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, 2021
Date of reporting period: May 31, 2021
ITEM 1. REPORTS TO STOCKHOLDERS.
MAY 05.31.21
SEMI-ANNUAL REPORT
AB ALL CHINA EQUITY PORTFOLIO
As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
FROM THE PRESIDENT |
Dear Shareholder,
We’re pleased to provide this report for the AB All China Equity Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.
At AB, we’re striving to help our clients achieve better outcomes by:
+ | Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets |
+ | Applying differentiated investment insights through a connected global research network |
+ | Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions |
Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.
For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in AB mutual funds—and for placing your trust in our firm.
Sincerely,
Onur Erzan
President and Chief Executive Officer, AB Mutual Funds
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 1 |
SEMI-ANNUAL REPORT
July 8, 2021
This report provides management’s discussion of fund performance for the AB All China Equity Portfolio for the semi-annual reporting period ended May 31, 2021.
The Fund’s investment objective is to seek long-term growth of capital.
NAV RETURNS AS OF MAY 31, 2021 (unaudited)
6 Months | 12 Months | |||||||
AB ALL CHINA EQUITY PORTFOLIO | ||||||||
Class A Shares | 8.03% | 37.84% | ||||||
Advisor Class Shares1 | 8.16% | 38.26% | ||||||
MSCI China All Shares Index (net) | 7.91% | 45.21% |
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 to its benchmark, the Morgan Stanley Capital International (“MSCI”) China All Shares Index (net), for the six- and 12-month periods ended May 31, 2021.
All share classes of the Fund outperformed the benchmark in the six-month period but underperformed for the 12-month period, before sales charges. During the first half of the 12-month period, the Fund’s lack of exposure to many high-flying Internet businesses, such as e-commerce companies and online game providers, detracted, relative to the benchmark. However, as those high-growth stocks became very expensive, and as the market’s recovery began to broaden in the second half of the period, the Fund’s balanced, diversified portfolio composition contributed.
During the six-month period, stock selection within the consumer-discretionary and industrials sectors contributed, while selection in technology and health care detracted. During the 12-month period, stock selection within the technology and health-care sectors detracted, while selection in communication services and industrials contributed.
The Fund did not utilize derivatives during either period.
2 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
MARKET REVIEW AND INVESTMENT STRATEGY
Chinese equities rose during both the six- and 12-month periods ended May 31, 2021, as China managed to contain the COVID-19 pandemic better than most countries around the world. A robust recovery in exports, which benefited from a reopening in trade partners’ economies, and generous policy support at home, helped to make China the only major economy that logged positive growth in 2020.
During first half of the 12-month period, investors flocked to market darlings in the consumer and health-care sectors, which featured high growth but were volatile and expensive. This fueled strong headwinds for the Fund, but it also created distortions that the Fund’s Senior Investment Management Team (the “Team”) exploited to fuel a comeback in the second half of the period. As the economy moves back toward normal, the Team continues to focus on identifying attractive businesses that are benefiting from sustainable earnings growth but trading at compelling prices, as well as on moving up the quality scale without having to pay a hefty premium.
INVESTMENT POLICIES
The Adviser seeks to achieve the Fund’s investment objective by investing, under normal circumstances, at least 80% of the Fund’s net assets in a portfolio of equity securities of companies economically tied to the People’s Republic of China (“China”) (including Hong Kong). A company is considered to be economically tied to China if it: (i) is domiciled or organized in China; (ii) has securities that are traded principally in China; or (iii) conducts a substantial part of its economic activities in China. Equity securities may include common stocks, preferred stocks, the equity securities of real estate investment trusts, depositary receipts and derivative instruments related to equity securities. The Adviser expects to invest Fund assets both in shares of companies that trade on the Shanghai Stock Exchange or the Shenzhen Stock Exchange (“China A shares”) and shares of companies economically tied to China that trade in Hong Kong or outside of China.
The Adviser believes that, over time, securities that are undervalued by the market relative to their long-term earnings power can provide high returns. The Adviser utilizes fundamental analysis and its quantitative models to attempt to identify these securities for investment by the Fund, attempting to balance factors relating to valuation, company quality and investor sentiment, and will seek to build a portfolio that delivers attractive risk-adjusted returns.
The Adviser may, but frequently will not, hedge the foreign currency exposure resulting from the Fund’s security positions through the use of currency-related derivatives. The Fund is “non-diversified”.
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 3 |
DISCLOSURES AND RISKS
Benchmark Disclosure
The MSCI China All Shares Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI China All Shares Index captures large- and mid-cap representation across China A-shares, B-shares, H-shares, Red-chips, P-chips and foreign listings (e.g., American depositary receipts). The index aims to reflect the opportunity set of China share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. Net returns reflect the reinvestment of dividends after deduction of non-US withholding tax. An investor cannot invest directly in an index, and its results are not indicative 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, including public health crises (including the occurrence of a contagious disease or illness), 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.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors. Investments in emerging-market countries such as China may involve more risk than investments in developed countries because the markets in emerging-market countries are less developed and less liquid and are subject to increased economic, political, regulatory or other uncertainties. In addition, the value of the Fund’s investments may decline because of factors such as unfavorable or unsuccessful government actions and reduction in government or central bank support.
China/Single Country Risk: Investments in issuers located in a particular country or geographic region may have more risk because of particular market factors affecting that country or region, including political instability, geopolitical risks or unpredictable economic conditions. Risks of investments in securities of companies in China include the volatility of the Chinese stock market, heavy dependence on exports, which may be affected adversely by trade barriers or disputes or may decrease, sometimes significantly, when the world economy weakens, and the continuing
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DISCLOSURES AND RISKS (continued)
importance of the role of the Chinese government, which may take actions that affect economic and market practices. While the Chinese economy has grown at a rapid rate in recent years, the rate of growth has been declining, and there can be no assurance that China’s economy will continue to grow in the future. Investments in China A shares are subject to quotas that may restrict daily trading and to additional risks that could affect liquidity compared to investments in companies in developed markets. Risks of investments in companies based in Hong Kong include heavy reliance on the US economy and regional economies, particularly the Chinese economy, which makes these investments vulnerable to changes in these economies.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments in equity securities denominated in foreign currencies or reduce the Fund’s returns. Emerging-market currencies may be more volatile and less liquid, and subject to significantly greater risk of currency controls and convertibility restrictions, than currencies of developed countries.
Depositary Receipts Risk: Investing in depositary receipts involves risks that are similar to the risks of direct investments in foreign securities. For example, investing in depositary receipts may involve risks relating to political, economic or regulatory conditions in foreign countries. In addition, the issuers of the securities underlying certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally go down.
Non-Diversification Risk: The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value (“NAV”).
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 5 |
DISCLOSURES AND RISKS (continued)
Industry/Sector Risk: Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
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HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF MAY 31, 2021 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
CLASS A SHARES | ||||||||
1 Year | 37.84% | 31.95% | ||||||
Since Inception1 | 11.74% | 10.06% | ||||||
ADVISOR CLASS SHARES2 | ||||||||
1 Year | 38.26% | 38.26% | ||||||
Since Inception1 | 12.02% | 12.02% |
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.56% and 1.31% for Class A and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios, exclusive of acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs, to 1.50% and 1.25% for Class A and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before February 28, 2022, and may be extended by the Adviser for additional one-year terms. Any fees waived and expenses borne by the Adviser may be reimbursed by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne, provided that no reimbursement payment will be made that would cause the Fund’s covered operating expenses to exceed the applicable expense limitations. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | Inception date: 7/25/2018. |
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 CHINA EQUITY PORTFOLIO | 7 |
HISTORICAL PERFORMANCE (continued)
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
JUNE 30, 2021 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 21.17% | |||
Since Inception1 | 9.54% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 26.79% | |||
Since Inception1 | 11.44% |
1 | Inception date: 7/25/2018. |
2 | Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund. |
8 | AB ALL CHINA EQUITY 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.
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EXPENSE EXAMPLE (continued)
Beginning Account Value December 1, 2020 | Ending Account Value May 31, 2021 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,080.30 | $ | 7.47 | 1.44 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.75 | $ | 7.24 | 1.44 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,081.60 | $ | 6.18 | 1.19 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.00 | $ | 5.99 | 1.19 | % |
* | 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). |
** | Assumes 5% annual return before expenses. |
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PORTFOLIO SUMMARY
May 31, 2021 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $204.5
1 | All data are as of May 31, 2021. The Fund’s sector and country breakdowns are expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.
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PORTFOLIO SUMMARY (continued)
May 31, 2021 (unaudited)
TEN LARGEST HOLDINGS1
Company | U.S. $ Value | Percent of Net Assets | ||||||
Tencent Holdings Ltd. | $ | 17,829,157 | 8.7 | % | ||||
Alibaba Group Holding Ltd. | 16,730,924 | 8.2 | ||||||
China Construction Bank Corp. – Class H | 6,953,118 | 3.4 | ||||||
Kweichow Moutai Co., Ltd. – Class A | 6,128,655 | 3.0 | ||||||
Meituan – Class B | 5,888,347 | 2.9 | ||||||
China Merchants Bank Co., Ltd. – Class H | 5,088,618 | 2.5 | ||||||
NetEase, Inc. | 4,677,054 | 2.3 | ||||||
Ping An Insurance Group Co. of China, Ltd. – Class A | 4,584,664 | 2.2 | ||||||
Contemporary Amperex Technology Co., Ltd. – Class A | 4,371,232 | 2.1 | ||||||
Industrial Bank Co., Ltd. – Class A | 4,225,654 | 2.1 | ||||||
$ | 76,477,423 | 37.4 | % |
1 | Long-term investments. |
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PORTFOLIO OF INVESTMENTS
May 31, 2021 (unaudited)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
COMMON STOCKS – 98.5% | ||||||||
Consumer Discretionary – 25.9% | ||||||||
Auto Components – 0.4% | ||||||||
Huayu Automotive Systems Co., Ltd. – Class A | 211,800 | $ | 803,226 | |||||
|
| |||||||
Automobiles – 0.5% | ||||||||
Great Wall Motor Co., Ltd. – Class H | 354,000 | 982,138 | ||||||
|
| |||||||
Diversified Consumer Services – 1.8% | ||||||||
Fu Shou Yuan International Group Ltd. | 1,820,000 | 1,952,405 | ||||||
New Oriental Education & Technology Group, Inc.(a) | 166,400 | 1,685,424 | ||||||
|
| |||||||
3,637,829 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure – 5.5% | ||||||||
Galaxy Entertainment Group Ltd.(a) | 469,000 | 3,929,691 | ||||||
Jiumaojiu International Holdings Ltd.(a)(b) | 844,000 | 3,316,343 | ||||||
Melco Resorts & Entertainment Ltd. (ADR)(a) | 155,090 | 2,665,997 | ||||||
Shenzhen Overseas Chinese Town Co., Ltd. – Class A(a) | 1,056,100 | 1,383,344 | ||||||
|
| |||||||
11,295,375 | ||||||||
|
| |||||||
Household Durables – 1.3% | ||||||||
TCL Technology Group Corp. – Class A | 2,029,000 | 2,593,786 | ||||||
|
| |||||||
Internet & Direct Marketing Retail – 11.0% | ||||||||
Alibaba Group Holding Ltd.(a) | 625,560 | 16,730,924 | ||||||
Meituan – Class B(a)(b) | 168,000 | 5,888,347 | ||||||
|
| |||||||
22,619,271 | ||||||||
|
| |||||||
Specialty Retail – 2.8% | ||||||||
China Tourism Group Duty Free Corp., Ltd. – Class A | 36,431 | 1,976,789 | ||||||
Topsports International Holdings Ltd.(b) | 1,000,000 | 1,547,718 | ||||||
Zhongsheng Group Holdings Ltd. | 260,000 | 2,162,503 | ||||||
|
| |||||||
5,687,010 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods – 2.6% | ||||||||
Li Ning Co., Ltd. | 411,000 | 3,778,652 | ||||||
Shenzhou International Group Holdings Ltd. | 61,000 | 1,607,986 | ||||||
|
| |||||||
5,386,638 | ||||||||
|
| |||||||
53,005,273 | ||||||||
|
| |||||||
Financials – 18.8% | ||||||||
Banks – 14.1% | ||||||||
Agricultural Bank of China Ltd. – Class H | 4,806,000 | 1,950,078 | ||||||
Bank of Hangzhou Co., Ltd. – Class A | 884,600 | 2,305,025 | ||||||
Bank of Nanjing Co., Ltd. – Class A | 1,256,200 | 2,029,439 | ||||||
China Construction Bank Corp. – Class H | 8,439,000 | 6,953,118 | ||||||
China Merchants Bank Co., Ltd. – Class H | 550,000 | 5,088,618 | ||||||
Industrial Bank Co., Ltd. – Class A(a) | 1,154,400 | 4,225,654 | ||||||
Ping An Bank Co., Ltd. – Class A | 866,273 | 3,338,820 |
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 13 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Shanghai Pudong Development Bank Co., Ltd. – Class A | 1,828,270 | $ | 2,976,008 | |||||
|
| |||||||
28,866,760 | ||||||||
|
| |||||||
Capital Markets – 2.5% | ||||||||
CITIC Securities Co., Ltd. – Class A(a) | 425,310 | 1,752,057 | ||||||
GF Securities Co., Ltd. – Class H | 679,000 | 979,641 | ||||||
Hithink RoyalFlush Information Network Co., Ltd. – Class A | 54,600 | 1,024,980 | ||||||
Huatai Securities Co., Ltd. – Class H(b) | 820,000 | 1,268,598 | ||||||
|
| |||||||
5,025,276 | ||||||||
|
| |||||||
Insurance – 2.2% | ||||||||
Ping An Insurance Group Co. of China, Ltd. – Class A | 399,193 | 4,584,664 | ||||||
|
| |||||||
38,476,700 | ||||||||
|
| |||||||
Communication Services – 11.0% | ||||||||
Entertainment – 2.3% | ||||||||
NetEase, Inc.(c) | 199,100 | 4,677,054 | ||||||
|
| |||||||
Interactive Media & Services – 8.7% | ||||||||
Tencent Holdings Ltd. | 228,050 | 17,829,157 | ||||||
|
| |||||||
22,506,211 | ||||||||
|
| |||||||
Materials – 8.4% | ||||||||
Chemicals – 1.5% | ||||||||
Luxi Chemical Group Co., Ltd. – Class A | 645,500 | 1,660,219 | ||||||
Wanhua Chemical Group Co., Ltd. – Class A | 89,200 | 1,533,830 | ||||||
|
| |||||||
3,194,049 | ||||||||
|
| |||||||
Construction Materials – 0.5% | ||||||||
Gansu Shangfeng Cement Co., Ltd. – Class A | 288,500 | 978,238 | ||||||
|
| |||||||
Metals & Mining – 5.4% | ||||||||
Baoshan Iron & Steel Co., Ltd. – Class A | 2,360,879 | 2,926,974 | ||||||
Ganfeng Lithium Co., Ltd. – Class A | 55,100 | 1,034,701 | ||||||
Nanjing Iron & Steel Co., Ltd. | 1,748,200 | 1,019,088 | ||||||
Shandong Nanshan Aluminum Co., Ltd. – Class A(a) | 3,681,700 | 2,335,820 | ||||||
Zijin Mining Group Co., Ltd. – Class A | 2,118,050 | 3,741,436 | ||||||
|
| |||||||
11,058,019 | ||||||||
|
| |||||||
Paper & Forest Products – 1.0% | ||||||||
Shandong Chenming Paper Holdings, Ltd. – Class A(a) | 1,234,800 | 1,995,759 | ||||||
|
| |||||||
17,226,065 | ||||||||
|
| |||||||
Information Technology – 7.9% | ||||||||
Electronic Equipment, Instruments & Components – 4.2% | ||||||||
BOE Technology Group Co., Ltd. – Class A | 1,776,400 | 1,761,450 | ||||||
Kingboard Laminates Holdings Ltd. | 811,000 | 1,754,058 | ||||||
Luxshare Precision Industry Co., Ltd. – Class A | 532,410 | 3,293,236 |
14 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Wuxi Lead Intelligent Equipment Co., Ltd. – Class A | 117,500 | $ | 1,670,037 | |||||
|
| |||||||
8,478,781 | ||||||||
|
| |||||||
IT Services – 3.1% | ||||||||
21Vianet Group, Inc. (ADR)(a) | 165,120 | 3,685,478 | ||||||
GDS Holdings Ltd.(a) | 292,040 | 2,707,268 | ||||||
|
| |||||||
6,392,746 | ||||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 0.6% | ||||||||
LONGi Green Energy Technology Co., Ltd. – Class A | 82,700 | 1,267,408 | ||||||
|
| |||||||
16,138,935 | ||||||||
|
| |||||||
Consumer Staples – 7.8% |
| |||||||
Beverages – 6.5% | ||||||||
Anhui Kouzi Distillery Co., Ltd. – Class A | 130,725 | 1,387,414 | ||||||
Anhui Yingjia Distillery Co., Ltd. – Class A | 226,400 | 1,499,191 | ||||||
Kweichow Moutai Co., Ltd. – Class A | 17,463 | 6,128,655 | ||||||
Tsingtao Brewery Co., Ltd. – Class A(a) | 141,055 | 2,327,403 | ||||||
Wuliangye Yibin Co., Ltd. – Class A | 40,336 | 2,013,997 | ||||||
|
| |||||||
13,356,660 | ||||||||
|
| |||||||
Food & Staples Retailing – 0.7% | ||||||||
Yixintang Pharmaceutical Group Co., Ltd. – Class A | 218,700 | 1,343,478 | ||||||
|
| |||||||
Food Products – 0.6% | ||||||||
WH Group Ltd.(b) | 1,368,500 | 1,180,181 | ||||||
|
| |||||||
15,880,319 | ||||||||
|
| |||||||
Industrials – 7.0% |
| |||||||
Building Products – 0.6% | ||||||||
Zhuzhou Kibing Group Co., Ltd. – Class A | 482,200 | 1,223,913 | ||||||
|
| |||||||
Commercial Services & Supplies – 1.6% | ||||||||
Ever Sunshine Lifestyle Services Group Ltd.(b) | 1,141,800 | 3,160,635 | ||||||
|
| |||||||
Electrical Equipment – 2.6% | ||||||||
Contemporary Amperex Technology Co., Ltd. – Class A | 67,849 | 4,371,232 | ||||||
NARI Technology Co., Ltd. – Class A(a) | 217,234 | 1,035,223 | ||||||
|
| |||||||
5,406,455 | ||||||||
|
| |||||||
Machinery – 1.7% | ||||||||
Zoomlion Heavy Industry Science and Technology Co., Ltd. – Class A(a) | 2,045,034 | 3,522,471 | ||||||
|
| |||||||
Road & Rail – 0.5% | ||||||||
Daqin Railway Co., Ltd. – Class A | 974,237 | 1,061,698 | ||||||
|
| |||||||
14,375,172 | ||||||||
|
|
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 15 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Health Care – 4.9% |
| |||||||
Health Care Providers & Services – 1.4% | ||||||||
Aier Eye Hospital Group Co., Ltd. – Class A(a) | 87,500 | $ | 1,156,200 | |||||
Shanghai Pharmaceuticals Holding Co., Ltd. – Class H | 751,900 | 1,643,656 | ||||||
|
| |||||||
2,799,856 | ||||||||
|
| |||||||
Life Sciences Tools & Services – 0.5% | ||||||||
Wuxi Biologics Cayman, Inc.(a)(b) | 76,000 | 1,127,930 | ||||||
|
| |||||||
Pharmaceuticals – 3.0% | ||||||||
Jiangsu Hengrui Medicine Co., Ltd. – Class A(a) | 139,577 | 1,886,398 | ||||||
Joincare Pharmaceutical Group Industry Co., Ltd. – Class A | 383,800 | 895,074 | ||||||
Livzon Pharmaceutical Group, Inc. – Class A | 203,675 | 1,558,151 | ||||||
Yunnan Baiyao Group Co., Ltd. – Class A | 91,603 | 1,797,464 | ||||||
|
| |||||||
6,137,087 | ||||||||
|
| |||||||
10,064,873 | ||||||||
|
| |||||||
Real Estate – 3.5% | ||||||||
Real Estate Management & Development – 3.5% | ||||||||
China Resources Land Ltd. | 288,000 | 1,360,775 | ||||||
CIFI Holdings Group Co., Ltd. | 3,399,083 | 2,962,060 | ||||||
KWG Living Group Holdings Ltd.(a)(b) | 377,600 | 382,358 | ||||||
Midea Real Estate Holding Ltd.(b)(c) | 788,400 | 1,885,403 | ||||||
Times Neighborhood Holdings Ltd.(b) | 695,000 | 532,950 | ||||||
|
| |||||||
7,123,546 | ||||||||
|
| |||||||
Utilities – 3.3% |
| |||||||
Gas Utilities – 2.5% | ||||||||
ENN Energy Holdings Ltd. | 70,000 | 1,286,844 | ||||||
Kunlun Energy Co., Ltd. | 3,334,000 | 3,785,410 | ||||||
|
| |||||||
5,072,254 | ||||||||
|
| |||||||
Independent Power and Renewable Electricity Producers – 0.8% | ||||||||
China Longyuan Power Group Corp., Ltd. – Class H | 1,129,000 | 1,622,554 | ||||||
|
| |||||||
6,694,808 | ||||||||
|
| |||||||
Total Common Stocks | 201,491,902 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS – 1.2% |
| |||||||
Investment Companies – 1.2% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.01%(d)(e)(f) | 2,395,763 | 2,395,763 | ||||||
|
| |||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 99.7% | 203,887,665 | |||||||
|
|
16 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.0% | ||||||||
Investment Companies – 0.0% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.01%(d)(e)(f) | 42,132 | $ | 42,132 | |||||
|
| |||||||
Total Investments – 99.7% | 203,929,797 | |||||||
Other assets less liabilities – 0.3% | 570,792 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 204,500,589 | ||||||
|
|
(a) | Non-income producing security. |
(b) | 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, 2021, the aggregate market value of these securities amounted to $20,290,463 or 9.9% of net assets. |
(c) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(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. |
(f) | Affiliated investments. |
Glossary:
ADR – American Depositary Receipt
See notes to financial statements.
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 17 |
STATEMENT OF ASSETS & LIABILITIES
May 31, 2021 (unaudited)
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $163,697,763) | $ | 201,491,902 | (a) | |
Affiliated issuers (cost $2,437,895—including investment of cash collateral for securities loaned of $42,132) | 2,437,895 | |||
Foreign currencies, at value (cost $114,247) | 116,324 | |||
Receivable for capital stock sold | 824,906 | |||
Unaffiliated dividends receivable | 169,840 | |||
Affiliated dividends receivable | 23 | |||
|
| |||
Total assets | 205,040,890 | |||
|
| |||
Liabilities | ||||
Payable for capital stock redeemed | 208,408 | |||
Advisory fee payable | 148,972 | |||
Custody and accounting fees payable | 50,599 | |||
Payable for collateral received on securities loaned | 42,132 | |||
Administrative fee payable | 39,353 | |||
Transfer Agent fee payable | 2,968 | |||
Directors’ fee payable | 950 | |||
Distribution fee payable | 494 | |||
Accrued expenses and other liabilities | 46,425 | |||
|
| |||
Total liabilities | 540,301 | |||
|
| |||
Net Assets | $ | 204,500,589 | ||
|
| |||
Composition of Net Assets | ||||
Capital stock, at par | $ | 1,504 | ||
Additional paid-in capital | 158,006,418 | |||
Distributable earnings | 46,492,667 | |||
|
| |||
$ | 204,500,589 | |||
|
|
Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value
Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
A | $ | 2,543,835 | 187,597 | $ | 13.56 | * | ||||||
| ||||||||||||
Advisor | $ | 201,956,754 | 14,852,272 | $ | 13.60 | |||||||
|
(a) | Includes securities on loan with a value of $708,689 (See Note E). |
* | The maximum offering price per share for Class A shares was $14.16 which reflects a sales charge of 4.25%. |
See notes to financial statements.
18 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2021 (unaudited)
Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers (net of foreign taxes withheld of $35,959) | $ | 510,090 | ||||||
Affiliated issuers | 165 | |||||||
Securities lending income | 13,938 | $ | 524,193 | |||||
|
| |||||||
Expenses | ||||||||
Advisory fee (see Note B) | 853,718 | |||||||
Transfer agency—Class A | 164 | |||||||
Transfer agency—Advisor Class | 11,351 | |||||||
Distribution fee—Class A | 3,201 | |||||||
Custody and accounting | 68,578 | |||||||
Administrative | 45,826 | |||||||
Audit and tax | 25,678 | |||||||
Registration fees | 23,340 | |||||||
Legal | 14,591 | |||||||
Directors’ fees | 9,754 | |||||||
Printing | 8,793 | |||||||
Miscellaneous | 10,266 | |||||||
|
| |||||||
Total expenses | 1,075,260 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Note B and Note E) | (756 | ) | ||||||
|
| |||||||
Net expenses | 1,074,504 | |||||||
|
| |||||||
Net investment loss | (550,311 | ) | ||||||
|
| |||||||
Realized and Unrealized Gain on Investment and Foreign Currency Transactions | ||||||||
Net realized gain on: | ||||||||
Investment transactions | 9,625,115 | |||||||
Foreign currency transactions | 21,104 | |||||||
Net change in unrealized appreciation/depreciation on: | ||||||||
Investments | 1,268,133 | |||||||
Foreign currency denominated assets and liabilities | 733 | |||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 10,915,085 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 10,364,774 | ||||||
|
|
See notes to financial statements.
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 19 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income (loss) | $ | (550,311 | ) | $ | 782,424 | |||
Net realized gain on investment and foreign currency transactions | 9,646,219 | 2,553,930 | ||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency denominated assets and liabilities | 1,268,866 | 25,312,322 | ||||||
|
|
|
| |||||
Net increase in net assets from operations | 10,364,774 | 28,648,676 | ||||||
Distributions to Shareholders | ||||||||
Class A | (5,465 | ) | (18,285 | ) | ||||
Advisor Class | (645,142 | ) | (1,057,302 | ) | ||||
Capital Stock Transactions | ||||||||
Net increase | 52,030,891 | 25,825,701 | ||||||
|
|
|
| |||||
Total increase | 61,745,058 | 53,398,790 | ||||||
Net Assets | ||||||||
Beginning of period | 142,755,531 | 89,356,741 | ||||||
|
|
|
| |||||
End of period | $ | 204,500,589 | $ | 142,755,531 | ||||
|
|
|
|
See notes to financial statements.
20 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
May 31, 2021 (unaudited)
NOTE A
Significant Accounting Policies
AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 13 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB All China Equity Portfolio (the “Fund”), a non-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 C, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares are not currently being offered. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Advisor Class shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All eleven classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 21 |
NOTES TO FINANCIAL STATEMENTS (continued)
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. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m.,
22 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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 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
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 23 |
NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021:
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks: | ||||||||||||||||
Consumer Discretionary | $ | 2,665,997 | $ | 50,339,276 | $ | – 0 | – | $ | 53,005,273 | |||||||
Financials | – 0 | – | 38,476,700 | – 0 | – | 38,476,700 | ||||||||||
Communication Services | – 0 | – | 22,506,211 | – 0 | – | 22,506,211 | ||||||||||
Materials | – 0 | – | 17,226,065 | – 0 | – | 17,226,065 | ||||||||||
Information Technology | 3,685,478 | 12,453,457 | – 0 | – | 16,138,935 | |||||||||||
Consumer Staples | – 0 | – | 15,880,319 | – 0 | – | 15,880,319 | ||||||||||
Industrials | – 0 | – | 14,375,172 | – 0 | – | 14,375,172 | ||||||||||
Health Care | – 0 | – | 10,064,873 | – 0 | – | 10,064,873 | ||||||||||
Real Estate | – 0 | – | 7,123,546 | – 0 | – | 7,123,546 | ||||||||||
Utilities | – 0 | – | 6,694,808 | – 0 | – | 6,694,808 | ||||||||||
Short-Term Investments: | ||||||||||||||||
Investment Companies | 2,395,763 | – 0 | – | – 0 | – | 2,395,763 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 42,132 | – 0 | – | – 0 | – | 42,132 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 8,789,370 | 195,140,427 | † | – 0 | – | 203,929,797 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other Financial Instruments* | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 8,789,370 | $ | 195,140,427 | $ | – 0 | – | $ | 203,929,797 | |||||||
|
|
|
|
|
|
|
|
† | A significant portion of the Fund’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1. |
* | 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. |
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 the 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
24 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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. The Fund’s investments in Chinese securities may be subject to a 10% Chinese Withholding Income Tax (“WIT”) on any dividends, interest or other income from Chinese sources, unless the statutory WIT of 10% is subject to reduction or exemption in accordance with the applicable tax treaty signed with China or domestic regulation.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 25 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 .95% of Fund’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs), on an annual basis (the “Expense Caps”) to 1.50% and 1.25% of the daily average net assets for Class A and Advisor Class, respectively. For the six months ended May 31, 2021, such reimbursements/waivers amounted to $0. The Expense Caps may not be terminated by the Adviser before February 28, 2022. Any fees waived and expenses borne by the Adviser through July 25, 2019 are subject to repayment by the Fund until the end of the third fiscal year after the fiscal period in which the fee was waived or the expense was borne; such waivers that are subject to repayment amount to $218,709 for the period ended November 30, 2018 and $202,645 for the year ended November 30, 2019. In any case, no repayment will be made that would cause the Fund’s total annual operating expenses to exceed the Expense Caps’ 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, 2021, the reimbursement for such services amounted to $45,826.
The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency
26 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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 $9,000 for the six months ended May 31, 2021.
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 no front-end sales charges from the sale of Class A shares and received no contingent deferred sales charges imposed upon redemptions by shareholders of Class A for the six months ended May 31, 2021.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended May 31, 2021, such waiver amounted to $715.
A summary of the Fund’s transactions in AB mutual funds for the six months ended May 31, 2021 is as follows:
Fund | Market Value 11/30/20 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 5/31/21 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 4,210 | $ | 29,813 | $ | 31,627 | $ | 2,396 | $ | 0 | * | |||||||||
Government Money Market Portfolio** | 3,221 | 4,628 | 7,807 | 42 | 0 | * | ||||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 2,438 | $ | 0 | * | |||||||||||||||
|
|
|
|
* | Amount is less than $500. |
** | Investment of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 27 |
NOTES TO FINANCIAL STATEMENTS (continued)
subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.) (“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings (and related transactions). As a result, as of May 20, 2021, AXA no longer owns shares of Equitable.
Sales that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolios’ investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares. There are no distribution and servicing fees on the Advisor Class. 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. 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, 2021, were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 92,438,584 | $ | 43,559,408 | ||||
U.S. government securities | – 0 | – | – 0 | – |
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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 | $ | 41,161,212 | ||
Gross unrealized depreciation | (3,367,073 | ) | ||
|
| |||
Net unrealized appreciation | $ | 37,794,139 | ||
|
|
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 derivative transactions for the six months ended May 31, 2021.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E
Securities Lending
The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and
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NOTES TO FINANCIAL STATEMENTS (continued)
for certain other administrative expenses. If the Fund receives non-cash collateral, the Fund will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Fund will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Fund earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Fund in 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. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower.
A summary of the Fund’s transactions surrounding securities lending for the six months ended May 31, 2021 is as follows:
Government Money Market Portfolio | ||||||||||||||||||||
Market Value of Securities on Loan* | Cash Collateral* | Market Value of Non-Cash Collateral* | Income from Borrowers | Income Earned | Advisory Fee Waived | |||||||||||||||
$ 708,689 | $ | 42,132 | $ | 723,021 | $ | 13,815 | $ | 123 | $ | 41 |
* | As of May 31, 2021. |
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NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021 (unaudited) | Year Ended November 30, 2020 | Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | – 0 | – | 548 | $ | – 0 | – | $ | 5,843 | ||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 422 | 1,178 | 5,436 | 12,351 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 422 | 1,726 | $ | 5,436 | $ | 18,194 | ||||||||||||||||||
| ||||||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Shares sold | 4,158,674 | 3,880,486 | $ | 57,934,332 | $ | 41,651,892 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 47,134 | 97,231 | 608,031 | 1,019,954 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (474,146 | ) | (1,559,422 | ) | (6,516,908 | ) | (16,864,339 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 3,731,662 | 2,418,295 | $ | 52,025,455 | $ | 25,807,507 | ||||||||||||||||||
|
NOTE G
Risks Involved in Investing in the Fund
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, including public health crises (including the occurrence of a contagious disease or illness), 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.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors. Investments in emerging market countries such as China may involve more risk than investments in developed countries because the markets in emerging market countries are less developed and less liquid and are subject to increased economic, political, regulatory, or other uncertainties. In addition, the value of the Fund’s investments may decline because of factors such as unfavorable or unsuccessful government actions and reduction in government or central bank support.
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NOTES TO FINANCIAL STATEMENTS (continued)
China/Single Country Risk—Investments in issuers located in a particular country or geographic region may have more risk because of particular market factors affecting that country or region, including political instability, geopolitical risks or unpredictable economic conditions. Risks of investments in securities of companies in China include the volatility of the Chinese stock market, heavy dependence on exports, which may be affected adversely by trade barriers or disputes or may decrease, sometimes significantly, when the world economy weakens, and the continuing importance of the role of the Chinese Government, which may take actions that affect economic and market practices. While the Chinese economy has grown at a rapid rate in recent years, the rate of growth has been declining, and there can be no assurance that China’s economy will continue to grow in the future. Investments in China A shares are subject to quotas that may restrict daily trading and to additional risks that could affect liquidity compared to investments in companies in developed markets. Risks of investments in companies based in Hong Kong include heavy reliance on the U.S. economy and regional economies, particularly the Chinese economy, which makes these investments vulnerable to changes in these economies.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments in equity securities denominated in foreign currencies or reduce the Fund’s returns. Emerging market currencies may be more volatile and less liquid, and subject to significantly greater risk of currency controls and convertibility restrictions, than currencies of developed countries.
Depositary Receipts Risk—Investing in depositary receipts involves risks that are similar to the risks of direct investments in foreign securities. For example, investing in depositary receipts may involve risks relating to political, economic or regulatory conditions in foreign countries. In addition, the issuers of the securities underlying certain depositary receipts are under no obligation to distribute shareholder communications or pass through any voting rights with respect to the deposited securities to the holders of such receipts.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
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NOTES TO FINANCIAL STATEMENTS (continued)
Non-Diversification Risk—The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.
Industry/Sector Risk—Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
LIBOR Transition and Associated Risk—A Fund may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. The United Kingdom Financial Conduct Authority, which regulates LIBOR, will cease publishing certain LIBOR benchmarks at the end of 2021. Although certain LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 33 |
NOTES TO FINANCIAL STATEMENTS (continued)
had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended May 31, 2021.
NOTE I
Distributions to Shareholders
The tax character of distributions paid for the year ending November 30, 2021 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended November 30, 2020 and November 30, 2019 were as follows:
2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 1,075,587 | $ | – 0 | – | |||
|
|
|
| |||||
Total taxable distributions paid | $ | 1,075,587 | $ | – 0 | – | |||
|
|
|
|
As of November 30, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 627,290 | ||
Accumulated capital and other losses | (121,699 | )(a) | ||
Unrealized appreciation/(depreciation) | 36,272,909 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | 36,778,500 | ||
|
|
(a) | As of November 30, 2020, the Fund had a net capital loss carryforward of $121,699. During the fiscal year, the Fund utilized $2,431,204 of capital loss carry forwards to offset current year net realized gains. |
(b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales. |
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NOTES TO FINANCIAL STATEMENTS (continued)
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of November 30, 2020, the Fund had a net short-term capital loss carryforward of $121,699, which may be carried forward for an indefinite period.
Note J
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.
NOTE K
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 35 |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A | ||||||||||||||||
Six Months Ended | Year Ended November 30, | July 25, 2018(a) to November 30, 2018 | ||||||||||||||
2020 | 2019 | |||||||||||||||
|
| |||||||||||||||
Net asset value, beginning of period | $ 12.58 | $ 10.02 | $ 8.37 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income (loss)(b)(c) | (.06 | ) | .04 | .10 | (.01 | ) | ||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.07 | 2.62 | 1.55 | (1.62 | ) | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net asset value from operations | 1.01 | 2.66 | 1.65 | (1.63 | ) | |||||||||||
|
| |||||||||||||||
Less: Dividends | ||||||||||||||||
Dividends from net investment income | (.03 | ) | (.10 | ) | – 0 | – | – 0 | – | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 13.56 | $ 12.58 | $ 10.02 | $ 8.37 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(d) | 8.03 | % | 26.73 | % | 19.71 | % | (16.30 | )% | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $2,544 | $2,355 | $1,859 | $685 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements | 1.44 | %(e) | 1.50 | % | 1.50 | % | 1.50 | %(e) | ||||||||
Expenses, before waivers/reimbursements | 1.44 | %(e) | 1.56 | % | 1.93 | % | 4.81 | %(e) | ||||||||
Net investment income (loss)(c) | (.90 | )%(e) | .40 | % | 1.00 | % | (.33 | )%(e) | ||||||||
Portfolio turnover rate | 25 | % | 74 | % | 62 | % | 38 | % |
See footnote summary on page 37.
36 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||
Six Months Ended | Year Ended November 30, | July 25, 2018(a) to November 30, 2018 | ||||||||||||||
2020 | 2019 | |||||||||||||||
|
| |||||||||||||||
Net asset value, beginning of period | $ 12.63 | $ 10.05 | $ 8.38 | $ 10.00 | ||||||||||||
|
| |||||||||||||||
Income From Investment Operations | ||||||||||||||||
Net investment income (loss)(b)(c) | (.04 | ) | .08 | .12 | (.01 | ) | ||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | 1.07 | 2.62 | 1.55 | (1.61 | ) | |||||||||||
|
| |||||||||||||||
Net increase (decrease) in net asset value from operations | 1.03 | 2.70 | 1.67 | (1.62 | ) | |||||||||||
|
| |||||||||||||||
Less: Dividends | ||||||||||||||||
Dividends from net investment income | (.06 | ) | (.12 | ) | – 0 | – | – 0 | – | ||||||||
|
| |||||||||||||||
Net asset value, end of period | $ 13.60 | $ 12.63 | $ 10.05 | $ 8.38 | ||||||||||||
|
| |||||||||||||||
Total Return | ||||||||||||||||
Total investment return based on net asset value(d) | 8.16 | % | 27.12 | % | 19.93 | % | (16.20 | )% | ||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (000’s omitted) | $201,957 | $140,401 | $87,498 | $36,145 | ||||||||||||
Ratio to average net assets of: | ||||||||||||||||
Expenses, net of waivers/reimbursements | 1.19 | %(e) | 1.25 | % | 1.25 | % | 1.25 | %(e) | ||||||||
Expenses, before waivers/reimbursements | 1.19 | %(e) | 1.31 | % | 1.67 | % | 5.13 | %(e) | ||||||||
Net investment income (loss)(c) | (.61 | )%(e) | .69 | % | 1.28 | % | (.37 | )%(e) | ||||||||
Portfolio turnover rate | 25 | % | 74 | % | 62 | % | 38 | % |
(a) | Commencement of operations. |
(b) | Based on average shares outstanding. |
(c) | Net of expenses waived/reimbursed by the Adviser. |
(d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charge or contingent deferred sales charge is not reflected in the calculation of total investment return. Total investment 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 for a period of less than one year is not annualized. |
(e) | Annualized. |
See notes to financial statements.
abfunds.com | AB ALL CHINA EQUITY PORTFOLIO | 37 |
BOARD OF DIRECTORS
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Onur Erzan, President and Chief Executive Officer | Nancy P. Jacklin(1) Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
John Lin(2), Vice President Stuart Rae(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | Joseph J. Mantineo, Treasurer and Chief Financial Officer Vincent S. Noto, Chief Compliance Officer Phyllis J. Clarke, Controller |
Custodian and Accounting Agent Brown Brothers Harriman & Co. 50 Post Office Square Boston, MA 02110
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 | Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 |
1 | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Adviser’s China Equity Team. Messrs. Lin and Rae are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
38 | AB ALL CHINA EQUITY PORTFOLIO | abfunds.com |
Operation and Effectiveness of the Funds’ Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).
Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2021, which covered the period January 1, 2020 through December 31, 2020 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner.
Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP.
The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Funds’ LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions
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have been noted since the implementation of the LRMP. During the Program Reporting Period, beginning in March 2020, all financial markets experienced extreme levels of price volatility and relative illiquidity resulting from the COVID-19 impacts on the global economy. This extreme relative illiquidity resulted in significantly wider bid-ask spreads to transact in securities, including many of those securities held by the Fund, and in a diminished depth of liquidity in most markets, to varying degrees. Nonetheless, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
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Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB All China Equity Portfolio (the “Fund”) at a meeting held by video conference on May 3-5, 2021 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.
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:
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
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has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant at the request of the directors. 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 2019 and 2020 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in 2019 and concluded that the Adviser’s level of profitability from its relationship with the Fund in 2020 was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to,
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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 recent profitability to the Adviser would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-year period ended February 28, 2021 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 utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any
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sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
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, and rules adopted, 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 uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment
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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 presentations from time to time 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 asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability (currently unprofitable) to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities 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
Global Bond Fund
High Income Fund
High Yield Portfolio1
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Sustainable Thematic Credit Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
1 | Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio. |
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NOTES
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NOTES
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NOTES
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NOTES
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NOTES
abfunds.com | AB GLOBAL BOND FUND | 51 |
NOTES
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AB ALL CHINA EQUITY PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
ACE-0152-0521
MAY 05.31.21
SEMI-ANNUAL REPORT
AB ALL MARKET INCOME PORTFOLIO
As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
FROM THE PRESIDENT |
Dear Shareholder,
We’re pleased to provide this report for the 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.
At AB, we’re striving to help our clients achieve better outcomes by:
+ | Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets |
+ | Applying differentiated investment insights through a connected global research network |
+ | Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions |
Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.
For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in AB mutual funds—and for placing your trust in our firm.
Sincerely,
Onur Erzan
President and Chief Executive Officer, AB Mutual Funds
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 1 |
SEMI-ANNUAL REPORT
July 12, 2021
This report provides management’s discussion of fund performance for the AB All Market Income Portfolio for the semi-annual reporting period ended May 31, 2021.
The Fund’s investment objective is to seek current income with consideration of capital appreciation.
NAV RETURNS AS OF MAY 31, 2021 (unaudited)
6 Months | 12 Months | |||||||
AB ALL MARKET INCOME PORTFOLIO | ||||||||
Class A Shares | 7.40% | 20.91% | ||||||
Class C Shares | 6.93% | 19.78% | ||||||
Advisor Class Shares1 | 7.52% | 21.03% | ||||||
Primary Benchmark: MSCI ACWI (net) | 15.99% | 41.85% | ||||||
Bloomberg Barclays Global Aggregate Bond Index (USD hedged) | -1.70% | 0.09% |
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 to its primary benchmark, the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) (net), and the Bloomberg Barclays Global Aggregate Bond Index (USD hedged) for the six- and 12-month periods ended May 31, 2021.
During both periods, all share classes of the Fund underperformed the primary benchmark, and outperformed the Bloomberg Barclays Global Aggregate Bond Index (USD hedged), before sales charges. The Fund’s strategic decision to achieve diversification involved holding assets other than equities; overall, this diversification detracted from performance, relative to the all-equity benchmark.
During the six-month period, overall security selection within the equity allocation contributed, particularly in income equities. Allocation to US concentrated equities detracted. Overall security selection in fixed income was also positive; allocation to the AB High Income Fund led contributors, while exposure to US sovereigns detracted. Overall security selection
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within equities and fixed income was positive during the 12-month period. Selection within income equities and AB High Income Fund contributed most, while US concentrated equities and US sovereigns led detractors.
The Fund utilized derivatives for hedging and investment purposes. For both periods, futures, interest rate swaps, total return swaps and purchased options detracted, while credit default swaps, inflation consumer price index swaps and written options contributed to absolute returns. Currency forwards added for the six-month period and detracted for the 12-month period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities reached post-pandemic highs, recording strong double-digit returns for the six-month period ended May 31, 2021. Global economies continued to rebound from record GDP contractions, supported by extensive monetary and fiscal stimulus from central banks and governments. Massive US stimulus under the Biden administration, the acceleration of worldwide vaccine distribution and easing restrictions further supported the global economic recovery. Toward the end of the period, markets became more volatile as inflationary fears precipitated a rise in longer-term interest rates, which pressured the valuations of many market-leading growth stocks and boosted a rotation into cyclical and value-oriented shares. Despite concern around a potentially overstimulated economy, inflation data remained muted and yields fell back, easing the rotation toward value stocks and dampening volatility. Small-cap stocks outperformed large-cap stocks on a relative basis, and intervals of market rotation led value-style stocks to substantially outperform their growth-style peers.
Global fixed-income market returns were mixed, with elevated volatility and dispersion between regions and credit sectors. Developed-market government bonds fell sharply in all major developed markets except Japan. Historically low interest rates also set the stage for a sharp rebound in risk assets. Emerging-market high-yield sovereign bonds, along with emerging- and developed-market high-yield corporates, led significant gains as investors searched for higher yields. Emerging-market corporate and local-currency bonds also had positive results. Investment-grade developed- and emerging-market corporate bonds had negative results during the period. Securitized assets also fell but outperformed US Treasuries. The US dollar fell against all major developed-market currencies, except the yen, and was mixed against emerging-market currencies. Brent crude oil prices rebounded significantly on the improved global economic outlook and OPEC+ production cuts. In addition, copper advanced strongly, partly due to increased demand for infrastructure and green-energy initiatives.
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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 nontraditional assets. The Team utilizes rigorous quantitative research tools and fundamental expertise across all regions and markets.
INVESTMENT POLICIES
The Adviser allocates the Fund’s investments primarily among a broad range of income-producing securities, including common stock of companies that regularly pay dividends, 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 focuses 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 adjusts 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”).
(continued on next page)
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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 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 may be leveraged, with net investment exposure 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.
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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, hedged to the US dollar. 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 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.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest-rate risk is generally greater for fixed-income securities with longer maturities or durations. The current historically low interest rate environment heightens the risks associated with rising interest rates.
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DISCLOSURES AND RISKS (continued)
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Fund. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 7 |
DISCLOSURES AND RISKS (continued)
may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally go down.
Investment in Other Investment Companies Risk: As with other investments, investments in other investment companies are subject to market and selection risk. In addition, shareholders of the Fund bear both their proportionate share of expenses in the Fund (including management fees) and, indirectly, the expenses of the investment companies in which the Fund invests (to the extent these expenses are not waived or reimbursed by the Adviser).
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.
All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
8 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
HISTORICAL PERFORMANCE
AVERAGE ANNUAL RETURNS AS OF MAY 31, 2021 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | |||||||
CLASS A SHARES | ||||||||
1 Year | 20.91% | 15.72% | ||||||
5 Years | 4.88% | 3.98% | ||||||
Since Inception1 | 4.62% | 3.92% | ||||||
CLASS C SHARES | ||||||||
1 Year | 19.78% | 18.78% | ||||||
5 Years | 4.07% | 4.07% | ||||||
Since Inception1 | 3.83% | 3.83% | ||||||
ADVISOR CLASS SHARES2 | ||||||||
1 Year | 21.03% | 21.03% | ||||||
5 Years | 5.12% | 5.12% | ||||||
Since Inception1 | 4.88% | 4.88% |
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.61%, 2.36% and 1.36% 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, 2022 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | Inception date: 12/18/2014. |
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, 2021 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 14.29% | |||
5 Years | 3.67% | |||
Since Inception1 | 4.01% | |||
CLASS C SHARES | ||||
1 Year | 17.36% | |||
5 Years | 3.76% | |||
Since Inception1 | 3.91% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 19.60% | |||
5 Years | 4.81% | |||
Since Inception1 | 4.95% |
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, 2020 | Ending Account Value May 31, 2021 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
Class A | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,074.00 | $ | 4.14 | 0.80 | % | $ | 5.12 | 0.99 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.94 | $ | 4.03 | 0.80 | % | $ | 4.99 | 0.99 | % |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 11 |
EXPENSE EXAMPLE (continued)
Beginning Account Value December 1, 2020 | Ending Account Value May 31, 2021 | Expenses Paid During Period* | Annualized Expense Ratio* | Total Expenses Paid During Period+ | Total Annualized Expense Ratio+ | |||||||||||||||||||
Class C | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,069.30 | $ | 8.00 | 1.55 | % | $ | 8.98 | 1.74 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.20 | $ | 7.80 | 1.55 | % | $ | 8.75 | 1.74 | % | ||||||||||||
Advisor Class | ||||||||||||||||||||||||
Actual | $ | 1,000 | $ | 1,075.20 | $ | 2.85 | 0.55 | % | $ | 3.83 | 0.74 | % | ||||||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.19 | $ | 2.77 | 0.55 | % | $ | 3.73 | 0.74 | % |
* | 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, 2021 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $89.4
TEN LARGEST HOLDINGS2
Security | U.S. $ Value | Percent of Net Assets | ||||||
AB High Income Fund, Inc. – Class Z | $ | 14,530,386 | 16.3 | % | ||||
Microsoft Corp. | 1,417,184 | 1.6 | ||||||
Amazon.com, Inc. | 912,129 | 1.0 | ||||||
Facebook, Inc. – Class A | 863,574 | 1.0 | ||||||
Apple, Inc. | 722,863 | 0.8 | ||||||
S&P 500 Index | 619,271 | 0.7 | ||||||
Financial Select Sector SPDR Fund | 604,421 | 0.7 | ||||||
Energy Select Sector SPDR Fund | 592,061 | 0.7 | ||||||
Alphabet, Inc. – Class C | 434,080 | 0.5 | ||||||
IQVIA Holdings, Inc. | 394,343 | 0.4 | ||||||
$ | 21,090,312 | 23.7 | % |
1 | All data are as of May 31, 2021. 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, 2021 (unaudited)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
COMMON STOCKS – 37.1% | ||||||||||||
Information Technology – 7.7% | ||||||||||||
Communications Equipment – 0.0% | ||||||||||||
Cisco Systems, Inc./Delaware | 546 | $ | 28,883 | |||||||||
Juniper Networks, Inc. | 42 | 1,106 | ||||||||||
|
| |||||||||||
29,989 | ||||||||||||
|
| |||||||||||
Electronic Equipment, Instruments & Components – 0.7% | ||||||||||||
Amphenol Corp. – Class A | 3,695 | 248,526 | ||||||||||
Arrow Electronics, Inc.(a) | 611 | 73,521 | ||||||||||
CDW Corp./DE | 1,324 | 219,016 | ||||||||||
Hitachi Ltd. | 125 | 6,586 | ||||||||||
IPG Photonics Corp.(a) | 272 | 56,919 | ||||||||||
Venture Corp., Ltd. | 35 | 509 | ||||||||||
|
| |||||||||||
605,077 | ||||||||||||
|
| |||||||||||
IT Services – 1.7% | ||||||||||||
Accenture PLC – Class A | 105 | 29,627 | ||||||||||
Akamai Technologies, Inc.(a) | 675 | 77,092 | ||||||||||
Automatic Data Processing, Inc. | 1,490 | 292,070 | ||||||||||
Broadridge Financial Solutions, Inc. | 813 | 129,657 | ||||||||||
Cognizant Technology Solutions Corp. – Class A | 3,086 | 220,834 | ||||||||||
Computershare Ltd. | 70 | 875 | ||||||||||
International Business Machines Corp. | 1,438 | 206,698 | ||||||||||
Mastercard, Inc. – Class A | 1,025 | 369,594 | ||||||||||
Paychex, Inc. | 42 | 4,248 | ||||||||||
SCSK Corp. | 6 | 358 | ||||||||||
Visa, Inc. – Class A | 571 | 129,788 | ||||||||||
Western Union Co. (The) – Class W | 2,344 | 57,358 | ||||||||||
|
| |||||||||||
1,518,199 | ||||||||||||
|
| |||||||||||
Semiconductors & Semiconductor Equipment – 1.0% | ||||||||||||
Applied Materials, Inc. | 1,662 | 229,572 | ||||||||||
ASM International NV | 40 | 12,510 | ||||||||||
ASML Holding NV | 63 | 42,562 | ||||||||||
Intel Corp. | 2,180 | 124,522 | ||||||||||
KLA Corp. | 474 | 150,206 | ||||||||||
QUALCOMM, Inc. | 1,137 | 152,972 | ||||||||||
Texas Instruments, Inc. | 1,150 | 218,293 | ||||||||||
|
| |||||||||||
930,637 | ||||||||||||
|
| |||||||||||
Software – 2.9% | ||||||||||||
Adobe, Inc.(a) | 393 | 198,300 | ||||||||||
Autodesk, Inc.(a) | 121 | 34,589 | ||||||||||
Cadence Design Systems, Inc.(a) | 1,038 | 131,816 | ||||||||||
Crowdstrike Holdings, Inc. – Class A(a) | 297 | 65,979 | ||||||||||
Electronic Arts, Inc. | 1,217 | 173,946 |
14 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Microsoft Corp.(b) | 5,676 | $ | 1,417,184 | |||||||||
Sage Group PLC (The) | 141 | 1,311 | ||||||||||
SAP SE | 1,756 | 245,864 | ||||||||||
ServiceNow, Inc.(a) | 279 | 132,212 | ||||||||||
Trade Desk, Inc. (The) – Class A(a) | 9 | 5,293 | ||||||||||
Trend Micro, Inc./Japan | 1,317 | 66,885 | ||||||||||
VMware, Inc. – Class A(a) | 782 | 123,470 | ||||||||||
Zoom Video Communications, Inc. – Class A(a) | 54 | 17,903 | ||||||||||
|
| |||||||||||
2,614,752 | ||||||||||||
|
| |||||||||||
Technology Hardware, Storage & Peripherals – 1.4% | ||||||||||||
Apple, Inc.(b) | 5,801 | 722,863 | ||||||||||
Brother Industries Ltd. | 30 | 638 | ||||||||||
HP, Inc. | 161 | 4,706 | ||||||||||
NetApp, Inc. | 1,557 | 120,465 | ||||||||||
Samsung Electronics Co., Ltd. | 4,169 | 299,252 | ||||||||||
Seagate Technology Holdings PLC | 643 | 61,567 | ||||||||||
|
| |||||||||||
1,209,491 | ||||||||||||
|
| |||||||||||
6,908,145 | ||||||||||||
|
| |||||||||||
Financials – 6.1% | ||||||||||||
Banks – 1.0% | ||||||||||||
ABN AMRO Bank NV (GDR)(a)(c) | 5,971 | 79,951 | ||||||||||
BOC Hong Kong Holdings Ltd. | 478 | 1,763 | ||||||||||
Chiba Bank Ltd. (The) | 68 | 442 | ||||||||||
Citigroup, Inc. | 1,516 | 119,324 | ||||||||||
Citizens Financial Group, Inc. | 54 | 2,695 | ||||||||||
Concordia Financial Group Ltd. | 140 | 530 | ||||||||||
Credit Agricole SA | 5,789 | 86,768 | ||||||||||
DBS Group Holdings Ltd. | 233 | 5,354 | ||||||||||
Fifth Third Bancorp | 3,937 | 165,905 | ||||||||||
Hang Seng Bank Ltd. | 98 | 2,089 | ||||||||||
Huntington Bancshares, Inc./OH | 131 | 2,078 | ||||||||||
KeyCorp | 124 | 2,857 | ||||||||||
Lloyds Banking Group PLC | 26,080 | 18,441 | ||||||||||
M&T Bank Corp. | 17 | 2,732 | ||||||||||
National Bank of Canada | 134 | 10,458 | ||||||||||
Nordea Bank Abp | 15,211 | 165,244 | ||||||||||
Oversea-Chinese Banking Corp., Ltd. | 434 | 4,100 | ||||||||||
PNC Financial Services Group, Inc. (The) | 55 | 10,707 | ||||||||||
Regions Financial Corp. | 124 | 2,903 | ||||||||||
Sumitomo Mitsui Financial Group, Inc. | 3,200 | 116,994 | ||||||||||
Truist Financial Corp. | 174 | 10,750 | ||||||||||
United Overseas Bank Ltd. | 152 | 3,018 | ||||||||||
US Bancorp | 184 | 11,184 | ||||||||||
Wells Fargo & Co. | 2,424 | 113,249 | ||||||||||
|
| |||||||||||
939,536 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 15 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Capital Markets – 2.2% | ||||||||||||
3i Group PLC | 125 | $ | 2,200 | |||||||||
ASX Ltd. | 25 | 1,474 | ||||||||||
Bank of New York Mellon Corp. (The) | 107 | 5,573 | ||||||||||
BlackRock, Inc. – Class A | 204 | 178,916 | ||||||||||
Charles Schwab Corp. (The) | 3,705 | 273,614 | ||||||||||
CME Group, Inc. – Class A | 530 | 115,943 | ||||||||||
Credit Suisse Group AG | 12,445 | 135,983 | ||||||||||
EQT AB(d) | 321 | 11,664 | ||||||||||
Euronext NV(c) | 723 | 76,824 | ||||||||||
Franklin Resources, Inc. | 4,112 | 140,671 | ||||||||||
Goldman Sachs Group, Inc. (The) | 982 | 365,323 | ||||||||||
Hargreaves Lansdown PLC | 46 | 1,078 | ||||||||||
IGM Financial, Inc. | 4,578 | 168,522 | ||||||||||
London Stock Exchange Group PLC | 831 | 89,168 | ||||||||||
Magellan Financial Group Ltd. | 17 | 634 | ||||||||||
Moody’s Corp. | 738 | 247,488 | ||||||||||
Morgan Stanley | 703 | 63,938 | ||||||||||
Northern Trust Corp. | 26 | 3,151 | ||||||||||
Partners Group Holding AG | 3 | 4,528 | ||||||||||
Schroders PLC | 16 | 806 | ||||||||||
Singapore Exchange Ltd. | 103 | 809 | ||||||||||
St. James’s Place PLC | 69 | 1,365 | ||||||||||
State Street Corp. | 45 | 3,914 | ||||||||||
T Rowe Price Group, Inc. | 172 | 32,912 | ||||||||||
|
| |||||||||||
1,926,498 | ||||||||||||
|
| |||||||||||
Consumer Finance – 0.4% | ||||||||||||
Ally Financial, Inc. | 684 | 37,421 | ||||||||||
American Express Co. | 1,690 | 270,620 | ||||||||||
Capital One Financial Corp. | 105 | 16,882 | ||||||||||
Synchrony Financial | 75 | 3,556 | ||||||||||
|
| |||||||||||
328,479 | ||||||||||||
|
| |||||||||||
Diversified Financial Services – 0.5% | ||||||||||||
Groupe Bruxelles Lambert SA | 854 | 96,901 | ||||||||||
Industrivarden AB – Class A | 859 | 35,012 | ||||||||||
Industrivarden AB – Class C | 901 | 35,207 | ||||||||||
Kinnevik AB – Class B(a)(d) | 2,928 | 80,679 | ||||||||||
M&G PLC | 49,111 | 169,835 | ||||||||||
|
| |||||||||||
417,634 | ||||||||||||
|
| |||||||||||
Equity Real Estate Investment Trusts (REITs) – 0.2% | ||||||||||||
Orix JREIT, Inc. | 77 | 141,249 | ||||||||||
WP Carey, Inc. | 542 | 40,894 | ||||||||||
|
| |||||||||||
182,143 | ||||||||||||
|
|
16 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Insurance – 1.5% | ||||||||||||
Admiral Group PLC | 24 | $ | 999 | |||||||||
Aflac, Inc. | 84 | 4,761 | ||||||||||
Allianz SE | 54 | 14,340 | ||||||||||
Allstate Corp. (The) | 39 | 5,328 | ||||||||||
American Financial Group, Inc./OH | 10 | 1,331 | ||||||||||
Assicurazioni Generali SpA(d) | 142 | 2,916 | ||||||||||
Baloise Holding AG | 6 | 999 | ||||||||||
CNP Assurances | 7,328 | 134,730 | ||||||||||
Direct Line Insurance Group PLC | 176 | 743 | ||||||||||
Fidelity National Financial, Inc. | 1,027 | 48,259 | ||||||||||
Gjensidige Forsikring ASA | 25 | 563 | ||||||||||
Great-West Lifeco, Inc. | 237 | 7,287 | ||||||||||
Hartford Financial Services Group, Inc. (The) | 46 | 3,006 | ||||||||||
iA Financial Corp., Inc. | 1,456 | 83,777 | ||||||||||
Japan Post Holdings Co., Ltd.(a) | 17,000 | 143,287 | ||||||||||
Legal & General Group PLC | 28,843 | 116,281 | ||||||||||
Lincoln National Corp. | 23 | 1,605 | ||||||||||
Manulife Financial Corp. | 7,667 | 160,188 | ||||||||||
Medibank Pvt Ltd. | 2,734 | 6,607 | ||||||||||
MetLife, Inc. | 2,413 | 157,714 | ||||||||||
MS&AD Insurance Group Holdings, Inc. | 57 | 1,746 | ||||||||||
NN Group NV | 3,010 | 153,203 | ||||||||||
PICC Property & Casualty Co., Ltd. – Class H | 92,000 | 89,799 | ||||||||||
Power Corp. of Canada | 72 | 2,348 | ||||||||||
Principal Financial Group, Inc. | 35 | 2,289 | ||||||||||
Progressive Corp. (The) | 76 | 7,530 | ||||||||||
Prudential Financial, Inc. | 1,519 | 162,487 | ||||||||||
Reinsurance Group of America, Inc. – Class A | 9 | 1,134 | ||||||||||
Sompo Holdings, Inc. | 41 | 1,650 | ||||||||||
Sun Life Financial, Inc. | 75 | 4,040 | ||||||||||
Swiss Life Holding AG | 5 | 2,607 | ||||||||||
Swiss Re AG | 39 | 3,771 | ||||||||||
T&D Holdings, Inc. | 69 | 939 | ||||||||||
Tokio Marine Holdings, Inc. | 81 | 3,796 | ||||||||||
Travelers Cos., Inc. (The) | 33 | 5,270 | ||||||||||
Tryg A/S | 46 | 1,092 | ||||||||||
Zurich Insurance Group AG | 20 | 8,412 | ||||||||||
|
| |||||||||||
1,346,834 | ||||||||||||
|
| |||||||||||
Mortgage Real Estate Investment Trusts (REITs) – 0.3% | ||||||||||||
AGNC Investment Corp. | 8,036 | 148,987 | ||||||||||
Annaly Capital Management, Inc. | 15,976 | 148,098 | ||||||||||
|
| |||||||||||
297,085 | ||||||||||||
|
| |||||||||||
5,438,209 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 17 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Consumer Discretionary – 5.3% | ||||||||||||
Auto Components – 0.4% | ||||||||||||
Aisin Corp. | 3,000 | $ | 130,806 | |||||||||
Aptiv PLC(a) | 1,671 | 251,352 | ||||||||||
Bridgestone Corp. | 73 | 3,233 | ||||||||||
Magna International, Inc. – Class A (Canada) | 37 | 3,721 | ||||||||||
|
| |||||||||||
389,112 | ||||||||||||
|
| |||||||||||
Automobiles – 0.6% | ||||||||||||
Bayerische Motoren Werke AG | 622 | 66,030 | ||||||||||
Daimler AG | 1,397 | 130,337 | ||||||||||
Porsche Automobil Holding SE (Preference Shares) | 20 | 2,225 | ||||||||||
Tesla, Inc.(a) | 309 | 193,193 | ||||||||||
Toyota Motor Corp. | 1,324 | 109,877 | ||||||||||
|
| |||||||||||
501,662 | ||||||||||||
|
| |||||||||||
Distributors – 0.0% | ||||||||||||
Genuine Parts Co. | 19 | 2,491 | ||||||||||
|
| |||||||||||
Diversified Consumer Services – 0.2% | ||||||||||||
Service Corp. International/US | 3,247 | 172,156 | ||||||||||
|
| |||||||||||
Hotels, Restaurants & Leisure – 0.6% | ||||||||||||
Chipotle Mexican Grill, Inc. – Class A(a) | 28 | 38,416 | ||||||||||
Compass Group PLC(a) | 4,834 | 110,193 | ||||||||||
Darden Restaurants, Inc. | 253 | 36,237 | ||||||||||
Galaxy Entertainment Group Ltd.(a) | 13,800 | 115,628 | ||||||||||
McDonald’s Corp. | 186 | 43,504 | ||||||||||
Starbucks Corp. | 1,342 | 152,827 | ||||||||||
|
| |||||||||||
496,805 | ||||||||||||
|
| |||||||||||
Household Durables – 0.2% | ||||||||||||
Casio Computer Co., Ltd. | 25 | 437 | ||||||||||
Electrolux AB | 4,882 | 138,982 | ||||||||||
Husqvarna AB – Class B | 54 | 795 | ||||||||||
Iida Group Holdings Co., Ltd. | 19 | 511 | ||||||||||
Lennar Corp. – Class A | 120 | 11,881 | ||||||||||
Persimmon PLC | 476 | 21,283 | ||||||||||
PulteGroup, Inc. | 740 | 42,765 | ||||||||||
Sekisui Chemical Co., Ltd. | 49 | 854 | ||||||||||
Sekisui House Ltd. | 79 | 1,663 | ||||||||||
Whirlpool Corp. | 8 | 1,897 | ||||||||||
|
| |||||||||||
221,068 | ||||||||||||
|
| |||||||||||
Internet & Direct Marketing Retail – 1.9% | ||||||||||||
Alibaba Group Holding Ltd. (Sponsored ADR)(a) | 806 | 172,452 | ||||||||||
Amazon.com, Inc.(a)(b) | 283 | 912,129 | ||||||||||
eBay, Inc. | 1,378 | 83,892 | ||||||||||
HelloFresh SE(a) | 942 | 85,165 | ||||||||||
MercadoLibre, Inc.(a) | 63 | 85,596 |
18 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Naspers Ltd. – Class N | 1,147 | $ | 252,830 | |||||||||
Prosus NV(a) | 893 | 92,518 | ||||||||||
Zalando SE(a) (c) | 497 | 53,085 | ||||||||||
|
| |||||||||||
1,737,667 | ||||||||||||
|
| |||||||||||
Leisure Products – 0.1% | ||||||||||||
Hasbro, Inc. | 520 | 49,904 | ||||||||||
|
| |||||||||||
Media – 0.1% | ||||||||||||
Interpublic Group of Cos., Inc. (The) | 3,753 | 126,439 | ||||||||||
|
| |||||||||||
Multiline Retail – 0.1% | ||||||||||||
Canadian Tire Corp., Ltd. – Class A | 8 | 1,369 | ||||||||||
Target Corp. | 361 | 81,918 | ||||||||||
Wesfarmers Ltd. | 146 | 6,257 | ||||||||||
|
| |||||||||||
89,544 | ||||||||||||
|
| |||||||||||
Specialty Retail – 0.5% | ||||||||||||
ABC-Mart, Inc. | 4 | 230 | ||||||||||
Best Buy Co., Inc. | 190 | 22,085 | ||||||||||
Home Depot, Inc. (The)(b) | 454 | 144,785 | ||||||||||
TJX Cos., Inc. (The) | 3,044 | 205,592 | ||||||||||
Tractor Supply Co. | 235 | 42,700 | ||||||||||
USS Co., Ltd. | 28 | 493 | ||||||||||
|
| |||||||||||
415,885 | ||||||||||||
|
| |||||||||||
Textiles, Apparel & Luxury Goods – 0.6% | ||||||||||||
EssilorLuxottica SA | 302 | 52,436 | ||||||||||
Kering SA | 70 | 64,106 | ||||||||||
NIKE, Inc. – Class B | 2,175 | 296,800 | ||||||||||
Pandora A/S | 624 | 84,284 | ||||||||||
|
| |||||||||||
497,626 | ||||||||||||
|
| |||||||||||
4,700,359 | ||||||||||||
|
| |||||||||||
Health Care – 4.7% | ||||||||||||
Biotechnology – 0.2% | ||||||||||||
Amgen, Inc. | 682 | 162,275 | ||||||||||
Gilead Sciences, Inc. | 161 | 10,644 | ||||||||||
|
| |||||||||||
172,919 | ||||||||||||
|
| |||||||||||
Health Care Equipment & Supplies – 1.3% | ||||||||||||
Abbott Laboratories | 2,795 | 326,037 | ||||||||||
Align Technology, Inc.(a) | 27 | 15,934 | ||||||||||
Baxter International, Inc. | 1,760 | 144,531 | ||||||||||
Coloplast A/S – Class B | 336 | 53,319 | ||||||||||
Cooper Cos., Inc. (The) | 475 | 186,889 | ||||||||||
Koninklijke Philips NV | 2,710 | 153,132 | ||||||||||
Medtronic PLC | 2,245 | 284,195 | ||||||||||
|
| |||||||||||
1,164,037 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 19 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Health Care Providers & Services – 0.7% | ||||||||||||
Anthem, Inc. | 930 | $ | 370,345 | |||||||||
Henry Schein, Inc.(a) | 939 | 71,401 | ||||||||||
Sonic Healthcare Ltd. | 58 | 1,558 | ||||||||||
UnitedHealth Group, Inc. | 349 | 143,760 | ||||||||||
|
| |||||||||||
587,064 | ||||||||||||
|
| |||||||||||
Health Care Technology – 0.0% | ||||||||||||
Veeva Systems, Inc. – Class A(a) | 146 | 42,535 | ||||||||||
|
| |||||||||||
Life Sciences Tools & Services – 0.7% | ||||||||||||
Bio-Rad Laboratories, Inc. – Class A(a) | 121 | 72,887 | ||||||||||
IQVIA Holdings, Inc.(a) | 1,642 | 394,343 | ||||||||||
Thermo Fisher Scientific, Inc. | 239 | 112,210 | ||||||||||
|
| |||||||||||
579,440 | ||||||||||||
|
| |||||||||||
Pharmaceuticals – 1.8% | ||||||||||||
AbbVie, Inc. | 2,073 | 234,664 | ||||||||||
Astellas Pharma, Inc. | 240 | 3,829 | ||||||||||
AstraZeneca PLC | 170 | 19,376 | ||||||||||
AstraZeneca PLC (Sponsored ADR) | 2,241 | 127,222 | ||||||||||
Bristol-Myers Squibb Co. | 1,116 | 73,343 | ||||||||||
Eisai Co., Ltd. | 30 | 2,012 | ||||||||||
Eli Lilly & Co. | 75 | 14,980 | ||||||||||
GlaxoSmithKline PLC | 650 | 12,398 | ||||||||||
Johnson & Johnson | 822 | 139,123 | ||||||||||
Merck & Co., Inc. | 327 | 24,816 | ||||||||||
Novartis AG | 287 | 25,354 | ||||||||||
Orion Oyj – Class B(d) | 13 | 574 | ||||||||||
Otsuka Holdings Co., Ltd. | 50 | 2,096 | ||||||||||
Pfizer, Inc. | 721 | 27,924 | ||||||||||
Recordati Industria Chimica e Farmaceutica SpA | 13 | 725 | ||||||||||
Roche Holding AG | 4 | 1,510 | ||||||||||
Roche Holding AG | 757 | 264,989 | ||||||||||
Sanofi | 1,991 | 213,024 | ||||||||||
Takeda Pharmaceutical Co., Ltd. | 4,800 | 164,023 | ||||||||||
Zoetis, Inc. | 1,531 | 270,497 | ||||||||||
|
| |||||||||||
1,622,479 | ||||||||||||
|
| |||||||||||
4,168,474 | ||||||||||||
|
| |||||||||||
Industrials – 3.8% | ||||||||||||
Aerospace & Defense – 0.0% | ||||||||||||
BAE Systems PLC | 416 | 3,098 | ||||||||||
General Dynamics Corp. | 32 | 6,077 | ||||||||||
Huntington Ingalls Industries, Inc. | 17 | 3,675 | ||||||||||
Lockheed Martin Corp. | 33 | 12,613 | ||||||||||
Singapore Technologies Engineering Ltd. | 201 | 591 | ||||||||||
|
| |||||||||||
26,054 | ||||||||||||
|
|
20 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Air Freight & Logistics – 0.2% | ||||||||||||
Deutsche Post AG | 128 | $ | 8,695 | |||||||||
Kuehne & Nagel International AG | 455 | 153,609 | ||||||||||
|
| |||||||||||
162,304 | ||||||||||||
|
| |||||||||||
Building Products – 0.6% | ||||||||||||
AGC, Inc. | 25 | 1,093 | ||||||||||
Cie de Saint-Gobain(a) | 1,271 | 85,318 | ||||||||||
Lixil Corp. | 900 | 24,405 | ||||||||||
Masco Corp. | 1,061 | 63,989 | ||||||||||
Otis Worldwide Corp. | 4,040 | 316,453 | ||||||||||
Xinyi Glass Holdings Ltd. | 14,235 | 55,673 | ||||||||||
|
| |||||||||||
546,931 | ||||||||||||
|
| |||||||||||
Commercial Services & Supplies – 0.0% | ||||||||||||
Copart, Inc.(a) | 259 | 33,414 | ||||||||||
Securitas AB – Class B | 40 | 655 | ||||||||||
Toppan Printing Co., Ltd. | 33 | 576 | ||||||||||
|
| |||||||||||
34,645 | ||||||||||||
|
| |||||||||||
Construction & Engineering – 0.1% | ||||||||||||
Bouygues SA | 29 | 1,179 | ||||||||||
Kajima Corp. | 10,358 | 143,700 | ||||||||||
Obayashi Corp. | 84 | 714 | ||||||||||
Shimizu Corp. | 71 | 579 | ||||||||||
Taisei Corp. | 24 | 848 | ||||||||||
|
| |||||||||||
147,020 | ||||||||||||
|
| |||||||||||
Electrical Equipment – 0.3% | ||||||||||||
ABB Ltd. | 3,624 | 123,502 | ||||||||||
Eaton Corp. PLC | 52 | 7,553 | ||||||||||
Emerson Electric Co. | 77 | 7,368 | ||||||||||
Mitsubishi Electric Corp. | 236 | 3,679 | ||||||||||
Rockwell Automation, Inc. | 91 | 23,999 | ||||||||||
Schneider Electric SE | 70 | 11,141 | ||||||||||
Vertiv Holdings Co. | 2,766 | 68,652 | ||||||||||
|
| |||||||||||
245,894 | ||||||||||||
|
| |||||||||||
Industrial Conglomerates – 0.4% | ||||||||||||
3M Co. | 1,554 | 315,524 | ||||||||||
DCC PLC | 13 | 1,104 | ||||||||||
Siemens AG | 99 | 16,250 | ||||||||||
|
| |||||||||||
332,878 | ||||||||||||
|
| |||||||||||
Machinery – 1.3% | ||||||||||||
Cummins, Inc. | 537 | 138,159 | ||||||||||
Dover Corp. | 1,112 | 167,356 | ||||||||||
GEA Group AG | 19 | 827 | ||||||||||
Kone Oyj – Class B | 44 | 3,580 | ||||||||||
Mitsubishi Heavy Industries Ltd. | 4,800 | 147,815 | ||||||||||
PACCAR, Inc. | 1,344 | 123,057 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 21 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
SKF AB – Class B | 5,050 | $ | 136,572 | |||||||||
Snap-on, Inc. | 604 | 153,790 | ||||||||||
Volvo AB – Class B | 9,877 | 260,328 | ||||||||||
|
| |||||||||||
1,131,484 | ||||||||||||
|
| |||||||||||
Marine – 0.2% | ||||||||||||
Nippon Yusen KK | 4,100 | 167,039 | ||||||||||
|
| |||||||||||
Professional Services – 0.4% | ||||||||||||
Adecco Group AG | 456 | 31,560 | ||||||||||
Randstad NV | 15 | 1,168 | ||||||||||
RELX PLC | 4,051 | 106,147 | ||||||||||
RELX PLC (London) | 249 | 6,486 | ||||||||||
SGS SA | 11 | 34,367 | ||||||||||
Verisk Analytics, Inc. – Class A | 1,089 | 188,212 | ||||||||||
|
| |||||||||||
367,940 | ||||||||||||
|
| |||||||||||
Road & Rail – 0.0% | ||||||||||||
Aurizon Holdings Ltd. | 239 | 673 | ||||||||||
Nippon Express Co., Ltd. | 10 | 809 | ||||||||||
|
| |||||||||||
1,482 | ||||||||||||
|
| |||||||||||
Trading Companies & Distributors – 0.3% | ||||||||||||
Bunzl PLC | 43 | 1,393 | ||||||||||
Fastenal Co. | 2,165 | 114,832 | ||||||||||
Ferguson PLC | 29 | 3,938 | ||||||||||
ITOCHU Corp. | 153 | 4,614 | ||||||||||
WW Grainger, Inc. | 322 | 148,815 | ||||||||||
|
| |||||||||||
273,592 | ||||||||||||
|
| |||||||||||
3,437,263 | ||||||||||||
|
| |||||||||||
Communication Services – 2.7% | ||||||||||||
Diversified Telecommunication | ||||||||||||
AT&T, Inc. | 922 | 27,135 | ||||||||||
BCE, Inc. | 9 | 448 | ||||||||||
Elisa Oyj | 18 | 1,067 | ||||||||||
HKT Trust & HKT Ltd. – Class SS | 490 | 669 | ||||||||||
Lumen Technologies, Inc. | 1,611 | 22,296 | ||||||||||
Nippon Telegraph & Telephone Corp. | 166 | 4,495 | ||||||||||
Orange SA | 837 | 10,681 | ||||||||||
Shaw Communications, Inc. – Class B | 59 | 1,764 | ||||||||||
Spark New Zealand Ltd. | 29,810 | 97,031 | ||||||||||
Swisscom AG | 4 | 2,260 | ||||||||||
Telefonica SA | 31,601 | 155,677 | ||||||||||
Telenor ASA | 2,982 | 51,927 | ||||||||||
TELUS Corp. | 55 | 1,241 | ||||||||||
Verizon Communications, Inc. | 535 | 30,222 | ||||||||||
Washington H Soul Pattinson & Co., Ltd.(d) | 13 | 298 | ||||||||||
|
| |||||||||||
407,211 | ||||||||||||
|
|
22 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Entertainment – 0.2% | ||||||||||||
Netflix, Inc.(a) | 138 | $ | 69,388 | |||||||||
Nintendo Co., Ltd. | 195 | 120,747 | ||||||||||
Take-Two Interactive Software, Inc.(a) | 127 | 23,566 | ||||||||||
|
| |||||||||||
213,701 | ||||||||||||
|
| |||||||||||
Interactive Media & Services – 1.6% | ||||||||||||
Alphabet, Inc. – Class A(a)(b) | 55 | 129,627 | ||||||||||
Alphabet, Inc. – Class C(a)(b) | 180 | 434,080 | ||||||||||
Facebook, Inc. – Class A(a) | 2,627 | 863,574 | ||||||||||
|
| |||||||||||
1,427,281 | ||||||||||||
|
| |||||||||||
Media – 0.2% | ||||||||||||
Comcast Corp. – Class A | 2,413 | 138,361 | ||||||||||
Fox Corp. – Class B | 375 | 13,605 | ||||||||||
Omnicom Group, Inc. | 28 | 2,303 | ||||||||||
ViacomCBS, Inc. – Class B | 73 | 3,097 | ||||||||||
|
| |||||||||||
157,366 | ||||||||||||
|
| |||||||||||
Wireless Telecommunication | ||||||||||||
KDDI Corp. | 208 | 7,091 | ||||||||||
Rogers Communications, Inc. – Class B | 45 | 2,323 | ||||||||||
Softbank Corp. | 12,371 | 158,621 | ||||||||||
Tele2 AB – Class B | 64 | 872 | ||||||||||
Vodafone Group PLC | 42,342 | 76,768 | ||||||||||
|
| |||||||||||
245,675 | ||||||||||||
|
| |||||||||||
2,451,234 | ||||||||||||
|
| |||||||||||
Materials – 2.3% | ||||||||||||
Chemicals – 1.1% | ||||||||||||
Arkema SA | 8 | 1,060 | ||||||||||
Asahi Kasei Corp. | 162 | 1,819 | ||||||||||
Celanese Corp. – Class A | 714 | 118,131 | ||||||||||
Covestro AG(c) | 369 | 25,774 | ||||||||||
Dow, Inc. | 2,470 | 168,997 | ||||||||||
Eastman Chemical Co. | 18 | 2,257 | ||||||||||
EMS-Chemie Holding AG | 1 | 939 | ||||||||||
Evonik Industries AG | 1,017 | 36,515 | ||||||||||
FUCHS PETROLUB SE (Preference Shares) | 8 | 411 | ||||||||||
International Flavors & Fragrances, Inc. | 1,457 | 206,413 | ||||||||||
JSR Corp. | 26 | 792 | ||||||||||
Linde PLC | 401 | 120,541 | ||||||||||
LyondellBasell Industries NV – Class A | 697 | 78,496 | ||||||||||
Mitsubishi Chemical Holdings Corp. | 4,800 | 38,794 | ||||||||||
Mitsubishi Gas Chemical Co., Inc. | 20 | 470 | ||||||||||
Mitsui Chemicals, Inc. | 4,523 | 152,994 | ||||||||||
Nitto Denko Corp. | 19 | 1,499 | ||||||||||
Nutrien Ltd. | 73 | 4,540 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 23 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Sika AG | 186 | $ | 59,885 | |||||||||
Tosoh Corp. | 33 | 587 | ||||||||||
Yara International ASA | 22 | 1,174 | ||||||||||
|
| |||||||||||
1,022,088 | ||||||||||||
|
| |||||||||||
Construction Materials – 0.0% | ||||||||||||
CRH PLC | 101 | 5,284 | ||||||||||
Holcim Ltd.(a) | 67 | 4,009 | ||||||||||
|
| |||||||||||
9,293 | ||||||||||||
|
| |||||||||||
Containers & Packaging – 0.2% | ||||||||||||
AMCOR PLC | 11,178 | 131,900 | ||||||||||
International Paper Co. | 48 | 3,029 | ||||||||||
Packaging Corp. of America | 12 | 1,784 | ||||||||||
|
| |||||||||||
136,713 | ||||||||||||
|
| |||||||||||
Metals & Mining – 1.0% | ||||||||||||
Anglo American PLC | 167 | 7,414 | ||||||||||
Antofagasta PLC | 51 | 1,116 | ||||||||||
B2Gold Corp. | 136 | 696 | ||||||||||
BHP Billiton Ltd. | 5,304 | 196,463 | ||||||||||
Boliden AB | 35 | 1,406 | ||||||||||
Evolution Mining Ltd. | 221 | 897 | ||||||||||
Evraz PLC | 17,081 | 154,243 | ||||||||||
Fortescue Metals Group Ltd. | 9,682 | 165,352 | ||||||||||
Rio Tinto Ltd. | 255 | 24,188 | ||||||||||
Rio Tinto PLC | 1,632 | 140,349 | ||||||||||
Steel Dynamics, Inc. | 2,770 | 172,931 | ||||||||||
|
| |||||||||||
865,055 | ||||||||||||
|
| |||||||||||
Paper & Forest Products – 0.0% | ||||||||||||
Mondi PLC | 62 | 1,674 | ||||||||||
Oji Holdings Corp. | 104 | 623 | ||||||||||
UPM-Kymmene Oyj | 69 | 2,635 | ||||||||||
|
| |||||||||||
4,932 | ||||||||||||
|
| |||||||||||
2,038,081 | ||||||||||||
|
| |||||||||||
Consumer Staples – 1.4% | ||||||||||||
Beverages – 0.4% | ||||||||||||
Asahi Group Holdings Ltd.(d) | 3,359 | 162,373 | ||||||||||
Coca-Cola Co. (The) | 3,532 | 195,284 | ||||||||||
Coca-Cola HBC AG | 25 | 910 | ||||||||||
Kirin Holdings Co., Ltd. | 106 | 2,142 | ||||||||||
PepsiCo, Inc. | 179 | 26,481 | ||||||||||
Treasury Wine Estates Ltd. | 93 | 843 | ||||||||||
|
| |||||||||||
388,033 | ||||||||||||
|
| |||||||||||
Food & Staples Retailing – 0.1% | ||||||||||||
CVS Health Corp. | 169 | 14,608 | ||||||||||
Etablissements Franz Colruyt NV | 7 | 427 |
24 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
ICA Gruppen AB | 13 | $ | 638 | |||||||||
Kesko Oyj – Class B | 35 | 1,217 | ||||||||||
Koninklijke Ahold Delhaize NV | 135 | 3,930 | ||||||||||
Seven & i Holdings Co., Ltd. | 97 | 4,269 | ||||||||||
Sysco Corp. | 66 | 5,346 | ||||||||||
Tesco PLC | 1,000 | 3,165 | ||||||||||
Wm Morrison Supermarkets PLC | 311 | 780 | ||||||||||
Woolworths Group Ltd. | 163 | 5,274 | ||||||||||
|
| |||||||||||
39,654 | ||||||||||||
|
| |||||||||||
Food Products – 0.2% | ||||||||||||
Archer-Daniels-Midland Co. | 72 | 4,790 | ||||||||||
Bunge Ltd. | 668 | 57,996 | ||||||||||
Campbell Soup Co. | 25 | 1,217 | ||||||||||
Conagra Brands, Inc. | 63 | 2,400 | ||||||||||
Danone SA | 1,090 | 77,700 | ||||||||||
General Mills, Inc. | 79 | 4,966 | ||||||||||
JM Smucker Co. (The) | 14 | 1,866 | ||||||||||
Kellogg Co. | 183 | 11,985 | ||||||||||
MEIJI Holdings Co., Ltd. | 15 | 932 | ||||||||||
Nestle SA | 373 | 46,072 | ||||||||||
Orkla ASA | 97 | 1,012 | ||||||||||
Tyson Foods, Inc. – Class A | 38 | 3,021 | ||||||||||
Wilmar International Ltd. | 248 | 897 | ||||||||||
|
| |||||||||||
214,854 | ||||||||||||
|
| |||||||||||
Household Products – 0.1% | ||||||||||||
Clorox Co. (The) | 16 | 2,827 | ||||||||||
Essity AB – Class B | 78 | 2,700 | ||||||||||
Henkel AG & Co. KGaA | 13 | 1,290 | ||||||||||
Kimberly-Clark Corp. | 44 | 5,748 | ||||||||||
Procter & Gamble Co. (The) | 319 | 43,017 | ||||||||||
Reckitt Benckiser Group PLC | 92 | 8,298 | ||||||||||
|
| |||||||||||
63,880 | ||||||||||||
|
| |||||||||||
Personal Products – 0.0% | ||||||||||||
Unilever PLC | 340 | 20,379 | ||||||||||
|
| |||||||||||
Tobacco – 0.6% | ||||||||||||
Altria Group, Inc. | 3,650 | 179,653 | ||||||||||
British American Tobacco PLC | 281 | 10,823 | ||||||||||
Imperial Brands PLC | 7,072 | 160,342 | ||||||||||
Japan Tobacco, Inc.(d) | 155 | 3,079 | ||||||||||
Philip Morris International, Inc. | 2,208 | 212,918 | ||||||||||
|
| |||||||||||
566,815 | ||||||||||||
|
| |||||||||||
1,293,615 | ||||||||||||
|
| |||||||||||
Utilities – 1.3% | ||||||||||||
Electric Utilities – 0.7% | ||||||||||||
Alliant Energy Corp. | 32 | 1,829 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 25 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
American Electric Power Co., Inc. | 64 | $ | 5,504 | |||||||||
AusNet Services Ltd. | 59,246 | 80,225 | ||||||||||
CK Infrastructure Holdings Ltd. | 85 | 541 | ||||||||||
CLP Holdings Ltd. | 212 | 2,188 | ||||||||||
Duke Energy Corp. | 99 | 9,922 | ||||||||||
Edison International | 49 | 2,737 | ||||||||||
Endesa SA | 3,954 | 113,999 | ||||||||||
Evergy, Inc. | 2,250 | 139,478 | ||||||||||
Eversource Energy | 44 | 3,572 | ||||||||||
Fortis, Inc./Canada | 60 | 2,738 | ||||||||||
Fortum Oyj | 1,371 | 39,603 | ||||||||||
Hydro One Ltd.(c) | 42 | 1,069 | ||||||||||
Iberdrola SA | 4,307 | 59,367 | ||||||||||
Mercury NZ Ltd. | 88 | 416 | ||||||||||
NRG Energy, Inc. | 1,082 | 34,786 | ||||||||||
Pinnacle West Capital Corp. | 14 | 1,184 | ||||||||||
Power Assets Holdings Ltd. | 179 | 1,123 | ||||||||||
PPL Corp. | 99 | 2,882 | ||||||||||
Red Electrica Corp. SA | 2,916 | 58,386 | ||||||||||
Terna SPA | 5,093 | 38,917 | ||||||||||
Xcel Energy, Inc. | 69 | 4,891 | ||||||||||
|
| |||||||||||
605,357 | ||||||||||||
|
| |||||||||||
Gas Utilities – 0.3% | ||||||||||||
AltaGas Ltd.(d) | 1,459 | 28,961 | ||||||||||
Atmos Energy Corp. | 16 | 1,587 | ||||||||||
Hong Kong & China Gas Co., Ltd. | 1,379 | 2,428 | ||||||||||
Osaka Gas Co., Ltd. | 48 | 918 | ||||||||||
Snam SpA(d) | 18,001 | 105,933 | ||||||||||
Tokyo Gas Co., Ltd. | 48 | 951 | ||||||||||
UGI Corp. | 2,018 | 92,929 | ||||||||||
|
| |||||||||||
233,707 | ||||||||||||
|
| |||||||||||
Independent Power and Renewable Electricity Producers – 0.1% | ||||||||||||
Uniper SE | 1,903 | 69,884 | ||||||||||
|
| |||||||||||
Multi-Utilities – 0.2% | ||||||||||||
AGL Energy Ltd. | 5,709 | 36,406 | ||||||||||
Algonquin Power & Utilities Corp. | 77 | 1,176 | ||||||||||
Ameren Corp. | 33 | 2,779 | ||||||||||
Atco Ltd./Canada – Class I | 849 | 30,585 | ||||||||||
CMS Energy Corp. | 37 | 2,321 | ||||||||||
Consolidated Edison, Inc. | 44 | 3,399 | ||||||||||
Dominion Energy, Inc. | 104 | 7,918 | ||||||||||
DTE Energy Co. | 25 | 3,450 | ||||||||||
National Grid PLC | 459 | 6,127 | ||||||||||
Public Service Enterprise Group, Inc. | 65 | 4,038 |
26 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
RWE AG | 83 | $ | 3,154 | |||||||||
Sempra Energy | 763 | 103,379 | ||||||||||
WEC Energy Group, Inc. | 41 | 3,850 | ||||||||||
|
| |||||||||||
208,582 | ||||||||||||
|
| |||||||||||
1,117,530 | ||||||||||||
|
| |||||||||||
Real Estate – 0.9% | ||||||||||||
Equity Real Estate Investment Trusts (REITs) – 0.8% | ||||||||||||
American Tower Corp. | 866 | 221,228 | ||||||||||
Iron Mountain, Inc.(d) | 3,644 | 158,660 | ||||||||||
Omega Healthcare Investors, Inc. | 3,733 | 136,703 | ||||||||||
Stockland | 13,707 | 49,371 | ||||||||||
VICI Properties, Inc.(d) | 4,272 | 132,987 | ||||||||||
|
| |||||||||||
698,949 | ||||||||||||
|
| |||||||||||
Real Estate Management & | ||||||||||||
CBRE Group, Inc. – Class A(a) | 1,545 | 135,620 | ||||||||||
CK Asset Holdings Ltd. | 310 | 2,111 | ||||||||||
Daiwa House Industry Co., Ltd. | 73 | 2,125 | ||||||||||
Hang Lung Properties Ltd. | 261 | 675 | ||||||||||
Henderson Land Development Co., Ltd. | 187 | 902 | ||||||||||
Nomura Real Estate Holdings, Inc. | 14 | 367 | ||||||||||
Sino Land Co., Ltd. | 426 | 680 | ||||||||||
Sun Hung Kai Properties Ltd. | 168 | 2,624 | ||||||||||
Swire Properties Ltd. | 151 | 455 | ||||||||||
Wharf Real Estate Investment Co., Ltd. | 216 | 1,307 | ||||||||||
|
| |||||||||||
146,866 | ||||||||||||
|
| |||||||||||
845,815 | ||||||||||||
|
| |||||||||||
Energy – 0.9% | ||||||||||||
Energy Equipment & Services – 0.0% | ||||||||||||
Baker Hughes Co. – Class A | 94 | 2,293 | ||||||||||
|
| |||||||||||
Oil, Gas & Consumable Fuels – 0.9% | ||||||||||||
Enagas SA | 32 | 752 | ||||||||||
Exxon Mobil Corp. | 1,888 | 110,203 | ||||||||||
Galp Energia SGPS SA | 2,819 | 35,350 | ||||||||||
Idemitsu Kosan Co., Ltd. | 3,100 | 73,582 | ||||||||||
Keyera Corp.(d) | 4,133 | 102,499 | ||||||||||
LUKOIL PJSC (Sponsored ADR) | 971 | 78,855 | ||||||||||
Lundin Energy AB | 25 | 857 | ||||||||||
Marathon Petroleum Corp. | 84 | 5,191 | ||||||||||
Neste Oyj | 830 | 54,744 | ||||||||||
ONEOK, Inc. | 335 | 17,668 | ||||||||||
Parkland Corp./Canada(d) | 530 | 17,369 | ||||||||||
Pembina Pipeline Corp.(d) | 71 | 2,295 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 27 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Repsol SA | 7,620 | $ | 101,941 | |||||||||
TC Energy Corp. | 121 | 6,181 | ||||||||||
Valero Energy Corp. | 2,114 | 169,966 | ||||||||||
|
| |||||||||||
777,453 | ||||||||||||
|
| |||||||||||
779,746 | ||||||||||||
|
| |||||||||||
Total Common Stocks | 33,178,471 | |||||||||||
|
| |||||||||||
INVESTMENT COMPANIES – 18.0% | ||||||||||||
Funds and Investment Trusts – 18.0%(e) | ||||||||||||
AB High Income Fund, Inc. – Class Z(f) | 1,807,262 | 14,530,386 | ||||||||||
Energy Select Sector SPDR Fund | 11,340 | 592,061 | ||||||||||
Financial Select Sector SPDR Fund | 15,910 | 604,421 | ||||||||||
Industrial Select Sector SPDR Fund(d) | 3,570 | 375,278 | ||||||||||
|
| |||||||||||
Total Investment Companies | 16,102,146 | |||||||||||
|
| |||||||||||
PREFERRED STOCKS – 7.5% | ||||||||||||
Real Estate – 7.5% | ||||||||||||
Diversified REITs – 1.8% | ||||||||||||
Armada Hoffler Properties, Inc. | 8,122 | 224,573 | ||||||||||
Colony Capital, Inc. | 1,050 | 26,460 | ||||||||||
Colony Capital, Inc. | 2,253 | 56,212 | ||||||||||
Colony Capital, Inc. | 11,300 | 281,935 | ||||||||||
Colony Capital, Inc. | 6,098 | 152,145 | ||||||||||
Gladstone Commercial Corp. | 6,437 | 161,440 | ||||||||||
Gladstone Commercial Corp. | 2,150 | 56,223 | ||||||||||
Global Net Lease, Inc. | 3,467 | 91,460 |
28 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Global Net Lease, Inc. | 4,450 | $ | 119,738 | |||||||||
PS Business Parks, Inc. | 1,636 | 42,438 | ||||||||||
PS Business Parks, Inc. | 5,441 | 144,731 | ||||||||||
PS Business Parks, Inc. | 2,700 | 73,170 | ||||||||||
Vornado Realty Trust | 558 | 14,413 | ||||||||||
Vornado Realty Trust | 6,516 | 166,158 | ||||||||||
|
| |||||||||||
1,611,096 | ||||||||||||
|
| |||||||||||
Health Care REITs – 0.0% | ||||||||||||
Global Medical REIT, Inc. | 1,176 | 31,223 | ||||||||||
|
| |||||||||||
Hotel & Resort REITs – 1.1% | ||||||||||||
DiamondRock Hospitality Co. | 6,875 | 199,719 | ||||||||||
Hersha Hospitality Trust | 3,635 | 88,876 | ||||||||||
Hersha Hospitality Trust | 2,052 | 48,509 | ||||||||||
Hersha Hospitality Trust | 1,135 | 26,968 | ||||||||||
Pebblebrook Hotel Trust | 950 | 24,253 | ||||||||||
Pebblebrook Hotel Trust | 5,626 | 142,619 | ||||||||||
Pebblebrook Hotel Trust | 4,819 | 122,451 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 29 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Pebblebrook Hotel Trust | 177 | $ | 4,544 | |||||||||
Summit Hotel Properties, Inc. | 4,522 | 115,266 | ||||||||||
Summit Hotel Properties, Inc. | 1,075 | 28,659 | ||||||||||
Sunstone Hotel Investors, Inc. | 350 | 8,844 | ||||||||||
Sunstone Hotel Investors, Inc. | 5,050 | 128,775 | ||||||||||
|
| |||||||||||
939,483 | ||||||||||||
|
| |||||||||||
Industrial REITs – 0.5% | ||||||||||||
Monmouth Real Estate Investment Corp. | 7,925 | 199,552 | ||||||||||
Plymouth Industrial REIT, Inc. | 1,100 | 29,112 | ||||||||||
Rexford Industrial Realty, Inc. | 1,244 | 31,610 | ||||||||||
Rexford Industrial Realty, Inc. | 4,168 | 110,035 | ||||||||||
Rexford Industrial Realty, Inc. | 3,072 | 85,187 | ||||||||||
|
| |||||||||||
455,496 | ||||||||||||
|
| |||||||||||
Office REITs – 0.4% | ||||||||||||
City Office REIT, Inc. | 5,325 | 136,426 | ||||||||||
SL Green Realty Corp. | 1,718 | 44,479 | ||||||||||
Vornado Realty Trust | 4,821 | 127,660 | ||||||||||
Vornado Realty Trust | 230 | 6,123 | ||||||||||
|
| |||||||||||
314,688 | ||||||||||||
|
|
30 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
Real Estate Development – 0.5% | ||||||||||||
American Finance Trust, Inc. | 8,325 | $ | 214,036 | |||||||||
Pebblebrook Hotel Trust | 4,564 | 117,934 | ||||||||||
Sunstone Hotel Investors, Inc. | 2,925 | 78,214 | ||||||||||
|
| |||||||||||
410,184 | ||||||||||||
|
| |||||||||||
Real Estate Operating Companies – 0.1% | ||||||||||||
Brookfield Property Partners LP | 335 | 8,204 | ||||||||||
Brookfield Property Partners LP | 2,779 | 73,782 | ||||||||||
|
| |||||||||||
81,986 | ||||||||||||
|
| |||||||||||
Residential REITs – 0.8% | ||||||||||||
American Homes 4 Rent | 8,409 | 212,664 | ||||||||||
American Homes 4 Rent | 875 | 22,190 | ||||||||||
American Homes 4 Rent | 1,683 | 43,943 | ||||||||||
American Homes 4 Rent | 393 | 10,407 | ||||||||||
American Homes 4 Rent | 300 | 8,256 | ||||||||||
Bluerock Residential Growth REIT, Inc. | 350 | 8,923 | ||||||||||
Bluerock Residential Growth REIT, Inc. | 2,741 | 69,347 | ||||||||||
Centerspace | 2,640 | 69,907 | ||||||||||
UMH Properties, Inc. | 6,216 | 160,932 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 31 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
UMH Properties, Inc. | 5,800 | $ | 150,278 | |||||||||
|
| |||||||||||
756,847 | ||||||||||||
|
| |||||||||||
Retail REITs – 1.2% | ||||||||||||
American Finance Trust, Inc. | 1,075 | 27,875 | ||||||||||
Brookfield Property REIT, Inc. | 7,265 | 183,805 | ||||||||||
Cedar Realty Trust, Inc. | 6,003 | 151,276 | ||||||||||
National Retail Properties, Inc. | 970 | 24,696 | ||||||||||
Saul Centers, Inc. | 7,607 | 201,357 | ||||||||||
Saul Centers, Inc. | 695 | 18,501 | ||||||||||
SITE Centers Corp. | 5,081 | 131,191 | ||||||||||
Spirit Realty Capital, Inc. | 5,725 | 154,976 | ||||||||||
Urstadt Biddle Properties, Inc. | 2,000 | 52,780 | ||||||||||
Urstadt Biddle Properties, Inc. | 6,638 | 171,260 | ||||||||||
|
| |||||||||||
1,117,717 | ||||||||||||
|
| |||||||||||
Specialized REITs – 1.1% | ||||||||||||
Digital Realty Trust, Inc. | 825 | 22,069 | ||||||||||
Digital Realty Trust, Inc. | 2,840 | 80,400 | ||||||||||
Digital Realty Trust, Inc. | 9,200 | 255,392 |
32 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||||||
| ||||||||||||
EPR Properties | 805 | $ | 20,745 | |||||||||
National Storage Affiliates Trust | 8,819 | 235,908 | ||||||||||
Public Storage | 1,975 | 53,266 | ||||||||||
Public Storage | 6,250 | 162,500 | ||||||||||
QTS Realty Trust, Inc. | 6,449 | 175,735 | ||||||||||
|
| |||||||||||
1,006,015 | ||||||||||||
|
| |||||||||||
Total Preferred Stocks | 6,724,735 | |||||||||||
|
| |||||||||||
Principal Amount (000) | ||||||||||||
EMERGING MARKETS - SOVEREIGNS – 2.8% | ||||||||||||
Argentina – 0.1% | ||||||||||||
Argentine Republic Government International Bond | U.S.$ | 297 | 101,876 | |||||||||
1.00%, 07/09/2029 | 16 | 6,343 | ||||||||||
|
| |||||||||||
108,219 | ||||||||||||
|
| |||||||||||
Bahrain – 0.3% | ||||||||||||
Bahrain Government International Bond | 200 | 223,687 | ||||||||||
|
| |||||||||||
Dominican Republic – 0.2% | ||||||||||||
Dominican Republic International Bond | 200 | 214,225 | ||||||||||
|
| |||||||||||
Ecuador – 0.2% | ||||||||||||
Ecuador Government International Bond | 182 | 130,645 | ||||||||||
Zero Coupon, 07/31/2030(c) | 12 | 6,647 | ||||||||||
|
| |||||||||||
137,292 | ||||||||||||
|
| |||||||||||
Egypt – 0.2% | ||||||||||||
Egypt Government International Bond | 200 | 215,037 | ||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 33 |
PORTFOLIO OF INVESTMENTS (continued)
Principal Amount (000) | U.S. $ Value | |||||||||||
| ||||||||||||
El Salvador – 0.2% | ||||||||||||
El Salvador Government International Bond | U.S.$ | 182 | $ | 178,133 | ||||||||
|
| |||||||||||
Gabon – 0.2% | ||||||||||||
Gabon Government International Bond | 200 | 199,600 | ||||||||||
|
| |||||||||||
Ghana – 0.2% | ||||||||||||
Ghana Government International Bond | 200 | 199,038 | ||||||||||
|
| |||||||||||
Guatemala – 0.3% | ||||||||||||
Guatemala Government Bond | 200 | 223,662 | ||||||||||
|
| |||||||||||
Ivory Coast – 0.2% | ||||||||||||
Ivory Coast Government International Bond | 200 | 215,600 | ||||||||||
|
| |||||||||||
Kenya – 0.3% | ||||||||||||
Kenya Government International Bond | 200 | 222,037 | ||||||||||
|
| |||||||||||
Lebanon – 0.0% | ||||||||||||
Lebanon Government International Bond | 107 | 14,097 | ||||||||||
|
| |||||||||||
Senegal – 0.2% | ||||||||||||
Senegal Government International Bond | 200 | 203,538 | ||||||||||
|
| |||||||||||
Ukraine – 0.2% | ||||||||||||
Ukraine Government International Bond | 150 | 166,669 | ||||||||||
|
| |||||||||||
Total Emerging Markets – Sovereigns | 2,520,834 | |||||||||||
|
| |||||||||||
Notional Amount | ||||||||||||
OPTIONS PURCHASED – PUTS – 1.0% | ||||||||||||
Options on Equities – 1.0% | ||||||||||||
Euro STOXX 50 Index | EUR | 4,488,000 | 88,189 |
34 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Notional Amount | U.S. $ Value | |||||||||||
| ||||||||||||
Euro STOXX 50 Index | EUR | 1,155,000 | $ | 22,696 | ||||||||
FTSE 100 Index | GBP | 1,711,000 | 32,785 | |||||||||
FTSE 100 Index | GBP | 472,000 | 9,044 | |||||||||
Nikkei 225 Index | JPY | 392,000,000 | 55,758 | |||||||||
Nikkei 225 Index | JPY | 73,500,000 | 10,455 | |||||||||
Nikkei 225 Index | JPY | 98,000,000 | 13,940 | |||||||||
S&P 500 Index | USD | 41,785,000 | 619,271 | |||||||||
S&P 500 Index | USD | 3,425,000 | 50,760 | |||||||||
|
| |||||||||||
Total Options Purchased – Puts | 902,898 | |||||||||||
|
| |||||||||||
GOVERNMENTS - TREASURIES – 0.7% | ||||||||||||
Colombia – 0.2% | ||||||||||||
Colombian TES | USD | 492,700 | 136,696 | |||||||||
|
| |||||||||||
Indonesia – 0.2% | ||||||||||||
Indonesia Treasury Bond | IDR | 1,105,000 | 84,045 | |||||||||
Series FR71 | 1,438,000 | 116,319 | ||||||||||
|
| |||||||||||
200,364 | ||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 35 |
PORTFOLIO OF INVESTMENTS (continued)
Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
Mexico – 0.2% | ||||||||||
Mexican Bonos | MXN | 2,777 | $ | 157,851 | ||||||
|
| |||||||||
Russia – 0.1% | ||||||||||
Russian Federal Bond – OFZ | RUB | 9,626 | 133,933 | |||||||
|
| |||||||||
Total Governments – Treasuries | 628,844 | |||||||||
|
| |||||||||
EMERGING MARKETS - | ||||||||||
Brazil – 0.2% | ||||||||||
Brazil Notas do Tesouro Nacional | BRL | 658 | 132,990 | |||||||
|
| |||||||||
South Africa – 0.2% | ||||||||||
Republic of South Africa Government Bond | ZAR | 2,848 | 187,122 | |||||||
|
| |||||||||
Total Emerging Markets – Treasuries | 320,112 | |||||||||
|
| |||||||||
QUASI-SOVEREIGNS – 0.2% | ||||||||||
Quasi-Sovereign Bonds – 0.2% | ||||||||||
Mexico – 0.2% | ||||||||||
Petroleos Mexicanos | U.S.$ | 43 | 41,817 | |||||||
7.69%, 01/23/2050 | 97 | 93,411 | ||||||||
|
| |||||||||
Total Quasi-Sovereigns | 135,228 | |||||||||
|
| |||||||||
Shares | ||||||||||
SHORT-TERM INVESTMENTS – 21.2% | ||||||||||
Investment Companies – 19.0% | ||||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, | 16,924,451 | 16,924,451 | ||||||||
|
| |||||||||
36 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Principal Amount (000) | U.S. $ Value | |||||||||
| ||||||||||
U.S. Treasury Bills – 2.2% | ||||||||||
United States – 2.2% | ||||||||||
U.S. Treasury Bill | U.S.$ | 2,000 | $ | 1,999,928 | ||||||
|
| |||||||||
Shares | ||||||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 88.9% | 79,437,647 | |||||||||
|
| |||||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.6% | ||||||||||
Investment Companies – 0.6% | ||||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, | 500,491 | 500,491 | ||||||||
|
| |||||||||
Total Investments – 89.5% | 79,938,138 | |||||||||
Other assets less liabilities – 10.5% | 9,420,780 | |||||||||
�� |
|
| ||||||||
Net Assets – 100.0% | $ | 89,358,918 | ||||||||
|
|
FUTURES (see Note D)
Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Purchased Contracts |
| |||||||||||||||
10 Yr Australian Bond Futures | 9 | June 2021 | $ | 970,983 | $ | 7,171 | ||||||||||
10 Yr Mini Japan Government Bond Futures | 38 | June 2021 | 5,240,461 | 4,012 | ||||||||||||
BIST 30 Futures | 291 | June 2021 | 517,996 | (3,350 | ) | |||||||||||
Canadian 10 Yr Bond Futures | 3 | September 2021 | 357,998 | 839 | ||||||||||||
Euro STOXX 50 Index Futures | 27 | June 2021 | 1,328,530 | 13,194 | ||||||||||||
Euro-Bund Futures | 7 | June 2021 | 1,450,633 | 8,357 | ||||||||||||
FTSE 100 Index Futures | 14 | June 2021 | 1,395,436 | 3,652 | ||||||||||||
FTSE KLCI Futures | 60 | June 2021 | 1,147,453 | 2,947 | ||||||||||||
Hang Seng Index Futures | 4 | June 2021 | 746,254 | 5,676 | ||||||||||||
Long Gilt Futures | 8 | September 2021 | 1,444,695 | 1,921 | ||||||||||||
MSCI Singapore IX ETS Futures | 16 | June 2021 | 434,994 | 2,092 | ||||||||||||
S&P 500 E-Mini Futures | 38 | June 2021 | 7,984,560 | 106,227 | ||||||||||||
SPI 200 Futures | 2 | June 2021 | 276,213 | 7,217 | ||||||||||||
TOPIX Index Futures | 7 | June 2021 | 1,229,071 | 23,485 | ||||||||||||
U.S. T-Note 10 Yr (CBT) Futures | 59 | September 2021 | 7,784,313 | 11,903 | ||||||||||||
WIG 20 Index Futures | 46 | June 2021 | 558,280 | 45,481 |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 37 |
PORTFOLIO OF INVESTMENTS (continued)
Description | Number of Contracts | Expiration Month | Current Notional | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||
Sold Contracts |
| |||||||||||||||
Euro STOXX 50 Index Futures | 12 | June 2021 | $ | 590,457 | $ | (22,892 | ) | |||||||||
FTSE 100 Index Futures | 2 | June 2021 | 199,348 | (5,378 | ) | |||||||||||
FTSE China A50 Futures | 13 | June 2021 | 236,054 | (6,394 | ) | |||||||||||
FTSE/JSE Top 40 Futures | 1 | June 2021 | 44,893 | (257 | ) | |||||||||||
Mexican BOLSA Index Futures | 8 | June 2021 | 204,193 | (8,117 | ) | |||||||||||
OMXS30 Index Futures | 33 | June 2021 | 891,846 | (4,346 | ) | |||||||||||
S&P 500 E-Mini Futures | 25 | June 2021 | 5,253,000 | (97,866 | ) | |||||||||||
S&P TSX 60 Index Futures | 1 | June 2021 | 195,124 | (7,154 | ) | |||||||||||
SGX Nifty 50 Futures | 39 | June 2021 | 1,215,240 | (18,382 | ) | |||||||||||
TOPIX Index Futures | �� | 1 | June 2021 | 175,582 | (2,054 | ) | ||||||||||
|
| |||||||||||||||
$ | 67,984 | |||||||||||||||
|
|
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 | RUB | 6,487 | USD | 87 | 07/28/2021 | $ | (347 | ) | ||||||||
Bank of America, NA | USD | 2,164 | RUB | 160,761 | 07/28/2021 | 8,603 | ||||||||||
Barclays Bank PLC | KRW | 654,129 | USD | 587 | 07/22/2021 | (3,187 | ) | |||||||||
Barclays Bank PLC | MYR | 2,237 | USD | 545 | 09/23/2021 | 2,302 | ||||||||||
Barclays Bank PLC | NZD | 855 | USD | 614 | 06/16/2021 | (8,536 | ) | |||||||||
Barclays Bank PLC | EUR | 555 | USD | 679 | 06/16/2021 | (298 | ) | |||||||||
Barclays Bank PLC | MYR | 257 | USD | 62 | 09/23/2021 | (159 | ) | |||||||||
Barclays Bank PLC | USD | 962 | MYR | 3,983 | 09/23/2021 | 3,494 | ||||||||||
Barclays Bank PLC | USD | 533 | MXN | 10,757 | 06/18/2021 | 6,351 | ||||||||||
Barclays Bank PLC | USD | 599 | PHP | 29,442 | 07/22/2021 | 16,036 | ||||||||||
BNP Paribas SA | CHF | 1,350 | USD | 1,497 | 06/16/2021 | (5,236 | ) | |||||||||
BNP Paribas SA | USD | 833 | EUR | 686 | 06/16/2021 | 5,638 | ||||||||||
BNP Paribas SA | USD | 885 | SEK | 7,393 | 06/16/2021 | 6,525 | ||||||||||
Citibank, NA | COP | 5,680,436 | USD | 1,512 | 07/15/2021 | (15,987 | ) | |||||||||
Citibank, NA | PEN | 4,286 | USD | 1,173 | 07/15/2021 | 50,214 | ||||||||||
Citibank, NA | AUD | 1,403 | USD | 1,087 | 06/16/2021 | 1,286 | ||||||||||
Citibank, NA | GBP | 397 | USD | 560 | 06/16/2021 | (4,440 | ) | |||||||||
Deutsche Bank AG | HUF | 226,100 | USD | 735 | 06/24/2021 | (61,824 | ) | |||||||||
Deutsche Bank AG | GBP | 488 | USD | 686 | 06/16/2021 | (7,569 | ) | |||||||||
Deutsche Bank AG | USD | 793 | CAD | 960 | 06/16/2021 | 2,675 | ||||||||||
Deutsche Bank AG | USD | 540 | PEN | 1,978 | 07/15/2021 | (22,432 | ) | |||||||||
Deutsche Bank AG | USD | 633 | SEK | 5,280 | 06/16/2021 | 4,431 | ||||||||||
Deutsche Bank AG | USD | 815 | INR | 60,633 | 07/15/2021 | 15,865 | ||||||||||
Deutsche Bank AG | USD | 391 | COP | 1,444,006 | 07/15/2021 | (2,249 | ) | |||||||||
Goldman Sachs International | KRW | 365,034 | USD | 324 | 07/22/2021 | (5,640 | ) | |||||||||
Goldman Sachs International | HUF | 161,334 | USD | 539 | 06/24/2021 | (29,490 | ) | |||||||||
Goldman Sachs International | RUB | 50,793 | USD | 667 | 06/16/2021 | (23,810 | ) | |||||||||
Goldman Sachs International | BRL | 5,325 | USD | 1,002 | 06/02/2021 | (13,833 | ) | |||||||||
Goldman Sachs International | BRL | 2,219 | USD | 424 | 06/02/2021 | 607 | ||||||||||
Goldman Sachs International | CNY | 1,096 | USD | 170 | 06/24/2021 | (1,886 | ) | |||||||||
Goldman Sachs International | TWD | 477 | USD | 17 | 07/22/2021 | (422 | ) | |||||||||
Goldman Sachs International | USD | 730 | EUR | 604 | 06/16/2021 | 9,111 |
38 | 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) | ||||||||||||
Goldman Sachs International | USD | 413 | BRL | 2,219 | 06/02/2021 | $ | 10,529 | |||||||||
Goldman Sachs International | USD | 544 | CNY | 3,532 | 06/24/2021 | 9,726 | ||||||||||
Goldman Sachs International | USD | 1,000 | BRL | 5,325 | 07/02/2021 | 13,841 | ||||||||||
Goldman Sachs International | USD | 1,018 | BRL | 5,325 | 06/02/2021 | (1,457 | ) | |||||||||
Goldman Sachs International | USD | 285 | IDR | 4,176,663 | 07/15/2021 | 6,879 | ||||||||||
HSBC Bank USA | USD | 242 | IDR | 3,575,587 | 07/15/2021 | 8,051 | ||||||||||
JPMorgan Chase Bank, NA | USD | 376 | PHP | 18,056 | 07/22/2021 | 980 | ||||||||||
Morgan Stanley Capital Services, Inc. | CLP | 731,802 | USD | 1,030 | 07/15/2021 | 17,081 | ||||||||||
Natwest Markets PLC | TWD | 22,784 | USD | 823 | 07/22/2021 | (9,515 | ) | |||||||||
Natwest Markets PLC | MYR | 3,255 | USD | 786 | 09/23/2021 | (2,775 | ) | |||||||||
Natwest Markets PLC | CHF | 881 | USD | 977 | 06/16/2021 | (3,185 | ) | |||||||||
Standard Chartered Bank | IDR | 4,845,221 | USD | 337 | 07/15/2021 | (1,916 | ) | |||||||||
Standard Chartered Bank | CLP | 195,551 | USD | 278 | 07/15/2021 | 7,168 | ||||||||||
Standard Chartered Bank | TWD | 12,227 | USD | 436 | 07/22/2021 | (11,151 | ) | |||||||||
Standard Chartered Bank | USD | 213 | INR | 15,759 | 07/15/2021 | 2,864 | ||||||||||
Standard Chartered Bank | USD | 771 | PHP | 37,661 | 07/22/2021 | 15,993 | ||||||||||
State Street Bank & Trust Co. | HUF | 82,742 | USD | 279 | 06/24/2021 | (12,224 | ) | |||||||||
State Street Bank & Trust Co. | TWD | 41,061 | USD | 1,484 | 07/22/2021 | (16,382 | ) | |||||||||
State Street Bank & Trust Co. | THB | 13,904 | USD | 443 | 07/15/2021 | (2,205 | ) | |||||||||
State Street Bank & Trust Co. | ZAR | 14,694 | USD | 1,008 | 06/17/2021 | (59,183 | ) | |||||||||
State Street Bank & Trust Co. | CZK | 21,215 | USD | 989 | 06/24/2021 | (31,112 | ) | |||||||||
State Street Bank & Trust Co. | PLN | 2,959 | USD | 781 | 06/24/2021 | (26,467 | ) | |||||||||
State Street Bank & Trust Co. | CAD | 601 | USD | 497 | 06/16/2021 | (1,299 | ) | |||||||||
State Street Bank & Trust Co. | AUD | 718 | USD | 557 | 06/16/2021 | 1,202 | ||||||||||
State Street Bank & Trust Co. | NZD | 543 | USD | 390 | 06/16/2021 | (4,997 | ) | |||||||||
State Street Bank & Trust Co. | CHF | 391 | USD | 428 | 06/16/2021 | (6,743 | ) | |||||||||
State Street Bank & Trust Co. | GBP | 194 | USD | 275 | 06/16/2021 | (1,067 | ) | |||||||||
State Street Bank & Trust Co. | GBP | 94 | USD | 129 | 06/17/2021 | (4,280 | ) | |||||||||
State Street Bank & Trust Co. | USD | 102 | EUR | 84 | 06/16/2021 | 747 | ||||||||||
State Street Bank & Trust Co. | USD | 702 | PLN | 2,671 | 06/24/2021 | 26,874 | ||||||||||
State Street Bank & Trust Co. | USD | 17 | TWD | 477 | 07/22/2021 | 182 | ||||||||||
State Street Bank & Trust Co. | USD | 60 | NOK | 497 | 07/15/2021 | (185 | ) | |||||||||
State Street Bank & Trust Co. | USD | 497 | CAD | 601 | 06/16/2021 | 1,615 | ||||||||||
State Street Bank & Trust Co. | USD | 165 | SEK | 1,376 | 06/16/2021 | 831 | ||||||||||
State Street Bank & Trust Co. | USD | 190 | NOK | 1,618 | 07/15/2021 | 4,506 | ||||||||||
State Street Bank & Trust Co. | USD | 570 | NOK | 4,711 | 06/16/2021 | (3,688 | ) | |||||||||
State Street Bank & Trust Co. | USD | 306 | ZAR | 4,346 | 06/17/2021 | 9,395 | ||||||||||
State Street Bank & Trust Co. | USD | 793 | CNY | 5,188 | 06/24/2021 | 19,205 | ||||||||||
State Street Bank & Trust Co. | USD | 288 | MXN | 5,775 | 06/18/2021 | 1,704 | ||||||||||
State Street Bank & Trust Co. | USD | 386 | JPY | 41,990 | 06/16/2021 | (2,300 | ) | |||||||||
State Street Bank & Trust Co. | USD | 192 | JPY | 21,083 | 06/16/2021 | 144 | ||||||||||
State Street Bank & Trust Co. | USD | 949 | THB | 29,563 | 07/15/2021 | (2,261 | ) | |||||||||
State Street Bank & Trust Co. | USD | 1,827 | INR | 137,586 | 07/15/2021 | 58,183 | ||||||||||
UBS AG | BRL | 3,106 | USD | 594 | 06/02/2021 | 850 | ||||||||||
UBS AG | USD | 590 | BRL | 3,106 | 06/02/2021 | 2,871 | ||||||||||
UBS AG | USD | 552 | SEK | 4,632 | 06/16/2021 | 7,223 | ||||||||||
UBS AG | USD | 104 | RUB | 7,629 | 06/16/2021 | 173 | ||||||||||
|
| |||||||||||||||
$ | (49,782 | ) | ||||||||||||||
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 39 |
PORTFOLIO OF INVESTMENTS (continued)
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
Description | Fixed Rate (Pay) Receive | Payment Frequency | Implied Credit Spread at May 31, 2021 | Notional Amount (000) | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
Sale Contracts |
| |||||||||||||||||||||||||||
CDX-NAHY Series 36, 5 Year Index, 06/20/2026* | 5.00 | % | Quarterly | 2.87 | % | USD | 14,400 | $ | 1,534,528 | $ | 1,400,263 | $ | 134,265 | |||||||||||||||
CDX-NAHY Series 36, 5 Year Index, 06/20/2026* | 5.00 | Quarterly | 2.87 | USD | 280 | 29,838 | 26,073 | 3,765 | ||||||||||||||||||||
iTraxx Xover Series 35, 5 Year Index, 06/20/2026* | 5.00 | Quarterly | 2.46 | EUR | 2,990 | 466,905 | 422,981 | 43,924 | ||||||||||||||||||||
iTraxx Xover Series 35, 5 Year Index, 06/20/2026* | 5.00 | Quarterly | 2.46 | EUR | 70 | 10,935 | 9,528 | 1,407 | ||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||
$ | 2,042,206 | $ | 1,858,845 | $ | 183,361 | |||||||||||||||||||||||
|
|
|
|
|
|
* | Termination date |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
USD | 1,050 | 01/10/2022 | 3 Month LIBOR | 1.941% | Quarterly/ Semi-Annual | $ | 19,336 | $ | – 0 | – | $ | 19,336 | ||||||||||
CNY | 740 | 02/17/2025 | China 7-Day Reverse Repo Rate | 2.547% | Quarterly | (530 | ) | – 0 | – | (530 | ) | |||||||||||
CNY | 2,204 | 02/20/2025 | China 7-Day Reverse Repo Rate | 2.598% | Quarterly | (975 | ) | – 0 | – | (975 | ) | |||||||||||
CNY | 2,236 | 02/21/2025 | China 7-Day Reverse Repo Rate | 2.620% | Quarterly | (691 | ) | – 0 | – | (691 | ) | |||||||||||
EUR | 10 | 09/12/2029 | 6 Month EURIBOR | (0.157)% | Semi-Annual/ Annual | (157 | ) | – 0 | – | (157 | ) | |||||||||||
EUR | 180 | 11/18/2029 | 6 Month EURIBOR | 0.073% | Semi-Annual/ Annual | 1,255 | – 0 | – | 1,255 | |||||||||||||
EUR | 220 | 01/23/2030 | 6 Month EURIBOR | 0.131% | Semi-Annual/ Annual | 3,079 | – 0 | – | 3,079 |
40 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
USD | 80 | 02/12/2030 | 3 Month LIBOR | 1.495% | Quarterly/ Semi-Annual | $ | 751 | $ | – 0 | – | $ | 751 | ||||||||||
USD | 670 | 06/10/2030 | 3 Month LIBOR | 0.865% | Quarterly/ Semi-Annual | (32,613 | ) | – 0 | – | (32,613 | ) | |||||||||||
EUR | 430 | 06/11/2030 | 6 Month EURIBOR | (0.045) | Semi-Annual/ Annual | (3,653 | ) | 3 | (3,656 | ) | ||||||||||||
EUR | 60 | 06/19/2030 | 6 Month EURIBOR | (0.119)% | Semi-Annual/ Annual | (1,087 | ) | (3 | ) | (1,084 | ) | |||||||||||
USD | 40 | 06/19/2030 | 3 Month LIBOR | 0.725% | Quarterly/ Semi-Annual | (2,484 | ) | – 0 | – | (2,484 | ) | |||||||||||
USD | 760 | 08/04/2030 | 3 Month LIBOR | 0.536% | Quarterly/ Semi-Annual | (62,354 | ) | – 0 | – | (62,354 | ) | |||||||||||
EUR | 520 | 08/05/2030 | 6 Month EURIBOR | (0.232)% | Semi-Annual/ Annual | (17,696 | ) | – 0 | – | (17,696 | ) | |||||||||||
USD | 320 | 08/20/2030 | 3 Month LIBOR | 0.645% | Quarterly/ Semi-Annual | (23,365 | ) | – 0 | – | (23,365 | ) | |||||||||||
USD | 1,510 | 10/21/2030 | 3 Month LIBOR | 0.794% | Quarterly/ Semi-Annual | (95,970 | ) | – 0 | – | (95,970 | ) | |||||||||||
EUR | 600 | 10/22/2030 | 6 Month EURIBOR | (0.280)% | Semi-Annual/ Annual | (25,135 | ) | – 0 | – | (25,135 | ) | |||||||||||
USD | 480 | 11/12/2030 | 3 Month LIBOR | 0.938% | Quarterly/ Semi-Annual | (24,825 | ) | – 0 | – | (24,825 | ) | |||||||||||
EUR | 190 | 11/12/2030 | 6 Month EURIBOR | (0.169)% | Semi-Annual/ Annual | (5,775 | ) | – 0 | – | (5,775 | ) | |||||||||||
NZD | 130 | 11/23/2030 | 3 Month BKBM | 0.841% | Quarterly/ Semi-Annual | (9,323 | ) | – 0 | – | (9,323 | ) | |||||||||||
EUR | 20 | 11/27/2030 | (0.247)% | 6 Month EURIBOR | Annual/ Semi-Annual | 815 | – 0 | – | 815 | |||||||||||||
EUR | 230 | 12/02/2030 | (0.253)% | 6 Month EURIBOR | Annual/ Semi-Annual | 8,853 | (1 | ) | 8,854 | |||||||||||||
EUR | 160 | 12/24/2030 | (0.266)% | 6 Month EURIBOR | Annual/ Semi-Annual | 6,565 | – 0 | – | 6,565 | |||||||||||||
AUD | 260 | 12/31/2030 | 6 Month BBSW | 0.999% | Semi-Annual | (11,066 | ) | – 0 | – | (11,066 | ) | |||||||||||
EUR | 70 | 01/04/2031 | (0.259)% | 6 Month EURIBOR | Annual/ Semi-Annual | 2,849 | – 0 | – | 2,849 | |||||||||||||
NZD | 320 | 01/05/2031 | 3 Month BKBM | 0.978% | Quarterly/ Semi-Annual | (19,866 | ) | – 0 | – | (19,866 | ) | |||||||||||
GBP | 370 | 01/07/2031 | 0.453% | 6 Month LIBOR | Semi-Annual | 26,362 | – 0 | – | 26,362 | |||||||||||||
NOK | 310 | 01/11/2031 | 6 Month NIBOR | 1.274% | Semi-Annual/ Annual | (1,507 | ) | – 0 | – | (1,507 | ) | |||||||||||
NZD | 210 | 01/11/2031 | 3 Month BKBM | 1.058% | Quarterly/ Semi-Annual | (11,956 | ) | – 0 | – | (11,956 | ) |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 41 |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
GBP | 470 | 01/12/2031 | 0.526% | 6 Month LIBOR | Semi-Annual | $ | 28,901 | $ | – 0 | – | $ | 28,901 | ||||||||||
AUD | 530 | 01/13/2031 | 6 Month BBSW | 1.126% | Semi-Annual | (17,957 | ) | – 0 | – | (17,957 | ) | |||||||||||
GBP | 80 | 01/14/2031 | 0.490% | 6 Month LIBOR | Semi-Annual | 5,321 | 1 | 5,320 | ||||||||||||||
JPY | 6,190 | 01/21/2031 | 0.063% | 6 Month LIBOR | Semi-Annual | 267 | – 0 | – | 267 | |||||||||||||
NOK | 1,740 | 01/21/2031 | 6 Month NIBOR | 1.348% | Semi-Annual/ Annual | (7,095 | ) | – 0 | – | (7,095 | ) | |||||||||||
NZD | 240 | 01/21/2031 | 3 Month BKBM | 1.075% | Quarterly/ Semi-Annual | (13,496 | ) | – 0 | – | (13,496 | ) | |||||||||||
AUD | 190 | 02/02/2031 | 6 Month BBSW | 1.155% | Semi-Annual | (6,234 | ) | – 0 | – | (6,234 | ) | |||||||||||
JPY | 116,730 | 02/19/2031 | 0.136% | 6 Month LIBOR | Semi-Annual | (2,339 | ) | 3 | (2,342 | ) | ||||||||||||
NOK | 3,400 | 02/19/2031 | 6 Month NIBOR | 1.634% | Semi-Annual/ Annual | (3,530 | ) | – 0 | – | (3,530 | ) | |||||||||||
USD | 220 | 08/21/2045 | 3 Month LIBOR | 2.630% | Quarterly/ Semi-Annual | 29,513 | – 0 | – | 29,513 | |||||||||||||
USD | 70 | 09/04/2045 | 3 Month LIBOR | 2.708% | Quarterly/ Semi-Annual | 10,419 | – 0 | – | 10,419 | |||||||||||||
AUD | 180 | 12/23/2030 | 6 Month BBSW | 0.955% | Semi-Annual | (8,185 | ) | – 0 | – | (8,185 | ) | |||||||||||
AUD | 280 | 02/26/2031 | 6 Month BBSW | 1.752% | Semi-Annual | 2,699 | – 0 | – | 2,699 | |||||||||||||
CAD | 110 | 03/31/2031 | 3 Month CDOR | 2.054% | Semi-Annual | 1,425 | – 0 | – | 1,425 | |||||||||||||
NOK | 1,410 | 04/21/2031 | 6 Month NIBOR | 1.755% | Semi-Annual/ Annual | 28 | – 0 | – | 28 | |||||||||||||
NZD | 220 | 04/21/2031 | 3 Month BKBM | 1.790% | Quarterly/ Semi-Annual | (2,893 | ) | – 0 | – | (2,893 | ) | |||||||||||
CAD | 280 | 04/29/2031 | 3 Month CDOR | 2.024% | Semi-Annual | 2,566 | (10 | ) | 2,576 | |||||||||||||
GBP | 60 | 04/29/2031 | 1.080% | 6 Month LIBOR | Semi-Annual | (536 | ) | 2 | (538 | ) | ||||||||||||
AUD | 840 | 04/30/2031 | 6 Month BBSW | 1.772% | Semi-Annual | 6,376 | – 0 | – | 6,376 | |||||||||||||
NOK | 10,780 | 05/03/2031 | 6 Month NIBOR | 1.786% | Semi-Annual/ Annual | 3,200 | – 0 | – | 3,200 | |||||||||||||
NZD | 630 | 05/03/2031 | 3 Month BKBM | 1.843% | Quarterly/ Semi-Annual | (6,485 | ) | – 0 | – | (6,485 | ) | |||||||||||
JPY | 122,280 | 05/07/2031 | 0.130% | 6 Month LIBOR | Semi-Annual | (674 | ) | 1 | (675 | ) |
42 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Rate Type | ||||||||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||
USD | 490 | 05/11/2031 | | 3 Month LIBOR | | 1.560% | Quarterly/ Semi-Annual | $ | 361 | $ | – 0 | – | $ | 361 | ||||||||||||||
CAD | 420 | 05/14/2031 | | 3 Month CDOR | | 1.974% | Semi-Annual | 1,921 | – 0 | – | 1,921 | |||||||||||||||||
NZD | 1,160 | 05/18/2031 | | 3 Month BKBM | | 1.985% | Quarterly/ Semi-Annual | (1,673 | ) | – 0 | – | (1,673 | ) | |||||||||||||||
USD | 10 | 05/18/2031 | | 3 Month LIBOR | | 1.591% | Quarterly/ Semi-Annual | 32 | – 0 | – | 32 | |||||||||||||||||
EUR | 410 | 02/19/2031 | (0.030)% | | 6 Month EURIBOR | | Annual/ Semi-Annual | 5,876 | 1 | 5,875 | ||||||||||||||||||
CHF | 360 | 03/01/2031 | 0.068% | | 6 Month LIBOR | | Annual/ Semi-Annual | (1,679 | ) | – 0 | – | (1,679 | ) | |||||||||||||||
EUR | 110 | 03/01/2031 | 0.049% | | 6 Month EURIBOR | | Annual/ Semi-Annual | 764 | – 0 | – | 764 | |||||||||||||||||
JPY | 16,530 | 04/06/2031 | 0.158% | | 6 Month LIBOR | | Semi-Annual | (564 | ) | – 0 | – | (564 | ) | |||||||||||||||
CHF | 170 | 04/06/2031 | 0.026% | | 6 Month LIBOR | | Annual/ Semi-Annual | (137 | ) | – 0 | – | (137 | ) | |||||||||||||||
SEK | 20 | 04/21/2031 | | 3 Month STIBOR | | 0.786% | Quarterly/ Annual | – 0 | – | (1 | ) | 1 | ||||||||||||||||
EUR | 1,080 | 05/03/2031 | 0.148% | | 6 Month EURIBOR | | Annual/ Semi-Annual | (4,815 | ) | 7 | (4,822 | ) | ||||||||||||||||
CHF | 840 | 05/03/2031 | 0.084% | | 6 Month LIBOR | | Annual/ Semi-Annual | (5,133 | ) | 3 | (5,136 | ) | ||||||||||||||||
EUR | 490 | 05/11/2031 | | 6 Month EURIBOR | | 0.115% | Semi-Annual/ Annual | (22 | ) | 1 | (23 | ) | ||||||||||||||||
JPY | 121,190 | 05/18/2031 | 0.126% | | 6 Month LIBOR | | Semi-Annual | (12 | ) | – 0 | – | (12 | ) | |||||||||||||||
CHF | 300 | 05/18/2031 | 0.079% | | 6 Month EURIBOR | | Annual/ Semi-Annual | (1,493 | ) | – 0 | – | (1,493 | ) | |||||||||||||||
EUR | 150 | 05/18/2031 | 0.154% | | 6 Month EURIBOR | | Annual/ Semi-Annual | (671 | ) | – 0 | – | (671 | ) | |||||||||||||||
NZD | 590 | 02/19/2031 | | 3 Month BKBM | | 1.616% | Quarterly/ Semi-Annual | (12,533 | ) | – 0 | – | (12,533 | ) | |||||||||||||||
CHF | 280 | 02/19/2031 | (0.054)% | | 6 Month LIBOR | | Annual/ Semi-Annual | 1,759 | (1 | ) | 1,760 | |||||||||||||||||
|
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|
| |||||||||||||||||||||||
$ | (277,891 | ) | $ | 6 | $ | (277,897 | ) | |||||||||||||||||||||
|
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|
|
|
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 43 |
PORTFOLIO OF INVESTMENTS (continued)
INFLATION (CPI) SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||||||||||||
Swap Counterparty | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/ Received | Market Value | Upfront Premiums Paid/ (Received) | Unrealized Appreciation/ (Depreciation) | ||||||||||||||||||||||||
Bank of America, NA | USD 8,300 | 01/05/2023 | 2.163% | CPI# | Maturity | $ | 130,466 | $ | – 0 | – | $ | 130,466 | ||||||||||||||||||||
Bank of America, NA | 610 | 01/19/2023 | 2.213% | CPI# | Maturity | 7,692 | – 0 | – | 7,692 | |||||||||||||||||||||||
JPMorgan Chase Bank, NA | 400 | 11/10/2021 | 1.896% | CPI# | Maturity | 8,650 | – 0 | – | 8,650 | |||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||
$ | 146,808 | $ | – 0 | – | $ | 146,808 | ||||||||||||||||||||||||||
|
|
|
|
|
|
# | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
TOTAL RETURN SWAPS (see Note D)
Counterparty & Referenced Obligation | Rate Paid/ Received | Payment Frequency | Current Notional (000) | Maturity Date | Unrealized Appreciation/ (Depreciation) | |||||||||||||||
Receive Total Return on Reference Obligation |
| |||||||||||||||||||
JPMorgan Chase Bank, NA | ||||||||||||||||||||
JPABSAA1(1) | 0.14% | Maturity | USD | 4,487 | 06/30/2021 | $ | – 0 | – | ||||||||||||
Morgan Stanley Capital Services LLC |
| |||||||||||||||||||
RTS Futures | 0.00% | Monthly | USD | 475 | 06/17/2021 | 17,895 | ||||||||||||||
RTS Futures | 0.00% | Monthly | USD | 184 | 06/17/2021 | 3,092 | ||||||||||||||
Pay Total Return on Reference Obligation |
| |||||||||||||||||||
Morgan Stanley Capital Services LLC |
| |||||||||||||||||||
KOSPI 200 Futures | 0.00% | Monthly | KRW | 213,175 | 06/10/2021 | 1,153 | ||||||||||||||
KOSPI 200 Futures | 0.00% | Monthly | KRW | 639,525 | 06/10/2021 | (12,557 | ) | |||||||||||||
IBOVESPA Futures | 0.00% | Monthly | BRL | 502 | 06/16/2021 | (4,464 | ) | |||||||||||||
IBOVESPA Futures | 0.00% | Monthly | BRL | 1,004 | 06/16/2021 | (8,033 | ) | |||||||||||||
Swiss Market Index Futures | 0.00% | Monthly | CHF | 114 | 06/18/2021 | (3,586 | ) | |||||||||||||
|
| |||||||||||||||||||
$ | (6,500 | ) | ||||||||||||||||||
|
|
(a) | Non-income producing security. |
(b) | Position, or a portion thereof, has been segregated to collateralize margin requirements for open futures contracts. |
(c) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At May 31, 2021, the aggregate market value of these securities amounted to $2,649,318 or 3.0% of net assets. |
(d) | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(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 |
(f) | Affiliated investments. |
(g) | Defaulted. |
(h) | The rate shown represents the 7-day yield as of period end. |
44 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Currency Abbreviations:
AUD – Australian Dollar
BRL – Brazilian Real
CAD – Canadian Dollar
CHF – Swiss Franc
CLP – Chilean Peso
CNY – Chinese Yuan Renminbi
COP – Colombian Peso
CZK – Czech Koruna
EUR – Euro
GBP – Great British Pound
HUF – Hungarian Forint
IDR – Indonesian Rupiah
INR – Indian Rupee
JPY – Japanese Yen
KRW – South Korean Won
MXN – Mexican Peso
MYR – Malaysian Ringgit
NOK – Norwegian Krone
NZD – New Zealand Dollar
PEN – Peruvian Sol
PHP – Philippine Peso
PLN – Polish Zloty
RUB – Russian Ruble
SEK – Swedish Krona
THB – Thailand Baht
TWD – New Taiwan Dollar
USD – United States Dollar
ZAR – South African Rand
Glossary:
ADR – American Depositary Receipt
BBSW – Bank Bill Swap Reference Rate (Australia)
BIST – Borsa Istanbul Stock Exchange
BKBM – Bank Bill Benchmark (New Zealand)
CBT – Chicago Board of Trade
CDOR – Canadian Dealer Offered Rate
CDX-NAHY – North American High Yield Credit Default Swap Index
CPI – Consumer Price Index
ETS – Emission Trading Scheme
EURIBOR – Euro Interbank Offered Rate
FTSE – Financial Times Stock Exchange
GDR – Global Depositary Receipt
JSE – Johannesburg Stock Exchange
KLCI – Kuala Lumpur Composite Index
KOSPI – Korea Composite Stock Price Index
LIBOR – London Interbank Offered Rate
MSCI – Morgan Stanley Capital International
NIBOR – Norwegian Interbank Offered Rate
OMXS –Stockholm Stock Exchange
PJSC – Public Joint Stock Company
REIT – Real Estate Investment Trust
RTS – Russian Trading System
SGX – Singapore Exchange
SPDR – Standard & Poor’s Depository Receipt
SPI – Share Price Index
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 45 |
PORTFOLIO OF INVESTMENTS (continued)
STIBOR – Stockholm Interbank Offered Rate
TOPIX – Tokyo Price Index
TSX – Toronto Stock Exchange
WIG – Warszawski Indeks Gieldowy
(1) | The following table represents the 50 largest (long/(short)) equity basket holdings underlying the total return swap in JPABSAA1 as of May 31, 2021. |
Security Description | Shares | Current Notional | Percent of Basket’s Value | |||||||||
S&P 500 Total Return Index | (277 | ) | $ | (2,418,865 | ) | (53.9 | )% | |||||
MSCI Daily TR Gross EAFE Index | (111 | ) | (1,151,632 | ) | (25.7 | )% | ||||||
JPMorgan Cash Index | (2,705 | ) | (824,542 | ) | (18.4 | )% | ||||||
Microsoft Corp. | 820 | 204,750 | 4.6 | % | ||||||||
Alphabet, Inc. | 52 | 125,302 | 2.8 | % | ||||||||
MSCI Daily TR Gross Canada Index | (11 | ) | (117,968 | ) | (2.6 | )% | ||||||
Roche Holding AG | 308 | 107,142 | 2.4 | % | ||||||||
Oracle Corp. | 1,355 | 106,688 | 2.4 | % | ||||||||
Amazon.com, Inc. | 32 | 103,056 | 2.3 | % | ||||||||
Apple, Inc. | 794 | 98,970 | 2.2 | % | ||||||||
UnitedHealth Group, Inc. | 228 | 93,976 | 2.1 | % | ||||||||
Home Depot, Inc. (The) | 278 | 88,528 | 2.0 | % | ||||||||
Paychex, Inc. | 866 | 87,620 | 2.0 | % | ||||||||
Facebook, Inc. | 267 | 87,620 | 2.0 | % | ||||||||
AutoZone, Inc. | 62 | 87,166 | 1.9 | % | ||||||||
Salmar ASA | 990 | 73,093 | 1.6 | % | ||||||||
Royal Bank of Canada | 698 | 71,731 | 1.6 | % | ||||||||
Swedish Match AB | 7,588 | 70,369 | 1.6 | % | ||||||||
CME Group, Inc. | 322 | 70,369 | 1.6 | % | ||||||||
Automatic Data Processing, Inc. | 350 | 68,553 | 1.5 | % | ||||||||
Nippon Telegraph & Telephone Co. | 2,490 | 66,737 | 1.5 | % | ||||||||
Walmart, Inc. | 463 | 65,829 | 1.5 | % | ||||||||
Deckers Outdoor Corp. | 188 | 63,105 | 1.4 | % | ||||||||
RELX PLC | 2,360 | 61,743 | 1.4 | % | ||||||||
Koninklijke Ahold Delhaize | 2,075 | 59,927 | 1.3 | % | ||||||||
Merck & Co., Inc. | 828 | 59,927 | 1.3 | % | ||||||||
Citrix Systems, Inc. | 517 | 59,473 | 1.3 | % | ||||||||
Texas Instruments, Inc. | 311 | 59,019 | 1.3 | % | ||||||||
Anthem, Inc. | 147 | 58,565 | 1.3 | % | ||||||||
Aristrocrat Leisure, Ltd. | 1,843 | 58,565 | 1.3 | % | ||||||||
Procter & Gamble Co. (The) | 424 | 57,203 | 1.3 | % | ||||||||
Partners Group Holding AG | 37 | 56,749 | 1.3 | % | ||||||||
Capgemini SE | 302 | 56,295 | 1.3 | % | ||||||||
Royal Dutch Shell PLC | 31 | 56,295 | 1.3 | % | ||||||||
Constellation Software, Inc./Canada | 39 | 55,841 | 1.2 | % | ||||||||
Enel SpA | 5,623 | 55,387 | 1.2 | % | ||||||||
Fidelity National Information | 363 | 54,025 | 1.2 | % | ||||||||
Amadeus IT Group SA | 692 | 52,209 | 1.2 | % | ||||||||
Novo Nordisk A/S | 654 | 51,755 | 1.2 | % | ||||||||
Taiwan Semiconductor Manufacturing | 441 | 51,755 | 1.2 | % | ||||||||
S&P Global, Inc. | 132 | 49,939 | 1.1 | % | ||||||||
JPMorgan Chase & Co. | 299 | 49,031 | 1.1 | % | ||||||||
Activision Blizzard, Inc. | 495 | 48,123 | 1.1 | % | ||||||||
Compass Group PLC | 21 | 48,123 | 1.1 | % |
46 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Security Description | Shares | Current Notional | Percent of Basket’s Value | |||||||||
Sony Group Corp. | 470 | $ | 46,307 | 1.0 | % | |||||||
Auto Trader Group PLC | 57 | 45,853 | 1.0 | % | ||||||||
Visa, Inc. | 202 | 45,853 | 1.0 | % | ||||||||
Philip Morris International, Inc. | 466 | 44,945 | 1.0 | % | ||||||||
Wolters Kluwer NV | 469 | 44,945 | 1.0 | % | ||||||||
Mastercard, Inc. | 120 | 43,129 | 1.0 | % | ||||||||
Other Long | 23,913 | 1,370,223 | 30.6 | % |
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 47 |
STATEMENT OF ASSETS & LIABILITIES
May 31, 2021 (unaudited)
Assets |
| |||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $45,085,454) | $ | 47,982,810 | (a) | |
Affiliated issuers (cost $31,758,730—including investment of cash collateral for securities loaned of $500,491) | 31,955,328 | |||
Cash | 4,467,678 | |||
Cash collateral due from broker | 2,156,786 | |||
Foreign currencies, at value (cost $3,697,476) | 3,730,522 | |||
Unrealized appreciation on forward currency exchange contracts | 361,955 | |||
Receivable for capital stock sold | 261,109 | |||
Receivable for investment securities sold and foreign currency transactions | 225,819 | |||
Unaffiliated dividends and interest receivable | 225,289 | |||
Unrealized appreciation on inflation swaps | 146,808 | |||
Affiliated dividends receivable | 106,231 | |||
Receivable for variation margin on centrally cleared swaps | 32,796 | |||
Unrealized appreciation on total return swaps | 22,140 | |||
Receivable for terminated total return swaps | 18,846 | |||
Receivable for variation margin on futures | 18,762 | |||
|
| |||
Total assets | 91,712,879 | |||
|
| |||
Liabilities |
| |||
Cash collateral due to broker | 920,000 | |||
Payable for collateral received on securities loaned | 500,491 | |||
Unrealized depreciation on forward currency exchange contracts | 411,737 | |||
Payable for investment securities purchased and foreign currency transactions | 321,645 | |||
Unrealized depreciation on total return swaps | 28,640 | |||
Payable for capital stock redeemed | 24,419 | |||
Directors’ fees payable | 4,541 | |||
Distribution fee payable | 2,043 | |||
Transfer Agent fee payable | 1,463 | |||
Advisory fee payable | 535 | |||
Accrued expenses and other liabilities | 138,447 | |||
|
| |||
Total liabilities | 2,353,961 | |||
|
| |||
Net Assets | $ | 89,358,918 | ||
|
| |||
Composition of Net Assets |
| |||
Capital stock, at par | $ | 934 | ||
Additional paid-in capital | 97,884,869 | |||
Accumulated loss | (8,526,885 | ) | ||
|
| |||
Net Assets | $ | 89,358,918 | ||
|
|
(a) | Includes securities on loan with a value of $1,395,448 (see Note E). |
See notes to financial statements.
48 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
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 | $ | 8,090,473 | 846,359 | $ | 9.56 | * | ||||||
| ||||||||||||
C | $ | 566,492 | 59,220 | $ | 9.57 | |||||||
| ||||||||||||
Advisor | $ | 80,701,953 | 8,430,056 | $ | 9.57 | |||||||
|
* | The maximum offering price per share for Class A shares was $9.98 which reflects a sales charge of 4.25%. |
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 49 |
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2021 (unaudited)
Investment Income |
| |||||||
Dividends |
| |||||||
Affiliated issuers | $ | 1,030,523 | ||||||
Unaffiliated issuers | 805,771 | |||||||
Interest (net of foreign taxes withheld of $1,745) | 111,903 | |||||||
Securities lending income | 7,282 | $ | 1,955,479 | |||||
|
| |||||||
Expenses |
| |||||||
Advisory fee (see Note B) | 251,810 | |||||||
Distribution fee—Class A | 9,347 | |||||||
Distribution fee—Class C | 3,285 | |||||||
Transfer agency—Class A | 1,596 | |||||||
Transfer agency—Class C | 155 | |||||||
Transfer agency—Advisor Class | 17,724 | |||||||
Custody and accounting | 91,543 | |||||||
Audit and tax | 53,360 | |||||||
Administrative | 44,606 | |||||||
Registration fees | 28,094 | |||||||
Legal | 17,535 | |||||||
Printing | 15,889 | |||||||
Directors’ fees | 9,536 | |||||||
Miscellaneous | 18,376 | |||||||
|
| |||||||
Total expenses | 562,856 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | (298,743 | ) | ||||||
|
| |||||||
Net expenses | 264,113 | |||||||
|
| |||||||
Net investment income | 1,691,366 | |||||||
|
| |||||||
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Affiliated Underlying Portfolios | (625,521 | ) | ||||||
Investment transactions(a) | 5,205,487 | |||||||
Forward currency exchange contracts | 88,261 | |||||||
Futures | (800,188 | ) | ||||||
Options written | 144,376 | |||||||
Swaps | (36,815 | ) | ||||||
Foreign currency transactions | 172,119 | |||||||
Net change in unrealized appreciation/depreciation of: |
| |||||||
Affiliated Underlying Portfolios | 1,315,786 | |||||||
Investments(b) | (301,347 | ) | ||||||
Forward currency exchange contracts | (65,447 | ) | ||||||
Futures | 222,660 | |||||||
Swaps | (391,446 | ) | ||||||
Foreign currency denominated assets and liabilities | (18,033 | ) | ||||||
|
| |||||||
Net gain on investment and foreign currency transactions | 4,909,892 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 6,601,258 | ||||||
|
|
(a) | Net of foreign capital gains taxes of $849. |
(b) | Net of decrease in accrued foreign capital gains taxes of $137. |
See notes to financial statements.
50 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,691,366 | $ | 2,976,616 | ||||
Net realized gain (loss) on investment and foreign currency transactions | 4,147,719 | (10,802,418 | ) | |||||
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | 762,173 | 1,339,194 | ||||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 6,601,258 | (6,486,608 | ) | |||||
Distributions to Shareholders | ||||||||
Class A | (149,288 | ) | (286,500 | ) | ||||
Class C | (10,157 | ) | (33,929 | ) | ||||
Advisor Class | (1,764,149 | ) | (4,028,729 | ) | ||||
Capital Stock Transactions |
| |||||||
Net decrease | (9,570,632 | ) | (3,051,229 | ) | ||||
|
|
|
| |||||
Total decrease | (4,892,968 | ) | (13,886,995 | ) | ||||
Net Assets |
| |||||||
Beginning of period | 94,251,886 | 108,138,881 | ||||||
|
|
|
| |||||
End of period | $ | 89,358,918 | $ | 94,251,886 | ||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 51 |
NOTES TO FINANCIAL STATEMENTS
May 31, 2021 (unaudited)
NOTE A
Significant Accounting Policies
AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 13 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB All Market 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 May 31, 2021, Class C shares will automatically convert to Class A shares eight years after the end of the calendar month of purchase. Prior to May 31, 2021, Class C shares automatically converted 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”).
52 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 53 |
NOTES TO FINANCIAL STATEMENTS (continued)
determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and
54 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on an 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.
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 55 |
NOTES TO FINANCIAL STATEMENTS (continued)
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of May 31, 2021:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks: | ||||||||||||||||
Information Technology | $ | 6,230,795 | $ | 677,350 | $ | – 0 | – | $ | 6,908,145 | |||||||
Financials | 3,407,298 | 2,030,911 | – 0 | – | 5,438,209 | |||||||||||
Consumer Discretionary | 3,176,101 | 1,524,258 | – 0 | – | 4,700,359 | |||||||||||
Health Care | 3,250,555 | 917,919 | – 0 | – | 4,168,474 | |||||||||||
Industrials | 1,893,538 | 1,543,725 | – 0 | – | 3,437,263 | |||||||||||
Communication Services | 1,763,030 | 688,204 | – 0 | – | 2,451,234 | |||||||||||
Materials | 1,009,715 | 1,028,366 | – 0 | – | 2,038,081 | |||||||||||
Consumer Staples | 775,188 | 518,427 | – 0 | – | 1,293,615 | |||||||||||
Utilities | 496,964 | 620,566 | – 0 | – | 1,117,530 | |||||||||||
Real Estate | 785,198 | 60,617 | – 0 | – | 845,815 | |||||||||||
Energy | 512,520 | 267,226 | – 0 | – | 779,746 | |||||||||||
Investment Companies | 16,102,146 | – 0 | – | – 0 | – | 16,102,146 | ||||||||||
Preferred Stocks | 6,724,735 | – 0 | – | – 0 | – | 6,724,735 | ||||||||||
Emerging Markets – Sovereigns | – 0 | – | 2,520,834 | – 0 | – | 2,520,834 | ||||||||||
Options Purchased – Puts | – 0 | – | 902,898 | – 0 | – | 902,898 | ||||||||||
Governments – Treasuries | – 0 | – | 628,844 | – 0 | – | 628,844 | ||||||||||
Emerging Markets – Treasuries | – 0 | – | 320,112 | – 0 | – | 320,112 | ||||||||||
Quasi-Sovereigns | – 0 | – | 135,228 | – 0 | – | 135,228 | ||||||||||
Short-Term Investments: | ||||||||||||||||
Investment Companies | 16,924,451 | – 0 | – | – 0 | – | 16,924,451 | ||||||||||
U.S. Treasury Bills | – 0 | – | 1,999,928 | – 0 | – | 1,999,928 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 500,491 | – 0 | – | – 0 | – | 500,491 | ||||||||||
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Total Investments in Securities | 63,552,725 | 16,385,413 | – 0 | – | 79,938,138 | |||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Futures | 188,858 | 55,316 | – 0 | – | 244,174 | (b) | ||||||||||
Forward Currency Exchange Contracts | – 0 | – | 361,955 | – 0 | – | 361,955 | ||||||||||
Centrally Cleared Credit Default Swaps | – 0 | – | 2,042,206 | – 0 | – | 2,042,206 | (b) | |||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 171,293 | – 0 | – | 171,293 | (b) | |||||||||
Inflation (CPI) Swaps | – 0 | – | 146,808 | – 0 | – | 146,808 | ||||||||||
Total Return Swaps | – 0 | – | 22,140 | – 0 | – | 22,140 | ||||||||||
Liabilities: | ||||||||||||||||
Futures | (116,744 | ) | (59,446 | ) | – 0 | – | (176,190 | )(b) | ||||||||
Forward Currency Exchange Contracts | – 0 | – | (411,737 | ) | – 0 | – | (411,737 | ) | ||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (449,184 | ) | – 0 | – | (449,184 | )(b) | ||||||||
Total Return Swaps | – 0 | – | (28,640 | ) | – 0 | – | (28,640 | ) | ||||||||
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Total | $ | 63,624,839 | $ | 18,236,124 | $ | – 0 | – | $ | 81,860,963 | |||||||
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(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. |
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NOTES TO FINANCIAL STATEMENTS (continued)
(b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily.
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NOTES TO FINANCIAL STATEMENTS (continued)
Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each 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 .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. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) 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, 2021, such reimbursements/waivers amounted to $166,753. The Expense Caps may not be terminated by the Adviser before February 28, 2022. 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 amounted to $192,023 for the
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NOTES TO FINANCIAL STATEMENTS (continued)
year 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 Expense Caps’ 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, 2021, the Adviser voluntarily agreed to waive such fees in the amount of $44,606.
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 $10,426 for the six months ended May 31, 2021.
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 $154 from the sale of Class A shares and received $16 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, 2021.
The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended May 31, 2021, such waiver amounted to $4,004.
The Fund currently invests in AB High Income Fund, Inc. (“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, 2022 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, 2021, such waiver amounted to $83,371.
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NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the Fund’s transactions in AB mutual funds for the six months ended May 31, 2021 is as follows:
Distributions | ||||||||||||||||||||||||||||||||
Fund | Market Value 11/30/20 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Realized Gain (Loss) (000) | Change in Unrealized Appr./ (Depr.) (000) | Market Value 5/31/21 (000) | Dividend Income (000) | Realized Gains (000) | ||||||||||||||||||||||||
Government Money Market Portfolio | $ | 13,316 | $ | 69,114 | $ | 65,505 | $ | – 0 | – | $ | – 0 | – | $ | 16,925 | $ | 1 | $ | – 0 | – | |||||||||||||
AB High Income Fund, Inc. | 35,037 | 1,582 | 22,779 | (626 | ) | 1,316 | 14,530 | 1,030 | – 0 | – | ||||||||||||||||||||||
Government Money Market Portfolio* | 537 | 4,402 | 4,439 | – 0 | – | – 0 | – | 500 | 0 | ** | – 0 | – | ||||||||||||||||||||
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Total | $ | (626 | ) | $ | 1,316 | $ | 31,955 | $ | 1,031 | $ | – 0 | – | ||||||||||||||||||||
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* | Investments of cash collateral for securities lending transactions (see Note E). |
** | Amount is less than $500. |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.) (“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings (and related transactions). As a result, as of May 20, 2021, AXA no longer owns shares of Equitable.
Sales that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company
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NOTES TO FINANCIAL STATEMENTS (continued)
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 $2,678 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, 2021 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 34,780,317 | $ | 58,304,412 | ||||
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 | $ | 5,270,276 | ||
Gross unrealized depreciation | (2,112,348 | ) | ||
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Net unrealized appreciation | $ | 3,157,928 | ||
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1. Derivative Financial Instruments
The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
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NOTES TO FINANCIAL STATEMENTS (continued)
The principal types of derivatives utilized by the Fund, as well as the methods in which they may be used are:
• | Futures |
The Fund may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Fund bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Fund may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Fund enters into futures, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
During the six months ended May 31, 2021, 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
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NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021, the Fund held forward currency exchange contracts for hedging and non-hedging purposes.
• | Option Transactions |
For hedging and investment purposes, the Fund may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Fund may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of loss of the premium and change in market value should the counterparty not perform under the contract. If a put or call option purchased by the Fund were permitted to expire without being sold or exercised, its premium would represent a loss to the Fund. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. Premiums received from written options which expire unexercised are 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
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NOTES TO FINANCIAL STATEMENTS (continued)
brokerage commissions, is also treated as a realized gain, or if the premium received is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium received is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium received reduces the cost basis of the security or currency purchased by the Fund. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value.
During the six months ended May 31, 2021, the Fund held written options for hedging and non-hedging purposes. During the six months ended May 31, 2021, the Fund held purchased 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.
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
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NOTES TO FINANCIAL STATEMENTS (continued)
movements in interest rates or in the value of the underlying securities. The Fund accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received for OTC swaps are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Fund enters into a centrally cleared swap, the Fund deposits and maintains as collateral an initial margin with the broker, as required by the clearinghouse on which the transaction is effected. Such amount is shown as cash collateral due from broker on the statement of assets and liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
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
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NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021, 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, 2021, the Fund held inflation (CPI) swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Fund may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Fund, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Fund may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Fund receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon
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NOTES TO FINANCIAL STATEMENTS (continued)
rate applied to the notional amount. If the Fund is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Fund will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Fund for the same referenced obligations with the same counterparty.
Credit default swaps may involve greater risks than if a Fund had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Fund is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Fund is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Fund coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Fund.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
During the six months ended May 31, 2021, the Fund held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Fund may enter into total return swaps in order to take a “long” or “short” position with respect to an underlying referenced asset. The
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NOTES TO FINANCIAL STATEMENTS (continued)
Fund is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty.
During the six months ended May 31, 2021, the Fund held total return swaps for hedging and non-hedging purposes.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.
The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the six months ended May 31, 2021, 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 | $ | 34,203 | * | ||||||||
Equity contracts | Receivable/Payable for variation margin on futures | 209,971 | * | Receivable/Payable for variation margin on futures | $ | 176,190 | * |
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NOTES TO FINANCIAL STATEMENTS (continued)
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of | Fair Value | Statement of | Fair Value | ||||||||
Credit contracts | Receivable/Payable for variation margin on centrally cleared swaps | $ | 183,361 | * | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on centrally cleared swaps | 171,304 | * | Receivable/Payable for variation margin on centrally cleared swaps | $ | 449,201 | * | |||||
Foreign currency contracts | Unrealized appreciation on forward currency exchange contracts | 361,955 | Unrealized depreciation on forward currency exchange contracts | 411,737 | ||||||||
Equity contracts | Investments in securities, at value | 902,898 | ||||||||||
Interest rate contracts | Unrealized appreciation on inflation swaps | 146,808 | ||||||||||
Equity contracts | Unrealized appreciation on total return swaps | 22,140 | Unrealized depreciation on total return swaps | 28,640 | ||||||||
|
|
|
| |||||||||
Total | $ | 2,032,640 | $ | 1,065,768 | ||||||||
|
|
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
Derivative Type | Location of Gain or | 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 | $ | (174,767 | ) | $ | 30,925 | ||||
Equity contracts | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | (625,421 | ) | 191,735 |
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NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of Gain or | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Foreign currency contracts | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | $ | 88,261 | $ | (65,447 | ) | ||||
Credit contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | (4,742 | ) | – 0 | – | |||||
Equity contracts | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | 134,669 | (493,268 | ) | ||||||
Credit contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | 4,347 | – 0 | – | ||||||
Equity contracts | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | 140,029 | – 0 | – | ||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 257,510 | (477,065 | ) | ||||||
Credit contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | 17,460 | 45,537 |
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NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of Gain or | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Equity contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (311,785 | ) | $ | 40,082 | ||||
|
|
|
| |||||||
Total | $ | (474,439 | ) | $ | (727,501 | ) | ||||
|
|
|
|
The following table represents the average monthly volume of the Fund’s derivative transactions during the six months ended May 31, 2021:
Futures: | ||||
Average notional amount of buy contracts | $ | 17,053,171 | ||
Average notional amount of sale contracts | $ | 6,875,423 | ||
Forward Currency Exchange Contracts: | ||||
Average principal amount of buy contracts | $ | 15,401,741 | ||
Average principal amount of sale contracts | $ | 16,520,416 | ||
Purchased Options: | ||||
Average notional amount | $ | 31,372,130 | (a) | |
Options Written: | ||||
Average notional amount | $ | 9,589,668 | (a) | |
Inflation Swaps: | ||||
Average notional amount | $ | 9,310,000 | ||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 21,805,131 | ||
Centrally Cleared Credit Default Swaps: | ||||
Average notional amount of sale contracts | $ | 6,482,097 | (b) | |
Total Return Swaps: | ||||
Average notional amount | $ | 11,574,165 |
(a) | Positions were open for four months during the period. |
(b) | Positions were open for three months during the period. |
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of May 31, 2021. Exchange-traded derivatives
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NOTES TO FINANCIAL STATEMENTS (continued)
and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
Counterparty | Derivative Assets Subject to a MA | Derivatives Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivative Assets | |||||||||||||||
Bank of America, NA | $ | 299,475 | $ | (347 | ) | $ | – 0 | – | $ | – 0 | – | $ | 299,128 | |||||||
Barclays Bank PLC | 28,183 | (12,180 | ) | – 0 | – | – 0 | – | 16,003 | ||||||||||||
BNP Paribas SA | 12,163 | (5,236 | ) | – 0 | – | – 0 | – | 6,927 | ||||||||||||
Citibank, NA | 51,500 | (20,427 | ) | (20,000 | ) | – 0 | – | 11,073 | ||||||||||||
Deutsche Bank AG | 22,971 | (22,971 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Goldman Sachs International | 50,693 | (50,693 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
HSBC Bank USA | 8,051 | – 0 | – | – 0 | – | – 0 | – | 8,051 | ||||||||||||
JPMorgan Chase Bank, NA | 9,630 | – 0 | – | – 0 | – | – 0 | – | 9,630 | ||||||||||||
Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | 39,221 | (28,640 | ) | – 0 | – | – 0 | – | 10,581 | ||||||||||||
Standard Chartered Bank | 26,025 | (13,067 | ) | – 0 | – | – 0 | – | 12,958 | ||||||||||||
State Street Bank & Trust Co. | 124,588 | (124,588 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
UBS AG | 761,301 | – 0 | – | (761,301 | ) | – 0 | – | – 0 | – | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 1,433,801 | $ | (278,149 | ) | $ | (781,301 | ) | $ | – 0 | – | $ | 374,351 | ^ | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Counterparty | Derivative Liabilities Subject to a MA | Derivatives Available for Offset | Cash Collateral Pledged* | Security Collateral Pledged* | Net Amount of Derivative Liabilities | |||||||||||||||
Bank of America, NA | $ | 347 | $ | (347 | ) | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | ||||||
Barclays Bank PLC | 12,180 | (12,180 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
BNP Paribas SA | 5,236 | (5,236 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Citibank, NA | 20,427 | (20,427 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Deutsche Bank AG | 94,074 | (22,971 | ) | – 0 | – | – 0 | – | 71,103 | ||||||||||||
Goldman Sachs International | 76,538 | (50,693 | ) | – 0 | – | – 0 | – | 25,845 | ||||||||||||
Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | 28,640 | (28,640 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
Natwest Markets PLC | 15,475 | – 0 | – | – 0 | – | – 0 | – | 15,475 | ||||||||||||
Standard Chartered Bank | 13,067 | (13,067 | ) | – 0 | – | – 0 | – | – 0 | – | |||||||||||
State Street Bank & Trust Co. | 174,393 | (124,588 | ) | – 0 | – | – 0 | – | 49,805 | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 440,377 | $ | (278,149 | ) | $ | – 0 | – | $ | – 0 | – | $ | 162,228^ | |||||||
|
|
|
|
|
|
|
|
|
|
* | 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. |
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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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. If the Fund receives non-cash collateral, the Fund will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Fund will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle,
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NOTES TO FINANCIAL STATEMENTS (continued)
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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Fund earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Fund in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Fund’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower.
A summary of the Fund’s transactions surrounding securities lending for the six months ended May 31, 2021 is as follows:
Market Value of Securities on Loan* | Cash Collateral* | Market Value of Non-Cash Collateral* | Income from Borrowers | Government Money Market Portfolio | ||||||||||||||||||
Income Earned | Advisory Fee Waived | |||||||||||||||||||||
$ | 1,395,448 | $ | 500,491 | $ | 944,788 | $ | 7,248 | $ | 34 | $ | 9 |
*As | of May 31, 2021. |
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NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021 (unaudited) | Year Ended November 30, 2020 | Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 134,074 | 58,049 | $ | 1,248,046 | $ | 571,095 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 14,519 | 28,692 | 136,098 | 252,993 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (31,193 | ) | (108,278 | ) | (292,482 | ) | (897,189 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 117,400 | (21,537 | ) | $ | 1,091,662 | $ | (73,101 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 312 | 26,776 | $ | 2,945 | $ | 264,853 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 777 | 2,432 | 7,282 | 21,460 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (34,849 | ) | (47,404 | ) | (325,378 | ) | (424,605 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (33,760 | ) | (18,196 | ) | $ | (315,151 | ) | $ | (138,292 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Shares sold | 1,125,375 | 3,743,456 | $ | 10,561,567 | $ | 33,372,624 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends and distributions | 142,339 | 361,269 | 1,335,892 | 3,192,212 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,374,359 | ) | (4,566,651 | ) | (22,244,602 | ) | (39,404,672 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (1,106,645 | ) | (461,926 | ) | $ | (10,347,143 | ) | $ | (2,839,836 | ) | ||||||||||||||
| ||||||||||||||||||||||||
NOTE G
Risks Involved in Investing in the Fund
Market Risk—The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
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
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NOTES TO FINANCIAL STATEMENTS (continued)
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 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.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations. The current historically low interest rate environment heightens the risks associated with rising interest rates.
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Fund’s assets can decline as can the value of the Fund’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk—Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.
Derivatives Risk—The Fund may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid,
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NOTES TO FINANCIAL STATEMENTS (continued)
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.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Fund. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
Investment in Other Investment Companies Risk—As with other investments, investments in other investment companies are subject to market and selection risk. In addition, shareholders of the Fund bear both their proportionate share of expenses in the Fund (including management fees) and, indirectly, the expenses of the investment companies in which the Fund invests (to the extent these expenses are not waived or reimbursed by the Adviser).
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NOTES TO FINANCIAL STATEMENTS (continued)
LIBOR Transition and Associated Risk—A Fund may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. The United Kingdom Financial Conduct Authority, which regulates LIBOR, will cease publishing certain LIBOR benchmarks at the end of 2021. Although certain LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results.
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NOTES TO FINANCIAL STATEMENTS (continued)
Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended May 31, 2021.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending November 30, 2021 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended November 30, 2020 and November 30, 2019 were as follows:
2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 4,349,158 | $ | 4,729,768 | ||||
|
|
|
| |||||
Total taxable distributions | $ | 4,349,158 | $ | 4,729,768 | ||||
|
|
|
|
As of November 30, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 103,261 | ||
Accumulated capital and other losses | (12,071,054 | )(a) | ||
Unrealized appreciation/(depreciation) | (1,222,257 | )(b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | (13,190,050 | )(c) | |
|
|
(a) | As of November 30, 2020, the Fund had a net capital loss carryforward of $12,066,410. As of November 30, 2020, the cumulative deferred loss on straddles was $4,644. |
(b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of swaps, and the tax deferral of losses on wash sales. |
(c) | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the accrual of foreign capital gains tax and the tax treatment of defaulted securities. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of November 30, 2020,
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NOTES TO FINANCIAL STATEMENTS (continued)
the Fund had a net short-term capital loss carryforward of $7,951,278 and a net long-term capital loss carryforward of $4,115,132, which may be carried forward for an indefinite period.
NOTE J
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.
NOTE K
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
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FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 9.09 | $ 9.94 | $ 9.30 | $ 10.43 | $ 9.90 | $ 9.75 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income(a)(b) | .16 | .26 | .33 | .48 | .45 | .39 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .50 | (.73 | ) | .74 | (.95 | ) | .72 | .37 | ||||||||||||||||
Contributions from Affiliates | – 0 | – | – 0 | – | – 0 | – | .00 | (c) | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .66 | (.47 | ) | 1.07 | (.47 | ) | 1.17 | .76 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.19 | ) | (.38 | ) | (.43 | ) | (.45 | ) | (.64 | ) | (.52 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.21 | ) | – 0 | – | (.09 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.19 | ) | (.38 | ) | (.43 | ) | (.66 | ) | (.64 | ) | (.61 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.56 | $ 9.09 | $ 9.94 | $ 9.30 | $ 10.43 | $ 9.90 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 7.40 | % | (4.51 | )% | 11.77 | % | (4.80 | )% | 12.30 | % | 8.20 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $8,090 | $6,624 | $7,463 | $5,590 | $5,247 | $399 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | .80 | %^ | .76 | % | .78 | % | .74 | % | .76 | % | .78 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | 1.46 | %^ | 1.37 | % | 1.41 | % | 1.37 | % | 1.80 | % | 3.91 | % | ||||||||||||
Net investment income(b) | 3.49 | %^ | 2.87 | % | 3.43 | % | 4.85 | % | 4.39 | % | 4.04 | % | ||||||||||||
Portfolio turnover rate | 47 | % | 105 | % | 77 | % | 74 | % | 69 | % | 94 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .19 | %^ | .24 | % | .24 | % | .26 | % | .23 | % | .22 | % |
See footnote summary on page 84.
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FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 9.09 | $ 9.94 | $ 9.30 | $ 10.44 | $ 9.90 | $ 9.75 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income(a)(b) | .13 | .19 | .25 | .40 | .37 | .33 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .50 | (.73 | ) | .75 | (.95 | ) | .73 | .36 | ||||||||||||||||
Contributions from Affiliates | – 0 | – | – 0 | – | – 0 | – | .00 | (c) | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .63 | (.54 | ) | 1.00 | (.55 | ) | 1.10 | .69 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.31 | ) | (.36 | ) | (.38 | ) | (.56 | ) | (.45 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.21 | ) | – 0 | – | (.09 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.15 | ) | (.31 | ) | (.36 | ) | (.59 | ) | (.56 | ) | (.54 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.57 | $ 9.09 | $ 9.94 | $ 9.30 | $ 10.44 | $ 9.90 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 6.93 | % | (5.25 | )% | 10.98 | % | (5.57 | )%(f) | 11.42 | % | 7.42 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $566 | $845 | $1,105 | $704 | $426 | $102 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | 1.55 | %^ | 1.51 | % | 1.53 | % | 1.49 | % | 1.52 | % | 1.54 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | 2.20 | %^ | 2.12 | % | 2.16 | % | 2.13 | % | 2.65 | % | 4.70 | % | ||||||||||||
Net investment income(b) | 2.71 | %^ | 2.15 | % | 2.65 | % | 4.11 | % | 3.63 | % | 3.35 | % | ||||||||||||
Portfolio turnover rate | 47 | % | 105 | % | 77 | % | 74 | % | 69 | % | 94 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .19 | %^ | .24 | % | .24 | % | .26 | % | .23 | % | .22 | % |
See | footnote summary on page 84. |
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FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 9.10 | $ 9.96 | $ 9.32 | $ 10.45 | $ 9.91 | $ 9.75 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income(a)(b) | .17 | .28 | .36 | .50 | .47 | .50 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment and foreign currency transactions | .50 | (.73 | ) | .73 | (.95 | ) | .73 | .29 | ||||||||||||||||
Contributions from Affiliates | – 0 | – | – 0 | – | – 0 | – | .00 | (c) | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .67 | (.45 | ) | 1.09 | (.45 | ) | 1.20 | .79 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.20 | ) | (.41 | ) | (.45 | ) | (.47 | ) | (.66 | ) | (.54 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | (.21 | ) | – 0 | – | (.09 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.20 | ) | (.41 | ) | (.45 | ) | (.68 | ) | (.66 | ) | (.63 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 9.57 | $ 9.10 | $ 9.96 | $ 9.32 | $ 10.45 | $ 9.91 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 7.52 | % | (4.35 | )% | 12.03 | % | (4.56 | )% | 12.53 | % | 8.51 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $80,703 | $86,783 | $99,571 | $97,826 | $89,667 | $19,926 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | .55 | %^ | .51 | % | .53 | % | .49 | % | .52 | % | .53 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | 1.20 | %^ | 1.12 | % | 1.15 | % | 1.12 | % | 1.61 | % | 3.40 | % | ||||||||||||
Net investment income(b) | 3.72 | %^ | 3.12 | % | 3.77 | % | 5.09 | % | 4.64 | % | 5.08 | % | ||||||||||||
Portfolio turnover rate | 47 | % | 105 | % | 77 | % | 74 | % | 69 | % | 94 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .19 | %^ | .24 | % | .24 | % | .26 | % | .23 | % | .22 | % |
See | footnote summary on page 84. |
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FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
(a) | Based on average shares outstanding. |
(b) | Net of expenses waived/reimbursed by the Adviser. |
(c) | Amount is less than $.005. |
(d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
(e) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the period shown below, such waiver amounted to: |
Six Months Ended May 31, 2021 | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
Class A | .19 | %^ | .23 | % | .21 | % | .25 | % | .22 | % | .21 | % | ||||||||||||
Class C | .19 | %^ | .23 | % | .21 | % | .25 | % | .22 | % | .20 | % | ||||||||||||
Advisor Class | .19 | %^ | .23 | % | .21 | % | .25 | % | .22 | % | .21 | % |
(f) | The net asset value and total return include adjustments in accordance with accounting principles generally accepted in the United States of America for financial reporting purposes. As such, the net asset value and total return for shareholder transactions may differ from financial statements. |
^ | Annualized. |
See notes to financial statements.
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BOARD OF DIRECTORS
Marshall C. Turner, Jr.(1) Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Onur Erzan, President and Chief Executive Officer | Nancy P. Jacklin(1) Jeanette W. Loeb(1) 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 Karen Watkin(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210
Principal Underwriter AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105
Transfer Agent AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | Independent Registered Public Accounting Firm Ernst & Young LLP 5 Times Square New York, NY 10036
Legal Counsel Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
1 | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
2 | The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by its Multi-Asset Solutions Team. Messrs. Harting and Loewy and Ms. Watkin are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).
Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2021, which covered the period January 1, 2020 through December 31, 2020 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner.
Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP.
The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended,
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and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP. During the Program Reporting Period, beginning in March 2020, all financial markets experienced extreme levels of price volatility and relative illiquidity resulting from the COVID-19 impacts on the global economy. This extreme relative illiquidity resulted in significantly wider bid-ask spreads to transact in securities, including many of those securities held by the Fund, and in a diminished depth of liquidity in most markets, to varying degrees. Nonetheless, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
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Information Regarding the Review and Approval of the Fund’s Advisory Agreement
The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB All Market Income Portfolio (the “Fund”) at a meeting held by video conference on August 4-5, 2020 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying funds advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
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Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. The Adviser had not requested any reimbursements from the Fund since its inception in December 2014. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in the periods reviewed.
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
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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 performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended May 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, and their discussion with the Adviser of the reasons for the Fund’s underperformance in the periods reviewed, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any
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sub-advised funds utilizing investment strategies similar to the those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors previously discussed these matters with an independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund invests in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the
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expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the peer group median. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
92 | 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
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
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TAXABLE
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ALTERNATIVES
All Market Real Return Portfolio
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Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
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Conservative Wealth Strategy
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CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
1 | Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio. |
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 93 |
NOTES
94 | AB ALL MARKET INCOME PORTFOLIO | abfunds.com |
NOTES
abfunds.com | AB ALL MARKET INCOME PORTFOLIO | 95 |
NOTES
96 | 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-0152-0521
MAY 05.31.21
SEMI-ANNUAL REPORT
AB SMALL CAP VALUE PORTFOLIO
As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.
You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.
Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
FROM THE PRESIDENT |
Dear Shareholder,
We’re pleased to provide this report for the 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.
At AB, we’re striving to help our clients achieve better outcomes by:
+ | Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets |
+ | Applying differentiated investment insights through a connected global research network |
+ | Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions |
Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.
For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in AB mutual funds—and for placing your trust in our firm.
Sincerely,
Onur Erzan
President and Chief Executive Officer, AB Mutual Funds
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 1 |
SEMI-ANNUAL REPORT
July 12, 2021
This report provides management’s discussion of fund performance for the AB Small Cap Value Portfolio for the semi-annual reporting period ended May 31, 2021.
The Fund’s investment objective is to seek long-term growth of capital.
NAV RETURNS AS OF MAY 31, 2021 (unaudited)
6 Months | 12 Months | |||||||
AB SMALL CAP VALUE PORTFOLIO | ||||||||
Class A Shares | 46.33% | 87.76% | ||||||
Class C Shares | 45.68% | 86.33% | ||||||
Advisor Class Shares1 | 46.44% | 88.08% | ||||||
Russell 2000 Value Index | 37.56% | 79.38% |
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, 2021.
During the six-month period, all share classes outperformed the benchmark, before sales charges. Overall security selection contributed most, relative to the benchmark, primarily within the industrials and financials sectors, while selection within energy and consumer staples detracted. Sector selection also contributed, led by an overweight to consumer discretionary and an underweight to health care. An overweight to industrials and an underweight to communication services detracted from overall performance.
During the 12-month period, all share classes outperformed the benchmark, before sales charges. Security selection contributed, led by selection within the industrials and financials sectors, while selection within consumer discretionary and energy detracted. Sector selection was also positive, as losses from overweights to technology and industrials were offset by an overweight to consumer discretionary and an underweight to utilities.
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
Global equities reached post-pandemic highs, recording strong double-digit returns for the six-month period ended May 31, 2021. Global economies continued to rebound from record GDP contractions, supported by extensive monetary and fiscal stimulus from central banks and governments. Massive US stimulus under the Biden administration, the acceleration of worldwide vaccine distribution and easing restrictions further supported the global economic recovery. Toward the end of the period, markets became more volatile as inflationary fears precipitated a rise in longer-term interest rates, which pressured the valuations of many market-leading growth stocks and boosted a rotation into cyclical and value-oriented shares. Despite concern around a potentially overstimulated economy, inflation data remained muted and yields fell back, easing the rotation toward value stocks and dampening volatility. Small-cap stocks outperformed large-cap stocks on a relative basis, and intervals of market rotation led value-style stocks to substantially outperform their growth-style peers.
The Fund’s Senior Investment Management Team (the “Team”) seeks to invest opportunistically in what it considers to be undervalued companies with solid fundamentals and attractive long-term earnings prospects. 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, including public health crises (including the occurrence of a contagious disease or illness), 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.
Industry/Sector Risk: Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the
4 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
DISCLOSURES AND RISKS (continued)
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 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, 2021 (unaudited)
NAV Returns | SEC Returns (reflects applicable | |||||||
CLASS A SHARES | ||||||||
1 Year | 87.76% | 79.71% | ||||||
5 Years | 13.30% | 12.32% | ||||||
Since Inception1 | 11.28% | 10.54% | ||||||
CLASS C SHARES | ||||||||
1 Year | 86.33% | 85.33% | ||||||
5 Years | 12.44% | 12.44% | ||||||
Since Inception1 | 10.44% | 10.44% | ||||||
ADVISOR CLASS SHARES2 | ||||||||
1 Year | 88.08% | 88.08% | ||||||
5 Years | 13.57% | 13.57% | ||||||
Since Inception1 | 11.55% | 11.55% |
The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.21%, 1.97% and 0.96% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. 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, 2021 (unaudited)
SEC Returns (reflects applicable | ||||
CLASS A SHARES | ||||
1 Year | 69.27% | |||
5 Years | 11.79% | |||
Since Inception1 | 9.77% | |||
CLASS C SHARES | ||||
1 Year | 74.67% | |||
5 Years | 11.92% | |||
Since Inception1 | 9.65% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 77.29% | |||
5 Years | 13.06% | |||
Since Inception1 | 10.76% |
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, 2020 | Ending Account Value May 31, 2021 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,463.30 | $ | 7.06 | 1.15 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,019.20 | $ | 5.79 | 1.15 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,456.80 | $ | 11.64 | 1.90 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,015.46 | $ | 9.55 | 1.90 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,464.40 | $ | 5.53 | 0.90 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.44 | $ | 4.53 | 0.90 | % |
* | 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. |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 9 |
PORTFOLIO SUMMARY
May 31, 2021 (unaudited)
PORTFOLIO STATISTICS
Net Assets ($mil): $630.3
TEN LARGEST HOLDINGS2
Company | U.S. $ Value | Percent of Net Assets | ||||||
MEDNAX, Inc. | $ | 10,336,576 | 1.6 | % | ||||
Herman Miller, Inc. | 9,883,128 | 1.6 | ||||||
Texas Capital Bancshares, Inc. | 9,811,612 | 1.6 | ||||||
Herc Holdings, Inc. | 9,743,344 | 1.5 | ||||||
Goodyear Tire & Rubber Co. (The) | 9,726,417 | 1.5 | ||||||
Stifel Financial Corp. | 9,549,555 | 1.5 | ||||||
BankUnited, Inc. | 9,437,712 | 1.5 | ||||||
Carpenter Technology Corp. | 9,317,900 | 1.5 | ||||||
KB Home | 9,140,589 | 1.5 | ||||||
Sterling Bancorp/DE | 8,984,873 | 1.4 | ||||||
$ | 95,931,706 | 15.2 | % |
1 | All data are as of May 31, 2021. 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, 2021 (unaudited)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
COMMON STOCKS – 97.6% | ||||||||
Financials – 24.2% | ||||||||
Banks – 16.2% | ||||||||
1st Source Corp. | 120,326 | $ | 5,952,527 | |||||
Associated Banc-Corp. | 269,890 | 6,204,771 | ||||||
Bank of Marin Bancorp | 91,382 | 3,080,487 | ||||||
Carter Bankshares, Inc.(a) | 258,437 | 4,023,864 | ||||||
HarborOne Bancorp, Inc. | 515,025 | 7,648,121 | ||||||
Heritage Financial Corp./WA | 232,652 | 6,749,235 | ||||||
Independent Bank Group, Inc. | 89,510 | 7,048,912 | ||||||
Pacific Premier Bancorp, Inc. | 151,994 | 6,987,164 | ||||||
Sandy Spring Bancorp, Inc. | 118,331 | 5,497,658 | ||||||
Sterling Bancorp/DE | 337,270 | 8,984,873 | ||||||
Synovus Financial Corp. | 180,945 | 8,888,018 | ||||||
Texas Capital Bancshares, Inc.(a) | 142,445 | 9,811,612 | ||||||
TriCo Bancshares | 135,443 | 6,494,492 | ||||||
Umpqua Holdings Corp. | 340,694 | 6,500,442 | ||||||
Webster Financial Corp. | 149,173 | 8,455,126 | ||||||
|
| |||||||
102,327,302 | ||||||||
|
| |||||||
Capital Markets – 2.5% | ||||||||
Moelis & Co. | 112,918 | 6,062,568 | ||||||
Stifel Financial Corp. | 137,840 | 9,549,555 | ||||||
|
| |||||||
15,612,123 | ||||||||
|
| |||||||
Insurance – 2.0% | ||||||||
Hanover Insurance Group, Inc. (The) | 46,020 | 6,419,330 | ||||||
Selective Insurance Group, Inc. | 78,982 | 5,944,975 | ||||||
|
| |||||||
12,364,305 | ||||||||
|
| |||||||
Thrifts & Mortgage Finance – 3.5% | ||||||||
BankUnited, Inc. | 197,483 | 9,437,712 | ||||||
Premier Financial Corp. | 142,540 | 4,347,470 | ||||||
WSFS Financial Corp. | 159,923 | 8,509,503 | ||||||
|
| |||||||
22,294,685 | ||||||||
|
| |||||||
152,598,415 | ||||||||
|
| |||||||
Industrials – 21.0% | ||||||||
Aerospace & Defense – 0.5% | ||||||||
AAR Corp.(a) | 71,048 | 2,966,254 | ||||||
|
| |||||||
Airlines – 1.1% | ||||||||
SkyWest, Inc.(a) | 146,581 | 7,186,866 | ||||||
|
| |||||||
Building Products – 1.2% | ||||||||
Masonite International Corp.(a) | 62,873 | 7,516,467 | ||||||
|
| |||||||
Commercial Services & Supplies – 2.3% | ||||||||
Herman Miller, Inc. | 206,760 | 9,883,128 | ||||||
Viad Corp.(a) | 108,050 | 4,769,327 | ||||||
|
| |||||||
14,652,455 | ||||||||
|
|
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 11 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Construction & Engineering – 0.9% | ||||||||
BrightView Holdings, Inc.(a) | 325,810 | $ | 5,652,803 | |||||
|
| |||||||
Electrical Equipment – 1.2% | ||||||||
Regal Beloit Corp. | 51,560 | 7,333,379 | ||||||
|
| |||||||
Machinery – 8.1% | ||||||||
Blue Bird Corp.(a) | 316,210 | 8,272,054 | ||||||
Crane Co. | 55,702 | 5,318,984 | ||||||
Kennametal, Inc. | 106,232 | 3,984,762 | ||||||
Manitowoc Co., Inc. (The)(a) | 209,182 | 5,401,079 | ||||||
REV Group, Inc.(a) | 271,740 | 5,086,973 | ||||||
Shyft Group, Inc. (The) | 222,670 | 8,679,677 | ||||||
Terex Corp. | 166,450 | 8,716,986 | ||||||
Welbilt, Inc.(a) | 230,877 | 5,704,971 | ||||||
|
| |||||||
51,165,486 | ||||||||
|
| |||||||
Professional Services – 1.2% |
| |||||||
Korn Ferry | 117,340 | 7,675,209 | ||||||
|
| |||||||
Road & Rail – 1.1% | ||||||||
ArcBest Corp. | 92,840 | 7,226,666 | ||||||
|
| |||||||
Trading Companies & Distributors – 3.4% | ||||||||
GATX Corp. | 63,900 | 6,304,374 | ||||||
Herc Holdings, Inc.(a) | 84,710 | 9,743,344 | ||||||
MRC Global, Inc.(a) | 481,836 | 5,174,919 | ||||||
|
| |||||||
21,222,637 | ||||||||
|
| |||||||
132,598,222 | ||||||||
|
| |||||||
Consumer Discretionary – 21.0% | ||||||||
Auto Components – 2.6% | ||||||||
Dana, Inc. | 252,026 | 6,837,465 | ||||||
Goodyear Tire & Rubber Co. (The)(a) | 490,490 | 9,726,417 | ||||||
|
| |||||||
16,563,882 | ||||||||
|
| |||||||
Diversified Consumer Services – 2.6% | ||||||||
Hillenbrand, Inc. | 136,800 | 6,238,080 | ||||||
Houghton Mifflin Harcourt Co.(a) | 669,285 | 6,652,693 | ||||||
Regis Corp.(a)(b) | 378,962 | 3,463,712 | ||||||
|
| |||||||
16,354,485 | ||||||||
|
| |||||||
Hotels, Restaurants & Leisure – 5.9% |
| |||||||
Dine Brands Global, Inc.(a) | 75,030 | 7,124,099 | ||||||
Hilton Grand Vacations, Inc.(a) | 191,160 | 8,741,747 | ||||||
Papa John’s International, Inc. | 63,891 | 6,002,559 | ||||||
Ruth’s Hospitality Group, Inc.(a) | 299,999 | 7,241,976 | ||||||
Scientific Games Corp./DE – Class A(a) | 108,650 | 7,881,471 | ||||||
|
| |||||||
36,991,852 | ||||||||
|
|
12 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Household Durables – 2.8% |
| |||||||
KB Home | 195,270 | $ | 9,140,589 | |||||
Taylor Morrison Home Corp. – Class A(a) | 280,708 | 8,314,571 | ||||||
|
| |||||||
17,455,160 | ||||||||
|
| |||||||
Leisure Products – 0.6% | ||||||||
Malibu Boats, Inc.(a) | 51,677 | 4,052,510 | ||||||
|
| |||||||
Specialty Retail – 3.0% | ||||||||
Foot Locker, Inc. | 122,290 | 7,739,734 | ||||||
Genesco, Inc.(a) | 58,324 | 3,207,820 | ||||||
Sally Beauty Holdings, Inc.(a) | 349,080 | 7,613,435 | ||||||
|
| |||||||
18,560,989 | ||||||||
|
| |||||||
Textiles, Apparel & Luxury Goods – 3.5% | ||||||||
Kontoor Brands, Inc.(b) | 138,010 | 8,835,400 | ||||||
Oxford Industries, Inc. | 81,885 | 7,840,489 | ||||||
Steven Madden Ltd. | 133,140 | 5,511,996 | ||||||
|
| |||||||
22,187,885 | ||||||||
|
| |||||||
132,166,763 | ||||||||
|
| |||||||
Materials – 8.4% | ||||||||
Chemicals – 4.9% | ||||||||
AdvanSix, Inc.(a) | 169,630 | 5,370,486 | ||||||
GCP Applied Technologies, Inc.(a) | 162,056 | 3,950,925 | ||||||
HB Fuller Co. | 87,210 | 6,027,955 | ||||||
Innospec, Inc. | 34,302 | 3,468,275 | ||||||
Orion Engineered Carbons SA(a) | 328,444 | 6,647,707 | ||||||
Trinseo SA | 83,474 | 5,420,802 | ||||||
|
| |||||||
30,886,150 | ||||||||
|
| |||||||
Metals & Mining – 3.5% | ||||||||
Carpenter Technology Corp. | 194,447 | 9,317,900 | ||||||
Commercial Metals Co. | 259,570 | 8,168,668 | ||||||
Schnitzer Steel Industries, Inc. – Class A | 78,130 | 4,256,522 | ||||||
|
| |||||||
21,743,090 | ||||||||
|
| |||||||
52,629,240 | ||||||||
|
| |||||||
Information Technology – 5.7% | ||||||||
Communications Equipment – 0.6% | ||||||||
Casa Systems, Inc.(a) | 462,273 | 4,012,530 | ||||||
|
| |||||||
Electronic Equipment, Instruments & Components – 1.0% | ||||||||
Belden, Inc. | 118,582 | 6,000,249 | ||||||
|
| |||||||
IT Services – 0.7% | ||||||||
Unisys Corp.(a) | 164,967 | 4,241,302 | ||||||
|
| |||||||
Semiconductors & Semiconductor Equipment – 1.6% | ||||||||
Kulicke & Soffa Industries, Inc. | 97,270 | 5,048,313 | ||||||
MagnaChip Semiconductor Corp.(a)(b) | 215,998 | 5,119,153 | ||||||
|
| |||||||
10,167,466 | ||||||||
|
|
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 13 |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Software – 1.2% |
| |||||||
A10 Networks, Inc.(a) | 337,900 | $ | 3,287,767 | |||||
CommVault Systems, Inc.(a) | 56,842 | 4,329,655 | ||||||
|
| |||||||
7,617,422 | ||||||||
|
| |||||||
Technology Hardware, Storage & Peripherals – 0.6% | ||||||||
NCR Corp.(a) | 84,287 | 4,062,633 | ||||||
|
| |||||||
36,101,602 | ||||||||
|
| |||||||
Real Estate – 5.5% | ||||||||
Equity Real Estate Investment Trusts (REITs) – 5.5% | ||||||||
Armada Hoffler Properties, Inc. | 184,828 | 2,452,668 | ||||||
Cousins Properties, Inc. | 122,583 | 4,546,603 | ||||||
Independence Realty Trust, Inc. | 371,659 | 6,347,936 | ||||||
National Storage Affiliates Trust | 114,500 | 5,278,450 | ||||||
Physicians Realty Trust | 260,806 | 4,728,413 | ||||||
RLJ Lodging Trust | 350,000 | 5,379,500 | ||||||
STAG Industrial, Inc.(b) | 163,695 | 5,845,548 | ||||||
|
| |||||||
34,579,118 | ||||||||
|
| |||||||
Energy – 4.2% | ||||||||
Energy Equipment & Services – 2.4% | ||||||||
Cactus, Inc. – Class A | 214,930 | 7,531,147 | ||||||
Dril-Quip, Inc.(a) | 131,150 | 4,397,460 | ||||||
Helix Energy Solutions Group, Inc.(a) | 538,512 | 2,816,418 | ||||||
|
| |||||||
14,745,025 | ||||||||
|
| |||||||
Oil, Gas & Consumable Fuels – 1.8% | ||||||||
Cimarex Energy Co. | 81,810 | 5,542,627 | ||||||
HollyFrontier Corp. | 184,410 | 5,987,793 | ||||||
|
| |||||||
11,530,420 | ||||||||
|
| |||||||
26,275,445 | ||||||||
|
| |||||||
Consumer Staples – 2.2% | ||||||||
Food Products – 2.2% | ||||||||
Hain Celestial Group, Inc. (The)(a)(b) | 150,804 | 6,146,771 | ||||||
Nomad Foods Ltd.(a) | 258,019 | 7,913,443 | ||||||
|
| |||||||
14,060,214 | ||||||||
|
| |||||||
Communication Services – 2.0% | ||||||||
Entertainment – 1.1% | ||||||||
IMAX Corp.(a) | 308,960 | 6,676,626 | ||||||
|
| |||||||
Media – 0.9% | ||||||||
Criteo SA (Sponsored ADR)(a) | 161,347 | 6,008,562 | ||||||
|
| |||||||
12,685,188 | ||||||||
|
| |||||||
Utilities – 1.8% | ||||||||
Electric Utilities – 0.9% | ||||||||
IDACORP, Inc. | 56,700 | 5,553,765 | ||||||
|
|
14 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
Company | Shares | U.S. $ Value | ||||||
| ||||||||
Gas Utilities – 0.9% |
| |||||||
Southwest Gas Holdings, Inc. | 90,630 | $ | 5,982,486 | |||||
|
| |||||||
11,536,251 | ||||||||
|
| |||||||
Health Care – 1.6% | ||||||||
Health Care Providers & Services – 1.6% | ||||||||
MEDNAX, Inc.(a) | 323,220 | 10,336,576 | ||||||
|
| |||||||
Total Common Stocks | 615,567,034 | |||||||
|
| |||||||
SHORT-TERM INVESTMENTS – 1.8% | ||||||||
Investment Companies – 1.8% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, | 11,115,733 | 11,115,733 | ||||||
|
| |||||||
Total Investments Before Security Lending Collateral for Securities Loaned – 99.4% | 626,682,767 | |||||||
|
| |||||||
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.0% | ||||||||
Investment Companies – 0.0% | ||||||||
AB Fixed Income Shares, Inc.– Government Money Market Portfolio – Class AB, | 42 | 42 | ||||||
|
| |||||||
Total Investments – 99.4% | 626,682,809 | |||||||
Other assets less liabilities – 0.6% | 3,661,922 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 630,344,731 | ||||||
|
|
(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
REIT – Real Estate Investment Trust
See notes to financial statements.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 15 |
STATEMENT OF ASSETS & LIABILITIES
May 31, 2021 (unaudited)
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $452,257,766) | $ | 615,567,034 | (a) | |
Affiliated issuers (cost $11,115,775—including investment of cash collateral for securities loaned of $42) | 11,115,775 | |||
Receivable for investment securities sold | 3,908,998 | |||
Receivable for capital stock sold | 847,446 | |||
Unaffiliated dividends receivable | 635,276 | |||
Affiliated dividends receivable | 52 | |||
|
| |||
Total assets | 632,074,581 | |||
|
| |||
Liabilities |
| |||
Payable for investment securities purchased | 941,072 | |||
Advisory fee payable | 393,682 | |||
Payable for capital stock redeemed | 256,284 | |||
Distribution fee payable | 37,603 | |||
Administrative fee payable | 33,453 | |||
Directors’ fees payable | 4,975 | |||
Payable for collateral received on securities loaned | 42 | |||
Accrued expenses | 62,739 | |||
|
| |||
Total liabilities | 1,729,850 | |||
|
| |||
Net Assets | $ | 630,344,731 | ||
|
| |||
Composition of Net Assets |
| |||
Capital stock, at par | $ | 3,655 | ||
Additional paid-in capital | 451,534,840 | |||
Distributable earnings | 178,806,236 | |||
|
| |||
Net Assets | $ | 630,344,731 | ||
|
|
Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value
Class | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
A | $ | 187,348,789 | 10,946,539 | $ | 17.11 | * | ||||||
| ||||||||||||
C | $ | 956,857 | 58,494 | $ | 16.36 | |||||||
| ||||||||||||
Advisor | $ | 442,039,085 | 25,547,269 | $ | 17.30 | |||||||
|
(a) | Includes securities on loan with a value of $15,178,306 (see Note E). |
* | The maximum offering price per share for Class A shares was $17.87 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, 2021 (unaudited)
Investment Income | ||||||||
Dividends | ||||||||
Unaffiliated issuers (net of foreign taxes withheld of $2,155) | $ | 3,834,412 | ||||||
Affiliated issuers | 671 | |||||||
Securities lending income | 9,188 | $ | 3,844,271 | |||||
|
| |||||||
Expenses | ||||||||
Advisory fee (see Note B) | 2,073,513 | |||||||
Distribution fee—Class A | 202,013 | |||||||
Distribution fee—Class C | 3,546 | |||||||
Transfer agency—Class A | 20,549 | |||||||
Transfer agency—Class C | 117 | |||||||
Transfer agency—Advisor Class | 45,939 | |||||||
Custody and accounting | 55,550 | |||||||
Administrative | 39,195 | |||||||
Registration fees | 27,928 | |||||||
Audit and tax | 23,946 | |||||||
Legal | 15,994 | |||||||
Printing | 12,322 | |||||||
Directors’ fees | 11,305 | |||||||
Miscellaneous | 8,599 | |||||||
|
| |||||||
Total expenses | 2,540,516 | |||||||
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | (2,639 | ) | ||||||
|
| |||||||
Net expenses | 2,537,877 | |||||||
|
| |||||||
Net investment income | 1,306,394 | |||||||
|
| |||||||
Realized and Unrealized Gain on Investment Transactions | ||||||||
Net realized gain on investment transactions | 43,965,956 | |||||||
Net change in unrealized appreciation/depreciation of investments | 139,487,909 | |||||||
|
| |||||||
Net gain on investment transactions | 183,453,865 | |||||||
|
| |||||||
Contributions from Affiliates (see Note B) | 131 | |||||||
|
| |||||||
Net Increase in Net Assets from Operations | $ | 184,760,390 | ||||||
|
|
See notes to financial statements.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 17 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,306,394 | $ | 1,805,747 | ||||
Net realized gain (loss) on investment transactions | 43,965,956 | (26,963,447 | ) | |||||
Net change in unrealized appreciation/depreciation of investments | 139,487,909 | 19,981,813 | ||||||
Contributions from Affiliates (see Note B) | 131 | – 0 | – | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 184,760,390 | (5,175,887 | ) | |||||
Distributions to Shareholders | ||||||||
Class A | (473,503 | ) | (4,376,367 | ) | ||||
Class C | – 0 | – | (7,131 | ) | ||||
Advisor Class | (1,526,842 | ) | (6,263,355 | ) | ||||
Capital Stock Transactions | ||||||||
Net increase | 65,397,933 | 20,041,007 | ||||||
|
|
|
| |||||
Total increase | 248,157,978 | 4,218,267 | ||||||
Net Assets | ||||||||
Beginning of period | 382,186,753 | 377,968,486 | ||||||
|
|
|
| |||||
End of period | $ | 630,344,731 | $ | 382,186,753 | ||||
|
|
|
|
See notes to financial statements.
18 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
May 31, 2021 (unaudited)
NOTE A
Significant Accounting Policies
AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 13 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB 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 May 31, 2021, Class C shares will automatically convert to Class A shares eight years after the end of the calender month of purchase. Prior to May 31, 2021, Class C shares automatically converted to Class A shares ten years after the end of the calender 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”).
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 19 |
NOTES TO FINANCIAL STATEMENTS (continued)
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. 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
20 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
• | Level 1—quoted prices in active markets for identical investments |
• | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
• | Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
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
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 21 |
NOTES TO FINANCIAL STATEMENTS (continued)
as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of May 31, 2021:
Investments in | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Common Stocks(a) | $ | 615,567,034 | $ | – 0 | – | $ | – 0 | – | $ | 615,567,034 | ||||||
Short-Term Investments | 11,115,733 | – 0 | – | – 0 | – | 11,115,733 | ||||||||||
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | 42 | – 0 | – | – 0 | – | 42 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 626,682,809 | – 0 | – | – 0 | – | 626,682,809 | ||||||||||
Other Financial Instruments(b) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 626,682,809 | $ | – 0 | – | $ | – 0 | – | $ | 626,682,809 | ||||||
|
|
|
|
|
|
|
|
(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. |
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
22 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current 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. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
6. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each 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 SMALL CAP VALUE PORTFOLIO | 23 |
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 .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 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, 2021, there were no such reimbursements. The Expense Caps may not be terminated by the Adviser before February 28, 2022.
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, 2021, the reimbursement for such services amounted to $39,195.
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 $45,194 for the six months ended May 31, 2021.
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 $125 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, 2021.
24 | AB SMALL CAP VALUE 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. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended May 31, 2021, such waiver amounted to $2,584.
A summary of the Fund’s transactions in AB mutual funds for the six months ended May 31, 2021 is as follows:
Fund | Market Value 11/30/20 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 5/31/21 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 7,796 | $ | 95,160 | $ | 91,840 | $ | 11,116 | $ | 1 | ||||||||||
Government Money Market Portfolio* | 1,453 | 8,608 | 10,061 | 0 | ** | 0 | ** | |||||||||||||
|
|
|
| |||||||||||||||||
Total | $ | 11,116 | $ | 1 | ||||||||||||||||
|
|
|
|
* | Investments of cash collateral for securities lending transactions (see Note E). |
** | Amount is less than $500. |
During the six months ended May 31, 2021, the Adviser reimbursed the Fund $131 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings (and related transactions). As a result, as of May 20, 2021, AXA no longer owns shares of Equitable.
Sales that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 25 |
NOTES TO FINANCIAL STATEMENTS (continued)
“assignment” causing a termination of the Fund’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Fund subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to ..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 $1,034 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, 2021 were as follows:
Purchases | Sales | |||||||
Investment securities (excluding U.S. government securities) | $ | 207,013,604 | $ | 147,942,892 | ||||
U.S. government securities | – 0 | – | – 0 | – |
26 | AB SMALL CAP VALUE 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 | $ | 167,320,324 | ||
Gross unrealized depreciation | (4,011,056 | ) | ||
|
| |||
Net unrealized appreciation | $ | 163,309,268 | ||
|
|
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, 2021.
2. Currency Transactions
The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E
Securities Lending
The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 27 |
NOTES TO FINANCIAL STATEMENTS (continued)
Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. If the Fund receives non-cash collateral, the Fund will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any income or other distributions from the securities; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Fund will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Fund earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Fund in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Fund’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower.
A summary of the Fund’s transactions surrounding securities lending for the six months ended May 31, 2021 is as follows:
Market Value on Loan* | Cash Collateral* | Market Value of Non-Cash Collateral* | Income from Borrowers | Government Money Market Portfolio | ||||||||||||||||||
Income Earned | Advisory Fee Waived | |||||||||||||||||||||
$ | 15,178,306 | $ | 42 | $ | 15,834,481 | $ | 9,079 | $ | 109 | $ | 55 |
* | As of May 31, 2021. |
28 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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, 2021 (unaudited) | Year Ended November 30, 2020 | Six Months Ended May 31, 2021 (unaudited) | Year Ended November 30, 2020 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 991,458 | 2,737,831 | $ | 15,182,482 | $ | 24,294,434 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of distributions | 37,041 | 352,586 | 464,862 | 4,280,393 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (945,231 | ) | (5,410,998 | ) | (13,927,131 | ) | (52,899,714 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | 83,268 | (2,320,581 | ) | $ | 1,720,213 | $ | (24,324,887 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 47,426 | 7,825 | $ | 707,755 | $ | 69,019 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of distributions | – 0 | – | 454 | – 0 | – | 5,302 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (14,447 | ) | (6,049 | ) | (236,272 | ) | (58,445 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 32,979 | 2,230 | $ | 471,483 | $ | 15,876 | ||||||||||||||||||
| ||||||||||||||||||||||||
Advisor Class | ||||||||||||||||||||||||
Shares sold | 6,963,466 | 10,052,164 | $ | 107,451,382 | $ | 95,587,577 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of distributions | 74,467 | 452,381 | 943,501 | 5,541,673 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,892,129 | ) | (6,180,228 | ) | (45,188,646 | ) | (56,779,232 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 4,145,804 | 4,324,317 | $ | 63,206,237 | $ | 44,350,018 | ||||||||||||||||||
|
NOTE G
Risks Involved in Investing in the Fund
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, including public health crises (including the occurrence of a contagious disease or illness), 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.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 29 |
NOTES TO FINANCIAL STATEMENTS (continued)
Industry/Sector Risk—Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Fund’s investments.
LIBOR Transition and Associated Risk—A Fund may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. The United Kingdom Financial Conduct Authority, which regulates LIBOR, will cease publishing certain LIBOR benchmarks at the end of 2021. Although certain LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.
30 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended May 31, 2021.
NOTE I
Distributions to Shareholders
The tax character of distributions to be paid for the year ending November 30, 2021 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended November 30, 2020 and November 30, 2019 were as follows:
2020 | 2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 6,301,788 | $ | 3,838,462 | ||||
Net long-term capital gains | 4,345,065 | 12,969,749 | ||||||
|
|
|
| |||||
Total taxable distributions paid | $ | 10,646,853 | $ | 16,808,211 | ||||
|
|
|
|
As of November 30, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed ordinary income | $ | 1,749,697 | ||
Accumulated capital and other losses | (28,355,191 | )(a) | ||
Unrealized appreciation/(depreciation) | 22,651,816 | (b) | ||
|
| |||
Total accumulated earnings/(deficit) | $ | (3,953,678 | ) | |
|
|
(a) | As of November 30, 2020, the Fund had a net capital loss carryforward of $28,355,191. |
(b) | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are 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 for an indefinite period, and such losses will retain their character as
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 31 |
NOTES TO FINANCIAL STATEMENTS (continued)
either short-term or long-term capital losses. As of November 30, 2020, the Fund had a net long-term capital loss carryforward of $28,355,191, which may be carried forward for an indefinite period.
NOTE J
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.
NOTE K
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.
32 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 11.74 | $ 12.40 | $ 12.59 | $ 14.01 | $ 12.65 | $ 10.64 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income (loss)(a)(b) | .02 | .04 | .03 | (.01 | ) | (.02 | ) | (.01 | ) | |||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 5.39 | (.37 | ) | .43 | (.65 | ) | 1.45 | 2.07 | ||||||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 5.41 | (.33 | ) | .46 | (.66 | ) | 1.43 | 2.06 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.04 | ) | (.02 | ) | – 0 | – | – 0 | – | – 0 | – | (.01 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.31 | ) | (.65 | ) | (.76 | ) | (.07 | ) | (.04 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.04 | ) | (.33 | ) | (.65 | ) | (.76 | ) | (.07 | ) | (.05 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 17.11 | $ 11.74 | $ 12.40 | $ 12.59 | $ 14.01 | $ 12.65 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 46.33 | % | (2.71 | )% | 4.22 | % | (4.97 | )% | 11.35 | % | 19.52 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $187,349 | $127,581 | $163,493 | $179,874 | $197,908 | $140,096 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | 1.15 | %^ | 1.20 | % | 1.20 | % | 1.24 | % | 1.24 | % | 1.25 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | 1.15 | %^ | 1.21 | % | 1.20 | % | 1.25 | % | 1.25 | % | 1.43 | % | ||||||||||||
Net investment income (loss)(b) | .33 | %^ | .40 | % | .24 | % | (.07 | )% | (.18 | )% | (.12 | )% | ||||||||||||
Portfolio turnover rate | 29 | % | 48 | % | 40 | % | 42 | % | 36 | % | 51 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .00 | %^ | .00 | % | .00 | % | .01 | % | .01 | % | .01 | % |
See footnote summary on page 36.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 33 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 11.23 | $ 11.93 | $ 12.23 | $ 13.72 | $ 12.48 | $ 10.56 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment loss(a)(b) | (.04 | ) | (.04 | ) | (.06 | ) | (.11 | ) | (.12 | ) | (.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 5.17 | (.35 | ) | .41 | (.62 | ) | 1.43 | 2.05 | ||||||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 5.13 | (.39 | ) | .35 | (.73 | ) | 1.31 | 1.96 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Distributions | ||||||||||||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.31 | ) | (.65 | ) | (.76 | ) | (.07 | ) | (.04 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 16.36 | $ 11.23 | $ 11.93 | $ 12.23 | $ 13.72 | $ 12.48 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 45.68 | % | (3.41 | )% | 3.40 | % | (5.62 | )% | 10.53 | % | 18.62 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $957 | $287 | $278 | $153 | $41 | $53 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | 1.90 | %^ | 1.97 | % | 1.97 | % | 1.99 | % | 1.99 | % | 2.00 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | 1.90 | %^ | 1.97 | % | 1.97 | % | 2.00 | % | 2.07 | % | 2.31 | % | ||||||||||||
Net investment loss(b) | (.48 | )%^ | (.37 | )% | (.54 | )% | (.82 | )% | (.94 | )% | (.84 | )% | ||||||||||||
Portfolio turnover rate | 29 | % | 48 | % | 40 | % | 42 | % | 36 | % | 51 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .00 | %^ | .00 | % | .00 | % | .01 | % | .01 | % | .01 | % |
See footnote summary on page 36.
34 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class | ||||||||||||||||||||||||
Six Months (unaudited) | Year Ended November 30, | |||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
|
| |||||||||||||||||||||||
Net asset value, beginning of period | $ 11.88 | $ 12.54 | $ 12.73 | $ 14.12 | $ 12.71 | $ 10.66 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||
Net investment income(a)(b) | .04 | .07 | .06 | .03 | .01 | .01 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | 5.45 | (.36 | ) | .43 | (.66 | ) | 1.47 | 2.09 | ||||||||||||||||
Contributions from Affiliates | .00 | (c) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||||||
|
| |||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | 5.49 | (.29 | ) | .49 | (.63 | ) | 1.48 | 2.10 | ||||||||||||||||
|
| |||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (.07 | ) | (.06 | ) | (.03 | ) | – 0 | – | – 0 | – | (.01 | ) | ||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.31 | ) | (.65 | ) | (.76 | ) | (.07 | ) | (.04 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Total dividends and distributions | (.07 | ) | (.37 | ) | (.68 | ) | (.76 | ) | (.07 | ) | (.05 | ) | ||||||||||||
|
| |||||||||||||||||||||||
Net asset value, end of period | $ 17.30 | $ 11.88 | $ 12.54 | $ 12.73 | $ 14.12 | $ 12.71 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||
Total investment return based on net asset value(d) | 46.44 | % | (2.42 | )% | 4.41 | % | (4.70 | )% | 11.69 | % | 19.74 | % | ||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $442,039 | $254,319 | $214,197 | $144,136 | $73,679 | $7,635 | ||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e)‡ | .90 | %^ | .96 | % | .95 | % | .99 | % | .99 | % | 1.00 | % | ||||||||||||
Expenses, before waivers/reimbursements(e)‡ | .90 | %^ | .96 | % | .96 | % | 1.00 | % | 1.00 | % | 1.19 | % | ||||||||||||
Net investment income(b) | .58 | %^ | .67 | % | .48 | % | .20 | % | .07 | % | .11 | % | ||||||||||||
Portfolio turnover rate | 29 | % | 48 | % | 40 | % | 42 | % | 36 | % | 51 | % | ||||||||||||
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying |
| |||||||||||||||||||||||
portfolios | .00 | %^ | .00 | % | .00 | % | .01 | % | .01 | % | .01 | % |
See footnote summary on page 36.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 35 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
(a) | Based on average shares outstanding. |
(b) | Net of expenses waived/reimbursed by the Adviser. |
(c) | Amount is less than $.005. |
(d) | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized. |
(e) | In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the years ended November 30, 2018, November 30, 2017 and November 30, 2016, such waiver amounted to .01%, .01% and .01%, respectively. |
^ | Annualized. |
See notes to financial statements.
36 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
BOARD OF DIRECTORS
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Onur Erzan, President and Chief Executive Officer | Nancy P. Jacklin(1) Jeanette W. Loeb(1) Carol J. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
OFFICERS
James W. MacGregor(2), Vice President Erik A. Turenchalk(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
Custodian and Accounting Agent | 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 Small/Mid Cap Value Senior Investment Management Team. Messrs. MacGregor and Turenchalk are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 37 |
Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).
Another requirement of the Liquidity Rule is for the Fund’s Board of Trustees (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2021, which covered the period January 1, 2020 through December 31, 2020 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner.
Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP.
The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended,
38 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP. During the Program Reporting Period, beginning in March 2020, all financial markets experienced extreme levels of price volatility and relative illiquidity resulting from the COVID-19 impacts on the global economy. This extreme relative illiquidity resulted in significantly wider bid-ask spreads to transact in securities, including many of those securities held by the Fund, and in a diminished depth of liquidity in most markets, to varying degrees. Nonetheless, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 39 |
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 by video conference on May 3-5, 2021 (the “Meeting”).
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.
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:
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
40 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant at the request of the directors. 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 2019 and 2020 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s prior Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to,
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 41 |
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 independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended February 28, 2021 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. Taking into account the administrative expense reimbursement paid to the Adviser in the latest fiscal year, the directors noted that the Adviser’s total rate of compensation was above the median.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the
42 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
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, and rules adopted, 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 uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The Adviser had agreed to cap the Fund’s
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 43 |
expenses, but the directors noted that the Fund’s expense ratio was currently below the level of the Adviser’s 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 advisory fee schedule for the Fund does not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. The directors informed the Adviser that they would monitor the Fund’s asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
44 | AB SMALL CAP VALUE PORTFOLIO | abfunds.com |
This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
CORE
Global Core Equity Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund
VALUE
All China Equity Portfolio
International Value Fund
FIXED INCOME
MUNICIPAL
High Income Municipal Portfolio
Intermediate California Municipal Portfolio
Intermediate Diversified Municipal Portfolio
Intermediate New York Municipal Portfolio
Municipal Bond Inflation Strategy
Tax-Aware Fixed Income Opportunities 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
Global Bond Fund
High Income Fund
High Yield Portfolio1
Income Fund
Intermediate Duration Portfolio
Limited Duration High Income Portfolio
Short Duration Income Portfolio
Short Duration Portfolio
Sustainable Thematic Credit Portfolio
Total Return Bond Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio
CLOSED-END FUNDS
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
1 | Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio. |
abfunds.com | AB SMALL CAP VALUE PORTFOLIO | 45 |
NOTES
46 | AB GLOBAL BOND FUND | abfunds.com |
NOTES
abfunds.com | AB GLOBAL BOND FUND | 47 |
NOTES
48 | AB GLOBAL BOND FUND | abfunds.com |
NOTES
abfunds.com | AB GLOBAL BOND FUND | 49 |
NOTES
50 | AB GLOBAL BOND FUND | abfunds.com |
NOTES
abfunds.com | AB GLOBAL BOND FUND | 51 |
NOTES
52 | AB GLOBAL BOND FUND | abfunds.com |
AB SMALL CAP VALUE PORTFOLIO
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
SCV-0152-0521
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. 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. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 13. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AB Cap Fund, Inc. | ||
By: | /s/ Onur Erzan Onur Erzan President |
Date: July 27, 2021
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/ Onur Erzan | |
Onur Erzan | ||
President | ||
Date: July 27, 2021 | ||
By: | /s/ Joseph J. Mantineo | |
Joseph J. Mantineo | ||
Treasurer and Chief Financial Officer | ||
Date: July 27, 2021 |