | | | | | | | | 57,226,210 | | | | 5,105,809 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares converted from Class B | | | 14,708 | | | | 49,026 | | | | | | | | 1,103,909 | | | | 3,132,084 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares converted from Class C | | | 5,601 | | | | 692,836 | | | | | | | | 421,946 | | | | 47,787,048 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (601,583 | ) | | | (1,153,743 | ) | | | | | | | (45,508,736 | ) | | | (74,629,433 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 447,730 | | | | (49,867 | ) | | | | | | $ | 32,187,396 | | | $ | (515,424 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Class B | | | | | |
Shares sold | | | 10,194 | | | | 23,317 | | | | | | | $ | 425,365 | | | $ | 866,883 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 42,214 | | | | 5,731 | | | | | | | | 1,644,659 | | | | 200,357 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares converted to Class A | | | (26,042 | ) | | | (84,963 | ) | | | | | | | (1,103,909 | ) | | | (3,132,084 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (17,056 | ) | | | (49,599 | ) | | | | | | | (712,799 | ) | | | (1,839,995 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 9,310 | | | | (105,514 | ) | | | | | | $ | 253,316 | | | $ | (3,904,839 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class C | | | | | |
Shares sold | | | 47,779 | | | | 94,156 | | | | | | | $ | 2,054,612 | | | $ | 3,586,688 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 85,593 | | | | 27,830 | | | | | | | | 3,383,475 | | | | 984,913 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares converted to Class A | | | (9,727 | ) | | | (1,192,239 | ) | | | | | | | (421,946 | ) | | | (47,787,048 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (65,078 | ) | | | (256,148 | ) | | | | | | | (2,797,742 | ) | | | (9,562,191 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 58,567 | | | | (1,326,401 | ) | | | | | | $ | 2,218,399 | | | $ | (52,777,638 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Advisor Class | | | | | |
Shares sold | | | 154,334 | | | | 348,077 | | | | | | | $ | 12,690,427 | | | $ | 24,914,341 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 39,540 | | | | 3,149 | | | | | | | | 3,147,785 | | | | 205,691 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (63,635 | ) | | | (175,418 | ) | | | | | | | (5,176,027 | ) | | | (12,090,899 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase | | | 130,239 | | | | 175,808 | | | | | | | $ | 10,662,185 | | | $ | 13,029,133 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| abfunds.com | | AB GROWTH FUND | 29 |
NOTES TO FINANCIAL STATEMENTS (continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Shares | | | | | | Amount | | | | |
| | | Six Months Ended
January 31, 2018
(unaudited) | | | Year Ended
July 31,
2017 | | | | | | Six Months Ended
January 31, 2018
(unaudited) | | | Year Ended
July 31,
2017 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class R | | | | | |
Shares sold | | | 5,670 | | | | 23,473 | | | | | | | $ | 421,273 | | | $ | 1,475,749 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 3,592 | | | | 391 | | | | | | | | 257,232 | | | | 23,294 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (19,177 | ) | | | (12,775 | ) | | | | | | | (1,449,433 | ) | | | (824,313 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (9,915 | ) | | | 11,089 | | | | | | | $ | (770,928 | ) | | $ | 674,730 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class K | | | | | |
Shares sold | | | 2,460 | | | | 3,019 | | | | | | | $ | 191,987 | | | $ | 206,228 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 1,701 | | | | 384 | | | | | | | | 127,907 | | | | 23,862 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (3,104 | ) | | | (23,359 | ) | | | | | | | (239,477 | ) | | | (1,569,545 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 1,057 | | | | (19,956 | ) | | | | | | $ | 80,417 | | | $ | (1,339,455 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class I | | | | | |
Shares sold | | | 258 | | | | 167,035 | | | | | | | $ | 21,651 | | | $ | 11,144,679 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares issued in reinvestment of distributions | | | 14,593 | | | | 1,591 | | | | | | | | 1,156,175 | | | | 103,303 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shares redeemed | | | (2 | ) | | | (30 | ) | | | | | | | (133 | ) | | | (2,124 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase | | | 14,849 | | | | 168,596 | | | | | | | $ | 1,177,693 | | | $ | 11,245,858 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
For the six months ended January 31, 2018, the Fund recorded $1,148,654 related to a settlement of regulatory proceedings. This amount is presented in the Fund’s statement of changes in net assets. Neither the Fund nor its affiliates were involved in the proceedings or the calculation of the payment.
NOTE G
Risks Involved in Investing in the Fund
Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
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.
| | |
| 30 | AB GROWTH FUND | | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Focused Portfolio Risk—Investments in a limited number of companies may have more risk because 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.
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.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $280 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 six months ended January 31, 2018.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending July 31, 2018 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended July 31, 2017 and July 31, 2016 were as follows:
| | | | | | | | |
| | | 2017 | | | 2016 | |
Distributions paid from: | | | | | | | | |
Long-term capital gains | | $ | 7,335,835 | | | $ | 68,155,451 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 7,335,835 | | | $ | 68,155,451 | |
| | | | | | | | |
As of July 31, 2017, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed capital gains | | $ | 69,892,557 | |
Accumulated capital and other losses | | | (2,317,623 | )(a) |
Unrealized appreciation/(depreciation) | | | 231,426,636 | |
| | | | |
Total accumulated earnings/(deficit) | | $ | 299,001,570 | |
| | | | |
| (a) | At July 31, 2017, the Fund had a qualified late-year ordinary loss deferral of $2,317,623. These losses are deemed to arise on August 1, 2017. |
| | |
| abfunds.com | | AB GROWTH FUND | 31 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 July 31, 2017, the Fund did not have any capital loss carryforwards.
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.
| | |
| 32 | AB GROWTH FUND | | abfunds.com |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class A | |
| | | Six Months
Ended
January 31,
2018
(unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 71.87 | | | | $ 61.79 | | | | $ 66.15 | | | | $ 57.43 | | | | $ 48.62 | | | | $ 40.28 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss(a) | | | (.24 | )(b) | | | (.31 | )(b)† | | | (.30 | )(b) | | | (.25 | ) | | | (.31 | ) | | | (.08 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 13.56 | | | | 11.01 | | | | 1.64 | | | | 11.91 | | | | 9.12 | | | | 8.42 | |
Capital contributions | | | .11 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 13.43 | | | | 10.70 | | | | 1.46 | | | | 11.66 | | | | 8.81 | | | | 8.34 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 78.46 | | | | $ 71.87 | | | | $ 61.79 | | | | $ 66.15 | | | | $ 57.43 | | | | $ 48.62 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 19.36 | % | | | 17.48 | %† | | | 2.40 | % | | | 20.93 | % | | | 18.12 | % | | | 20.70 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $769,600 | | | | $672,808 | | | | $581,533 | | | | $621,337 | | | | $554,270 | | | | $513,991 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | 1.21 | %^ | | | 1.24 | % | | | 1.28 | % | | | 1.29 | % | | | 1.38 | % | | | 1.44 | % |
Expenses, before waivers/reimbursements(d) | | | 1.22 | %^ | | | 1.25 | % | | | 1.28 | % | | | 1.29 | % | | | 1.38 | % | | | 1.44 | % |
Net investment loss | | | (.62 | )%(b)^ | | | (.49 | )%(b)† | | | (.50 | )%(b) | | | (.40 | )% | | | (.56 | )% | | | (.18 | )% |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| abfunds.com | | AB GROWTH FUND | 33 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class B | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 41.18 | | | | $ 35.94 | | | | $ 41.20 | | | | $ 37.11 | | | | $ 31.65 | | | | $ 26.43 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment loss(a) | | | (.30 | )(b) | | | (.45 | )†(b) | | | (.47 | )(b) | | | (.48 | ) | | | (.46 | ) | | | (.27 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 7.54 | | | | 6.31 | | | | .91 | | | | 7.51 | | | | 5.92 | | | | 5.49 | |
Capital contributions | | | .06 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 7.30 | | | | 5.86 | | | | .56 | | | | 7.03 | | | | 5.46 | | | | 5.22 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 41.64 | | | | $ 41.18 | | | | $ 35.94 | | | | $ 41.20 | | | | $ 37.11 | | | | $ 31.65 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 18.88 | % | | | 16.61 | %† | | | 1.57 | % | | | 19.85 | % | | | 17.25 | % | | | 19.75 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $11,715 | | | | $11,202 | | | | $13,567 | | | | $17,178 | | | | $18,466 | | | | $21,313 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | 1.99 | %^ | | | 2.00 | % | | | 2.08 | % | | | 2.12 | % | | | 2.14 | % | | | 2.22 | % |
Expenses, before waivers/reimbursements(d) | | | 2.01 | %^ | | | 2.01 | % | | | 2.08 | % | | | 2.12 | % | | | 2.14 | % | | | 2.22 | % |
Net investment loss | | | (1.41 | )%(b)^ | | | (1.22 | )%(b)† | | | (1.30 | )%(b) | | | (1.23 | )% | | | (1.32 | )% | | | (.95 | )% |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| 34 | AB GROWTH FUND | | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class C | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 41.69 | | | | $ 36.37 | | | | $ 41.61 | | | | $ 37.42 | | | | $ 31.90 | | | | $ 26.62 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment
loss(a) | | | (.30 | )(b) | | | (.45 | )(b)† | | | (.46 | )(b) | | | (.45 | ) | | | (.45 | ) | | | (.26 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 7.64 | | | | 6.39 | | | | .92 | | | | 7.58 | | | | 5.97 | | | | 5.54 | |
Capital contributions | | | .06 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 7.40 | | | | 5.94 | | | | .58 | | | | 7.13 | | | | 5.52 | | | | 5.28 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from
net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 42.25 | | | | $ 41.69 | | | | $ 36.37 | | | | $ 41.61 | | | | $ 37.42 | | | | $ 31.90 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 18.89 | % | | | 16.60 | %† | | | 1.64 | % | | | 19.96 | % | | | 17.30 | % | | | 19.84 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $28,002 | | | | $25,188 | | | | $70,221 | | | | $73,695 | | | | $66,232 | | | | $61,326 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | 1.97 | %^ | | | 2.01 | % | | | 2.03 | % | | | 2.04 | % | | | 2.09 | % | | | 2.16 | % |
Expenses, before waivers/reimbursements(d) | | | 1.98 | %^ | | | 2.02 | % | | | 2.03 | % | | | 2.04 | % | | | 2.09 | % | | | 2.16 | % |
Net investment
loss | | | (1.38 | )%(b)^ | | | (1.20 | )%(b)† | | | (1.26 | )%(b) | | | (1.15 | )% | | | (1.28 | )% | | | (.90 | )% |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| abfunds.com | | AB GROWTH FUND | 35 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Advisor Class | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 77.43 | | | | $ 66.36 | | | | $ 70.45 | | | | $ 60.83 | | | | $ 51.34 | | | | $ 42.40 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(a) | | | (.16 | )(b) | | | (.19 | )(b)† | | | (.16 | )(b) | | | (.12 | ) | | | (.15 | ) | | | .05 | |
Net realized and unrealized gain on investment and foreign currency transactions | | | 14.66 | | | | 11.88 | | | | 1.77 | | | | 12.68 | | | | 9.64 | | | | 8.89 | |
Capital contributions | | | .12 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 14.62 | | | | 11.69 | | | | 1.73 | | | | 12.56 | | | | 9.49 | | | | 8.94 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from
net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 85.21 | | | | $ 77.43 | | | | $ 66.36 | | | | $ 70.45 | | | | $ 60.83 | | | | $ 51.34 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 19.49 | % | | | 17.80 | %† | | | 2.63 | % | | | 21.24 | % | | | 18.48 | % | | | 21.09 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $54,958 | | | | $39,856 | | | | $22,489 | | | | $32,687 | | | | $12,673 | | | | $6,938 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | .96 | %^ | | | .99 | % | | | 1.03 | % | | | 1.02 | % | | | 1.08 | % | | | 1.14 | % |
Expenses, before waivers/reimbursements(d) | | | .97 | %^ | | | 1.00 | % | | | 1.03 | % | | | 1.02 | % | | | 1.08 | % | | | 1.14 | % |
Net investment income (loss) | | | (.38 | )%(b)^ | | | (.27 | )%(b)† | | | (.25 | )%(b) | | | (.18 | )% | | | (.26 | )% | | | .12 | % |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| 36 | AB GROWTH FUND | | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class R | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 70.42 | | | | $ 60.75 | | | | $ 65.33 | | | | $ 56.92 | | | | $ 48.29 | | | | $ 40.06 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment
loss(a) | | | (.36 | )(b) | | | (.51 | ) (b)† | | | (.49 | )(b) | | | (.42 | ) | | | (.42 | ) | | | (.12 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 13.26 | | | | 10.80 | | | | 1.61 | | | | 11.77 | | | | 9.05 | | | | 8.35 | |
Capital contributions | | | .11 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 13.01 | | | | 10.29 | | | | 1.24 | | | | 11.35 | | | | 8.63 | | | | 8.23 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from
net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 76.59 | | | | $ 70.42 | | | | $ 60.75 | | | | $ 65.33 | | | | $ 56.92 | | | | $ 48.29 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 19.14 | % | | | 17.11 | %† | | | 2.08 | % | | | 20.56 | % | | | 17.87 | % | | | 20.55 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $2,081 | | | | $2,611 | | | | $1,579 | | | | $1,302 | | | | $1,205 | | | | $1,186 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/ reimbursements(d) | | | 1.55 | % ^ | | | 1.57 | % | | | 1.59 | % | | | 1.58 | % | | | 1.59 | % | | | 1.59 | % |
Expenses, before waivers/reimbursements(d) | | | 1.57 | %^ | | | 1.58 | % | | | 1.59 | % | | | 1.58 | % | | | 1.59 | % | | | 1.59 | % |
Net investment
loss | | | (.97 | )%(b)^ | | | (.81 | )%(b)† | | | (.82 | )%(b) | | | (.69 | )% | | | (.78 | )% | | | (.29 | )% |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| abfunds.com | | AB GROWTH FUND | 37 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class K | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 73.55 | | | | $ 63.23 | | | | $ 67.55 | | | | $ 58.57 | | | | $ 49.52 | | | | $ 40.97 | |
| | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment
loss(a) | | | (.26 | )(b) | | | (.29 | )(b)† | | | (.30 | )(b) | | | (.24 | ) | | | (.25 | ) | | | (.03 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 13.88 | | | | 11.23 | | | | 1.68 | | | | 12.16 | | | | 9.30 | | | | 8.58 | |
Capital contributions | | | .11 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 13.73 | | | | 10.94 | | | | 1.50 | | | | 11.92 | | | | 9.05 | | | | 8.55 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from
net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 80.44 | | | | $ 73.55 | | | | $ 63.23 | | | | $ 67.55 | | | | $ 58.57 | | | | $ 49.52 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 19.32 | % | | | 17.47 | %† | | | 2.39 | % | | | 20.96 | % | | | 18.28 | % | | | 20.87 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $1,603 | | | | $1,387 | | | | $2,455 | | | | $2,866 | | | | $2,208 | | | | $1,985 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | 1.25 | %^ | | | 1.26 | % | | | 1.26 | % | | | 1.26 | % | | | 1.26 | % | | | 1.28 | % |
Expenses, before waivers/reimbursements(d) | | | 1.26 | %^ | | | 1.27 | % | | | 1.26 | % | | | 1.26 | % | | | 1.26 | % | | | 1.28 | % |
Net investment
loss | | | (.67 | )%(b)^ | | | (.44 | )%(b)† | | | (.49 | )%(b) | | | (.38 | )% | | | (.45 | )% | | | (.06 | )% |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| 38 | AB GROWTH FUND | | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class I | |
| | | Six Months
Ended
January 31,
2018 (unaudited) | | | Year Ended July 31, | |
| | | | 2017 | | | 2016 | | | 2015 | | | 2014 | | | 2013 | |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net asset value, beginning of period | | | $ 77.05 | | | | $ 65.93 | | | | $ 69.98 | | | | $ 60.38 | | | | $ 50.89 | | | | $ 41.96 | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss)(a) | | | (.10 | )(b) | | | (.08 | )(b)† | | | (.10 | )(b) | | | .03 | | | | (.14 | ) | | | .13 | |
Net realized and unrealized gain on investment and foreign currency transactions | | | 14.59 | | | | 11.82 | | | | 1.75 | | | | 12.51 | | | | 9.63 | | | | 8.80 | |
Capital contributions | | | .12 | | | | – 0 | – | | | .12 | | | | – 0 | – | | | – 0 | – | | | – 0 | – |
| | | | |
Net increase in net asset value from operations | | | 14.61 | | | | 11.74 | | | | 1.77 | | | | 12.54 | | | | 9.49 | | | | 8.93 | |
| | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (6.84 | ) | | | (.62 | ) | | | (5.82 | ) | | | (2.94 | ) | | | – 0 | – | | | – 0 | – |
| | | | |
Net asset value, end of period | | | $ 84.82 | | | | $ 77.05 | | | | $ 65.93 | | | | $ 69.98 | | | | $ 60.38 | | | | $ 50.89 | |
| | | | |
Total Return | | | | | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value(c)* | | | 19.60 | % | | | 17.96 | %† | | | 2.73 | % | | | 21.37 | % | | | 18.65 | % | | | 21.28 | % |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $15,603 | | | | $13,030 | | | | $34 | | | | $37 | | | | $16,638 | | | | $16 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements(d) | | | .82 | %^ | | | .83 | % | | | .94 | % | | | .95 | % | | | .95 | % | | | .95 | % |
Expenses, before waivers/reimbursements(d) | | | .83 | %^ | | | .85 | % | | | .94 | % | | | .95 | % | | | .95 | % | | | .95 | % |
Net investment income (loss) | | | (.24 | )%(b)^ | | | (.12 | )%(b)† | | | (.16 | )%(b) | | | .04 | % | | | (.24 | )% | | | .29 | % |
Portfolio turnover rate | | | 20 | % | | | 54 | % | | | 47 | % | | | 59 | % | | | 72 | % | | | 70 | % |
See footnote summary on page 40.
| | |
| abfunds.com | | AB GROWTH FUND | 39 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
| (a) | Based on average shares outstanding. |
| (b) | Net of fees and expenses waived/reimbursed by the Adviser. |
| (c) | 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. |
| (d) | 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 six months ended January 31, 2018 and the year ended July 31, 2017, such waiver amounted to 0.01% (annualized) and 0.01%, respectively. |
| † | For the year ended July 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 | |
| $.01 | | | .02 | % | | | .02 | % |
| * | Includes the impact of proceeds received and credited to the Fund resulting from class action settlements, which enhanced the Fund’s performance for the six months ended January 31, 2018 and years ended July 31, 2017, July 31, 2016, July 31, 2015, July 31, 2014 and July 31, 2013 by 0.01%, 0.05%, 0.04%, 0.06%, 0.09% and 0.06%, respectively. |
| | Includes the impact of proceeds recorded and credited to the Fund resulting from regulatory settlements, which enhanced the Fund’s performance for the six months ended January 31, 2018 and the year ended July 31, 2016 by 0.14% and 0.22%, respectively. |
See notes to financial statements.
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| 40 | AB GROWTH FUND | | abfunds.com |
TRUSTEES
| | |
Marshall C. Turner, Jr.,(1) Chairman Michael J. Downey(1) William H. Foulk, Jr.(1) Nancy P. Jacklin(1) | | Robert M. Keith, President and Chief Executive Officer Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
| | |
Bruce K. Aronow(2), Vice President Frank V. Caruso(2), Vice President John H. Fogarty(2), Vice President Emilie D. Wrapp, Clerk | | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller and Chief Accounting Officer 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 Legal Counsel Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004 | | 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 |
| |
| | |
| 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 Growth Investment Team. Messrs. Aronow, Caruso and Fogarty are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s Portfolio. |
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| abfunds.com | | AB GROWTH FUND | 41 |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested trustees (the “directors”) of The AB Portfolios (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Growth Fund (the “Fund”) at a meeting held on May 2-4, 2017 (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 an independent evaluation prepared by the Company’s Senior Officer (who is also the Company’s Independent Compliance Officer), who acted as their independent fee consultant, of the reasonableness of the advisory fee, in which the Senior Officer concluded that the contractual fee for the Fund was reasonable. The directors also discussed the proposed continuance in private sessions with counsel and the Company’s Senior Officer.
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.
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
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| 42 | AB GROWTH FUND | | abfunds.com |
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. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. 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 2015 and 2016 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Company’s Senior 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 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.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency 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
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| abfunds.com | | AB GROWTH FUND | 43 |
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 information prepared by an analytical service that is not affiliated with the Adviser (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a peer group and a peer universe, 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 February 28, 2017 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 paid by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates paid by other funds in the same category as the Fund at a common asset level. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median.
The directors also considered the Adviser’s fee schedule for institutional clients pursuing a similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and the evaluation from the Company’s Senior Officer and noted the differences between the Fund’s fee schedule, on the one hand, and the institutional fee schedule and the schedule of fees charged to any offshore funds and any sub-advised funds, 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 also compared the advisory fee rate for the Fund with that for another AB Fund with a similar investment style.
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 light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised
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| 44 | AB GROWTH FUND | | abfunds.com |
fund clients as compared to funds such as the Fund, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
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. 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 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 a breakpoint in the future.
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| abfunds.com | | AB GROWTH FUND | 45 |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
US CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
US GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
US VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
INTERNATIONAL/ GLOBAL 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 GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund1
INTERNATIONAL/ GLOBAL EQUITY (continued)
INTERNATIONAL/ GLOBAL VALUE
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 Portfolio
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
TAXABLE
Bond Inflation Strategy
FlexFee™ High Yield Portfolio1
FlexFee™ International Bond Portfolio
Global Bond Fund
High Income Fund
Income Fund
Intermediate Bond Portfolio
Limited Duration High Income Portfolio
Short Duration Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
Unconstrained Bond Fund
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio1
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio1
TARGET-DATE
Multi-Manager Select Retirement Allocation Fund
Multi-Manager Select 2010 Fund
Multi-Manager Select 2015 Fund
Multi-Manager Select 2020 Fund
Multi-Manager Select 2025 Fund
Multi-Manager Select 2030 Fund
Multi-Manager Select 2035 Fund
Multi-Manager Select 2040 Fund
Multi-Manager Select 2045 Fund
Multi-Manager Select 2050 Fund
Multi-Manager Select 2055 Fund
CLOSED-END FUNDS
Alliance California Municipal Income Fund
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio1, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Government Money Market Portfolio is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
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 April 17, 2017, Tax-Managed All Market Income Portfolio was named Tax-Managed Balanced Wealth Strategy; prior to April 24, 2017, All Market Total Return Portfolio was named Balanced Wealth Strategy; prior to November 10, 2017, Government Money Market Portfolio was named Government Exchange Reserves; prior to January 8, 2018, Sustainable International Thematic Fund was named International Growth Fund; prior to February 23, 2018, FlexFee High Yield Portfolio was named High Yield Portfolio. |
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| 46 | AB GROWTH FUND | | abfunds.com |
NOTES
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| abfunds.com | | AB GROWTH FUND | 47 |
NOTES
| | |
| 48 | AB GROWTH FUND | | abfunds.com |
NOTES
| | |
| abfunds.com | | AB GROWTH FUND | 49 |
NOTES
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| 50 | AB GROWTH FUND | | abfunds.com |
NOTES
| | |
| abfunds.com | | AB GROWTH FUND | 51 |
NOTES
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| 52 | AB GROWTH FUND | | abfunds.com |
AB GROWTH FUND
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
GRO-0152-0118 
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF 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. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
| | |
EXHIBIT NO. | | DESCRIPTION OF EXHIBIT |
| |
| 12 (b) (1) | | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| 12 (b) (2) | | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
| 12 (c) | | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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): The AB Portfolios |
| |
| By: | | /s/ Robert M. Keith |
| | Robert M. Keith President |
| |
| Date: | | March 29, 2018 |
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: | | March 29, 2018 |
| | |
| By: | | /s/ Joseph J. Mantineo |
| | Joseph J. Mantineo Treasurer and Chief Financial Officer |
| |
| Date: | | March 29, 2018 |
