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: 811-01716
AB CAP FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2018
Date of reporting period: May 31, 2018
ITEM 1. REPORTS TO STOCKHOLDERS.
MAY 05.31.18
SEMI-ANNUAL REPORT
AB ALL MARKET INCOME PORTFOLIO
��
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.
FROM THE PRESIDENT | ![]() |
Dear Shareholder,
We are pleased to provide this report for AB All Market Income Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
+ | Transforming uncommon insights into uncommon knowledge with a global research scope |
+ | Navigating markets with seasoned investment experience and sophisticated solutions |
+ | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 1 |
SEMI-ANNUAL REPORT
July 16, 2018
This report provides management’s discussion of fund performance for AB All Market Income Portfolio for the semi-annual reporting period ended May 31, 2018.
The Fund’s investment objective is to seek current income with consideration of capital appreciation.
NAV RETURNS AS OF MAY 31, 2018 (unaudited)
6 Months | 12 Months | |||||||
AB ALL MARKET INCOME PORTFOLIO | ||||||||
Class A Shares | -2.03% | 1.80% | ||||||
Class C Shares | -2.35% | 1.01% | ||||||
Advisor Class Shares1 | -1.80% | 2.04% | ||||||
Primary Benchmark: MSCI ACWI (net) | 1.72% | 11.84% | ||||||
Bloomberg Barclays Global Aggregate Bond Index (USD hedged) | 0.11% | 1.18% |
1 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
INVESTMENT RESULTS
The table above shows the Fund’s performance compared to its primary benchmark, the Morgan Stanley Capital International All Country World Index (“MSCI ACWI, net”), and the Bloomberg Barclays Global Aggregate (USD hedged) for the six- and 12-month periods ended May 31, 2018.
All share classes of the Fund underperformed the primary benchmark and the Bloomberg Barclays Global Aggregate Bond Index during the six-month period, before sales charges. For the 12-month period, all share classes underperformed the primary benchmark; Class A and Advisor Class shares outperformed the Bloomberg Barclays Global Aggregate Bond Index, while Class C shares underperformed. The Fund’s strategic decision to achieve diversification involves holding assets other than equities. This diversification detracted from performance, relative to the all-equity benchmark, as equity markets outperformed other asset classes (including US Treasuries, emerging-market bonds and high-yield bonds) during both periods. Equity security selection also detracted, as the more income-oriented high-dividend stocks favored by the Fund underperformed.
2 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
Individual stock selection and emerging-market currency selection contributed for the six-month period. For the 12-month period, an allocation to emerging-market equities and call index overwriting contributed.
The Fund utilized derivatives in the form of futures, forwards, interest rate swaps, total return swaps, inflation (“CPI”) swaps, credit default swaps and written options for hedging and investment purposes. For both periods, interest rate swaps, total return swaps, CPI swaps and credit default swaps contributed to absolute performance, and futures and forwards detracted. Written options detracted for the 12-month period and added for the six-month period.
MARKET REVIEW AND INVESTMENT STRATEGY
After advancing to all-time highs, global stocks retraced some of their positive performance during the six-month period ended May 31, 2018. US equities had the highest returns, given strong corporate earnings results after the passage of major tax reform. Non-US and emerging-market equities also delivered positive performance, although they declined toward the end of the period as the US dollar strengthened and risk aversion increased. In terms of style, growth stocks outperformed value stocks. While US tax reform and strong economic data helped stocks reach record highs early in the period, inflation concerns and rising interest rates soon weighed on performance. Trade and geopolitical tensions added to downward pressure. Toward the end of the period, political turmoil in Italy decreased investors’ risk appetite.
Fixed-income markets were also volatile. Despite a multiyear high in oil prices, emerging-market debt was negatively affected by a stronger US dollar and higher global interest rates. Global high-yield and investment-grade corporates weakened in the risk-off environment, while developed-market treasuries and local-currency emerging-market bonds rallied. Developed-market yields generally either rose across the curve (particularly in Italy and the US) or flattened, with shorter maturities rising while longer maturities ended the period lower (bond yields move inversely to price). The US Federal Reserve raised interest rates twice in the period and began to formally reduce its balance sheet, as widely expected, while the European Central Bank started to scale back asset purchases.
The Fund’s Senior Investment Management Team (the “Team”) continues to focus on generating high, stable income with capital growth by investing in global fixed income, global equities and non-traditional assets. The Team utilizes rigorous quantitative research tools and fundamental expertise across all regions and markets.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 3 |
INVESTMENT POLICIES
The Adviser will allocate the Fund’s investments primarily among a broad range of income-producing securities, including common stock of companies that regularly pay dividends (including real estate investment trusts), debt securities (including high-yield debt securities, also known as “junk bonds”), preferred stocks and derivatives related to these types of securities. In addition, the Fund may engage in certain alternative income strategies that generally utilize derivatives to diversify sources of income and manage risk. The Fund pursues a global strategy, typically investing in securities of issuers located in the United States and in other countries throughout the world, including emerging-market countries.
In selecting equity securities for the Fund, the Adviser will focus on securities that have high dividend yields and are undervalued by the market relative to their long-term earnings potential. The Adviser intends to gain exposure to high-yield debt securities through investment in the AB High Income Fund and may, in the future, gain such exposure through direct investments in high-income securities. It is expected that the Fund will pursue a number of generally derivatives-based alternative investment strategies, such as taking long positions in currency derivatives on higher yielding currencies and/or short positions in currency derivatives on lower yielding currencies.
The Adviser will adjust the Fund’s investment exposure utilizing the Adviser’s Dynamic Asset Allocation (“DAA”) approach. DAA comprises a series of analytical and forecasting tools employed by the Adviser to gauge fluctuations in the risk/return profile of various asset classes. DAA seeks to adjust the Fund’s investment exposure in changing market conditions and thereby reduce overall portfolio volatility by mitigating the effects of market fluctuations, while preserving consistent long-term return potential. For example, the Adviser may seek to reduce the Fund’s risk exposure to one or more asset classes when DAA suggests that market risks relevant to those asset classes are rising but return opportunities are declining. In addition to directly increasing or decreasing asset class exposure by buying or selling securities in that asset class, the Adviser may pursue DAA implementation for the Fund by investing in derivatives and exchange-traded funds (“ETFs”).
The Adviser intends to utilize a variety of derivatives in its management of the Fund. The Adviser may use derivatives to gain exposure to an asset class, such as using interest rate derivatives to gain exposure to sovereign bonds. As noted above, the Adviser may separately pursue certain alternative investment strategies that utilize derivatives, and
(continued on next page)
4 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
may enter into derivatives in making the adjustments called for by DAA. As a result of the use of derivatives and short sales of securities, the Fund will frequently be leveraged, with gross investment exposure substantially in excess of its net assets.
Currency exchange rate fluctuations can have a dramatic impact on returns. The Fund’s foreign currency exposures will come both from investments in equity and debt securities priced or denominated in foreign currencies and from direct holdings of foreign currencies and currency-related derivatives. The Adviser may seek to hedge all or a portion of the currency exposure resulting from Fund investments or decide not to hedge this exposure. The Adviser may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 5 |
DISCLOSURES AND RISKS
Benchmark Disclosure
The MSCI ACWI and the Bloomberg Barclays Global Aggregate Bond Index (USD hedged) are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI ACWI (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets. The Bloomberg Barclays Global Aggregate Bond Index represents the performance of the global investment-grade developed fixed-income markets. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Net returns include the reinvestment of dividends after deduction of non-US withholding tax. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
High Yield Debt Securities: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of the junk bond market generally and less secondary market liquidity.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. The Fund may be subject to heightened interest rate risk due to rising rates as the current period of historically low interest rates may be ending. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
6 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
DISCLOSURES AND RISKS (continued)
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
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.
Short Sale Risk: Short sales involve the risk that the Fund will incur a loss by subsequently buying a security at a higher price than the price at which it sold the security. The amount of such loss is theoretically unlimited, as it will be based on the increase in value of the security sold short. In contrast, the risk of loss from a long position is limited to the Fund’s investment in the security, because the price of the security cannot fall below zero. The Fund may not always be able to close out a short position on favorable terms.
Leverage Risk: To the extent the Fund uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Fund’s investments.
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.
Liquidity Risk: Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 7 |
DISCLOSURES AND RISKS (continued)
investment in the Fund. Causes of liquidity risk may include low trading volumes and large positions. Foreign fixed-income securities may have more liquidity risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions 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 report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF MAY 31, 2018 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
CLASS A SHARES | ||||||||
1 Year | 1.80% | -2.56% | ||||||
Since Inception1 | 5.50% | 4.19% | ||||||
CLASS C SHARES | ||||||||
1 Year | 1.01% | 0.06% | ||||||
Since Inception1 | 4.72% | 4.72% | ||||||
ADVISOR CLASS SHARES2 | ||||||||
1 Year | 2.04% | 2.04% | ||||||
Since Inception1 | 5.78% | 5.78% |
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.84%, 2.71% and 1.64% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of acquired fund fees and expenses, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs to 0.99%, 1.74% and 0.74% for Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before February 28, 2019 and may be extended by the Adviser for additional one-year terms. Any fees waived and expenses borne by the Adviser through May 10, 2016 under the expense limitations in effect prior to that date may be reimbursed by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne, provided that no reimbursement payment will be made that would cause the Fund’s covered operating expenses to exceed the expense limitations. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | Inception date: 12/18/2014. |
2 | This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 9 |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
JUNE 30, 2018 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | -2.42% | |||
Since Inception1 | 4.13% | |||
CLASS C SHARES | ||||
1 Year | 0.10% | |||
Since Inception1 | 4.63% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 2.12% | |||
Since Inception1 | 5.70% |
1 | Inception date: 12/18/2014. |
2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
10 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 979.70 | $ | 3.65 | 0.74 | % | $ | 4.99 | 1.01 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.24 | $ | 3.73 | 0.74 | % | $ | 5.09 | 1.01 | % |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 11 |
EXPENSE EXAMPLE (continued)
Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 976.50 | $ | 7.34 | 1.49 | % | $ | 8.67 | 1.76 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.50 | $ | 7.49 | 1.49 | % | $ | 8.85 | 1.76 | % | ||||||||||||
Advisor Class | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 982.00 | $ | 2.42 | 0.49 | % | $ | 3.76 | 0.76 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.49 | $ | 2.47 | 0.49 | % | $ | 3.83 | 0.76 | % |
* | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period), respectively. |
** | 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 acquired fund fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. Currently 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 and other expenses of AB High Income Fund. The Fund’s effective 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 182/365 (to reflect the one-half year period). |
12 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO SUMMARY
May 31, 2018 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $120.2
TEN LARGEST HOLDINGS2
Security | U.S. $ Value | Percent of Net Assets | ||||||
AB High Income Fund, Inc. – Class Z | $ | 58,002,972 | 48.2 | % | ||||
JPMorgan Alerian MLP Index ETN | 3,023,261 | 2.5 | ||||||
iShares Mortgage Real Estate ETF | 1,605,274 | 1.3 | ||||||
Royal Dutch Shell PLC – Class B | 1,095,062 | 0.9 | ||||||
Apple, Inc. | 866,890 | 0.7 | ||||||
Rio Tinto PLC | 820,977 | 0.7 | ||||||
TOTAL SA | 727,459 | 0.6 | ||||||
PowerShares KBW Premium Yield Equity REIT Portfolio | 648,487 | 0.5 | ||||||
Repsol SA | 519,901 | 0.4 | ||||||
Brazil Notas do Tesouro Nacional – Series F | 513,869 | 0.4 | ||||||
$ | 67,824,152 | 56.2 | % |
1 | All data are as of May 31, 2018. The Fund’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). |
2 | Long-term investments. |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 13 |
PORTFOLIO OF INVESTMENTS
May 31, 2018 (unaudited)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
INVESTMENT COMPANIES – 53.1% | ||||||||||||
Funds and Investment Trusts – 53.1%(a) | ||||||||||||
AB High Income Fund, Inc. – Class Z(b) | 6,872,390 | $ | 58,002,972 | |||||||||
iShares International Developed Real Estate ETF | 9,691 | 290,149 | ||||||||||
iShares Mortgage Real Estate ETF(c) | 36,625 | 1,605,274 | ||||||||||
JPMorgan Alerian MLP Index ETN(c) | 111,354 | 3,023,261 | ||||||||||
PowerShares KBW Premium Yield Equity REIT Portfolio | 19,090 | 648,487 | ||||||||||
Vanguard Real Estate ETF(c) | 4,192 | 330,707 | ||||||||||
|
| |||||||||||
Total Investment Companies | 63,900,850 | |||||||||||
|
| |||||||||||
COMMON STOCKS – 29.2% | ||||||||||||
Financials – 4.9% | ||||||||||||
Banks – 2.5% | ||||||||||||
Australia & New Zealand Banking Group Ltd. | 6,525 | 134,100 | ||||||||||
Bank of America Corp. | 3,700 | 107,448 | ||||||||||
Barclays PLC | 7,660 | 20,063 | ||||||||||
BB&T Corp. | 2,240 | 117,600 | ||||||||||
BNP Paribas SA(c) | 2,341 | 145,460 | ||||||||||
BOC Hong Kong Holdings Ltd. | 35,000 | 175,198 | ||||||||||
Citigroup, Inc. | 4,770 | 318,111 | ||||||||||
DBS Group Holdings Ltd. | 1,200 | 25,249 | ||||||||||
DNB ASA | 1,020 | 18,282 | ||||||||||
Hang Seng Bank Ltd. | 1,400 | 34,905 | ||||||||||
HSBC Holdings PLC | 7,486 | 71,657 | ||||||||||
Intesa Sanpaolo SpA | 16,580 | 48,930 | ||||||||||
Intesa Sanpaolo SpA – RSP | 41,554 | 125,241 | ||||||||||
JPMorgan Chase & Co. | 4,000 | 428,040 | ||||||||||
Mitsubishi UFJ Financial Group, Inc. | 3,900 | 23,510 | ||||||||||
National Australia Bank Ltd. | 650 | 13,103 | ||||||||||
Nordea Bank AB | 26,519 | 255,036 | ||||||||||
Oversea-Chinese Banking Corp., Ltd. | 1,200 | 11,188 | ||||||||||
People’s United Financial, Inc. | 7,164 | 131,889 | ||||||||||
Royal Bank of Canada | 3,012 | 227,653 | ||||||||||
Swedbank AB – Class A | 12,430 | 258,405 | ||||||||||
Toronto-Dominion Bank (The) | 657 | 38,358 | ||||||||||
Wells Fargo & Co. | 4,475 | 241,605 | ||||||||||
|
| |||||||||||
2,971,031 | ||||||||||||
|
| |||||||||||
Capital Markets – 0.9% | ||||||||||||
BlackRock, Inc. – Class A | 224 | 119,668 | ||||||||||
CI Financial Corp.(c) | 5,741 | 111,313 | ||||||||||
CME Group, Inc. – Class A | 933 | 151,986 | ||||||||||
Daiwa Securities Group, Inc. | 26,000 | 150,329 | ||||||||||
Hong Kong Exchanges & Clearing Ltd. | 500 | 16,083 | ||||||||||
IG Group Holdings PLC | 1,680 | 19,292 | ||||||||||
IGM Financial, Inc. | 2,288 | 67,620 | ||||||||||
Intercontinental Exchange, Inc. | 342 | 24,244 |
14 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Investec PLC | 2,300 | $ | 16,959 | |||||||||
Kingston Financial Group Ltd.(c) | 26,000 | 9,221 | ||||||||||
Morgan Stanley | 3,585 | 179,752 | ||||||||||
Nomura Holdings, Inc. | 17,500 | 90,204 | ||||||||||
Partners Group Holding AG | 36 | 26,018 | ||||||||||
State Street Corp. | 840 | 80,733 | ||||||||||
|
| |||||||||||
1,063,422 | ||||||||||||
|
| |||||||||||
Diversified Financial Services – 0.1% | ||||||||||||
Berkshire Hathaway, Inc. – Class B(d) | 390 | 74,697 | ||||||||||
|
| |||||||||||
Insurance – 1.2% | ||||||||||||
Allianz SE | 940 | 193,671 | ||||||||||
American Financial Group, Inc./OH | 1,074 | 118,011 | ||||||||||
Axis Capital Holdings Ltd. | 1,241 | 70,551 | ||||||||||
CNP Assurances | 1,592 | 37,280 | ||||||||||
Direct Line Insurance Group PLC | 35,930 | 170,550 | ||||||||||
Everest Re Group Ltd. | 89 | 20,051 | ||||||||||
FNF Group | 1,020 | 37,699 | ||||||||||
Japan Post Holdings Co., Ltd. | 15,100 | 172,705 | ||||||||||
Legal & General Group PLC | 17,000 | 60,890 | ||||||||||
Mapfre SA | 41,059 | 124,537 | ||||||||||
Marsh & McLennan Cos., Inc.(e) | 299 | 24,031 | ||||||||||
Prudential Financial, Inc. | 811 | 78,537 | ||||||||||
Swiss Re AG | 432 | 37,148 | ||||||||||
Tryg A/S | 840 | 19,336 | ||||||||||
UnipolSai Assicurazioni SpA | 83,471 | 183,671 | ||||||||||
Zurich Insurance Group AG | 509 | 150,849 | ||||||||||
|
| |||||||||||
1,499,517 | ||||||||||||
|
| |||||||||||
Mortgage Real Estate Investment Trusts (REITs) – 0.2% | ||||||||||||
AGNC Investment Corp. | 14,902 | 280,455 | ||||||||||
|
| |||||||||||
5,889,122 | ||||||||||||
|
| |||||||||||
Consumer Discretionary – 4.3% | ||||||||||||
Auto Components – 0.0% | ||||||||||||
Bridgestone Corp. | 300 | 12,006 | ||||||||||
|
| |||||||||||
Automobiles – 0.6% | ||||||||||||
Bayerische Motoren Werke AG | 867 | 86,634 | ||||||||||
Ford Motor Co. | 28,290 | �� | 326,749 | |||||||||
General Motors Co. | 880 | 37,576 | ||||||||||
Subaru Corp. | 1,700 | 51,843 | ||||||||||
Toyota Motor Corp. | 2,900 | 183,939 | ||||||||||
|
| |||||||||||
686,741 | ||||||||||||
|
| |||||||||||
Diversified Consumer Services – 0.1% | ||||||||||||
Benesse Holdings, Inc. | 800 | 28,993 | ||||||||||
H&R Block, Inc. | 4,090 | 112,271 | ||||||||||
|
| |||||||||||
141,264 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 15 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Hotels, Restaurants & Leisure – 0.7% | ||||||||||||
Aristocrat Leisure Ltd. | 2,242 | $ | 50,684 | |||||||||
Compass Group PLC | 830 | 17,836 | ||||||||||
Crown Resorts Ltd. | 28,395 | 284,875 | ||||||||||
Darden Restaurants, Inc. | 580 | 50,698 | ||||||||||
Hilton Grand Vacations, Inc.(d) | 460 | 18,290 | ||||||||||
Las Vegas Sands Corp. | 359 | 28,939 | ||||||||||
McDonald’s Corp. | 1,661 | 265,776 | ||||||||||
Wyndham Worldwide Corp. | 281 | 30,472 | ||||||||||
Yum! Brands, Inc. | 1,871 | 152,168 | ||||||||||
|
| |||||||||||
899,738 | ||||||||||||
|
| |||||||||||
Household Durables – 0.7% | ||||||||||||
Auto Trader Group PLC(f) | 4,030 | 18,872 | ||||||||||
Barratt Developments PLC | 13,800 | 100,005 | ||||||||||
Berkeley Group Holdings PLC | 2,840 | 160,175 | ||||||||||
Garmin Ltd. | 2,812 | 168,973 | ||||||||||
Persimmon PLC | 490 | 18,437 | ||||||||||
Sekisui House Ltd. | 7,300 | 129,753 | ||||||||||
Taylor Wimpey PLC | 75,000 | 189,371 | ||||||||||
|
| |||||||||||
785,586 | ||||||||||||
|
| |||||||||||
Internet & Direct Marketing Retail – 0.5% | ||||||||||||
Amazon.com, Inc.(d)(e) | 226 | 368,294 | ||||||||||
Netflix, Inc.(d) | 592 | 208,147 | ||||||||||
|
| |||||||||||
576,441 | ||||||||||||
|
| |||||||||||
Leisure Products – 0.1% | ||||||||||||
Amer Sports Oyj(d) | 1,030 | 33,336 | ||||||||||
Mattel, Inc.(c) | 7,550 | 117,176 | ||||||||||
|
| |||||||||||
150,512 | ||||||||||||
|
| |||||||||||
Media – 0.5% | ||||||||||||
Comcast Corp. – Class A | 1,556 | 48,516 | ||||||||||
CTS Eventim AG & Co. KGaA | 261 | 12,573 | ||||||||||
Daiichikosho Co., Ltd. | 200 | 9,316 | ||||||||||
Lagardere SCA | 2,230 | 60,310 | ||||||||||
Omnicom Group, Inc. | 1,869 | 134,717 | ||||||||||
RTL Group SA (London) | 3,119 | 235,151 | ||||||||||
Singapore Press Holdings Ltd. | 20,300 | 39,840 | ||||||||||
Walt Disney Co. (The) | 170 | 16,910 | ||||||||||
|
| |||||||||||
557,333 | ||||||||||||
|
| |||||||||||
Multiline Retail – 0.5% | ||||||||||||
Harvey Norman Holdings Ltd.(c) | 41,480 | 112,623 | ||||||||||
Kohl’s Corp. | 1,170 | 78,097 | ||||||||||
Macy’s, Inc. | 880 | 30,721 | ||||||||||
Next PLC | 4,570 | 352,004 | ||||||||||
|
| |||||||||||
573,445 | ||||||||||||
|
| |||||||||||
Specialty Retail – 0.4% | ||||||||||||
Best Buy Co., Inc. | 2,522 | 172,126 | ||||||||||
Gap, Inc. (The) | 2,655 | 74,287 |
16 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Home Depot, Inc. (The)(e) | 454 | $ | 84,694 | |||||||||
L Brands, Inc. | 880 | 29,841 | ||||||||||
Ross Stores, Inc.(e) | 550 | 43,384 | ||||||||||
TJX Cos., Inc. (The) | 477 | 43,083 | ||||||||||
|
| |||||||||||
447,415 | ||||||||||||
|
| |||||||||||
Textiles, Apparel & Luxury Goods – 0.2% | ||||||||||||
HUGO BOSS AG | 1,833 | 164,475 | ||||||||||
Li & Fung Ltd. | 158,000 | 61,105 | ||||||||||
Moncler SpA | 362 | 16,605 | ||||||||||
Pandora A/S | 550 | 43,363 | ||||||||||
|
| |||||||||||
285,548 | ||||||||||||
|
| |||||||||||
5,116,029 | ||||||||||||
|
| |||||||||||
Information Technology – 3.8% | ||||||||||||
Communications Equipment – 0.4% | ||||||||||||
Cisco Systems, Inc.(e) | 10,060 | 429,663 | ||||||||||
|
| |||||||||||
Electronic Equipment, Instruments & Components – 0.2% | ||||||||||||
Corning, Inc. | 3,560 | 96,725 | ||||||||||
Hitachi Ltd. | 20,000 | 145,615 | ||||||||||
|
| |||||||||||
242,340 | ||||||||||||
|
| |||||||||||
Internet Software & Services – 0.5% | ||||||||||||
Alphabet, Inc. – Class A(d)(e) | 123 | 135,300 | ||||||||||
Alphabet, Inc. – Class C(d)(e) | 163 | 176,853 | ||||||||||
Facebook, Inc. – Class A(d)(e) | 1,197 | 229,561 | ||||||||||
Moneysupermarket.com Group PLC | 6,250 | 26,314 | ||||||||||
|
| |||||||||||
568,028 | ||||||||||||
|
| |||||||||||
IT Services – 0.6% | ||||||||||||
Amadeus IT Group SA – Class A | 427 | 33,906 | ||||||||||
Amdocs Ltd. | 180 | 12,143 | ||||||||||
Booz Allen Hamilton Holding Corp. | 842 | 37,966 | ||||||||||
Capgemini SE | 239 | 31,520 | ||||||||||
DXC Technology Co. | 995 | 91,649 | ||||||||||
Fidelity National Information Services, Inc.(e) | 584 | 59,696 | ||||||||||
Fujitsu Ltd. | 3,000 | 18,293 | ||||||||||
Leidos Holdings, Inc. | 850 | 51,051 | ||||||||||
Mastercard, Inc. – Class A | 82 | 15,590 | ||||||||||
Otsuka Corp. | 700 | 28,855 | ||||||||||
Paychex, Inc.(e) | 3,962 | 259,828 | ||||||||||
Total System Services, Inc. | 566 | 48,217 | ||||||||||
Visa, Inc. – Class A | 583 | 76,209 | ||||||||||
|
| |||||||||||
764,923 | ||||||||||||
|
| |||||||||||
Semiconductors & Semiconductor Equipment – 0.7% | ||||||||||||
Applied Materials, Inc. | 1,845 | 93,689 | ||||||||||
Intel Corp.(e) | 6,818 | 376,354 | ||||||||||
KLA-Tencor Corp. | 410 | 46,424 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 17 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Lam Research Corp. | 260 | $ | 51,527 | |||||||||
Marvell Technology Group Ltd. | 1,780 | 38,341 | ||||||||||
Skyworks Solutions, Inc. | 270 | 26,625 | ||||||||||
Texas Instruments, Inc. | 1,553 | 173,796 | ||||||||||
|
| |||||||||||
806,756 | ||||||||||||
|
| |||||||||||
Software – 0.6% | ||||||||||||
Activision Blizzard, Inc. | 1,752 | 124,234 | ||||||||||
Check Point Software Technologies Ltd.(d) | 146 | 14,215 | ||||||||||
Microsoft Corp. | 2,851 | 281,793 | ||||||||||
Nice Ltd.(d) | 412 | 43,476 | ||||||||||
Oracle Corp.(e) | 2,112 | 98,673 | ||||||||||
Oracle Corp. Japan | 700 | 53,120 | ||||||||||
Trend Micro, Inc./Japan | 2,600 | 146,993 | ||||||||||
|
| |||||||||||
762,504 | ||||||||||||
|
| |||||||||||
Technology Hardware, Storage & Peripherals – 0.8% | ||||||||||||
Apple, Inc.(e) | 4,639 | 866,890 | ||||||||||
HP, Inc. | 2,470 | 54,414 | ||||||||||
Konica Minolta, Inc. | 9,100 | 82,781 | ||||||||||
|
| |||||||||||
1,004,085 | ||||||||||||
|
| |||||||||||
4,578,299 | ||||||||||||
|
| |||||||||||
Energy – 3.7% | ||||||||||||
Energy Equipment & Services – 0.1% | ||||||||||||
Helmerich & Payne, Inc. | 1,305 | 86,626 | ||||||||||
Schlumberger Ltd. | 627 | 43,056 | ||||||||||
|
| |||||||||||
129,682 | ||||||||||||
|
| |||||||||||
Integrated Oil & Gas – 0.4% | ||||||||||||
Repsol SA | 27,280 | 519,901 | ||||||||||
|
| |||||||||||
Oil, Gas & Consumable Fuels – 3.2% | ||||||||||||
AltaGas Ltd. | 5,550 | 108,937 | ||||||||||
BP PLC | 4,087 | 31,258 | ||||||||||
Caltex Australia Ltd. | 6,240 | 138,388 | ||||||||||
Chevron Corp. | 636 | 79,055 | ||||||||||
ConocoPhillips | 460 | 30,999 | ||||||||||
Enagas SA | 5,024 | 134,009 | ||||||||||
Exxon Mobil Corp. | 2,085 | 169,385 | ||||||||||
HollyFrontier Corp. | 410 | 31,644 | ||||||||||
Marathon Petroleum Corp. | 2,732 | 215,910 | ||||||||||
Pembina Pipeline Corp. | 649 | 22,574 | ||||||||||
Royal Dutch Shell PLC – Class A | 327 | 11,338 | ||||||||||
Royal Dutch Shell PLC – Class B | 30,660 | 1,095,062 | ||||||||||
Snam SpA | 64,040 | 262,088 | ||||||||||
Suncor Energy, Inc. (Toronto) | 2,630 | 104,746 | ||||||||||
Targa Resources Corp. | 3,579 | 174,047 | ||||||||||
TOTAL SA | 11,966 | 727,459 | ||||||||||
TransCanada Corp. | 2,944 | 123,246 |
18 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Valero Energy Corp. | 3,301 | $ | 400,081 | |||||||||
|
| |||||||||||
3,860,226 | ||||||||||||
|
| |||||||||||
4,509,809 | ||||||||||||
|
| |||||||||||
Materials – 2.8% | ||||||||||||
Chemicals – 1.1% | ||||||||||||
Air Products & Chemicals, Inc. | 1,184 | 191,110 | ||||||||||
BASF SE | 1,297 | 128,059 | ||||||||||
CF Industries Holdings, Inc. | 4,171 | 171,595 | ||||||||||
Chemours Co. (The) | 500 | 24,495 | ||||||||||
Covestro AG(f) | 1,260 | 114,789 | ||||||||||
Croda International PLC | 392 | 24,257 | ||||||||||
DowDuPont, Inc. | 230 | 14,745 | ||||||||||
LyondellBasell Industries NV – Class A | 1,823 | 204,395 | ||||||||||
Methanex Corp. | 1,580 | 107,941 | ||||||||||
Monsanto Co. | 1,328 | 169,267 | ||||||||||
Nutrien Ltd. | 278 | 14,067 | ||||||||||
Praxair, Inc. | 225 | 35,159 | ||||||||||
Solvay SA | 380 | 50,933 | ||||||||||
Sumitomo Chemical Co., Ltd. | 4,000 | 24,079 | ||||||||||
Victrex PLC | 330 | 12,373 | ||||||||||
|
| |||||||||||
1,287,264 | ||||||||||||
|
| |||||||||||
Containers & Packaging – 0.3% | ||||||||||||
Amcor Ltd./Australia | 2,250 | 23,876 | ||||||||||
International Paper Co. | 5,612 | 300,242 | ||||||||||
|
| |||||||||||
324,118 | ||||||||||||
|
| |||||||||||
Copper – 0.3% | ||||||||||||
Antofagasta PLC | 25,100 | 351,463 | ||||||||||
|
| |||||||||||
Diversified Metals & Mining – 1.0% | ||||||||||||
Boliden AB | 9,870 | 348,056 | ||||||||||
Rio Tinto PLC | 14,556 | 820,977 | ||||||||||
|
| |||||||||||
1,169,033 | ||||||||||||
|
| |||||||||||
Metals & Mining – 0.1% | ||||||||||||
Lundin Mining Corp. | 16,780 | 105,215 | ||||||||||
Norsk Hydro ASA | 13,437 | 84,561 | ||||||||||
|
| |||||||||||
189,776 | ||||||||||||
|
| |||||||||||
3,321,654 | ||||||||||||
|
| |||||||||||
Industrials – 2.5% | ||||||||||||
Aerospace & Defense – 0.5% | ||||||||||||
Arconic, Inc. | 1,860 | 32,829 | ||||||||||
Boeing Co. (The)(e) | 1,374 | 483,868 | ||||||||||
Harris Corp. | 156 | 23,473 | ||||||||||
Raytheon Co. | 233 | 48,814 | ||||||||||
United Technologies Corp. | 600 | 74,892 | ||||||||||
|
| |||||||||||
663,876 | ||||||||||||
|
| |||||||||||
Air Freight & Logistics – 0.1% | ||||||||||||
United Parcel Service, Inc. – Class B | 1,666 | 193,456 | ||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 19 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Airlines – 0.1% | ||||||||||||
Deutsche Lufthansa AG (REG) | 1,390 | $ | 37,723 | |||||||||
Qantas Airways Ltd. | 7,740 | 37,041 | ||||||||||
|
| |||||||||||
74,764 | ||||||||||||
|
| |||||||||||
Commercial Services & Supplies – 0.0% | ||||||||||||
Republic Services, Inc. – Class A | 162 | 10,924 | ||||||||||
|
| |||||||||||
Construction & Engineering – 0.2% | ||||||||||||
ACS Actividades de Construccion y Servicios SA | 2,374 | 98,892 | ||||||||||
Bouygues SA | 2,174 | 100,387 | ||||||||||
|
| |||||||||||
199,279 | ||||||||||||
|
| |||||||||||
Electrical Equipment – 0.3% | ||||||||||||
Eaton Corp. PLC | 2,339 | 179,121 | ||||||||||
Emerson Electric Co. | 2,784 | 197,218 | ||||||||||
|
| |||||||||||
376,339 | ||||||||||||
|
| |||||||||||
Industrial Conglomerates – 0.6% | ||||||||||||
3M Co. | 618 | 121,888 | ||||||||||
General Electric Co. | 26,923 | 379,076 | ||||||||||
Siemens AG (REG) | 1,399 | 182,331 | ||||||||||
|
| |||||||||||
683,295 | ||||||||||||
|
| |||||||||||
Machinery – 0.1% | ||||||||||||
Amada Holdings Co., Ltd. | 1,100 | 11,897 | ||||||||||
Caterpillar, Inc. | 208 | 31,597 | ||||||||||
JTEKT Corp. | 4,300 | 62,332 | ||||||||||
|
| |||||||||||
105,826 | ||||||||||||
|
| |||||||||||
Professional Services – 0.1% | ||||||||||||
Intertek Group PLC | 410 | 29,736 | ||||||||||
Randstad NV | 1,208 | 72,045 | ||||||||||
RELX NV | 1,270 | 27,691 | ||||||||||
Wolters Kluwer NV | 505 | 28,369 | ||||||||||
|
| |||||||||||
157,841 | ||||||||||||
|
| |||||||||||
Road & Rail – 0.2% | ||||||||||||
Central Japan Railway Co. | 1,000 | 206,281 | ||||||||||
MTR Corp., Ltd. | 4,500 | 25,288 | ||||||||||
|
| |||||||||||
231,569 | ||||||||||||
|
| |||||||||||
Trading Companies & Distributors – 0.2% | ||||||||||||
ITOCHU Corp. | 2,900 | 54,264 | ||||||||||
Sumitomo Corp. | 10,000 | 167,149 | ||||||||||
|
| |||||||||||
221,413 | ||||||||||||
|
| |||||||||||
Transportation Infrastructure – 0.1% | ||||||||||||
Macquarie Infrastructure Corp.(c) | 2,580 | 99,846 | ||||||||||
|
| |||||||||||
3,018,428 | ||||||||||||
|
| |||||||||||
Health Care – 2.4% | ||||||||||||
Biotechnology – 0.5% | ||||||||||||
AbbVie, Inc.(e) | 4,213 | 416,834 |
20 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Celgene Corp.(d) | 933 | $ | 73,409 | |||||||||
Gilead Sciences, Inc. | 427 | 28,780 | ||||||||||
|
| |||||||||||
519,023 | ||||||||||||
|
| |||||||||||
Health Care Equipment & Supplies – 0.3% | ||||||||||||
Cochlear Ltd. | 1,245 | 184,267 | ||||||||||
Hoya Corp. | 3,400 | 201,355 | ||||||||||
|
| |||||||||||
385,622 | ||||||||||||
|
| |||||||||||
Health Care Providers & Services – 0.7% | ||||||||||||
AmerisourceBergen Corp. – Class A | 250 | 20,535 | ||||||||||
Anthem, Inc.(e) | 818 | 181,121 | ||||||||||
Cardinal Health, Inc. | 1,990 | 103,659 | ||||||||||
CVS Health Corp. | 362 | 22,947 | ||||||||||
Humana, Inc. | 468 | 136,179 | ||||||||||
UnitedHealth Group, Inc.(e) | 1,645 | 397,284 | ||||||||||
|
| |||||||||||
861,725 | ||||||||||||
|
| |||||||||||
Pharmaceuticals – 0.9% | ||||||||||||
Bristol-Myers Squibb Co. | 355 | 18,680 | ||||||||||
Merck & Co., Inc.(e) | 781 | 46,493 | ||||||||||
Novartis AG (REG) | 380 | 28,250 | ||||||||||
Novo Nordisk A/S – Class B | 1,359 | 64,591 | ||||||||||
Orion Oyj – Class B | 4,268 | 126,243 | ||||||||||
Pfizer, Inc.(e) | 13,000 | 467,090 | ||||||||||
Roche Holding AG | 1,066 | 228,563 | ||||||||||
Teva Pharmaceutical Industries Ltd. (Sponsored ADR) | 3,860 | 82,990 | ||||||||||
|
| |||||||||||
1,062,900 | ||||||||||||
|
| |||||||||||
2,829,270 | ||||||||||||
|
| |||||||||||
Utilities – 1.4% | ||||||||||||
Electric Utilities – 0.7% | ||||||||||||
Endesa SA | 783 | 17,275 | ||||||||||
Fortum Oyj | 473 | 11,103 | ||||||||||
PG&E Corp. | 2,531 | 109,668 | ||||||||||
Power Assets Holdings Ltd. | 19,500 | 135,624 | ||||||||||
Red Electrica Corp. SA | 10,154 | 198,250 | ||||||||||
SSE PLC | 9,567 | 173,791 | ||||||||||
Tokyo Electric Power Co. Holdings, Inc.(d) | 41,100 | 194,745 | ||||||||||
|
| |||||||||||
840,456 | ||||||||||||
|
| |||||||||||
Independent Power and Renewable Electricity Producers – 0.1% | ||||||||||||
AES Corp./VA | 10,058 | 128,239 | ||||||||||
|
| |||||||||||
Multi-Utilities – 0.6% | ||||||||||||
CenterPoint Energy, Inc.(e) | 9,626 | 251,528 | ||||||||||
Consolidated Edison, Inc. | 918 | 70,438 | ||||||||||
Engie SA | 9,764 | 154,025 | ||||||||||
National Grid PLC | 17,217 | 190,024 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 21 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
WEC Energy Group, Inc. | 1,207 | $ | 76,222 | |||||||||
|
| |||||||||||
742,237 | ||||||||||||
|
| |||||||||||
1,710,932 | ||||||||||||
|
| |||||||||||
Consumer Staples – 1.4% | ||||||||||||
Beverages – 0.2% | ||||||||||||
Coca-Cola Co. (The) | 630 | 27,090 | ||||||||||
Diageo PLC | 665 | 24,434 | ||||||||||
PepsiCo, Inc. | 1,292 | 129,523 | ||||||||||
|
| |||||||||||
181,047 | ||||||||||||
|
| |||||||||||
Food & Staples Retailing – 0.4% | ||||||||||||
Costco Wholesale Corp. | 60 | 11,894 | ||||||||||
Empire Co., Ltd. – Class A | 3,170 | 61,024 | ||||||||||
Walgreens Boots Alliance, Inc. | 2,855 | 178,124 | ||||||||||
Walmart, Inc.(e) | 2,996 | 247,290 | ||||||||||
|
| |||||||||||
498,332 | ||||||||||||
|
| |||||||||||
Food Products – 0.1% | ||||||||||||
General Mills, Inc. | 930 | 39,330 | ||||||||||
Salmar ASA | 650 | 28,340 | ||||||||||
Tyson Foods, Inc. – Class A | 480 | 32,385 | ||||||||||
|
| |||||||||||
100,055 | ||||||||||||
|
| |||||||||||
Household Products – 0.2% | ||||||||||||
Kimberly-Clark Corp. | 758 | 76,444 | ||||||||||
Procter & Gamble Co. (The) | 3,058 | 223,754 | ||||||||||
|
| |||||||||||
300,198 | ||||||||||||
|
| |||||||||||
Personal Products – 0.1% | ||||||||||||
Unilever NV | 2,432 | 135,630 | ||||||||||
Unilever PLC | 279 | 15,382 | ||||||||||
|
| |||||||||||
151,012 | ||||||||||||
|
| |||||||||||
Tobacco – 0.4% | ||||||||||||
Altria Group, Inc.(e) | 3,595 | 200,385 | ||||||||||
British American Tobacco PLC | 668 | 34,289 | ||||||||||
Philip Morris International, Inc.(e) | 470 | 37,384 | ||||||||||
Swedish Match AB | 4,217 | 200,011 | ||||||||||
|
| |||||||||||
472,069 | ||||||||||||
|
| |||||||||||
1,702,713 | ||||||||||||
|
| |||||||||||
Telecommunication Services – 1.4% | ||||||||||||
Diversified Telecommunication Services – 1.2% | ||||||||||||
AT&T, Inc.(e) | 12,238 | 395,532 | ||||||||||
BCE, Inc. | 2,703 | 112,593 | ||||||||||
Bezeq The Israeli Telecommunication Corp., Ltd. | 39,351 | 48,104 | ||||||||||
BT Group PLC | 75,101 | 203,682 | ||||||||||
HKT Trust & HKT Ltd. – Class SS | 35,000 | 44,119 | ||||||||||
Nippon Telegraph & Telephone Corp. | 900 | 42,045 | ||||||||||
Telenor ASA | 830 | 17,097 | ||||||||||
Telia Co. AB | 61,320 | 287,511 |
22 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Verizon Communications, Inc. | 5,340 | $ | 254,558 | |||||||||
|
| |||||||||||
1,405,241 | ||||||||||||
|
| |||||||||||
Wireless Telecommunication Services – 0.2% | ||||||||||||
Tele2 AB – Class B(c) | 10,389 | 127,129 | ||||||||||
Vodafone Group PLC | 49,293 | 125,966 | ||||||||||
|
| |||||||||||
253,095 | ||||||||||||
|
| |||||||||||
1,658,336 | ||||||||||||
|
| |||||||||||
Real Estate – 0.6% | ||||||||||||
Equity Real Estate Investment Trusts (REITs) – 0.4% | ||||||||||||
AvalonBay Communities, Inc. | 360 | 59,594 | ||||||||||
HCP, Inc. | 663 | 15,892 | ||||||||||
Kimco Realty Corp. | 860 | 13,296 | ||||||||||
Lamar Advertising Co. – Class A | 154 | 10,660 | ||||||||||
Liberty Property Trust | 2,271 | 100,401 | ||||||||||
Ventas, Inc. | 860 | 47,008 | ||||||||||
VEREIT, Inc. | 23,672 | 169,491 | ||||||||||
Vicinity Centres | 13,160 | 26,538 | ||||||||||
Weyerhaeuser Co. | 500 | 18,665 | ||||||||||
|
| |||||||||||
461,545 | ||||||||||||
|
| |||||||||||
Real Estate Management & Development – 0.2% | ||||||||||||
CapitaLand Ltd. | 55,400 | 142,755 | ||||||||||
Hang Lung Group Ltd. | 10,000 | 30,913 | ||||||||||
Kerry Properties Ltd. | 27,500 | 146,658 | ||||||||||
|
| |||||||||||
320,326 | ||||||||||||
|
| |||||||||||
781,871 | ||||||||||||
|
| |||||||||||
Total Common Stocks | 35,116,463 | |||||||||||
|
| |||||||||||
PREFERRED STOCKS – 6.3% | ||||||||||||
Real Estate – 6.3% | ||||||||||||
Diversified REITs – 1.5% | ||||||||||||
Colony NorthStar, Inc. | 21,900 | 502,605 | ||||||||||
Gladstone Commercial Corp. | 5,000 | 124,850 | ||||||||||
Global Net Lease, Inc. | 4,075 | 100,286 | ||||||||||
Investors Real Estate Trust | 1,200 | 28,500 | ||||||||||
PS Business Parks, Inc. | 8,600 | 214,312 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 23 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
PS Business Parks, Inc. | 1,800 | $ | 44,514 | |||||||||
PS Business Parks, Inc. | 3,650 | 82,381 | ||||||||||
Spirit Realty Capital, Inc. | 4,300 | 93,353 | ||||||||||
VEREIT, Inc. | 15,475 | 391,517 | ||||||||||
Vornado Realty Trust | 4,000 | 96,560 | ||||||||||
Vornado Realty Trust | 4,100 | 94,423 | ||||||||||
|
| |||||||||||
1,773,301 | ||||||||||||
|
| |||||||||||
Equity Real Estate Investment Trusts (REITs) – 0.2% | ||||||||||||
Kimco Realty Corp. | 7,550 | 164,666 | ||||||||||
Public Storage | 2,000 | 48,360 | ||||||||||
|
| |||||||||||
213,026 | ||||||||||||
|
| |||||||||||
Health Care REITs – 0.3% | ||||||||||||
Sabra Health Care REIT, Inc. | 4,300 | 109,220 | ||||||||||
Senior Housing Properties Trust | 3,000 | 77,550 | ||||||||||
Ventas Realty LP/Ventas Capital Corp. | 5,625 | 140,625 | ||||||||||
|
| |||||||||||
327,395 | ||||||||||||
|
| |||||||||||
Hotel & Resort REITs – 0.8% | ||||||||||||
Ashford Hospitality Trust, Inc. | 5,000 | 117,125 | ||||||||||
Ashford Hospitality Trust, Inc. | 4,000 | 93,740 | ||||||||||
Ashford Hospitality Trust, Inc. | 2,350 | 55,014 | ||||||||||
Hersha Hospitality Trust | 3,000 | 72,900 |
24 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Hersha Hospitality Trust | 2,300 | $ | 52,900 | |||||||||
Hersha Hospitality Trust | 2,100 | 48,384 | ||||||||||
LaSalle Hotel Properties | 2,450 | 61,544 | ||||||||||
LaSalle Hotel Properties | 2,400 | 60,048 | ||||||||||
Pebblebrook Hotel Trust | 4,100 | 101,024 | ||||||||||
Pebblebrook Hotel Trust | 800 | 19,528 | ||||||||||
Summit Hotel Properties, Inc. | 2,450 | 59,951 | ||||||||||
Summit Hotel Properties, Inc. | 5,000 | 117,700 | ||||||||||
Sunstone Hotel Investors, Inc. | 4,475 | 113,038 | ||||||||||
Sunstone Hotel Investors, Inc. | 1,425 | 34,200 | ||||||||||
|
| |||||||||||
1,007,096 | ||||||||||||
|
| |||||||||||
Industrial REITs – 0.4% | ||||||||||||
Gramercy Property Trust | 3,900 | 99,684 | ||||||||||
Monmouth Real Estate Investment Corp. | 7,600 | 180,804 | ||||||||||
Rexford Industrial Realty, Inc. | 2,400 | 56,856 | ||||||||||
Rexford Industrial Realty, Inc. | 2,400 | 55,800 | ||||||||||
STAG Industrial, Inc. | 3,200 | 80,608 | ||||||||||
|
| |||||||||||
473,752 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 25 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Office REITs – 0.1% | ||||||||||||
Boston Properties, Inc. | 4,600 | $ | 109,664 | |||||||||
Vornado Realty Trust | 2,400 | 53,280 | ||||||||||
|
| |||||||||||
162,944 | ||||||||||||
|
| |||||||||||
Residential REITs – 0.7% | ||||||||||||
American Homes 4 Rent | 2,600 | 65,390 | ||||||||||
American Homes 4 Rent | 8,675 | 216,354 | ||||||||||
American Homes 4 Rent | 7,500 | 177,750 | ||||||||||
Apartment Investment & Management Co. | 4,475 | 116,753 | ||||||||||
UMH Properties, Inc. | 6,550 | 166,174 | ||||||||||
UMH Properties, Inc. | 2,000 | 46,460 | ||||||||||
|
| |||||||||||
788,881 | ||||||||||||
|
| |||||||||||
Retail REITs – 1.3% | ||||||||||||
Cedar Realty Trust, Inc. | 6,050 | 118,278 | ||||||||||
DDR Corp. | 6,775 | 158,467 | ||||||||||
DDR Corp. | 2,800 | 64,820 | ||||||||||
DDR Corp. | 2,400 | 53,352 | ||||||||||
Federal Realty Investment Trust | 3,900 | 85,917 | ||||||||||
GGP, Inc. | 6,925 | 167,654 |
26 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Kimco Realty Corp. | 4,600 | $ | 106,674 | |||||||||
National Retail Properties, Inc. | 8,900 | 197,936 | ||||||||||
Pennsylvania Real Estate Investment Trust | 3,000 | 62,970 | ||||||||||
Saul Centers, Inc. | 2,008 | 49,999 | ||||||||||
Saul Centers, Inc. | 8,000 | 180,800 | ||||||||||
Taubman Centers, Inc. | 5,300 | 127,836 | ||||||||||
Taubman Centers, Inc. | 2,800 | 66,500 | ||||||||||
Urstadt Biddle Properties, Inc. | 1,000 | 24,910 | ||||||||||
Urstadt Biddle Properties, Inc. | 4,250 | 98,600 | ||||||||||
Washington Prime Group, Inc. | 600 | 13,506 | ||||||||||
Washington Prime Group, Inc. | 1,600 | 33,456 | ||||||||||
|
| |||||||||||
1,611,675 | ||||||||||||
|
| |||||||||||
Specialized REITs – 1.0% | ||||||||||||
Digital Realty Trust, Inc. | 3,800 | 100,358 | ||||||||||
Digital Realty Trust, Inc. | 2,000 | 52,140 | ||||||||||
Digital Realty Trust, Inc. | 6,725 | 173,774 | ||||||||||
Digital Realty Trust, Inc. | 7,000 | 165,200 | ||||||||||
EPR Properties | 10,225 | 234,152 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 27 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
National Storage Affiliates Trust | 4,700 | $ | 114,680 | |||||||||
Public Storage | 3,500 | 86,345 | ||||||||||
Public Storage | 8,000 | 191,200 | ||||||||||
Public Storage | 1,650 | 40,607 | ||||||||||
Public Storage | 700 | 16,828 | ||||||||||
|
| |||||||||||
1,175,284 | ||||||||||||
|
| |||||||||||
Total Preferred Stocks | 7,533,354 | |||||||||||
|
| |||||||||||
Principal Amount (000) | ||||||||||||
EMERGING MARKETS – SOVEREIGNS – 1.8% | ||||||||||||
Argentina – 0.2% | ||||||||||||
Argentine Republic Government International Bond | U.S.$ | 300 | 295,500 | |||||||||
|
| |||||||||||
Bahrain – 0.1% | ||||||||||||
Bahrain Government International Bond | 200 | 177,750 | ||||||||||
|
| |||||||||||
Costa Rica – 0.0% | ||||||||||||
Costa Rica Government International Bond | 33 | 32,905 | ||||||||||
|
| |||||||||||
Ecuador – 0.2% | ||||||||||||
Ecuador Government International Bond | 200 | 197,307 | ||||||||||
|
| |||||||||||
Egypt – 0.2% | ||||||||||||
Citigroup Global Markets Holdings, Inc./United States | EGP | 5,350 | 280,972 | |||||||||
|
| |||||||||||
Ethiopia – 0.2% | ||||||||||||
Ethiopia International Bond | U.S.$ | 200 | 196,750 | |||||||||
|
|
28 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
Gabon – 0.2% | ||||||||||||
Gabon Government International Bond | U.S.$ | 200 | $ | 191,500 | ||||||||
|
| |||||||||||
Ivory Coast – 0.2% | ||||||||||||
Ivory Coast Government International Bond | EUR | 200 | 230,303 | |||||||||
|
| |||||||||||
Kenya – 0.2% | ||||||||||||
Kenya Government International Bond | U.S.$ | 200 | 200,846 | |||||||||
|
| |||||||||||
Ukraine – 0.2% | ||||||||||||
Ukraine Government International Bond | 200 | 203,750 | ||||||||||
|
| |||||||||||
Zambia – 0.1% | ||||||||||||
Zambia Government International Bond | 200 | 185,500 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 2,193,083 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – TREASURIES – 1.2% | ||||||||||||
Argentina – 0.1% | ||||||||||||
Argentine Bonos del Tesoro | ARS | 3,700 | 142,902 | |||||||||
|
| |||||||||||
Brazil – 0.4% | ||||||||||||
Brazil Notas do Tesouro Nacional | BRL | 1,867 | 513,869 | |||||||||
|
| |||||||||||
Dominican Republic – 0.4% | ||||||||||||
Dominican Republic International Bond | DOP | 19,700 | 498,425 | |||||||||
|
| |||||||||||
South Africa – 0.2% | ||||||||||||
Republic of South Africa Government Bond | ZAR | 1,800 | 157,411 | |||||||||
|
| |||||||||||
Sri Lanka – 0.1% | ||||||||||||
Sri Lanka Government Bonds | LKR | 19,000 | 124,763 | |||||||||
|
| |||||||||||
Total Emerging Markets – Treasuries | 1,437,370 | |||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 29 |
PORTFOLIO OF INVESTMENTS (continued)
Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
GOVERNMENTS – TREASURIES – 0.5% | ||||||||||||
Indonesia – 0.2% | ||||||||||||
Indonesia Treasury Bond | IDR | 2,319,000 | $ | 178,568 | ||||||||
Series FR71 | 981,000 | 78,808 | ||||||||||
|
| |||||||||||
257,376 | ||||||||||||
|
| |||||||||||
Mexico – 0.2% | ||||||||||||
Mexican Bonos | MXN | 3,049 | 170,434 | |||||||||
|
| |||||||||||
Russia – 0.1% | ||||||||||||
Russian Federal Bond – OFZ | RUB | 9,790 | 158,572 | |||||||||
|
| |||||||||||
Total Governments – Treasuries | 586,382 | |||||||||||
|
| |||||||||||
EMERGING MARKETS – CORPORATE BONDS – 0.3% | ||||||||||||
Financial Institutions – 0.2% | ||||||||||||
Banking – 0.2% | ||||||||||||
Fidelity Bank PLC | U.S.$ | 200 | 206,004 | |||||||||
|
| |||||||||||
Industrial – 0.1% | ||||||||||||
Energy – 0.1% | ||||||||||||
Petrobras Global Finance BV | 100 | 101,000 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Corporate Bonds | 307,004 | |||||||||||
|
| |||||||||||
QUASI-SOVEREIGNS – 0.2% | ||||||||||||
Quasi-Sovereign Bonds – 0.2% | ||||||||||||
Venezuela – 0.2% | ||||||||||||
Petroleos de Venezuela SA | 1,150 | 273,700 | ||||||||||
|
| |||||||||||
LOCAL GOVERNMENTS – REGIONAL BONDS – 0.1% | ||||||||||||
Argentina – 0.1% | ||||||||||||
Autonomous City of Buenos Aires Argentina | ARS | 3,248 | 125,400 | |||||||||
|
|
30 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
SHORT-TERM INVESTMENTS – 5.9% | ||||||||||||
Investment Companies – 5.9% | ||||||||||||
AB Fixed Income Shares, Inc. – | 7,086,574 | $ | 7,086,574 | |||||||||
|
| |||||||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 98.6% | 118,560,180 | |||||||||||
|
| |||||||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 5.2% | ||||||||||||
Investment Companies – 5.2% | ||||||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 1.57%(a)(b)(i) | 6,180,476 | 6,180,476 | ||||||||||
|
| |||||||||||
Total Investments – 103.8% | 124,740,656 | |||||||||||
Other assets less liabilities – (3.8)% | (4,522,724 | ) | ||||||||||
|
| |||||||||||
Net Assets – 100.0% | $ | 120,217,932 | ||||||||||
|
|
FUTURES (see Note D)
Description | Number of Contracts | Expiration Month | Notional (000) | Original Value | Value at May 31, 2018 | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
Purchased Contracts |
| |||||||||||||||||||||||
10 Yr Australian Bond Futures | 24 | June 2018 | AUD | 2,400 | $ | 2,312,682 | $ | 2,341,448 | $ | 28,766 | ||||||||||||||
10 Yr Mini Japan Government Bond Futures | 9 | June 2018 | JPY | 90,000 | 1,247,057 | 1,248,757 | 1,700 | |||||||||||||||||
Amsterdam Index Futures | 1 | June 2018 | EUR | 0 | * | 130,913 | 129,110 | (1,803 | ) | |||||||||||||||
Cac40 10 Euro Futures | 7 | June 2018 | EUR | 0 | * | 448,827 | 440,101 | (8,726 | ) | |||||||||||||||
Canadian 10 Yr Bond Futures | 17 | | September 2018 |
| CAD | 1,700 | 1,740,418 | 1,782,338 | 41,920 | |||||||||||||||
DAX Index Futures | 1 | June 2018 | EUR | 0 | * | 379,519 | 368,602 | (10,917 | ) | |||||||||||||||
Euro STOXX 50 Index Futures | 10 | June 2018 | EUR | 0 | * | 413,694 | 398,295 | (15,399 | ) |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 31 |
PORTFOLIO OF INVESTMENTS (continued)
Description | Number of Contracts | Expiration Month | Notional (000) | Original Value | Value at May 31, 2018 | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||
FTSE 100 Index Futures | 9 | June 2018 | GBP | 0 | * | $ | 920,810 | $ | 917,651 | $ | (3,159 | ) | ||||||||||||
IBEX 35 Index Futures | 1 | June 2018 | EUR | 0 | * | 119,351 | 110,441 | (8,910 | ) | |||||||||||||||
Mini MSCI Emerging Market Futures | 11 | June 2018 | USD | 1 | 653,316 | 616,935 | (36,381 | ) | ||||||||||||||||
Omxs30 Index Futures | 40 | June 2018 | SEK | 4 | 722,209 | 700,071 | (22,138 | ) | ||||||||||||||||
S&P 500 E-Mini Futures | 11 | June 2018 | USD | 1 | 1,491,196 | 1,488,025 | (3,171 | ) | ||||||||||||||||
SPI 200 Futures | 1 | June 2018 | AUD | 0 | * | 114,782 | 113,740 | (1,042 | ) | |||||||||||||||
TOPIX Index Futures | 10 | June 2018 | JPY | 100 | 1,603,137 | 1,603,622 | 485 | |||||||||||||||||
Sold Contracts |
| |||||||||||||||||||||||
Hang Seng Index Futures | 5 | June 2018 | HKD | 0 | * | 976,196 | 972,084 | 4,112 | ||||||||||||||||
Mini S&P TSX 60 Futures | 2 | June 2018 | CAD | 0 | * | 70,334 | 73,215 | (2,881 | ) | |||||||||||||||
MSCI EAFE Futures | 119 | June 2018 | USD | 6 | 12,056,959 | 11,822,650 | 234,309 | |||||||||||||||||
MSCI Singapore IX ETS Futures | 2 | June 2018 | SGD | 0 | * | 59,947 | 58,483 | 1,464 | ||||||||||||||||
S&P 500 E-Mini Futures | 171 | June 2018 | USD | 9 | 23,412,612 | 23,132,025 | 280,587 | |||||||||||||||||
S&P TSX 60 Index Futures | 16 | June 2018 | CAD | 3 | 2,284,717 | 2,342,866 | (58,149 | ) | ||||||||||||||||
SPI 200 Futures | 3 | June 2018 | AUD | 0 | * | 346,337 | 341,220 | 5,117 | ||||||||||||||||
|
| |||||||||||||||||||||||
$ | 425,784 | |||||||||||||||||||||||
|
|
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||
Bank of America, NA | TWD | 62,380 | USD | 2,152 | 6/07/18 | $ | 69,742 | |||||||
Bank of America, NA | USD | 874 | TRY | 3,428 | 6/19/18 | (121,848 | ) | |||||||
Bank of America, NA | USD | 1,158 | RUB | 71,672 | 6/26/18 | (11,417 | ) | |||||||
Bank of America, NA | USD | 1,122 | PHP | 59,638 | 9/11/18 | 1,302 | ||||||||
Bank of America, NA | USD | 1,025 | JPY | 111,725 | 6/19/18 | 3,130 | ||||||||
Barclays Bank PLC | CLP | 412,384 | USD | 691 | 6/21/18 | 36,750 | ||||||||
Barclays Bank PLC | KRW | 383,700 | USD | 360 | 7/26/18 | 4,756 | ||||||||
Barclays Bank PLC | CNY | 7,214 | USD | 1,135 | 7/19/18 | 14,009 | ||||||||
Barclays Bank PLC | TRY | 1,174 | USD | 247 | 6/19/18 | (10,942 | ) | |||||||
Barclays Bank PLC | USD | 181 | CHF | 178 | 6/19/18 | 308 | ||||||||
Barclays Bank PLC | USD | 922 | NOK | 7,163 | 6/19/18 | (45,645 | ) | |||||||
Barclays Bank PLC | USD | 967 | TWD | 28,151 | 6/07/18 | (27,904 | ) | |||||||
Barclays Bank PLC | USD | 1,611 | MXN | 30,358 | 6/19/18 | (93,303 | ) | |||||||
BNP Paribas SA | USD | 552 | JPY | 60,160 | 6/19/18 | 2,039 | ||||||||
Citibank, NA | KRW | 481,122 | USD | 452 | 7/26/18 | 6,409 |
32 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||
Citibank, NA | JPY | 159,534 | USD | 1,481 | 6/19/18 | $ | 12,547 | |||||||
Citibank, NA | PEN | 5,918 | USD | 1,829 | 6/21/18 | 21,809 | ||||||||
Citibank, NA | EUR | 1,496 | USD | 1,846 | 6/19/18 | 95,135 | ||||||||
Citibank, NA | GBP | 709 | USD | 984 | 6/19/18 | 40,974 | ||||||||
Citibank, NA | CAD | 660 | USD | 524 | 6/19/18 | 15,162 | ||||||||
Citibank, NA | USD | 1,166 | INR | 79,194 | 8/09/18 | (1,112 | ) | |||||||
Citibank, NA | USD | 1,502 | JPY | 159,534 | 6/19/18 | (34,496 | ) | |||||||
Credit Suisse International | CLP | 258,963 | USD | 417 | 6/19/18 | 6,037 | ||||||||
Credit Suisse International | NOK | 16,610 | USD | 2,119 | 6/19/18 | 87,679 | ||||||||
Credit Suisse International | MXN | 10,603 | USD | 572 | 6/19/18 | 41,899 | ||||||||
Credit Suisse International | SEK | 6,323 | USD | 730 | 6/19/18 | 11,915 | ||||||||
Credit Suisse International | TWD | 4,944 | USD | 167 | 6/19/18 | 1,874 | ||||||||
Credit Suisse International | TWD | 3,654 | USD | 126 | 6/07/18 | 3,601 | ||||||||
Credit Suisse International | NZD | 1,250 | USD | 872 | 6/19/18 | (3,133 | ) | |||||||
Credit Suisse International | CAD | 1,155 | USD | 900 | 6/19/18 | 9,224 | ||||||||
Credit Suisse International | CHF | 993 | USD | 1,057 | 6/19/18 | 47,665 | ||||||||
Credit Suisse International | PLN | 859 | USD | 250 | 6/19/18 | 17,589 | ||||||||
Credit Suisse International | USD | 2,076 | EUR | 1,706 | 6/19/18 | (79,325 | ) | |||||||
Credit Suisse International | USD | 531 | PEN | 1,736 | 6/21/18 | (1,422 | ) | |||||||
Credit Suisse International | USD | 243 | ZAR | 3,040 | 6/19/18 | (4,453 | ) | |||||||
Credit Suisse International | USD | 1,749 | NOK | 13,891 | 6/19/18 | (50,127 | ) | |||||||
Credit Suisse International | USD | 1,938 | SEK | 16,249 | 6/19/18 | (93,240 | ) | |||||||
Credit Suisse International | USD | 127 | HUF | 33,470 | 6/19/18 | (4,900 | ) | |||||||
Deutsche Bank AG | COP | 2,039,210 | USD | 752 | 6/21/18 | 46,580 | ||||||||
Deutsche Bank AG | USD | 586 | INR | 39,840 | 8/09/18 | 251 | ||||||||
Deutsche Bank AG | USD | 638 | IDR | 9,029,231 | 6/29/18 | 9,069 | ||||||||
Goldman Sachs International | GBP | 608 | USD | 840 | 6/19/18 | 31,096 | ||||||||
Goldman Sachs International | EUR | 1,066 | USD | 1,298 | 6/19/18 | 50,543 | ||||||||
Goldman Sachs International | USD | 1,211 | GBP | 878 | 6/19/18 | (42,819 | ) | |||||||
Goldman Sachs International | USD | 758 | CAD | 967 | 6/19/18 | (11,438 | ) | |||||||
Goldman Sachs International | USD | 1,871 | EUR | 1,496 | 6/19/18 | (119,660 | ) | |||||||
Goldman Sachs International | USD | 967 | TRY | 4,014 | 6/19/18 | (86,565 | ) | |||||||
Goldman Sachs International | USD | 377 | IDR | 5,228,603 | 7/26/18 | (3,417 | ) | |||||||
HSBC Bank USA | USD | 991 | GBP | 709 | 6/19/18 | (47,833 | ) | |||||||
Morgan Stanley Capital Services, Inc. | SEK | 16,888 | USD | 2,058 | 6/19/18 | 140,600 | ||||||||
Morgan Stanley Capital Services, Inc. | USD | 526 | CAD | 660 | 6/19/18 | (16,591 | ) | |||||||
Morgan Stanley Capital Services, Inc. | USD | 1,523 | JPY | 161,690 | 6/19/18 | (35,107 | ) | |||||||
Standard Chartered Bank | USD | 298 | CNY | 1,885 | 7/19/18 | (5,062 | ) | |||||||
State Street Bank & Trust Co. | HUF | 134,118 | USD | 533 | 6/19/18 | 42,173 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 33 |
PORTFOLIO OF INVESTMENTS (continued)
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Settlement Date | Unrealized Appreciation/ (Depreciation) | ||||||||||
State Street Bank & Trust Co. | THB | 19,956 | USD | 634 | 6/19/18 | $ | 9,931 | |||||||
State Street Bank & Trust Co. | ZAR | 8,798 | USD | 724 | 6/19/18 | 34,251 | ||||||||
State Street Bank & Trust Co. | CZK | 3,218 | USD | 157 | 6/19/18 | 11,041 | ||||||||
State Street Bank & Trust Co. | JPY | 2,819 | USD | 26 | 6/19/18 | (325 | ) | |||||||
State Street Bank & Trust Co. | PLN | 1,340 | USD | 394 | 6/19/18 | 31,247 | ||||||||
State Street Bank & Trust Co. | MYR | 677 | USD | 175 | 7/12/18 | 5,774 | ||||||||
State Street Bank & Trust Co. | NZD | 872 | USD | 631 | 6/19/18 | 21,073 | ||||||||
State Street Bank & Trust Co. | AUD | 1,040 | USD | 786 | 6/19/18 | (1,046 | ) | |||||||
State Street Bank & Trust Co. | AUD | 598 | USD | 466 | 6/19/18 | 13,826 | ||||||||
State Street Bank & Trust Co. | NOK | 534 | USD | 67 | 6/19/18 | 1,489 | ||||||||
State Street Bank & Trust Co. | CAD | 591 | USD | 461 | 6/19/18 | 4,388 | ||||||||
State Street Bank & Trust Co. | CHF | 871 | USD | 929 | 6/19/18 | 44,799 | ||||||||
State Street Bank & Trust Co. | CHF | 469 | USD | 471 | 6/19/18 | (5,305 | ) | |||||||
State Street Bank & Trust Co. | HKD | 429 | USD | 55 | 6/19/18 | (12 | ) | |||||||
State Street Bank & Trust Co. | GBP | 527 | USD | 738 | 6/19/18 | 36,749 | ||||||||
State Street Bank & Trust Co. | EUR | 205 | USD | 238 | 7/18/18 | (2,582 | ) | |||||||
State Street Bank & Trust Co. | ILS | 145 | USD | 41 | 6/19/18 | (101 | ) | |||||||
State Street Bank & Trust Co. | DKK | 193 | USD | 31 | 6/19/18 | 497 | ||||||||
State Street Bank & Trust Co. | ILS | 39 | USD | 11 | 7/17/18 | 27 | ||||||||
State Street Bank & Trust Co. | SGD | 30 | USD | 22 | 6/19/18 | (7 | ) | |||||||
State Street Bank & Trust Co. | EUR | 49 | USD | 58 | 6/19/18 | 414 | ||||||||
State Street Bank & Trust Co. | EUR | 7 | USD | 8 | 7/17/18 | (14 | ) | |||||||
State Street Bank & Trust Co. | EUR | 5 | USD | 6 | 7/17/18 | 21 | ||||||||
State Street Bank & Trust Co. | USD | 330 | EUR | 276 | 6/19/18 | (7,365 | ) | |||||||
State Street Bank & Trust Co. | USD | 5 | CHF | 5 | 6/19/18 | 26 | ||||||||
State Street Bank & Trust Co. | USD | 129 | GBP | 94 | 6/19/18 | (4,295 | ) | |||||||
State Street Bank & Trust Co. | USD | 373 | CAD | 477 | 6/19/18 | (5,165 | ) | |||||||
State Street Bank & Trust Co. | USD | 5 | HKD | 38 | 6/19/18 | 2 | ||||||||
State Street Bank & Trust Co. | USD | 219 | NOK | 1,697 | 6/19/18 | (11,136 | ) | |||||||
State Street Bank & Trust Co. | USD | 11 | DKK | 70 | 6/19/18 | (14 | ) | |||||||
State Street Bank & Trust Co. | USD | 565 | CHF | 524 | 6/19/18 | (32,789 | ) | |||||||
State Street Bank & Trust Co. | USD | 743 | AUD | 948 | 6/19/18 | (25,793 | ) | |||||||
State Street Bank & Trust Co. | USD | 21 | SEK | 182 | 6/19/18 | (453 | ) | |||||||
State Street Bank & Trust Co. | USD | 60 | JPY | 6,551 | 6/19/18 | 435 | ||||||||
State Street Bank & Trust Co. | USD | 481 | NZD | 665 | 6/19/18 | (15,431 | ) | |||||||
State Street Bank & Trust Co. | USD | 199 | PLN | 678 | 6/19/18 | (15,822 | ) | |||||||
State Street Bank & Trust Co. | USD | 248 | MYR | 975 | 7/12/18 | (3,955 | ) | |||||||
State Street Bank & Trust Co. | USD | 252 | ZAR | 3,092 | 6/19/18 | (9,552 | ) | |||||||
State Street Bank & Trust Co. | USD | 149 | CZK | 3,177 | 6/19/18 | (5,316 | ) | |||||||
State Street Bank & Trust Co. | USD | 135 | THB | 4,282 | 6/19/18 | (586 | ) | |||||||
UBS AG | JPY | 103,897 | USD | 975 | 6/19/18 | 19,100 | ||||||||
|
| |||||||||||||
$ | 8,134 | |||||||||||||
|
|
CALL OPTIONS WRITTEN (see Note D)
Description | Counterparty | Contracts | Exercise Price | Expiration Month | Notional (000) | Premiums Received | U.S. $ Value | |||||||||||||||||||
Euro STOXX 50 Index | Citibank, NA | 580 | EUR | 3,425.00 | July 2018 | EUR | 1 | $ | 42,175 | $ | (39,491 | ) | ||||||||||||||
FTSE 100 Index | Citibank, NA | 110 | GBP | 7,700.00 | June 2018 | GBP | 0 | * | 13,507 | (8,340 | ) |
34 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Description | Counterparty | Contracts | Exercise Price | Expiration Month | Notional (000) | Premiums Received | U.S. $ Value | |||||||||||||||||||
Nikkei 225 Index | Goldman Sachs International | 6,000 | JPY | 22,250.00 | July 2018 | JPY | 6 | $ | 26,199 | $ | (20,921 | ) | ||||||||||||||
S&P 500 Index | Goldman Sachs International | 2,200 | USD | 2,725.00 | June 2018 | USD | 2 | 87,252 | (35,945 | ) | ||||||||||||||||
S&P 500 Index | Goldman Sachs International | 600 | USD | 2,620.00 | June 2018 | USD | 1 | 24,462 | (56,332 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||||
$ | 193,595 | $ | (161,029 | ) | ||||||||||||||||||||||
|
|
|
|
PUT OPTIONS WRITTEN (see Note D)
Description | Counterparty | Contracts | Exercise Price | Expiration Month | Notional (000) | Premiums Received | U.S. $ Value | |||||||||||||||||||
Euro STOXX 50 Index | Citibank, NA | 580 | EUR | 3,425.00 | July 2018 | EUR | 1 | $ | 59,668 | $ | (59,219 | ) | ||||||||||||||
FTSE 100 Index | Citibank, NA | 110 | GBP | 7,700.00 | June 2018 | GBP | 0 | * | 9,698 | (13,388 | ) | |||||||||||||||
Nikkei 225 Index | Goldman Sachs International | 6,000 | JPY | 22,250.00 | July 2018 | JPY | 6 | 23,075 | (25,303 | ) | ||||||||||||||||
S&P 500 Index | Goldman Sachs International | 600 | USD | 2,620.00 | June 2018 | USD | 1 | 36,594 | (4,563 | ) | ||||||||||||||||
S&P 500 Index | Goldman Sachs International | 2,200 | USD | 2,725.00 | June 2018 | USD | 2 | 76,901 | (76,953 | ) | ||||||||||||||||
|
|
|
| |||||||||||||||||||||||
$ | 205,936 | $ | (179,426 | ) | ||||||||||||||||||||||
|
|
|
|
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||
USD 310 | 8/21/20 | 3 Month LIBOR | 1.620% | Quarterly/Semi-Annual | $ | (5,996 | ) | $ | — | $ | (5,996 | ) | ||||||||
USD 1,050 | 1/10/22 | 3 Month LIBOR | 1.941% | Quarterly/Semi-Annual | (26,128 | ) | — | (26,128 | ) | |||||||||||
EUR 990 | 1/10/22 | 0.107% | 6 Month EURIBOR | Annual/Semi-Annual | (2,435 | ) | — | (2,435 | ) | |||||||||||
EUR 150 | 3/24/27 | 6 Month EURIBOR | 0.829% | Semi-Annual/Annual | 1,019 | — | 1,019 | |||||||||||||
EUR 230 | 5/05/27 | 6 Month EURIBOR | 0.790% | Semi-Annual/Annual | (24 | ) | 1 | (25 | ) |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 35 |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||
EUR 210 | 6/02/27 | 6 Month EURIBOR | 0.762% | Semi-Annual/Annual | $ | 1,257 | $ | 129 | $ | 1,128 | ||||||||||
USD 340 | 6/07/27 | 3 Month LIBOR | 2.148% | Quarterly/Semi-Annual | (18,434 | ) | — | (18,434 | ) | |||||||||||
USD 450 | 6/20/27 | 3 Month LIBOR | 2.144% | Quarterly/Semi-Annual | (24,938 | ) | — | (24,938 | ) | |||||||||||
USD 290 | 6/30/27 | 3 Month LIBOR | 2.219% | Quarterly/Semi-Annual | (14,323 | ) | — | (14,323 | ) | |||||||||||
USD 240 | 7/11/27 | 3 Month LIBOR | 2.379% | Quarterly/Semi-Annual | (8,636 | ) | — | (8,636 | ) | |||||||||||
USD 620 | 8/08/27 | 3 Month LIBOR | 2.280% | Quarterly/Semi-Annual | (27,650 | ) | — | (27,650 | ) | |||||||||||
USD 470 | 9/11/27 | 3 Month LIBOR | 2.043% | Quarterly/Semi-Annual | (33,284 | ) | — | (33,284 | ) | |||||||||||
USD 300 | 9/29/27 | 3 Month LIBOR | 2.290% | Quarterly/Semi-Annual | (15,237 | ) | — | (15,237 | ) | |||||||||||
USD 520 | 10/10/27 | 3 Month LIBOR | 2.354% | Quarterly/Semi-Annual | (23,711 | ) | — | (23,711 | ) | |||||||||||
USD 280 | 11/08/27 | 3 Month LIBOR | 2.326% | Quarterly/Semi-Annual | (13,472 | ) | — | (13,472 | ) | |||||||||||
SEK 560 | 12/06/27 | 3 Month STIBOR | 1.083% | Quarterly/Annual | 497 | (3 | ) | 500 | ||||||||||||
USD 360 | 12/27/27 | 3 Month LIBOR | 2.492% | Quarterly/Semi-Annual | (10,288 | ) | — | (10,288 | ) | |||||||||||
USD 1,200 | 1/09/28 | 3 Month LIBOR | 2.468% | Quarterly/Semi-Annual | (34,160 | ) | — | (34,160 | ) | |||||||||||
GBP 140 | 1/09/28 | 1.320% | 6 Month LIBOR | Semi-Annual/Semi-Annual | 1,610 | — | 1,610 | |||||||||||||
NOK 11,460 | 1/11/28 | 6 Month NIBOR | 1.906% | Semi-Annual/Annual | (21,972 | ) | — | (21,972 | ) | |||||||||||
SEK 4,220 | 1/11/28 | 3 Month STIBOR | 1.193% | Quarterly/Annual | 6,027 | 1 | 6,026 |
36 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||
CHF 20 | 1/11/28 | 0.270% | 6 Month LIBOR | Annual/Semi-Annual | $ | 92 | $ | 6 | $ | 86 | ||||||||||
USD 300 | 1/16/28 | 3 Month LIBOR | 2.558% | Quarterly/Semi-Annual | (6,951 | ) | — | (6,951 | ) | |||||||||||
USD 350 | 1/23/28 | 3 Month LIBOR | 2.690% | Quarterly/Semi-Annual | (4,008 | ) | — | (4,008 | ) | |||||||||||
AUD 1,590 | 3/02/28 | 2.918% | 6 Month BBSW | Semi-Annual/Semi-Annual | (10,760 | ) | — | (10,760 | ) | |||||||||||
JPY 56,160 | 3/05/28 | 0.316% | 6 Month LIBOR | Semi-Annual/Semi-Annual | (1,648 | ) | — | (1,648 | ) | |||||||||||
NZD 850 | 3/05/28 | 3 Month BKBM | 3.195% | Quarterly/Semi-Annual | 7,849 | — | 7,849 | |||||||||||||
USD 660 | 3/09/28 | 3 Month LIBOR | 2.931% | Quarterly/Semi-Annual | 2,653 | — | 2,653 | |||||||||||||
CAD 670 | 4/09/28 | 3 Month CDOR | 2.563% | Semi-Annual/Semi-Annual | (1,003 | ) | (12 | ) | (991 | ) | ||||||||||
GBP 430 | 4/09/28 | 1.555% | 6 Month LIBOR | Semi-Annual/Semi-Annual | (5,432 | ) | — | (5,432 | ) | |||||||||||
AUD 380 | 4/10/28 | 2.860% | 6 Month BBSW | Semi-Annual/Semi-Annual | (512 | ) | — | (512 | ) | |||||||||||
JPY 59,550 | 4/11/28 | 0.297% | 6 Month LIBOR | Semi-Annual/Semi-Annual | (296 | ) | — | (296 | ) | |||||||||||
SEK 2,670 | 4/11/28 | 3 Month STIBOR | 1.205% | Quarterly/Annual | 2,500 | (1 | ) | 2,501 | ||||||||||||
USD 1,520 | 4/11/28 | 3 Month LIBOR | 2.825% | Quarterly/Semi-Annual | (6,363 | ) | — | (6,363 | ) | |||||||||||
EUR 260 | 4/11/28 | 0.959% | 6 Month EURIBOR | Annual/Semi-Annual | (2,486 | ) | — | (2,486 | ) |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 37 |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||
Notional | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||
USD 120 | 4/25/28 | 3 Month LIBOR | 3.011% | Quarterly/Semi-Annual | $ | 1,491 | $ | — | $ | 1,491 | ||||||||||
CAD 2,340 | 5/11/28 | 3 Month CDOR | 2.760% | Semi-Annual/Semi-Annual | 27,050 | — | 27,050 | |||||||||||||
GBP 780 | 5/11/28 | 1.593% | 6 Month LIBOR | Semi-Annual/Semi-Annual | (13,045 | ) | — | (13,045 | ) | |||||||||||
NOK 3,860 | 5/15/28 | 6 Month NIBOR | 2.234% | Semi-Annual/Annual | 3,878 | — | 3,878 | |||||||||||||
EUR 1,450 | 5/15/28 | 1.005% | 6 Month EURIBOR | Annual/Semi-Annual | (18,287 | ) | 5 | (18,292 | ) | |||||||||||
CHF 990 | 5/15/28 | 0.490% | 6 Month LIBOR | Annual/Semi-Annual | (10,597 | ) | 2 | (10,599 | ) | |||||||||||
USD 520 | 5/15/28 | 3 Month LIBOR | 3.011% | Quarterly/Semi-Annual | 6,271 | — | 6,271 | |||||||||||||
NZD 470 | 5/15/28 | 3 Month BKBM | 3.156% | Quarterly/Semi-Annual | 2,186 | — | 2,186 | |||||||||||||
USD 220 | 8/21/45 | 3 Month LIBOR | 2.630% | Quarterly/Semi-Annual | (12,538 | ) | — | (12,538 | ) | |||||||||||
USD 70 | 9/04/45 | 3 Month LIBOR | 2.708% | Quarterly/Semi-Annual | (3,287 | ) | — | (3,287 | ) | |||||||||||
|
|
|
|
|
| |||||||||||||||
$ | (313,521 | ) | $ | 128 | $ | (313,649 | ) | |||||||||||||
|
|
|
|
|
|
INFLATION (CPI) SWAPS (see Note D)
Rate Type | ||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Unrealized Appreciation/ (Depreciation) | ||||||||
Bank of America, NA | USD 8,300 | 1/05/23 | 2.163% | CPI# | Maturity | $ | 51,883 | |||||||
Bank of America, NA | USD 610 | 1/19/23 | 2.213% | CPI# | Maturity | 1,882 | ||||||||
Deutsche Bank AG | USD 1,920 | 10/01/20 | 1.273% | CPI# | Maturity | 67,720 | ||||||||
JPMorgan Chase Bank, NA | USD 400 | 11/10/21 | 1.896% | CPI# | Maturity | 7,522 | ||||||||
|
| |||||||||||||
$ | 129,007 | |||||||||||||
|
|
# | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
38 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
TOTAL RETURN SWAPS (see Note D)
Counterparty & Referenced Obligation | # of Shares or Units | Rate Paid/ Received | Payment Frequency | Notional Amount (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | ||||||||||||||
Receive Total Return on Reference Obligation |
| |||||||||||||||||||
Bank of America, NA |
| |||||||||||||||||||
iBoxx $ Liquid High Yield Index | 1,250,000 | LIBOR | Quarterly | USD | 1,250 | 6/20/18 | $ | (1,075 | ) | |||||||||||
Markit iBoxx EUR Liquid High Yield Index | 830,000 | EURIBOR | Maturity/ Quarterly | EUR | 830 | 3/20/19 | (8,628 | ) | ||||||||||||
Goldman Sachs International |
| |||||||||||||||||||
iBoxx $ Liquid High Yield Index | 3,500,000 | LIBOR | Quarterly | USD | 3,500 | 6/20/18 | 3,236 | |||||||||||||
Markit iBoxx EUR Liquid High Yield Index | 320,000 | EURIBOR | Quarterly | EUR | 320 | 3/20/19 | (4,588 | ) | ||||||||||||
Markit iBoxx EUR Liquid High Yield Index | 940,000 | EURIBOR | Quarterly | EUR | 940 | 3/20/19 | (21,381 | ) | ||||||||||||
Markit iBoxx EUR Liquid High Yield Index | 5,130,000 | EURIBOR | Quarterly | EUR | 5,130 | 3/20/19 | (50,089 | ) | ||||||||||||
Pay Total Return on Reference Obligation |
| |||||||||||||||||||
Bank of America, NA |
| |||||||||||||||||||
iBoxx $ Liquid High Yield Index | 15,890,000 | LIBOR | Quarterly | USD | 15,890 | 6/20/18 | (89,776 | ) | ||||||||||||
Goldman Sachs International |
| |||||||||||||||||||
iBoxx $ Liquid High Yield Index | 1,670,000 | LIBOR | Quarterly | USD | 1,670 | 6/20/18 | 6,430 | |||||||||||||
iBoxx $ Liquid High Yield Index | 1,000,000 | LIBOR | Quarterly | USD | 1,000 | 6/20/18 | 5,153 | |||||||||||||
Markit iBoxx EUR Liquid High Yield Index | 9,970,000 | EURIBOR | Quarterly | EUR | 9,970 | 3/20/19 | 221,345 | |||||||||||||
Morgan Stanley Capital Services, Inc. | ||||||||||||||||||||
MSABILN7 | 346,632 | FedFund Effective55 | Maturity | USD | 38,232 | 6/29/18 | – 0 | – | ||||||||||||
|
| |||||||||||||||||||
$ | 60,627 | |||||||||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 39 |
PORTFOLIO OF INVESTMENTS (continued)
* | Notional amount less than 500. |
(a) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov. Additionally, shareholder reports for AB funds can be obtained by calling AB at (800) 227-4618. |
(b) | Affiliated investments. |
(c) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(d) | Non-income producing security. |
(e) | Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts. |
(f) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At May 31, 2018, the aggregate market value of these securities amounted to $2,728,401 or 2.3% of net assets. |
(g) | Defaulted. |
(h) | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at May 31, 2018. |
(i) | The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
ARS – Argentine Peso AUD – Australian Dollar BRL – Brazilian Real CAD – Canadian Dollar CHF – Swiss Franc CLP – Chilean Peso CNY – Chinese Yuan Renminbi COP – Colombian Peso CZK – Czech Koruna DKK – Danish Krone DOP – Dominican Peso EGP – Egyptian Pound EUR – Euro GBP – Great British Pound HKD – Hong Kong Dollar HUF – Hungarian Forint IDR – Indonesian Rupiah ILS – Israeli Shekel INR – Indian Rupee JPY – Japanese Yen KRW – South Korean Won LKR – Sri Lankan Rupee MXN – Mexican Peso MYR – Malaysian Ringgit NOK – Norwegian Krone NZD – New Zealand Dollar PEN – Peruvian Sol PHP – Philippine Peso PLN – Polish Zloty RUB – Russian Ruble SEK – Swedish Krona SGD – Singapore Dollar THB – Thailand Baht TRY – Turkish Lira TWD – New Taiwan Dollar USD – United States Dollar ZAR – South African Rand |
40 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Glossary:
ADR – American Depositary Receipt BADLAR – Argentina Deposit Rates Badlar Private Banks BBSW – Bank Bill Swap Reference Rate (Australia) BKBM – Bank Bill Benchmark (New Zealand) CDOR – Canadian Dealer Offered Rate DAX – Deutscher Aktien Index (German Stock Index) EAFE – Europe, Australia, and Far East ETF – Exchange Traded Fund ETN – Exchange Traded Note ETS – Emission Trading Scheme EURIBOR – Euro Interbank Offered Rate FTSE – Financial Times Stock Exchange IBEX – International Business Exchange LIBOR – London Interbank Offered Rates MSCI – Morgan Stanley Capital International NIBOR – Norwegian Interbank Offered Rate REG – Registered Shares REIT – Real Estate Investment Trust RSP – Risparmio (Convertible Savings Shares) SPI – Share Price Index STIBOR – Stockholm Interbank Offered Rate TOPIX – Tokyo Price Index TSX – Toronto Stock Exchange |
The following table represents the 50 largest equity basket holdings underlying the total return swap with MSABILN7 as of May 31, 2018.
Security Description | Shares | Market Value as of 5/31/18 | Percent of Basket’s Net Assets | |||||||||
Nice Ltd. | 13,719 | $ | 513,231,365 | 23.3 | % | |||||||
Nippon Telegraph & Telephone Corp. | 33,882 | 172,999,097 | 7.8 | % | ||||||||
Oracle Corp Japan | 18,788 | 155,750,038 | 7.1 | % | ||||||||
Royal Dutch Shell PLC | 57,710 | 154,490,351 | 7.0 | % | ||||||||
Otsuka Corp. | 25,884 | 116,347,606 | 5.3 | % | ||||||||
Croda International PLC | 22,367 | 104,275,109 | 4.7 | % | ||||||||
Mitsubishi UFJ Financial Group Inc. | 147,939 | 97,018,531 | 4.4 | % | ||||||||
British American Tobacco PLC | 23,881 | 92,397,456 | 4.2 | % | ||||||||
Intertek Group PLC | 15,723 | 85,942,990 | 3.9 | % | ||||||||
Next PLC | 13,896 | 80,597,463 | 3.7 | % | ||||||||
Moneysupermarket.com Group PLC | 235,728 | 74,702,138 | 3.4 | % | ||||||||
Diageo PLC | 26,360 | 72,818,346 | 3.3 | % | ||||||||
IG Group Holdings PLC | 65,074 | 56,256,182 | 2.5 | % | ||||||||
Auto Trader Group PLC | 151,711 | 53,493,423 | 2.4 | % | ||||||||
Persimmon PLC | 18,744 | 53,082,887 | 2.4 | % | ||||||||
Compass Group PLC | 30,318 | 49,039,315 | 2.2 | % | ||||||||
Unilever PLC | 10,408 | 43,155,059 | 2.0 | % | ||||||||
Indivior PLC | 83,530 | 40,169,527 | 1.8 | % | ||||||||
Daiichikosho Co Ltd. | 7,591 | 38,560,994 | 1.7 | % | ||||||||
Direct Line Insurance Group PLC | 90,244 | 32,262,158 | 1.5 | % | ||||||||
HKT Trust & HKT Ltd. | 1,329,225 | 13,092,869 | 0.6 | % | ||||||||
Hang Seng Bank Ltd. | 55,899 | 10,972,881 | 0.5 | % | ||||||||
Salmar ASA | 29,398 | 10,495,046 | 0.5 | % | ||||||||
DNB ASA | 41,668 | 6,104,434 | 0.3 | % |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 41 |
PORTFOLIO OF INVESTMENTS (continued)
Security Description | Shares | Market Value as of 5/31/18 | Percent of Basket’s Net Assets | |||||||||
Telenor ASA | 33,922 | $ | 5,717,549 | 0.3 | % | |||||||
Tryg A/S | 33,326 | 4,888,920 | 0.2 | % | ||||||||
Royal Unibrew A/S | 7,442 | 3,401,044 | 0.2 | % | ||||||||
Aristocrat Leisure Ltd. | 84,867 | 2,549,420 | 0.1 | % | ||||||||
Total System Services Inc. | 29,208 | 2,488,213 | 0.1 | % | ||||||||
UnitedHealth Group Inc. | 9,164 | 2,213,275 | 0.1 | % | ||||||||
Oracle Corp. | 39,946 | 1,866,293 | 0.1 | % | ||||||||
Raytheon Co. | 8,827 | 1,849,341 | 0.1 | % | ||||||||
Toronto-Dominion Bank/The | 24,336 | 1,842,208 | 0.1 | % | ||||||||
Microsoft Corp. | 18,320 | 1,810,775 | 0.1 | % | ||||||||
Anthem Inc. | 7,670 | 1,698,260 | 0.1 | % | ||||||||
Royal Bank of Canada | 15,900 | 1,558,156 | 0.1 | % | ||||||||
Swiss Re AG | 17,054 | 1,452,668 | 0.1 | % | ||||||||
Booz Allen Hamilton Holding Corp. | 31,990 | 1,442,428 | 0.1 | % | ||||||||
Apple Inc. | 7,638 | 1,427,244 | 0.1 | % | ||||||||
Boeing Co./The | 4,004 | 1,409,920 | 0.1 | % | ||||||||
Amadeus IT Group SA | 20,436 | 1,387,590 | 0.1 | % | ||||||||
Ross Stores Inc. | 16,613 | 1,310,466 | 0.1 | % | ||||||||
DBS Group Holdings Ltd. | 45,859 | 1,301,021 | 0.1 | % | ||||||||
Amcor Ltd./Australia | 91,305 | 1,283,755 | 0.1 | % | ||||||||
Tyson Foods Inc. | 18,554 | 1,251,822 | 0.1 | % | ||||||||
Comcast Corp. | 40,086 | 1,249,867 | 0.1 | % | ||||||||
Fidelity National Information Services Inc. | 11,672 | 1,193,103 | 0.1 | % | ||||||||
FNF Group | 32,225 | 1,191,019 | 0.1 | % | ||||||||
Texas Instruments Inc. | 10,352 | 1,158,525 | 0.1 | % | ||||||||
Marsh & McLennan Cos., Inc. | 14,404 | 1,157,645 | 0.1 | % | ||||||||
Other | 584,597 | 29,146,075 | 0.5 | % | ||||||||
|
|
|
| |||||||||
Total | $ | 2,206,501,867 | 100.0 | % | ||||||||
|
|
|
|
See notes to financial statements.
42 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
STATEMENT OF ASSETS & LIABILITIES
May 31, 2018 (unaudited)
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $54,801,986) | $ | 53,470,634 | (a) | |
Affiliated issuers (cost $74,098,177—including investment of cash collateral for securities loaned of $6,180,476) | 71,270,022 | |||
Cash collateral due from broker | 731,594 | |||
Foreign currencies, at value (cost $351,958) | 335,981 | |||
Unrealized appreciation on forward currency exchange contracts | 1,106,957 | |||
Receivable for capital stock sold | 542,265 | |||
Affiliated dividends receivable | 327,985 | |||
Unaffiliated dividends and interest receivable | 323,522 | |||
Unrealized appreciation on total return swaps | 236,164 | |||
Receivable for variation margin on futures | 177,542 | |||
Unrealized appreciation on inflation swaps | 129,007 | |||
Receivable for investment securities sold | 11,809 | |||
Receivable due from Adviser | 650 | |||
Receivable for terminated centrally cleared interest rate swaps | 34 | |||
|
| |||
Total assets | 128,664,166 | |||
|
| |||
Liabilities | ||||
Due to custodian | 46,439 | |||
Options written, at value (premiums received $399,531) | 340,455 | |||
Payable for collateral received on securities loaned | 6,180,476 | |||
Unrealized depreciation on forward currency exchange contracts | 1,098,823 | |||
Payable for investment securities purchased and foreign currency transactions | 431,558 | |||
Unrealized depreciation on total return swaps | 175,537 | |||
Payable for terminated total return swaps | 86,381 | |||
Payable for capital stock redeemed | 9,403 | |||
Payable for variation margin on centrally cleared swaps | 3,090 | |||
Directors’ fees payable | 1,873 | |||
Distribution fee payable | 1,734 | |||
Transfer Agent fee payable | 1,150 | |||
Accrued expenses | 69,315 | |||
|
| |||
Total liabilities | 8,446,234 | |||
|
| |||
Net Assets | $ | 120,217,932 | ||
|
| |||
Composition of Net Assets | ||||
Capital stock, at par | $ | 1,225 | ||
Additional paid-in capital | 124,698,652 | |||
Undistributed net investment income | 416,471 | |||
Accumulated net realized loss on investment and foreign currency transactions | (1,094,029 | ) | ||
Net unrealized depreciation on investments and foreign currency denominated assets and liabilities | (3,804,387 | ) | ||
|
| |||
$ | 120,217,932 | |||
|
|
(a) | Includes securities on loan with a value of $6,063,619 (see Note E). |
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 43 |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value
Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
A | $ | 5,521,224 | 563,442 | $ | 9.80 | * | ||||||
| ||||||||||||
C | $ | 665,107 | 67,873 | $ | 9.80 | |||||||
| ||||||||||||
Advisor | $ | 114,031,601 | 11,618,763 | $ | 9.81 | |||||||
|
* | The maximum offering price per share for Class A shares was $10.23 which reflects a sales charge of 4.25%. |
See notes to financial statements.
44 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2018 (unaudited)
Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers (net of foreign taxes withheld of $38,955) | $ | 1,126,810 | ||||||
Affiliated issuers | 2,008,306 | |||||||
Interest (net of foreign taxes withheld of $453) | 201,568 | $ | 3,336,684 | |||||
|
| |||||||
Expenses | ||||||||
Advisory fee (see Note B) | 315,469 | |||||||
Distribution fee—Class A | 6,615 | |||||||
Distribution fee—Class C | 2,754 | |||||||
Transfer agency—Class A | 570 | |||||||
Transfer agency—Class C | 74 | |||||||
Transfer agency—Advisor Class | 11,699 | |||||||
Custodian | 104,829 | |||||||
Audit and tax | 59,355 | |||||||
Administrative | 38,568 | |||||||
Registration fees | 26,276 | |||||||
Legal | 19,170 | |||||||
Directors’ fees | 14,156 | |||||||
Printing | 10,480 | |||||||
Miscellaneous | 17,619 | |||||||
|
| |||||||
Total expenses | 627,634 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | (339,589 | ) | ||||||
|
| |||||||
Net expenses | 288,045 | |||||||
|
| |||||||
Net investment income | 3,048,639 | |||||||
|
| |||||||
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Affiliated Underlying Portfolios | (43,884 | ) | ||||||
Investment transactions | 343,185 | |||||||
Forward currency exchange contracts | (188,359 | ) | ||||||
Futures | (593,182 | ) | ||||||
Options written | (380,455 | ) | ||||||
Swaps | (317,927 | ) | ||||||
Foreign currency transactions | (23,767 | ) | ||||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Affiliated Underlying Portfolios | (2,733,240 | ) | ||||||
Investments | (2,294,528 | ) | ||||||
Forward currency exchange contracts | (28,209 | ) | ||||||
Futures | 817,118 | |||||||
Options written | 52,289 | |||||||
Swaps | 53,403 | |||||||
Foreign currency denominated assets and liabilities | (14,641 | ) | ||||||
|
| |||||||
Net loss on investment and foreign currency transactions | (5,352,197 | ) | ||||||
|
| |||||||
Contributions from Affiliates (see Note B) | 297 | |||||||
|
| |||||||
Net Decrease in Net Assets from Operations | $ | (2,303,261 | ) | |||||
|
|
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 45 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 3,048,639 | $ | 2,754,690 | ||||
Net realized gain (loss) on investment and foreign currency transactions | (1,204,389 | ) | 3,077,162 | |||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | (4,147,808 | ) | 37,478 | |||||
Contributions from Affiliates (see Note B) | 297 | – 0 | – | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | (2,303,261 | ) | 5,869,330 | |||||
Dividends and Distributions to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (122,536 | ) | (156,684 | ) | ||||
Class C | (10,845 | ) | (12,200 | ) | ||||
Advisor Class | (2,638,153 | ) | (3,023,478 | ) | ||||
Net realized gain on investment transactions | ||||||||
Class A | (106,263 | ) | – 0 | – | ||||
Class C | (8,224 | ) | – 0 | – | ||||
Advisor Class | (1,823,688 | ) | – 0 | – | ||||
Capital Stock Transactions | ||||||||
Net increase | 31,890,837 | 72,236,442 | ||||||
|
|
|
| |||||
Total increase | 24,877,867 | 74,913,410 | ||||||
Net Assets | ||||||||
Beginning of period | 95,340,065 | 20,426,655 | ||||||
|
|
|
| |||||
End of period (including undistributed net investment income of $416,471 and $139,366, respectively) | $ | 120,217,932 | $ | 95,340,065 | ||||
|
|
|
|
See notes to financial statements.
46 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
May 31, 2018 (unaudited)
NOTE A
Significant Accounting Policies
AB Cap Fund, Inc. (the “Company”), which is a Maryland corporation, is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company operates as a series company currently comprised of 28 portfolios. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB All Market Income Portfolio (the “Fund”), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Class B, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. 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. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 47 |
NOTES TO FINANCIAL STATEMENTS (continued)
Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most for-
48 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
eign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 49 |
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.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments are classified as Level 3.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of May 31, 2018:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Investment Companies | $ | 63,900,850 | $ | – 0 | – | $ | – 0 | – | $ | 63,900,850 | ||||||
Common Stocks: | ||||||||||||||||
Financials | 3,050,052 | 2,839,070 | – 0 | – | 5,889,122 | |||||||||||
Consumer Discretionary | 2,641,905 | 2,474,124 | – 0 | – | 5,116,029 | |||||||||||
Information Technology | 3,967,426 | 610,873 | – 0 | – | 4,578,299 | |||||||||||
Energy | 1,590,306 | 2,919,503 | – 0 | – | 4,509,809 | |||||||||||
Materials | 1,338,231 | 1,983,423 | – 0 | – | 3,321,654 | |||||||||||
Industrials | 1,877,002 | 1,141,426 | – 0 | – | 3,018,428 | |||||||||||
Health Care | 1,996,001 | 833,269 | – 0 | – | 2,829,270 | |||||||||||
Utilities | 771,719 | 939,213 | – 0 | – | 1,710,932 | |||||||||||
Consumer Staples | 1,264,627 | 438,086 | – 0 | – | 1,702,713 | |||||||||||
Telecommunication Services | 762,683 | 895,653 | – 0 | – | 1,658,336 | |||||||||||
Real Estate | 435,007 | 346,864 | – 0 | – | 781,871 |
50 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Preferred Stocks | $ | 7,533,354 | $ | – 0 | – | $ | – 0 | – | $ | 7,533,354 | ||||||
Emerging Markets – Sovereigns | – 0 | – | 2,193,083 | – 0 | – | 2,193,083 | ||||||||||
Emerging Markets – Treasuries | – 0 | – | 1,437,370 | – 0 | – | 1,437,370 | ||||||||||
Governments – Treasuries | – 0 | – | 586,382 | – 0 | – | 586,382 | ||||||||||
Emerging Markets – Corporate Bonds | – 0 | – | 307,004 | – 0 | – | 307,004 | ||||||||||
Quasi-Sovereigns | – 0 | – | 273,700 | – 0 | – | 273,700 | ||||||||||
Local Governments – Regional Bonds | – 0 | – | 125,400 | – 0 | – | 125,400 | ||||||||||
Short-Term Investments | 7,086,574 | – 0 | – | – 0 | – | 7,086,574 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 6,180,476 | – 0 | – | – 0 | – | 6,180,476 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 104,396,213 | 20,344,443 | – 0 | – | 124,740,656 | |||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Futures | 587,282 | 11,178 | – 0 | – | 598,460 | (b) | ||||||||||
Forward Currency Exchange Contracts | – 0 | – | 1,106,957 | – 0 | – | 1,106,957 | ||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 64,380 | – 0 | – | 64,380 | (b) | |||||||||
Inflation (CPI) Swaps | – 0 | – | 129,007 | – 0 | – | 129,007 | ||||||||||
Total Return Swaps | – 0 | – | 236,164 | – 0 | – | 236,164 | ||||||||||
Liabilities: | ||||||||||||||||
Futures | (100,582 | ) | (72,094 | ) | – 0 | – | (172,676 | )(b) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (1,098,823 | ) | – 0 | – | (1,098,823 | ) | ||||||||
Call Options Written | – 0 | – | (161,029 | ) | – 0 | – | (161,029 | ) | ||||||||
Put Options Written | – 0 | – | (179,426 | ) | – 0 | – | (179,426 | ) | ||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (377,901 | ) | – 0 | – | (377,901 | )(b) | ||||||||
Total Return Swaps | – 0 | – | (175,537 | ) | – 0 | – | (175,537 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | 104,882,913 | $ | 19,827,319 | $ | – 0 | – | $ | 124,710,232 | |||||||
|
|
|
|
|
|
|
|
(a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
(b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. Exchange-traded swaps with upfront premiums are presented here as market value. |
(c) | There were de minimis transfers under 1% of net assets between Level 1 and Level 2 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.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 51 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 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.
52 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
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 tax year and the prior 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 Company are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 53 |
NOTES TO FINANCIAL STATEMENTS (continued)
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% for the next $2.5 billion and .40% in excess of $5 billion, of the Fund’s average daily net assets. Effective August 28, 2017, the advisory fee was reduced from a flat fee of .70% of the Fund’s average daily net assets at all asset levels to the current fee schedule. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses, excluding, among other items, the Portfolio’s proportionate share of the advisory fees and other expenses of AB High Income Fund, Inc. (“ABHI”) on an annual basis (the “Expense Caps”) to .99%, 1.74% and .74% of daily average net assets for Class A, Class C, and Advisor Class shares, respectively. For the six months ended May 31, 2018, such reimbursements/waivers amounted to $153,873. The Expense Caps may not be terminated by the Adviser before February 28, 2019. Any fees waived and expenses borne by the Adviser through May 10, 2016 are subject to repayment by the Fund until the end of the third fiscal year after the fiscal period in which the fee were waived or the expense were borne; such waivers that are subject to repayment amount to $417,022 for the period ended November 30, 2015 and $192,023 for the period ended November 30, 2016. In any case, no reimbursement payment will be made that would cause the Fund’s total annual fund operating expenses to exceed the net fee percentages set forth above.
During the six months ended May 31, 2018, the Adviser reimbursed the Fund $297 for trading losses incurred due to a trade entry error.
The Fund currently invests in ABHI, an open-end management investment company managed by the Adviser. The Adviser has contractually agreed to waive its management fees and/or bear Fund expenses through February 28, 2019 in an amount equal to the Fund’s proportionate share of all advisory fees and other expenses of ABHI that are indirectly borne by the Fund. For the six months ended May 31, 2018, such waiver amounted to $138,366.
54 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of ..20% of the portfolio’s average daily net assets and bears its own expenses. 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 May 31, 2018, such waiver amounted to $5,526.
A summary of the Fund’s transactions in AB mutual funds for the six months ended May 31, 2018 is as follows:
Distributions | ||||||||||||||||||||||||||||||||
Fund | Market Value 11/30/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Realized Gain (Loss) (000) | Change in Unrealized Appr./ (Depr.) (000) | Market Value 5/31/18 (000) | Dividend Income (000) | Realized Gains (000) | ||||||||||||||||||||||||
Government Money Market Portfolio | $ | 3,746 | $ | 66,177 | $ | 62,836 | $ | – 0 | – | $ | – 0 | – | $ | 7,087 | $ | 36 | $ | – 0 | – | |||||||||||||
AB High Income Fund, Inc. | 46,323 | 15,985 | 1,528 | (44 | ) | (2,733 | ) | 58,003 | 1,942 | – 0 | – | |||||||||||||||||||||
Government Money Market Portfolio* | 3,743 | 36,917 | 34,480 | – 0 | – | – 0 | – | 6,180 | 30 | – 0 | – | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total | $ | (44 | ) | $ | (2,733 | ) | $ | 71,270 | $ | 2,008 | – 0 | – | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
* | Investments of cash collateral for securities lending transactions (see Note E). |
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended May 31, 2018, the Adviser voluntarily agreed to waive such fees in the amount of $38,568.
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 $8,856 for the six months ended May 31, 2018.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 55 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 $675 from the sale of Class A shares and received $0 and $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the six months ended May 31, 2018.
Brokerage commissions paid on investment transactions for the six months ended May 31, 2018 amounted to $35,792, of which $1 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 .25% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $245 for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the six months ended May 31, 2018 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 63,981,886 | $ | 37,807,895 | ||||
U.S. government securities | – 0 | – | – 0 | – |
56 | AB ALL MARKET INCOME PORTFOLIO | 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 | $ | 3,681,770 | ||
Gross unrealized depreciation | (7,472,298 | ) | ||
|
| |||
Net unrealized depreciation | $ | (3,790,528 | ) | |
|
|
1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
• | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 57 |
NOTES TO FINANCIAL STATEMENTS (continued)
During the six months ended May 31, 2018, the Fund held futures for hedging and non-hedging purposes.
• | Forward Currency Exchange Contracts |
The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
During the six months ended May 31, 2018, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
• | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
58 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from written options which expire unexercised are recorded by the Fund on the expiration date as realized gains from options written. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
At May 31, 2018, the maximum payments for written put options amounted to $12,242,470. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the six months ended May 31, 2018, the Fund held written options for hedging and non-hedging purposes.
• | Swaps |
The Fund may enter into swaps to hedge its exposure to interest rates, credit risk or currencies. The Fund may also enter into swaps for non-hedging purposes as a means of gaining market exposures, making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Fund in accordance with the terms of the respective swaps to provide value and recourse to the Fund or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 59 |
NOTES TO FINANCIAL STATEMENTS (continued)
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Fund and the counterparty and by the posting of collateral by the counterparty to the Fund to cover the Fund’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The
60 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Fund is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Fund holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Fund may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Fund may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Fund may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments).
During the six months ended May 31, 2018, the Fund held interest rate swaps for hedging and non-hedging purposes.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Fund against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the six months ended May 31, 2018, the Fund held inflation (CPI) swaps for hedging and non-hedging purposes.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 61 |
NOTES TO FINANCIAL STATEMENTS (continued)
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the six months ended May 31, 2018, the Fund held total return swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty tables below for additional details.
62 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
During the six months ended May 31, 2018, the Fund had entered into the following derivatives:
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on futures | $ | 72,386 | * | ||||||||
Equity contracts | Receivable/Payable for variation margin on futures | 526,074 | * | Receivable/Payable for variation margin on futures | $ | 172,676 | * | |||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | | 64,248 | * | Receivable/Payable for variation margin on centrally cleared swaps | | 377,897 | * | ||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts | | 1,106,957 | Unrealized depreciation on forward currency exchange contracts | | 1,098,823 | ||||||
Equity contracts | Options written, at value | 340,455 | ||||||||||
Interest rate contracts | Unrealized appreciation on inflation swaps | | 129,007 | |||||||||
Equity contracts | Unrealized appreciation on total return swaps | 236,164 | Unrealized depreciation on total return swaps | 175,537 | ||||||||
|
|
|
| |||||||||
Total | $ | 2,134,836 | $ | 2,165,388 | ||||||||
|
|
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | (106,400 | ) | $ | 43,028 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 63 |
NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Equity contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | $ | (486,782 | ) | $ | 774,090 | ||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | (188,359 | ) | (28,209 | ) | |||||
Equity contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | (380,455 | ) | 52,289 | ||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (230,726 | ) | (223,545 | ) | |||||
Equity contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | (87,201 | ) | 276,948 | ||||||
|
|
|
| |||||||
Total | $ | (1,479,923 | ) | $ | 894,601 | |||||
|
|
|
|
The following table represents the average monthly volume of the Fund’s derivative transactions during the six months ended May 31, 2018:
Futures: | ||||
Average original value of buy contracts | $ | 9,108,470 | ||
Average original value of sale contracts | $ | 22,567,840 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 26,540,179 | ||
Average principal amount of sale contracts | $ | 28,503,756 | ||
Options Written: | ||||
Average notional amount | $ | 7,413 | ||
Inflation Swaps: | ||||
Average notional amount | $ | 8,684,286 | ||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 27,560,999 | ||
Total Return Swaps: | ||||
Average notional amount | $ | 74,960,033 |
64 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements and net of the related collateral received/pledged by the Fund as of May 31, 2018. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivative Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivatives Assets | |||||||||||||||
Bank of America, NA | $ | 127,939 | $ | (127,939 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
Barclays Bank PLC | 55,823 | (55,823 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
BNP Paribas SA | 2,039 | – 0 | – | – 0 | – | – 0 | – | 2,039 | ||||||||||||
Citibank, NA | 192,036 | (156,046 | ) | – 0 | – | – 0 | – | 35,990 | ||||||||||||
Credit Suisse International | 227,483 | (227,483 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Deutsche Bank AG | 123,620 | – 0 | – | – 0 | – | – 0 | – | 123,620 | ||||||||||||
Goldman Sachs International | 317,803 | (317,803 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
JPMorgan Chase Bank, NA | 7,522 | – 0 | – | – 0 | – | – 0 | – | 7,522 | ||||||||||||
Morgan Stanley Capital Services, Inc. | 140,600 | (51,698 | ) | – 0 | – | – 0 | – | 88,902 | ||||||||||||
State Street Bank & Trust Co. | 258,163 | (147,064 | ) | – 0 | – | – 0 | – | 111,099 | ||||||||||||
UBS AG | 19,100 | – 0 | – | – 0 | – | – 0 | – | 19,100 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,472,128 | $ | (1,083,856 | ) | $ | – 0 | – | $ | – 0 | – | $ | 388,272 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivative Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivatives Liabilities | |||||||||||||||
Bank of America, NA | $ | 232,744 | $ | (127,939 | ) | $ | – 0 | – | $ | – 0 | – | $ | 104,805 | |||||||
Barclays Bank PLC | 177,794 | (55,823 | ) | – 0 | – | – 0 | – | 121,971 | ||||||||||||
Citibank, NA | 156,046 | (156,046 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Credit Suisse International | 236,600 | (227,483 | ) | – 0 | – | – 0 | – | 9,117 | ||||||||||||
Goldman Sachs International | 559,974 | (317,803 | ) | (70,000 | ) | – 0 | – | 172,171 | ||||||||||||
HSBC Bank USA | 47,833 | – 0 | – | – 0 | – | – 0 | – | 47,833 | ||||||||||||
Morgan Stanley Capital Services, Inc. | 51,698 | (51,698 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Standard Chartered Bank | 5,062 | – 0 | – | – 0 | – | – 0 | – | 5,062 | ||||||||||||
State Street Bank & Trust Co. | 147,064 | (147,064 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,614,815 | $ | (1,083,856 | ) | $ | (70,000 | ) | $ | – 0 | – | $ | 460,959 | ^ | ||||||
|
|
|
|
|
|
|
|
|
|
* | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 65 |
NOTES TO FINANCIAL STATEMENTS (continued)
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
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 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 May 31, 2018, the Fund had securities on loan with a value of $6,063,619 and had received cash collateral which has been invested into Government Money
66 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Market Portfolio of $6,180,476. 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 $30,103 from the borrowers and Government Money Market Portfolio, respectively, for the six months ended May 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 May 31, 2018, such waiver amounted to $3,256. 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.
NOTE F
Capital Stock
Each class consists of 1,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
Shares | Amount | |||||||||||||||||||||||
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 56,405 | 465,291 | $ | 562,472 | $ | 4,749,669 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 20,349 | 13,397 | 205,814 | 137,468 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (16,205 | ) | (16,111 | ) | (163,710 | ) | (163,768 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 60,549 | 462,577 | $ | 604,576 | $ | 4,723,369 | ||||||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 29,477 | 35,540 | $ | 299,307 | $ | 363,259 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 1,757 | 1,113 | 17,751 | 11,335 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (4,091 | ) | (6,233 | ) | (42,050 | ) | (63,872 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 27,143 | 30,420 | $ | 275,008 | $ | 310,722 | ||||||||||||||||||
| ||||||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Shares sold | 4,607,313 | 7,339,414 | $ | 46,687,892 | $ | 75,068,193 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 296,427 | 144,830 | 2,998,832 | 1,488,409 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1,865,829 | ) | (913,849 | ) | (18,675,471 | ) | (9,354,251 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 3,037,911 | 6,570,395 | $ | 31,011,253 | $ | 67,202,351 | ||||||||||||||||||
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 67 |
NOTES TO FINANCIAL STATEMENTS (continued)
At May 31, 2018, a shareholder of the Fund owned 11% of the Fund’s outstanding shares. Significant transactions by such shareholder, if any, may impact the Fund’s performance.
NOTE G
Risks Involved in Investing in the Fund
Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Fund’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Fund’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.
High Yield Debt Securities Risk—Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of the junk bond market generally and less secondary market liquidity.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory, or other uncertainties.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
68 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Fund, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected on the statement of assets and liabilities.
Short Sale Risk—Short sales involve the risk that the Fund will incur a loss by subsequently buying a security at a higher price than the price at which it sold the security. The amount of such loss is theoretically unlimited, as it will be based on the increase in value of the security sold short. In contrast, the risk of loss from a long position is limited to the Fund’s investment in the security, because the price of the security cannot fall below zero. The Fund may not always be able to close out a short position on favorable terms.
Leverage Risk—When the Fund borrows money or otherwise leverages its investments, its performance may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s investments. The Fund may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures or by borrowing money. The use of other types of derivative instruments by the Fund, such as options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Fund than if the Fund were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Liquidity Risk—Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of liquidity risk may include low trading volumes, large positions and heavy redemptions of fund shares. Over recent years, liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
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
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 69 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 May 31, 2018. Effective July 3, 2018, the Facility will be increased to $325 million.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending November 30, 2018 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended November 30, 2017 and November 30, 2016 were as follows:
2017 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 3,192,362 | $ | 1,046,479 | ||||
Long-term capital gains | – 0 | – | 151,605 | |||||
|
|
|
| |||||
Total taxable distributions paid | $ | 3,192,362 | $ | 1,198,084 | ||||
|
|
|
|
As of November 30, 2017, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 2,026,841 | (a) | |
Unrealized appreciation/(depreciation) | 504,480 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 2,531,321 | ||
|
|
(a) | During the fiscal year, the Fund utilized $596,728 of capital loss carryforwards to offset current year net realized gains. |
(b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the tax treatment of swaps, the tax treatment of passive foreign investment companies (PFICs), and the recognition for tax purposes of unrealized gains/losses on certain derivative instruments. |
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 incurred for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of November 30, 2017, the Fund did not have any capital loss carryforwards.
70 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE J
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. At this time, management is evaluating the implications of these changes on the financial statements.
NOTE K
Subsequent Event
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 71 |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A | ||||||||||||||||
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, | December 18, 2014(a) to November 30, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
| |||||||||||||||
Net asset value, beginning of period | $ 10.43 | $ 9.90 | $ 9.75 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income(b)(c) | .26 | .45 | .39 | .35 | ||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.44 | ) | .72 | .37 | (.24 | ) | ||||||||||
Contributions from Affiliates | .00 | (d) | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net asset value from operations | (.18 | ) | 1.17 | .76 | .11 | |||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | (.24 | ) | (.64 | ) | (.52 | ) | (.36 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.21 | ) | – 0 | – | (.09 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.45 | ) | (.64 | ) | (.61 | ) | (.36 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 9.80 | $ 10.43 | $ 9.90 | $ 9.75 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(e) | (2.03 | )% | 12.30 | % | 8.20 | % | 1.04 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $5,521 | $5,247 | $399 | $18 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | .74 | %^ | .76 | % | .78 | % | .77 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 1.33 | %^ | 1.80 | % | 3.91 | % | 3.92 | %^ | ||||||||
Net investment income(c) | 5.10 | %^ | 4.39 | % | 4.04 | % | 3.67 | %^ | ||||||||
Portfolio turnover rate | 35 | % | 69 | % | 94 | % | 88 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying |
| |||||||||||||||
portfolios: | .27 | % | .23 | %^^ | .22 | %^^ | .21 | %^^ |
See footnote summary on page 75.
72 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C | ||||||||||||||||
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, | December 18, 2014(a) to November 30, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
| |||||||||||||||
Net asset value, beginning of period | $ 10.44 | $ 9.90 | $ 9.75 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income(b)(c) | .22 | .37 | .33 | .28 | ||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.45 | ) | .73 | .36 | (.24 | ) | ||||||||||
Contributions from Affiliates | .00 | (d) | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net asset value from operations | (.23 | ) | 1.10 | .69 | .04 | |||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | (.20 | ) | (.56 | ) | (.45 | ) | (.29 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.21 | ) | – 0 | – | (.09 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.41 | ) | (.56 | ) | (.54 | ) | (.29 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 9.80 | $ 10.44 | $ 9.90 | $ 9.75 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(e) | (2.35 | )% | 11.42 | % | 7.42 | % | .31 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period | $665 | $426 | $102 | $10 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | 1.49 | %^ | 1.52 | % | 1.54 | % | 1.52 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 2.09 | %^ | 2.65 | % | 4.70 | % | 4.57 | %^ | ||||||||
Net investment income(c) | 4.38 | %^ | 3.63 | % | 3.35 | % | 2.89 | %^ | ||||||||
Portfolio turnover rate | 35 | % | 69 | % | 94 | % | 88 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying |
| |||||||||||||||
portfolios: | .27 | % | .23 | %^^ | .22 | %^^ | .21 | %^^ |
See footnote summary on page 75.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 73 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, | December 18, 2014(a) to November 30, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
| |||||||||||||||
Net asset value, beginning of period | $ 10.45 | $ 9.91 | $ 9.75 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income(b)(c) | .27 | .47 | .50 | .37 | ||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | (.45 | ) | .73 | .29 | (.24 | ) | ||||||||||
Contributions from Affiliates | .00 | (d) | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
| |||||||||||||||
Net increase (decrease) in net asset value from operations | (.18 | ) | 1.20 | .79 | .13 | |||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | (.25 | ) | (.66 | ) | (.54 | ) | (.38 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.21 | ) | – 0 | – | (.09 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.46 | ) | (.66 | ) | (.63 | ) | (.38 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 9.81 | $ 10.45 | $ 9.91 | $ 9.75 | ||||||||||||
|
| |||||||||||||||
Total Return |
| |||||||||||||||
Total investment return based on net asset value(e) | (1.80 | )% | 12.53 | % | 8.51 | % | 1.25 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $114,032 | $89,667 | $19,926 | $17,919 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | .49 | %^ | .52 | % | .53 | % | .53 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 1.08 | %^ | 1.61 | % | 3.40 | % | 3.52 | %^ | ||||||||
Net investment income(c) | 5.33 | %^ | 4.64 | % | 5.08 | % | 3.88 | %^ | ||||||||
Portfolio turnover rate | 35 | % | 69 | % | 94 | % | 88 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying |
| |||||||||||||||
portfolios: | .27 | % | .23 | %^^ | .22 | %^^ | .21 | %^^ |
See footnote summary on page 75.
74 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
(a) | Commencement of operations. |
(b) | Based on average shares outstanding. |
(c) | Net of fees and expenses waived/reimbursed by the Adviser. |
(d) | Amount is less than $.005. |
(e) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. 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. |
(f) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bear 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 period shown below, such waiver amounted to: |
Six Months Ended May 31, 2018 | Year Ended November 30, 2017 | Year Ended November 30, 2016 | December 18, 2014(a) to November 30, 2015 | |||||||||||||
Class A | .25 | % | .22 | % | .21 | % | .22 | %^ | ||||||||
Class C | .25 | % | .22 | % | .20 | % | .22 | %^ | ||||||||
Advisor Class | .25 | % | .22 | % | .21 | % | .21 | %^ |
^ | Annualized. |
^^ | Unaudited. |
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 75 |
BOARD OF DIRECTORS
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
Morgan C. Harting(2) , Vice President Daniel J. Loewy(2) , Vice President Joseph J. Mantineo, Treasurer and Chief Financial Officer | Emilie D. Wrapp, Secretary Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
1 | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
2 | The day-to-day management of, and investment decisions for, the Fund are made by its Investment Policy Team. Messrs. Harting and Loewy are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
76 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser, as proposed to be amended (the “Advisory Agreement”) to effect a fee reduction, in respect of AB All Market Income Portfolio (the “Fund”) at a meeting held on August 1-2, 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 proposed advisory fee, in which the Senior Officer concluded that the proposed 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 proposed advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the proposed 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 directors noted that the proposed lowering of
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 77 |
the advisory fee would benefit the Fund and its shareholders. The directors noted that the Adviser was reducing fees for business reasons, and had assured them that there would be no diminution in the nature or quality of services to the Fund. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. To date, the Adviser has not requested any reimbursements from the Fund. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Company’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 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 noted that the Fund was not profitable to the Adviser in the periods reviewed.
78 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the underlying funds advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute 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 Fund’s unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed 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-year period ended May 31, 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 proposed advisory fee rate payable 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 pro forma contractual effective advisory fee rate (reflecting a reduction in the advisory fee rate to take effect August 2017) with a peer group median.
The Adviser informed the directors that there were no institutional products managed by it that have a substantially similar investment style.
The directors noted that the Fund invests in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 79 |
Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures for a fund or to “equitize” cash inflows pending purchases of underlying securities, that the proposed advisory fee for the Fund would be paid for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
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) provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the effects of any fee waivers and/or expense reimbursements as a result of the Adviser’s expense cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the proposed 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.
80 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
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
FlexFee™ International Strategic Core Portfolio
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
FlexFee™ Emerging Markets Growth Portfolio
INTERNATIONAL/ GLOBAL EQUITY (continued)
Sustainable International Thematic Fund1
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 Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
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 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. |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 81 |
NOTES
82 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 83 |
NOTES
84 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
AB ALL MARKET INCOME PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
AMI-0152-0518
MAY 05.31.18
SEMI-ANNUAL REPORT
AB SMALL CAP VALUE PORTFOLIO
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.
FROM THE PRESIDENT | ![]() |
Dear Shareholder,
We are pleased to provide this report for AB Small Cap Value Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
As always, AB strives to keep clients ahead of what’s next by:
+ | Transforming uncommon insights into uncommon knowledge with a global research scope |
+ | Navigating markets with seasoned investment experience and sophisticated solutions |
+ | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 1 |
SEMI-ANNUAL REPORT
July 16, 2018
This report provides management’s discussion of fund performance for AB Small Cap Value Portfolio for the semi-annual reporting period ended May 31, 2018.
The Fund’s investment objective is to seek long-term growth of capital.
NAV RETURNS AS OF MAY 31, 2018 (unaudited)
6 Months | 12 Months | |||||||
AB SMALL CAP VALUE PORTFOLIO | ||||||||
Class A Shares | 3.19% | 14.82% | ||||||
Class C Shares | 2.80% | 14.02% | ||||||
Advisor Class Shares1 | 3.31% | 15.13% | ||||||
Russell 2000 Value Index | 3.81% | 16.35% |
1 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
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 with its benchmark, the Russell 2000 Value Index, for the six- and 12-month periods ended May 31, 2018.
All share classes of the Fund underperformed the benchmark during both periods, before sales charges. During the six-month period, stock selection in the industrials and health care sectors, along with an overweight to technology, detracted relative to the benchmark. Stock selection within technology, financials and energy holdings contributed.
During the 12-month period, stock selection in the health care and consumer discretionary sectors, along with an overweight to technology, were the primary causes of underperformance. Stock selection among energy, technology and financials holdings were the leading contributors.
The Fund did not utilize derivatives during the six- or 12-month periods.
2 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
MARKET REVIEW AND INVESTMENT STRATEGY
After advancing to all-time highs, global stocks retraced some of their positive performance during the six-month period ended May 31, 2018. US equities had the highest returns, given strong corporate earnings results after the passage of major tax reform. In terms of style, growth stocks outperformed value stocks. While US tax reform and strong economic data helped stocks reach record highs early in the period, inflation concerns and rising interest rates soon weighed on performance. Trade and geopolitical tensions added to downward pressure. Toward the end of the period, political turmoil in Italy decreased investors’ risk appetite.
The Fund’s Senior Investment Management Team (the “Team”) seeks to invest opportunistically in what it considers to be undervalued companies with solid fundamentals, without sacrificing the Fund’s deep value discipline. The Fund’s emphasis continues to be at the stock-specific level, as the Team looks for companies that offer compelling valuation, strong free cash flow and significant company-level catalysts.
INVESTMENT POLICIES
The Fund invests primarily in a portfolio of equity securities of small-capitalization US companies. Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities of small-capitalization companies. For purposes of this policy, small-capitalization companies are those that, at the time of investment, fall within the capitalization range between the smallest company in the Russell 2000 Value Index and the greater of $2.5 billion or the largest company in the Russell 2000 Value Index.
The Fund invests in companies that are determined by the Adviser to be undervalued, using the Adviser’s fundamental value approach. In selecting securities for the Fund, the Adviser uses its fundamental and quantitative research to identify companies whose long-term earnings power is not reflected in the current market price of the securities.
The Adviser seeks to manage the overall portfolio volatility relative to the Russell 2000 Value Index by favoring promising securities that offer the best balance between return and targeted risk.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 3 |
DISCLOSURES AND RISKS
Benchmark Disclosure
The Russell 2000® Value Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 2000 Value Index represents the performance of small-cap value companies within the US. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.
A Word About Risk
Market Risk: The value of the Fund’s assets will fluctuate as the stock 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 the Fund’s value approach, may underperform the market generally.
Capitalization Risk: Investments in small-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.
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 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. Net asset value (“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
4 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
DISCLOSURES AND RISKS (continued)
sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 5 |
HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF MAY 31, 2018 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
CLASS A SHARES | ||||||||
1 Year | 14.82% | 9.94% | ||||||
Since Inception1 | 11.54% | 10.18% | ||||||
CLASS C SHARES | ||||||||
1 Year | 14.02% | 13.02% | ||||||
Since Inception1 | 10.69% | 10.69% | ||||||
ADVISOR CLASS SHARES2 | ||||||||
1 Year | 15.13% | 15.13% | ||||||
Since Inception1 | 11.83% | 11.83% |
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.25%, 2.07% and 1.00% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios exclusive of expenses associated with acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs to 1.25%, 2.00% and 1.00% for Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before February 28, 2019 and may be extended by the Adviser for additional one-year terms. Any fees waived and expenses borne by the Adviser through December 2, 2015 under the expense limitations in effect prior to that date may be reimbursed by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne, provided that no reimbursement payment will be made that would cause the Fund’s covered operating expenses to exceed the expense limitations. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | Inception date: 12/3/2014. |
2 | This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
6 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
JUNE 30, 2018 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 7.80% | |||
Since Inception1 | 9.95% | |||
CLASS C SHARES | ||||
1 Year | 10.84% | |||
Since Inception1 | 10.46% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 12.98% | |||
Since Inception1 | 11.59% |
1 | Inception date: 12/3/2014. |
2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 7 |
EXPENSE EXAMPLE
(unaudited)
As a shareholder of a mutual fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
8 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
EXPENSE EXAMPLE (continued)
Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,031.90 | $ | 6.28 | 1.24 | % | $ | 6.33 | 1.25 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,018.75 | $ | 6.24 | 1.24 | % | $ | 6.29 | 1.25 | % | ||||||||||||
Class C | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,028.00 | $ | 10.06 | 1.99 | % | $ | 10.11 | 2.00 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,015.01 | $ | 10.00 | 1.99 | % | $ | 10.05 | 2.00 | % | ||||||||||||
Advisor Class | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,033.10 | $ | 5.02 | 0.99 | % | $ | 5.07 | 1.00 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.00 | $ | 4.99 | 0.99 | % | $ | 5.04 | 1.00 | % |
* | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period), respectively. |
** | 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 182/365 (to reflect the one-half year period). |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 9 |
PORTFOLIO SUMMARY
May 31, 2018 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $288.6
TEN LARGEST HOLDINGS2
Company | U.S. $ Value | Percent of Net Assets | ||||||
Independent Bank Group, Inc. | $ | 4,755,800 | 1.6 | % | ||||
Umpqua Holdings Corp. | 4,722,830 | 1.6 | ||||||
Sterling Bancorp/DE | 4,545,678 | 1.6 | ||||||
Texas Capital Bancshares, Inc. | 4,326,115 | 1.5 | ||||||
ICON PLC | 4,235,961 | 1.5 | ||||||
Associated Banc-Corp. | 4,235,772 | 1.4 | ||||||
SkyWest, Inc. | 4,019,070 | 1.4 | ||||||
Deckers Outdoor Corp. | 3,999,075 | 1.4 | ||||||
VeriFone Systems, Inc. | 3,993,372 | 1.4 | ||||||
Verint Systems, Inc. | 3,990,432 | 1.4 | ||||||
$ | 42,824,105 | 14.8 | % |
1 | All data are as of May 31, 2018. The Fund’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
2 | Long-term investments. |
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.
10 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS
May 31, 2018 (unaudited)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
COMMON STOCKS – 98.1% | ||||||||
Financials – 22.7% | ||||||||
Banks – 17.9% | ||||||||
1st Source Corp. | 40,400 | $ | 2,148,472 | |||||
Associated Banc-Corp. | 153,470 | 4,235,772 | ||||||
Customers Bancorp, Inc.(a) | 95,250 | 2,887,028 | ||||||
First Commonwealth Financial Corp. | 187,650 | 2,944,228 | ||||||
Fulton Financial Corp. | 146,350 | 2,553,808 | ||||||
Heritage Financial Corp./WA | 106,150 | 3,412,722 | ||||||
Hope Bancorp, Inc. | 185,801 | 3,342,560 | ||||||
Independent Bank Group, Inc. | 63,200 | 4,755,800 | ||||||
Sandy Spring Bancorp, Inc. | 26,260 | 1,091,103 | ||||||
Sterling Bancorp/DE | 185,160 | 4,545,678 | ||||||
Synovus Financial Corp. | 54,320 | 2,939,255 | ||||||
Texas Capital Bancshares, Inc.(a) | 44,900 | 4,326,115 | ||||||
Umpqua Holdings Corp. | 200,630 | 4,722,830 | ||||||
Webster Financial Corp. | 60,560 | 3,881,896 | ||||||
Zions Bancorporation | 70,233 | 3,849,471 | ||||||
|
| |||||||
51,636,738 | ||||||||
|
| |||||||
Insurance – 2.3% | ||||||||
First American Financial Corp. | 37,330 | 1,944,147 | ||||||
Selective Insurance Group, Inc. | 56,600 | 3,217,710 | ||||||
State Auto Financial Corp. | 49,820 | 1,545,416 | ||||||
|
| |||||||
6,707,273 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance – 2.5% | ||||||||
BankUnited, Inc. | 54,820 | 2,311,759 | ||||||
Essent Group Ltd.(a) | 62,581 | 2,146,528 | ||||||
WSFS Financial Corp. | 50,050 | 2,620,118 | ||||||
|
| |||||||
7,078,405 | ||||||||
|
| |||||||
65,422,416 | ||||||||
|
| |||||||
Information Technology – 18.3% | ||||||||
Communications Equipment – 3.3% | ||||||||
Extreme Networks, Inc.(a) | 175,150 | 1,508,042 | ||||||
Finisar Corp.(a) | 120,230 | 1,948,928 | ||||||
Infinera Corp.(a)(b) | 176,130 | 1,549,944 | ||||||
Mitel Networks Corp.(a) | 199,387 | 2,201,232 | ||||||
NetScout Systems, Inc.(a) | 84,680 | 2,286,360 | ||||||
|
| |||||||
9,494,506 | ||||||||
|
| |||||||
Electronic Equipment, Instruments & Components – 3.3% | ||||||||
Anixter International, Inc.(a) | 51,485 | 3,153,456 | ||||||
Sanmina Corp.(a) | 86,250 | 2,484,000 | ||||||
VeriFone Systems, Inc.(a) | 175,610 | 3,993,372 | ||||||
|
| |||||||
9,630,828 | ||||||||
|
| |||||||
IT Services – 5.6% | ||||||||
Booz Allen Hamilton Holding Corp. | 71,910 | 3,242,422 | ||||||
CSG Systems International, Inc. | 71,471 | 2,957,470 |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 11 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Luxoft Holding, Inc.(a) | 57,720 | $ | 2,077,920 | |||||
Unisys Corp.(a)(b) | 246,010 | 2,964,420 | ||||||
Virtusa Corp.(a) | 38,770 | 1,882,284 | ||||||
WNS Holdings Ltd. (ADR)(a) | 57,480 | 2,939,527 | ||||||
|
| |||||||
16,064,043 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 2.7% | ||||||||
Kulicke & Soffa Industries, Inc.(a) | 140,510 | 3,383,481 | ||||||
MagnaChip Semiconductor Corp.(a)(b) | 251,030 | 2,786,433 | ||||||
Mellanox Technologies Ltd.(a) | 19,990 | 1,707,146 | ||||||
|
| |||||||
7,877,060 | ||||||||
|
| |||||||
Software – 2.2% | ||||||||
A10 Networks, Inc.(a) | 348,806 | 2,242,822 | ||||||
Verint Systems, Inc.(a) | 94,560 | 3,990,432 | ||||||
|
| |||||||
6,233,254 | ||||||||
|
| |||||||
Technology Hardware, Storage & | ||||||||
NCR Corp.(a) | 111,450 | 3,354,645 | ||||||
|
| |||||||
52,654,336 | ||||||||
|
| |||||||
Industrials – 17.9% | ||||||||
Air Freight & Logistics – 1.4% | ||||||||
Air Transport Services Group, Inc.(a) | 82,350 | 1,729,350 | ||||||
Atlas Air Worldwide Holdings, Inc.(a) | 34,100 | 2,323,915 | ||||||
|
| |||||||
4,053,265 | ||||||||
|
| |||||||
Airlines – 2.1% | ||||||||
Hawaiian Holdings, Inc. | 55,460 | 2,052,020 | ||||||
SkyWest, Inc. | 70,510 | 4,019,070 | ||||||
|
| |||||||
6,071,090 | ||||||||
|
| |||||||
Commercial Services & Supplies – 1.6% | ||||||||
Knoll, Inc. | 142,860 | 2,885,772 | ||||||
Viad Corp. | 29,920 | 1,582,768 | ||||||
|
| |||||||
4,468,540 | ||||||||
|
| |||||||
Construction & Engineering – 3.4% | ||||||||
AECOM(a) | 70,310 | 2,320,230 | ||||||
Granite Construction, Inc. | 52,680 | 2,995,912 | ||||||
MYR Group, Inc.(a) | 52,596 | 2,053,348 | ||||||
Tutor Perini Corp.(a) | 120,210 | 2,380,158 | ||||||
|
| |||||||
9,749,648 | ||||||||
|
| |||||||
Electrical Equipment – 2.3% | ||||||||
EnerSys | 39,617 | 3,165,795 | ||||||
Regal Beloit Corp. | 43,500 | 3,456,075 | ||||||
|
| |||||||
6,621,870 | ||||||||
|
| |||||||
Machinery – 3.7% | ||||||||
Columbus McKinnon Corp./NY | 70,218 | 2,909,132 | ||||||
Oshkosh Corp. | 39,240 | 2,854,710 |
12 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
SPX FLOW, Inc.(a) | 45,270 | $ | 1,972,414 | |||||
Terex Corp. | 74,070 | 2,931,690 | ||||||
|
| |||||||
10,667,946 | ||||||||
|
| |||||||
Professional Services – 0.8% | ||||||||
TrueBlue, Inc.(a) | 87,538 | 2,258,480 | ||||||
|
| |||||||
Road & Rail – 1.6% | ||||||||
Covenant Transportation Group, Inc. – Class A(a) | 84,960 | 2,555,597 | ||||||
Saia, Inc.(a) | 26,059 | 2,147,261 | ||||||
|
| |||||||
4,702,858 | ||||||||
|
| |||||||
Trading Companies & Distributors – 1.0% | ||||||||
MRC Global, Inc.(a) | 140,770 | 2,906,901 | ||||||
|
| |||||||
51,500,598 | ||||||||
|
| |||||||
Consumer Discretionary – 13.3% | ||||||||
Auto Components – 2.2% | ||||||||
Cooper-Standard Holdings, Inc.(a) | 27,744 | 3,445,805 | ||||||
Dana, Inc. | 74,960 | 1,671,608 | ||||||
Tower International, Inc. | 40,943 | 1,203,724 | ||||||
|
| |||||||
6,321,137 | ||||||||
|
| |||||||
Diversified Consumer Services – 1.6% | ||||||||
Houghton Mifflin Harcourt Co.(a) | 206,650 | 1,405,220 | ||||||
Sotheby’s(a) | 60,410 | 3,311,676 | ||||||
|
| |||||||
4,716,896 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure – 1.6% | ||||||||
Bloomin’ Brands, Inc. | 129,260 | 2,742,897 | ||||||
Red Robin Gourmet Burgers, Inc.(a) | 40,170 | 2,022,560 | ||||||
|
| |||||||
4,765,457 | ||||||||
|
| |||||||
Household Durables – 1.3% | ||||||||
Ethan Allen Interiors, Inc. | 69,450 | 1,628,602 | ||||||
Taylor Morrison Home Corp. – Class A(a) | 98,930 | 2,126,995 | ||||||
|
| |||||||
3,755,597 | ||||||||
|
| |||||||
Internet & Direct Marketing Retail – 0.6% | ||||||||
Nutrisystem, Inc. | 48,300 | 1,801,590 | ||||||
|
| |||||||
Media – 1.2% | ||||||||
Scholastic Corp. | 74,510 | 3,352,205 | ||||||
|
| |||||||
Specialty Retail – 2.3% | ||||||||
Caleres, Inc. | 39,150 | 1,388,259 | ||||||
Citi Trends, Inc. | 101,750 | 3,053,517 | ||||||
Signet Jewelers Ltd. | 52,160 | 2,242,880 | ||||||
|
| |||||||
6,684,656 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods – 2.5% | ||||||||
Crocs, Inc.(a) | 173,730 | 3,099,343 | ||||||
Deckers Outdoor Corp.(a) | 35,340 | 3,999,075 | ||||||
|
| |||||||
7,098,418 | ||||||||
|
| |||||||
38,495,956 | ||||||||
|
|
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 13 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Energy – 8.2% | ||||||||
Energy Equipment & Services – 3.4% | ||||||||
Dril-Quip, Inc.(a) | 24,572 | $ | 1,180,685 | |||||
Helix Energy Solutions Group, Inc.(a) | 135,180 | 1,027,368 | ||||||
Oil States International, Inc.(a) | 76,320 | 2,701,728 | ||||||
Patterson-UTI Energy, Inc. | 120,670 | 2,495,455 | ||||||
RPC, Inc. | 143,400 | 2,354,628 | ||||||
|
| |||||||
9,759,864 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels – 4.8% | ||||||||
Oasis Petroleum, Inc.(a) | 271,820 | 3,541,815 | ||||||
QEP Resources, Inc.(a) | 261,990 | 3,167,459 | ||||||
SM Energy Co. | 134,770 | 3,530,974 | ||||||
SRC Energy, Inc.(a) | 289,360 | 3,744,318 | ||||||
|
| |||||||
13,984,566 | ||||||||
|
| |||||||
23,744,430 | ||||||||
|
| |||||||
Real Estate – 5.9% | ||||||||
Equity Real Estate Investment Trusts (REITs) – 5.9% | ||||||||
Armada Hoffler Properties, Inc. | 134,940 | 1,943,136 | ||||||
Education Realty Trust, Inc. | 77,488 | 2,831,412 | ||||||
Gramercy Property Trust | 93,770 | 2,585,239 | ||||||
Independence Realty Trust, Inc. | 301,880 | 2,928,236 | ||||||
National Storage Affiliates Trust | 124,270 | 3,494,472 | ||||||
STAG Industrial, Inc. | 125,333 | 3,338,871 | ||||||
|
| |||||||
17,121,366 | ||||||||
|
| |||||||
Health Care – 4.0% | ||||||||
Health Care Providers & Services – 2.5% | ||||||||
LifePoint Health, Inc.(a) | 49,640 | 2,623,474 | ||||||
Molina Healthcare, Inc.(a) | 31,370 | 2,664,254 | ||||||
WellCare Health Plans, Inc.(a) | 9,570 | 2,121,382 | ||||||
|
| |||||||
7,409,110 | ||||||||
|
| |||||||
Life Sciences Tools & Services – 1.5% | ||||||||
ICON PLC(a) | 32,842 | 4,235,961 | ||||||
|
| |||||||
11,645,071 | ||||||||
|
| |||||||
Materials – 3.5% | ||||||||
Chemicals – 2.4% | ||||||||
Orion Engineered Carbons SA | 119,060 | 3,417,022 | ||||||
Trinseo SA | 47,245 | 3,415,813 | ||||||
|
| |||||||
6,832,835 | ||||||||
|
| |||||||
Containers & Packaging – 1.1% | ||||||||
Graphic Packaging Holding Co. | 224,320 | 3,248,154 | ||||||
|
| |||||||
10,080,989 | ||||||||
|
|
14 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Utilities – 2.4% | ||||||||
Electric Utilities – 1.7% | ||||||||
PNM Resources, Inc. | 66,480 | $ | 2,655,876 | |||||
Portland General Electric Co. | 49,080 | 2,093,753 | ||||||
|
| |||||||
4,749,629 | ||||||||
|
| |||||||
Multi-Utilities – 0.7% | ||||||||
Black Hills Corp. | 35,730 | 2,078,057 | ||||||
|
| |||||||
6,827,686 | ||||||||
|
| |||||||
Consumer Staples – 1.9% | ||||||||
Beverages – 1.1% | ||||||||
Cott Corp. | 202,270 | 3,191,821 | ||||||
|
| |||||||
Food Products – 0.8% | ||||||||
Nomad Foods Ltd.(a) | 134,550 | 2,341,170 | ||||||
|
| |||||||
5,532,991 | ||||||||
|
| |||||||
Total Common Stocks | 283,025,839 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS – 2.1% | ||||||||
Investment Companies – 2.1% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 1.57%(c)(d)(e) | 6,178,279 | 6,178,279 | ||||||
|
| |||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 100.2% | 289,204,118 | |||||||
|
| |||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 1.2% | ||||||||
Investment Companies – 1.2% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 1.57%(c)(d)(e) | 3,451,169 | 3,451,169 | ||||||
|
| |||||||
Total Investments – 101.4% | 292,655,287 | |||||||
Other assets less liabilities – (1.4)% | (4,042,114 | ) | ||||||
|
| |||||||
Net Assets – 100.0% | $ | 288,613,173 | ||||||
|
|
(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. |
Glossary:
ADR – American Depositary Receipt
See notes to financial statements.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 15 |
STATEMENT OF ASSETS & LIABILITIES
May 31, 2018 (unaudited)
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $247,387,685) | $ | 283,025,839 | (a) | |
Affiliated issuers (cost $9,629,448—including investment of cash collateral for securities loaned of $3,451,169) | 9,629,448 | |||
Receivable for investment securities sold | 890,364 | |||
Unaffiliated dividends and interest receivable | 137,361 | |||
Receivable for capital stock sold | 134,838 | |||
Affiliated dividends receivable | 7,125 | |||
|
| |||
Total assets | 293,824,975 | |||
|
| |||
Liabilities | ||||
Payable for collateral received on securities loaned | 3,451,169 | |||
Payable for investment securities purchased | 1,442,790 | |||
Advisory fee payable | 206,329 | |||
Distribution fee payable | 42,022 | |||
Payable for capital stock redeemed | 13,550 | |||
Administrative fee payable | 7,957 | |||
Directors’ fees payable | 1,876 | |||
Transfer Agent fee payable | 1,366 | |||
Accrued expenses | 44,743 | |||
|
| |||
Total liabilities | 5,211,802 | |||
|
| |||
Net Assets | $ | 288,613,173 | ||
|
| |||
Composition of Net Assets | ||||
Capital stock, at par | $ | 2,105 | ||
Additional paid-in capital | 248,234,683 | |||
Accumulated net investment loss | (185,137 | ) | ||
Accumulated net realized gain on investment transactions | 4,923,368 | |||
Net unrealized appreciation on investments | 35,638,154 | |||
|
| |||
$ | 288,613,173 | |||
|
|
Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value
Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
A | $ | 199,005,922 | 14,558,374 | $ | 13.67 | * | ||||||
| ||||||||||||
C | $ | 64,265 | 4,825 | $ | 13.32 | |||||||
| ||||||||||||
Advisor | $ | 89,542,986 | 6,489,956 | $ | 13.80 | |||||||
|
(a) | Includes securities on loan with a value of $3,209,227 (see Note E). |
* | The maximum offering price per share for Class A shares was $14.28 which reflects a sales charge of 4.25%. |
See notes to financial statements.
16 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2018 (unaudited)
Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers (net of foreign taxes withheld of $10,936) | $ | 1,613,166 | ||||||
Affiliated issuers | 86,637 | $ | 1,699,803 | |||||
|
| |||||||
Expenses | ||||||||
Advisory fee (see Note B) | 1,095,304 | |||||||
Distribution fee—Class A | 242,138 | |||||||
Distribution fee—Class C | 212 | |||||||
Transfer agency—Class A | 12,843 | |||||||
Transfer agency—Class C | 24 | |||||||
Transfer agency—Advisor Class | 5,316 | |||||||
Recoupment of previously reimbursed expenses (see Note B) | 79,056 | |||||||
Administrative | 31,669 | |||||||
Custodian | 47,410 | |||||||
Registration fees | 25,300 | |||||||
Audit and tax | 24,314 | |||||||
Legal | 19,170 | |||||||
Directors’ fees | 14,160 | |||||||
Printing | 8,724 | |||||||
Miscellaneous | 5,849 | |||||||
|
| |||||||
Total expenses | 1,611,489 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | (12,072 | ) | ||||||
|
| |||||||
Net expenses | 1,599,417 | |||||||
|
| |||||||
Net investment income | 100,386 | |||||||
|
| |||||||
Realized and Unrealized Gain on Investment Transactions | ||||||||
Net realized gain on investment transactions | 5,594,305 | |||||||
|
| |||||||
Net change in unrealized appreciation/depreciation of investments | 3,144,513 | |||||||
|
| |||||||
Net gain on investment transactions | 8,738,818 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 8,839,204 | ||||||
|
|
See notes to financial statements.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 17 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income (loss) | $ | 100,386 | $ | (269,113 | ) | |||
Net realized gain on investment transactions | 5,594,305 | 14,992,234 | ||||||
Net change in unrealized appreciation/depreciation of investments | 3,144,513 | 10,017,634 | ||||||
|
|
|
| |||||
Net increase in net assets from operations | 8,839,204 | 24,740,755 | ||||||
Distributions to Shareholders from | ||||||||
Net realized gain on investment transactions | ||||||||
Class A | (10,665,866 | ) | (781,811 | ) | ||||
Class C | (2,276 | ) | (297 | ) | ||||
Advisor Class | (3,970,011 | ) | (166,713 | ) | ||||
Capital Stock Transactions | ||||||||
Net increase | 22,784,417 | 100,051,940 | ||||||
|
|
|
| |||||
Total increase | 16,985,468 | 123,843,874 | ||||||
Net Assets | ||||||||
Beginning of period | 271,627,705 | 147,783,831 | ||||||
|
|
|
| |||||
End of period (including accumulated net investment loss of ($185,137) and ($285,523), respectively) | $ | 288,613,173 | $ | 271,627,705 | ||||
|
|
|
|
See notes to financial statements.
18 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
May 31, 2018 (unaudited)
NOTE A
Significant Accounting Policies
AB Cap Fund, Inc. (the “Company”), which is a Maryland corporation, is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company operates as a series company currently comprised of 28 portfolios. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Small Cap Value Portfolio (the “Fund”), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Class B, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. 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. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 19 |
NOTES TO FINANCIAL STATEMENTS (continued)
securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements
20 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
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
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 21 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 May 31, 2018:
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks(a) | $ | 283,025,839 | $ | – 0 | – | $ | – 0 | – | $ | 283,025,839 | ||||||
Short-Term Investments | 6,178,279 | – 0 | – | – 0 | – | 6,178,279 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 3,451,169 | – 0 | – | – 0 | – | 3,451,169 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 292,655,287 | – 0 | – | – 0 | – | 292,655,287 | ||||||||||
Other Financial Instruments(b) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
Total(c) | $ | 292,655,287 | $ | – 0 | – | $ | – 0 | – | $ | 292,655,287 | ||||||
|
|
|
|
|
|
|
|
(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 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”)
22 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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.
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
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 23 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 tax year 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 Company are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .80% of the Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent
24 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB Mutual Funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transactions costs) on an annual basis (the “Expense Caps”) to 1.25%, 2.00%, and 1.00% of daily average net assets for Class A, Class C, and Advisor Class shares, respectively. For the six months ended May 31, 2018, the reimbursements/waivers amounted to $10. The Expense Caps may not be terminated by the Adviser before February 28, 2019. Any fees waived and expenses borne by the Adviser through December 2, 2015 are subject to repayment by the Fund until the end of the third fiscal year after the fiscal period in which the fee were waived or the expense were borne; such waivers that are subject to repayment amount to $300,074 for the period ended November 30. 2015 and $1,186 for the period ended November 30, 2016. During the six months ended May 31, 2018 and the year ended November 30, 2017, the Fund made repayments to the Adviser in the amount of $79,056 and $35,439, respectively. In any case, no reimbursement payment will be made that would cause the Fund’s total annual operating expenses to exceed the net fee percentages set forth above.
Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended May 31, 2018, the reimbursement for such services amounted to $31,669.
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 $9,055 for the six months ended May 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 $129 from the sale of Class A shares and received $0 and $0 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the six months ended May 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
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 25 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 May 31, 2018, such waiver amounted to $7,238.
A summary of the Fund’s transactions in AB mutual funds for the six months ended May 31, 2018 is as follows:
Fund | Market Value 11/30/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 5/31/18 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 6,358 | $ | 29,989 | $ | 30,169 | $ | 6,178 | $ | 45 | ||||||||||
Government Money Market Portfolio* | 11,906 | 35,084 | 43,539 | 3,451 | 42 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 9,629 | $ | 87 | ||||||||||||||||
|
|
|
|
* | Investments of cash collateral for securities lending transactions (see Note E). |
Brokerage commissions paid on investment transactions for the six months ended May 31, 2018 amounted to $126, of which $126 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 .25% of the Fund’s average daily net assets attributable to Class A shares and 1% of the Fund’s average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $-0- for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the
26 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the six months ended May 31, 2018 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding | $ | 53,712,987 | $ | 43,210,174 | ||||
U.S. government securities | – 0 | – | – 0 | – |
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 | $ | 43,933,976 | ||
Gross unrealized depreciation | (8,295,822 | ) | ||
|
| |||
Net unrealized appreciation | $ | 35,638,154 | ||
|
|
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 May 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
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 27 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 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 May 31, 2018, the Fund had securities on loan with a value of $3,209,227 and had received cash collateral which has been invested into Government Money Market Portfolio of $3,451,169. 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 $41,873 from the borrowers and Government Money Market Portfolio, respectively, for the six months ended May 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 May 31, 2018, such
28 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
waiver amounted to $4,824. 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.
NOTE F
Capital Stock
Each class consists of 1,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:
Shares | Amount | |||||||||||||||||||||||
Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | Six Months Ended May 31, 2018 (unaudited) | Year Ended November 30, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 207,310 | 4,811,022 | $ | 2,720,166 | $ | 61,770,401 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares issued in reinvestment of distributions | 795,515 | 59,939 | 10,461,022 | 774,410 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares converted from Class C | 119 | 1,939 | 1,567 | 24,722 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares redeemed | (566,318 | ) | (1,826,273 | ) | (7,494,566 | ) | (23,440,508 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net increase | 436,626 | 3,046,627 | $ | 5,688,189 | $ | 39,129,025 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 2,206 | 2,052 | $ | 29,350 | $ | 26,282 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares issued in reinvestment of distributions | 118 | 18 | 1,518 | 227 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares converted to Class A | (122 | ) | (1,971 | ) | (1,567 | ) | (24,722 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares redeemed | (386 | ) | (1,366 | ) | (5,147 | ) | (17,102 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net increase (decrease) | 1,816 | (1,267 | ) | $ | 24,154 | $ | (15,315 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Shares sold | 1,159,781 | 4,902,226 | $ | 15,595,489 | $ | 64,626,729 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares issued in reinvestment of distributions | 299,298 | 12,834 | 3,968,694 | 166,713 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Shares redeemed | (186,662 | ) | (298,177 | ) | (2,492,109 | ) | (3,855,212 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net increase | 1,272,417 | 4,616,883 | $ | 17,072,074 | $ | 60,938,230 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 29 |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE G
Risks Involved in Investing in the Fund
Capitalization Risk—Investments in small-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.
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 May 31, 2018. Effective July 3, 2018, the Facility will be increased to $325 million.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending November 30, 2018 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended November 30, 2017 and November 30, 2016 were as follows:
2017 | 2016 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | – 0 | – | $ | 384,988 | |||
Net long-term capital gains | 948,821 | 37,926 | ||||||
|
|
|
| |||||
Total taxable distributions paid | $ | 948,821 | $ | 422,914 | ||||
|
|
|
|
30 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
As of November 30, 2017, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 2,391,028 | ||
Undistributed capital gains | 12,246,089 | |||
Other losses | (285,523 | )(a) | ||
Unrealized appreciation/(depreciation) | 31,823,741 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 46,175,335 | ||
|
|
(a) | At November 30, 2017, the Fund had a qualified late-year ordinary loss deferral of $285,523. This loss is deemed to arise on December 1, 2017. |
(b) | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
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 incurred for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of November 30, 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.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 31 |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A | ||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | December 3, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, beginning of period | $ 14.01 | $ 12.65 | $ 10.64 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income (loss)(b)(c) | .00 | (d) | (.02 | ) | (.01 | ) | .00 | (d) | ||||||||
Net realized and unrealized gain on investment transactions | .42 | 1.45 | 2.07 | .66 | ||||||||||||
|
| |||||||||||||||
Net increase in net asset value from operations | .42 | 1.43 | 2.06 | .66 | ||||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | – 0 | – | – 0 | – | (.01 | ) | (.02 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.76 | ) | (.07 | ) | (.04 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.76 | ) | (.07 | ) | (.05 | ) | (.02 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 13.67 | $ 14.01 | $ 12.65 | $ 10.64 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(e) | 3.19 | % | 11.35 | % | 19.52 | % | 6.62 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $199,006 | $197,908 | $140,096 | $79,707 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | 1.24 | %^ | 1.24 | % | 1.25 | % | 1.25 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 1.25 | %^ | 1.25 | % | 1.43 | % | 1.91 | %^ | ||||||||
Net investment income (loss)(c) | .00 | %(g)^ | (.18 | )% | (.12 | )% | .02 | %^ | ||||||||
Portfolio turnover rate | 16 | % | 36 | % | 51 | % | 43 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying portfolios: |
| |||||||||||||||
0.01 | % | 0.01 | %^^ | 0.01 | %^^ | 0.00 | %^^ |
See footnote summary on page 35.
32 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C | ||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | December 3, 2014(a) to November 30, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, beginning of period | $ 13.72 | $ 12.48 | $ 10.56 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment loss(b)(c) | (.05 | ) | (.12 | ) | (.09 | ) | (.08 | ) | ||||||||
Net realized and unrealized gain on investment transactions | .41 | 1.43 | 2.05 | .66 | ||||||||||||
|
| |||||||||||||||
Net increase in net asset value from operations | .36 | 1.31 | 1.96 | .58 | ||||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | – 0 | – | – 0 | – | – 0 | – | (.02 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.76 | ) | (.07 | ) | (.04 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.76 | ) | (.07 | ) | (.04 | ) | (.02 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 13.32 | $ 13.72 | $ 12.48 | $ 10.56 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(e) | 2.80 | % | 10.53 | % | 18.62 | % | 5.78 | % | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $64 | $41 | $53 | $34 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | 1.99 | %^ | 1.99 | % | 2.00 | % | 2.00 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 2.04 | %^ | 2.07 | % | 2.31 | % | 4.26 | %^ | ||||||||
Net investment loss(c) | (.76 | )%^ | (.94 | )% | (.84 | )% | (.75 | )%^ | ||||||||
Portfolio turnover rate | 16 | % | 36 | % | 51 | % | 43 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying portfolios: |
| |||||||||||||||
0.01 | % | 0.01 | %^^ | 0.01 | %^^ | 0.00 | %^^ |
See footnote summary on page 35.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 33 |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | December 3, 2014(a) to November 30, 2015 | ||||||||||||||
2017 | 2016 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net asset value, beginning of period | $ 14.12 | $ 12.71 | $ 10.66 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income(b)(c) | .02 | .01 | .01 | .02 | ||||||||||||
Net realized and unrealized gain on investment transactions | .42 | 1.47 | 2.09 | .66 | ||||||||||||
|
| |||||||||||||||
Net increase in net asset value from operations | .44 | 1.48 | 2.10 | .68 | ||||||||||||
|
| |||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||
Dividends from net investment income | – 0 | – | – 0 | – | (.01 | ) | (.02 | ) | ||||||||
Distributions from net realized gain on investment transactions | (.76 | ) | (.07 | ) | (.04 | ) | – 0 | – | ||||||||
|
| |||||||||||||||
Total dividends and distributions | (.76 | ) | (.07 | ) | (.05 | ) | (.02 | ) | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 13.80 | $ 14.12 | $ 12.71 | $ 10.66 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(e) | 3.31 | % | 11.69 | % | 19.74 | % | 6.83 | %(h) | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $89,543 | $73,679 | $7,635 | $4,075 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements(f)† | .99 | %^ | .99 | % | 1.00 | % | 1.00 | %^ | ||||||||
Expenses, before waivers/reimbursements(f)† | 1.00 | %^ | 1.00 | % | 1.19 | % | 3.55 | %^ | ||||||||
Net investment income(c) | .25 | %^ | .07 | % | .11 | % | .24 | %^ | ||||||||
Portfolio turnover rate | 16 | % | 36 | % | 51 | % | 43 | % | ||||||||
† Expense ratios exclude the acquired fund fees of affiliated/unaffiliated underlying portfolios: |
| |||||||||||||||
0. | 01 % | 0.01 | %^^ | 0.01 | %^^ | 0.00 | %^^ |
See footnote summary on page 35.
34 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
(a) | Commencement of operations. |
(b) | Based on average shares outstanding. |
(c) | Net of fees and expenses waived/reimbursed by the Adviser. |
(d) | Amount is less than $.005. |
(e) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. 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. |
(f) | 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 May 31, 2018 and year ended November 30, 2017, such waiver amounted to .01% (annualized) and .01%, respectively. |
(g) | Amount is less than .005%. |
(h) | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
^ | Annualized. |
^^ | Unaudited. |
See notes to financial statements.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 35 |
BOARD OF DIRECTORS
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 J. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
James W. MacGregor(2) , Vice President Shri Singhvi(2), Vice President Emilie D. Wrapp, Secretary | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent | Legal Counsel | |
State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Seward & Kissel LLP One Battery Park Plaza New York, NY 10004
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 management of, and investment decisions for, the Fund’s portfolio are made by the Investment Policy Team. Messrs. MacGregor and Singhvi are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
36 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Small Cap Value Portfolio (the “Fund”) at a meeting held on May 1-3, 2018 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including materials from an outside consultant, who acted as their independent fee consultant, and comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 37 |
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Company’s prior Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2016 and 2017 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Company’s prior Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of 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.
38 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
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 somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an 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 group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1- and 3-year periods ended February 28, 2018 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s contractual advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients pursuing a similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and the materials from the Fund’s Senior Analyst and noted the differences
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 39 |
between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and 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 Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions; (iii) must prepare and distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to funds such as the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The directors concluded, based on the Adviser’s explanation of how it may use ETFs when they are the most cost-effective way to obtain desired exposures for a fund or to temporarily “equitize” cash inflows pending purchases of underlying securities, that the advisory fee for the Fund would be paid for services that would be in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
The directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the effects of any fee waivers and/or expense reimbursements as a result of the Adviser’s expense cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were
40 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund does not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and 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. The directors informed the Adviser that they would monitor the Fund’s assets (which were well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 41 |
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
FlexFee™ International Strategic Core Portfolio
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
FlexFee™ Emerging Markets Growth Portfolio
INTERNATIONAL/ GLOBAL EQUITY (continued)
Sustainable International Thematic Fund1
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 Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
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 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. |
42 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 43 |
NOTES
44 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
AB SMALL CAP VALUE PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
SCV-0152-0518
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-2(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 (a) (1) | Code of Ethics that is subject to the disclosure of Item 2 hereof | |
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): AB Cap Fund, Inc.
By: | /s/ Robert M. Keith | |
Robert M. Keith | ||
President |
Date: July 27, 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: July 27, 2018
By: | /s/ Joseph J. Mantineo | |
Joseph J. Mantineo | ||
Treasurer and Chief Financial Officer |
Date: July 27, 2018