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: 811-07618
AB MUNICIPAL INCOME FUND II, 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: May 31, 2018
Date of reporting period: November 30, 2017
ITEM 1. | REPORTS TO STOCKHOLDERS. |
NOV 11.30.17
SEMI-ANNUAL REPORT
AB MUNICIPAL INCOME FUND II
+ | AB ARIZONA PORTFOLIO |
+ | AB MASSACHUSETTS PORTFOLIO |
+ | AB MINNESOTA PORTFOLIO |
+ | AB NEW JERSEY PORTFOLIO |
+ | AB OHIO PORTFOLIO |
+ | AB PENNSYLVANIA PORTFOLIO |
+ | AB VIRGINIA PORTFOLIO |
Investment Products Offered | • Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed |
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
FROM THE PRESIDENT |
Dear Shareholder,
We are pleased to provide this report for AB Municipal Income Fund II: AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio (each a “Portfolio,” and collectively, the “Portfolios”). Please review the discussion of Portfolio performance, the market conditions during the reporting period and the Portfolios’ investment strategies.
As always, AB strives to keep clients ahead of what’s next by:
+ | Transforming uncommon insights into uncommon knowledge with a global research scope |
+ | Navigating markets with seasoned investment experience and sophisticated solutions |
+ | Providing thoughtful investment insights and actionable ideas |
Whether you’re an individual investor or a multi-billion-dollar institution, we put knowledge and experience to work for you.
AB’s global research organization connects and collaborates across platforms and teams to deliver impactful insights and innovative products. Better insights lead to better opportunities—anywhere in the world.
For additional information about AB’s range of products and shareholder resources, please log on to www.abfunds.com.
Thank you for your investment in the AB Mutual Funds.
Sincerely,
Robert M. Keith
President and Chief Executive Officer, AB Mutual Funds
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SEMI-ANNUAL REPORT
January 12, 2018
This report provides management’s discussion of fund performance for AB Municipal Income Fund II: AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio for the semi-annual reporting period ended November 30, 2017.
The investment objective of the Portfolios is to earn the highest level of current income, exempt from both federal income tax and state taxation of the respective state, that is available without assuming what the Adviser considers to be undue risk.
NAV RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
6 Months | 12 Months | |||||||
AB ARIZONA PORTFOLIO | ||||||||
Class A Shares | 0.66% | 4.95% | ||||||
Class B Shares1 | 0.37% | 4.26% | ||||||
Class C Shares | 0.37% | 4.26% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
6 Months | 12 Months | |||||||
AB MASSACHUSETTS PORTFOLIO | ||||||||
Class A Shares | 0.54% | 4.30% | ||||||
Class B Shares1 | 0.16% | 3.54% | ||||||
Class C Shares | 0.16% | 3.53% | ||||||
Advisor Class Shares2 | 0.67% | 4.58% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
6 Months | 12 Months | |||||||
AB MINNESOTA PORTFOLIO | ||||||||
Class A Shares | 0.43% | 4.33% | ||||||
Class B Shares1 | 0.05% | 3.44% | ||||||
Class C Shares | 0.06% | 3.54% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
1 | Effective January 31, 2009, Class B shares are no longer available for purchase to new investors. Please see Note A for more information. |
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 Portfolios. |
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NAV RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
6 Months | 12 Months | |||||||
AB NEW JERSEY PORTFOLIO | ||||||||
Class A Shares | 1.30% | 6.27% | ||||||
Class B Shares1 | 0.92% | 5.52% | ||||||
Class C Shares | 0.81% | 5.36% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
6 Months | 12 Months | |||||||
AB OHIO PORTFOLIO | ||||||||
Class A Shares | 0.37% | 5.01% | ||||||
Class B Shares1 | 0.00% | 4.25% | ||||||
Class C Shares | 0.00% | 4.12% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
6 Months | 12 Months | |||||||
AB PENNSYLVANIA PORTFOLIO | ||||||||
Class A Shares | 0.50% | 4.87% | ||||||
Class B Shares1 | 0.22% | 4.19% | ||||||
Class C Shares | 0.12% | 4.18% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
6 Months | 12 Months | |||||||
AB VIRGINIA PORTFOLIO | ||||||||
Class A Shares | 0.58% | 4.76% | ||||||
Class B Shares1 | 0.30% | 4.08% | ||||||
Class C Shares | 0.21% | 3.99% | ||||||
Advisor Class Shares2 | 0.80% | 5.13% | ||||||
Bloomberg Barclays Municipal Bond Index | 0.40% | 5.58% |
1 | Effective January 31, 2009, Class B shares are no longer available for purchase to new investors. Please see Note A for more information. |
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 Portfolios. |
INVESTMENT RESULTS
The preceding tables show performance for each Portfolio compared to its benchmark, the Bloomberg Barclays Municipal Bond Index, for the six- and 12-month periods ended November 30, 2017. All performance comparisons are before sales charges.
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Arizona Portfolio: For the six-month period, all share classes except Class A underperformed the benchmark; all share classes underperformed for the 12-month period.
For both periods, an underweight to the tax-supported state lease sector, an overweight to, and security selection within, the special tax sector detracted relative to the benchmark. Yield-curve positioning contributed for both periods, driven by an overweight to intermediate duration municipals. For the six-month period, security selection within the tax-supported state lease sector detracted, while selections in the public higher education and not-for-profit health care sectors contributed, as did an overweight to senior living sector. For the 12-month period, an overweight to the primary/secondary education sector contributed. Security selection within the primary/secondary education sectors detracted, while selections in the pre-refunded and public higher education sectors contributed.
Massachusetts Portfolio: Class A and Advisor Class shares outperformed the benchmark for the six-month period, while Class B and Class C shares underperformed; all share classes underperformed for the 12-month period.
For both periods, an overweight to the pre-refunded sector detracted relative to the benchmark. For the six-month period, yield-curve positioning detracted from returns, driven by an overweight to three- to four-year duration municipals. An underweight to the tax-supported state lease sector also detracted. Security selection within the private higher education, miscellaneous revenue and state general obligation (“GO”) sectors contributed. For the 12-month period, security selection within the toll road/transit and pre-refunded sectors detracted. An underweight to the state GO sector and an overweight to the private higher education sector contributed. Yield-curve positioning also contributed to returns, due to an overweight to intermediate duration municipals.
Minnesota Portfolio: For the six-month period, all share classes except Class A underperformed the benchmark; all share classes of the Portfolio underperformed for the 12-month period.
For both periods, an overweight to the pre-refunded sector detracted relative to the benchmark. For the six-month period, yield-curve positioning detracted, driven by an overweight to five- to six-year duration municipals. An underweight to the toll road/transit sectors also detracted. Security selection within the pre-refunded, electric utility and tax-supported local lease sectors contributed. For the 12-month period, an overweight to the electric utility sector detracted while an underweight to the state GO sector and an overweight to the not-for-profit health care sector contributed. Security selection within the tax-supported state lease and local GO sectors detracted, while security selection within the pre-refunded sector contributed. Yield-curve positioning also contributed during the period.
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New Jersey Portfolio: All share classes of the Portfolio outperformed the benchmark for the six-month period; except for Class A shares, all share classes underperformed for the 12-month period.
For both periods, yield-curve positioning contributed relative to the benchmark; security selection within the tax-supported local lease sector contributed, while overweights to the pre-refunded and miscellaneous revenue sectors detracted. For the six-month period, security selection within the miscellaneous revenue and tax-supported state lease sectors contributed, while selections in the water & sewer and airport/ports sectors detracted. For the 12-month period, an overweight to insured municipals detracted. Security selection within the pre-refunded sector contributed.
Ohio Portfolio: All share classes of the Portfolio underperformed the benchmark for both periods.
For both periods, an underweight to the tax-supported state lease and airport/ports sectors detracted relative to the benchmark, while security selection in the pre-refunded sector contributed. For the six-month period, yield-curve positioning detracted from returns. An overweight to senior living and an underweight to the state GO sectors contributed. Security selection within the tax-supported state lease sector detracted, while selections in the not-for-profit health care sector contributed. For the 12-month period, security selection in the local GO sector detracted, while selections within the tobacco securitization sector contributed. Yield-curve positioning contributed as well.
Pennsylvania Portfolio: Except for Class A shares, all share classes of the Portfolio underperformed the benchmark for the six-month period; all share classes of the Portfolio underperformed for the 12-month period.
For both periods, an underweight to the tax-supported state lease sector detracted relative to the benchmark, while yield-curve positioning contributed. For the six-month period, overweights to the pre-refunded sector and insured municipals detracted. Security selection within the water & sewer and miscellaneous revenue sectors contributed. For the 12-month period, an underweight to the airport/ports sector detracted. Security selection within the toll road/transit sector detracted, while selections in the pre-refunded and not-for-profit health care sectors contributed.
Virginia Portfolio: Class A and Advisor Class shares outperformed the benchmark for the six-month period, while Class B and Class C shares underperformed; all share classes of the Portfolio underperformed for the 12-month period.
For both periods, an overweight to the pre-refunded sector, an underweight to the tax-supported state lease sector and security selection within the local GO sector detracted relative to the benchmark. For the six-month
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period, yield-curve positioning was neutral. Security selection within the toll road/transit, special tax and senior living sectors contributed. For the 12-month period, security selection within the tobacco securitization and multi-family housing sectors contributed. Yield-curve positioning contributed, driven by an overweight to intermediate duration municipals.
All Portfolios used derivatives in the form of interest rate swaps for hedging purposes, which had an immaterial impact on absolute performance for the six-month period and detracted for the 12-month period.
MARKET REVIEW AND INVESTMENT STRATEGY
Both equities and corporate bonds delivered strong returns over the six-month period, consistent with a positive economic backdrop. Economic growth in major developed and emerging markets continued to grow at a decent clip while inflation remained moderate. In the municipal market, bond prices were supported by strong technicals, as supply remained low and an historic number of bonds matured or were called by issuers. Municipals delivered positive absolute returns. As demand for income, along with limited supply, helped mid-grade and high-yield municipals rally strongly.
The US Federal Reserve (the “Fed”) has raised its target for the Federal Funds rate by 75 basis points since the beginning of 2017. With the Fed on a path of normalizing interest rates and inflation at bay, both Treasury and AAA-rated municipal yield curves flattened over the period.
At the end of the reporting period, municipal investors were focused on the specter of tax reform and how it could potentially impact the after-tax relative attractiveness of municipal bonds. Ultimately, the final legislation included reductions for individuals, but the largest reductions were for corporations. The relatively slight lowering of individual tax rates is not expected to significantly reduce demand from individual investors for municipal bonds. Whether corporate demand for municipals, primarily insurance companies and banks, will be reduced depends on the after-tax yield and the potential tax consequences of selling municipal bonds they currently hold, to purchase other bonds that offer more attractive after-tax yields. With the after-tax yield advantage for municipal bonds already low by historical standards, the Portfolios are underweight to the longest-maturity bonds, potentially reducing exposure to a rise in yields, which could result from reduced investor demand for certain municipal bonds.
The Portfolios may purchase municipal securities that are insured under policies issued by certain insurance companies. Historically, insured municipal securities typically received a higher credit rating, which meant that the issuer of the securities paid a lower interest rate. As a result of declines in the credit quality and associated downgrades of most fund insurers, insurance has less value than it did in the past. The market now values insured municipal securities primarily based on the credit quality of
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the issuer of the security with little value given to the insurance feature. In purchasing such insured securities, the Adviser evaluates the risk and return of municipal securities through its own research. If an insurance company’s rating is downgraded or the company becomes insolvent, the prices of municipal securities insured by the insurance company may decline.
Portfolio | Insured Bonds1 | Pre-refunded/ ETM2/Insured Bonds1 | ||||||
Arizona | 17.48% | 1.81% | ||||||
Massachusetts | 4.25% | 0.00% | ||||||
Minnesota | 1.46% | 0.00% | ||||||
New Jersey | 24.12% | 9.23% | ||||||
Ohio | 1.33% | 0.00% | ||||||
Pennsylvania | 10.43% | 0.00% | ||||||
Virginia | 1.95% | 0.00% |
1 | Breakdowns expressed as a percentage of investments in municipal bonds. |
2 | Escrowed to maturity. |
INVESTMENT POLICIES
Each of the Portfolios pursues its objective by investing principally in high-yielding, predominantly investment-grade municipal securities. Each of the Portfolios invests, under normal circumstances, at least 80% of its net assets in municipal securities that pay interest that is exempt from federal income tax. These securities may pay interest that is subject to the federal alternative minimum tax for certain taxpayers. Each of the Portfolios pursues its objective by investing at least 80% of its net assets in municipal securities issued by the named state or municipal securities with interest that is otherwise exempt from the named state’s income tax.
The Portfolios may also invest in forward commitments; zero-coupon municipal securities and variable, floating and inverse floating-rate municipal securities; and derivatives, such as options, futures contracts, forwards and swaps.
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DISCLOSURES AND RISKS
Benchmark Disclosure
The Bloomberg Barclays Municipal Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays Municipal Bond Index represents the performance of the long-term tax-exempt bond market consisting of investment-grade bonds. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolios.
A Word About Risk
Market Risk: The value of the Portfolios’ assets will fluctuate as the bond market fluctuates. The value of the Portfolios’ investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Municipal Market Risk: This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Portfolios’ investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. To the extent that the Portfolios invest more of their assets in a particular state’s municipal securities, the Portfolios may be vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism and catastrophic natural disasters, such as hurricanes or earthquakes. The Portfolios’ investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
In addition, recent tax law changes could have a material impact on the value of municipal securities. Changes in tax rates or the treatment of
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DISCLOSURES AND RISKS (continued)
income from municipal securities, among other things, could negatively affect the municipal securities markets.
The Portfolios may invest in municipal securities of issuers in Puerto Rico or other US territories and their governmental agencies and municipalities, which are exempt from federal, state, and, where applicable, local income taxes. These municipal securities may have more risks than those of other US issuers of municipal securities. Like many US states and municipalities, Puerto Rico experienced a significant downturn during the recent recession. Puerto Rico’s downturn was particularly severe, and Puerto Rico continues to face a very challenging economic and fiscal environment. If the general economic situation in Puerto Rico continues to persist or worsens, the volatility and credit quality of Puerto Rican municipal securities could continue to be adversely affected, and the market for such securities may experience continued volatility.
Tax Risk: There is no guarantee that the income on the Portfolios’ municipal securities will be exempt from regular federal income and state income taxes. Unfavorable legislation, adverse interpretations by federal or state authorities, litigation or noncompliant conduct by the issuer of a municipal security could affect the tax-exempt status of municipal securities. If the Internal Revenue Service or a state authority determines that an issuer of a municipal security has not complied with applicable requirements, interest from the security could become subject to regular federal income tax and/or state personal income tax, possibly retroactively to the date the security was issued, the value of the security could decline significantly, and a portion of the distributions to Portfolio shareholders could be recharacterized as taxable. Recent federal legislation included reductions in tax rates for individuals, with relatively larger reductions in tax rates for corporations. These tax rate reductions may reduce the demand for municipal bonds which could reduce the value of municipal bonds held by the Portfolios.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. The Portfolios may be subject to heightened interest rate risk due to rising rates as the current period of historically low interest rates may be ending. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have
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DISCLOSURES AND RISKS (continued)
more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
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 Portfolios’ assets can decline as can the value of the Portfolios’ distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Liquidity Risk: Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Portfolios. Causes of liquidity risk may include low trading volumes, large positions and heavy redemptions of the Portfolios’ shares. Over recent years liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline. Municipal securities may have more liquidity risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
Derivatives Risk: Investments in derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolios, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolios are subject to management risk because they are actively managed investment funds. 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.
These risks are fully discussed in the Portfolios’ prospectus. As with all investments, you may lose money by investing in the Portfolios.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolios 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
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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 Portfolios have been deducted. Net asset value (“NAV”) returns do not reflect sales charges; if sales charges were reflected, the Portfolios’ quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 3.00% maximum front-end sales charge for Class A shares; the applicable contingent deferred sales charge for Class B shares (3% year 1, 2% year 2, 1% year 3) and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.
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HISTORICAL PERFORMANCE
AB ARIZONA PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.82% | 2.93% | ||||||||||||||
1 Year | 4.95% | 1.77% | ||||||||||||||
5 Years | 2.49% | 1.87% | ||||||||||||||
10 Years | 3.97% | 3.65% | ||||||||||||||
CLASS B SHARES | 0.92% | 1.48% | ||||||||||||||
1 Year | 4.26% | 1.26% | ||||||||||||||
5 Years | 1.77% | 1.77% | ||||||||||||||
10 Years3 | 3.54% | 3.54% | ||||||||||||||
CLASS C SHARES | 1.13% | 1.82% | ||||||||||||||
1 Year | 4.26% | 3.26% | ||||||||||||||
5 Years | 1.77% | 1.77% | ||||||||||||||
10 Years | 3.25% | 3.25% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.97%, 1.73% and 1.72% for Class A, Class B and Class C shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.78%, 1.53% and 1.53% for Class A, Class B and Class C shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
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HISTORICAL PERFORMANCE (continued)
AB ARIZONA PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 1.85% | |||
5 Years | 2.28% | |||
10 Years | 3.74% | |||
CLASS B SHARES | ||||
1 Year | 1.33% | |||
5 Years | 2.17% | |||
10 Years1 | 3.63% | |||
CLASS C SHARES | ||||
1 Year | 3.32% | |||
5 Years | 2.17% | |||
10 Years | 3.33% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
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HISTORICAL PERFORMANCE
AB MASSACHUSETTS PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.48% | 2.40% | ||||||||||||||
1 Year | 4.30% | 1.21% | ||||||||||||||
5 Years | 1.87% | 1.26% | ||||||||||||||
10 Years | 3.97% | 3.65% | ||||||||||||||
CLASS B SHARES | 0.75% | 1.22% | ||||||||||||||
1 Year | 3.54% | 0.54% | ||||||||||||||
5 Years | 1.14% | 1.14% | ||||||||||||||
10 Years3 | 3.55% | 3.55% | ||||||||||||||
CLASS C SHARES | 0.77% | 1.25% | ||||||||||||||
1 Year | 3.53% | 2.53% | ||||||||||||||
5 Years | 1.14% | 1.14% | ||||||||||||||
10 Years | 3.24% | 3.24% | ||||||||||||||
ADVISOR CLASS SHARES4 | 1.78% | 2.89% | ||||||||||||||
1 Year | 4.58% | 4.58% | ||||||||||||||
Since Inception5 | 0.14% | 0.14% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.88%, 1.63%, 1.63% and 0.65% for Class A, Class B, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.77%, 1.52%, 1.52% and 0.52% for Class A, Class B, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
4 | 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 Portfolios. |
5 | Inception date: 7/25/2016. |
14 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB MASSACHUSETTS PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 1.39% | |||
5 Years | 1.67% | |||
10 Years | 3.73% | |||
CLASS B SHARES | ||||
1 Year | 0.72% | |||
5 Years | 1.56% | |||
10 Years1 | 3.62% | |||
CLASS C SHARES | ||||
1 Year | 2.71% | |||
5 Years | 1.56% | |||
10 Years | 3.32% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 4.75% | |||
Since Inception3 | 0.70% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
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 Portfolios. |
3 | Inception date: 7/25/2016. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 15 |
HISTORICAL PERFORMANCE
AB MINNESOTA PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.23% | 2.10% | ||||||||||||||
1 Year | 4.33% | 1.22% | ||||||||||||||
5 Years | 2.14% | 1.53% | ||||||||||||||
10 Years | 3.63% | 3.32% | ||||||||||||||
CLASS B SHARES | 0.43% | 0.73% | ||||||||||||||
1 Year | 3.44% | 0.44% | ||||||||||||||
5 Years | 1.40% | 1.40% | ||||||||||||||
10 Years3 | 3.20% | 3.20% | ||||||||||||||
CLASS C SHARES | 0.51% | 0.87% | ||||||||||||||
1 Year | 3.54% | 2.54% | ||||||||||||||
5 Years | 1.40% | 1.40% | ||||||||||||||
10 Years | 2.89% | 2.89% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 1.11%, 1.92% and 1.85% for Class A, Class B and Class C shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios inclusive of interest expense to 0.85%, 1.60% and 1.60% for Class A, Class B and Class C shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
16 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB MINNESOTA PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 1.36% | |||
5 Years | 1.85% | |||
10 Years | 3.38% | |||
CLASS B SHARES | ||||
1 Year | 0.67% | |||
5 Years | 1.75% | |||
10 Years1 | 3.26% | |||
CLASS C SHARES | ||||
1 Year | 2.67% | |||
5 Years | 1.72% | |||
10 Years | 2.96% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 17 |
HISTORICAL PERFORMANCE
AB NEW JERSEY PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.44% | 2.43% | ||||||||||||||
1 Year | 6.27% | 3.12% | ||||||||||||||
5 Years | 2.34% | 1.72% | ||||||||||||||
10 Years | 3.88% | 3.57% | ||||||||||||||
CLASS B SHARES | 0.73% | 1.23% | ||||||||||||||
1 Year | 5.52% | 2.52% | ||||||||||||||
5 Years | 1.59% | 1.59% | ||||||||||||||
10 Years3 | 3.45% | 3.45% | ||||||||||||||
CLASS C SHARES | 0.73% | 1.23% | ||||||||||||||
1 Year | 5.36% | 4.36% | ||||||||||||||
5 Years | 1.58% | 1.58% | ||||||||||||||
10 Years | 3.14% | 3.14% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 1.01%, 1.76% and 1.76% for Class A, Class B and Class C shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.82%, 1.57% and 1.57% for Class A, Class B and Class C shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
18 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB NEW JERSEY PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 3.30% | |||
5 Years | 2.13% | |||
10 Years | 3.64% | |||
CLASS B SHARES | ||||
1 Year | 2.69% | |||
5 Years | 2.01% | |||
10 Years1 | 3.53% | |||
CLASS C SHARES | ||||
1 Year | 4.54% | |||
5 Years | 1.99% | |||
10 Years | 3.22% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 19 |
HISTORICAL PERFORMANCE
AB OHIO PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.29% | 2.10% | ||||||||||||||
1 Year | 5.01% | 1.87% | ||||||||||||||
5 Years | 1.78% | 1.16% | ||||||||||||||
10 Years | 3.48% | 3.16% | ||||||||||||||
CLASS B SHARES | 0.53% | 0.86% | ||||||||||||||
1 Year | 4.25% | 1.25% | ||||||||||||||
5 Years | 1.05% | 1.05% | ||||||||||||||
10 Years3 | 3.05% | 3.05% | ||||||||||||||
CLASS C SHARES | 0.58% | 0.94% | ||||||||||||||
1 Year | 4.12% | 3.12% | ||||||||||||||
5 Years | 1.02% | 1.02% | ||||||||||||||
10 Years | 2.75% | 2.75% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 1.03%, 1.85% and 1.78% for Class A, Class B and Class C shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.80%, 1.55% and 1.55% for Class A, Class B and Class C shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
20 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB OHIO PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 1.78% | |||
5 Years | 1.54% | |||
10 Years | 3.24% | |||
CLASS B SHARES | ||||
1 Year | 1.23% | |||
5 Years | 1.43% | |||
10 Years1 | 3.12% | |||
CLASS C SHARES | ||||
1 Year | 3.21% | |||
5 Years | 1.43% | |||
10 Years | 2.83% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 21 |
HISTORICAL PERFORMANCE
AB PENNSYLVANIA PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.41% | 2.24% | ||||||||||||||
1 Year | 4.87% | 1.69% | ||||||||||||||
5 Years | 2.15% | 1.53% | ||||||||||||||
10 Years | 3.74% | 3.43% | ||||||||||||||
CLASS B SHARES | 0.63% | 1.00% | ||||||||||||||
1 Year | 4.19% | 1.19% | ||||||||||||||
5 Years | 1.43% | 1.43% | ||||||||||||||
10 Years3 | 3.30% | 3.30% | ||||||||||||||
CLASS C SHARES | 0.70% | 1.11% | ||||||||||||||
1 Year | 4.18% | 3.18% | ||||||||||||||
5 Years | 1.43% | 1.43% | ||||||||||||||
10 Years | 3.01% | 3.01% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 1.05%, 1.79% and 1.79% for Class A, Class B and Class C shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.85%, 1.60% and 1.60% for Class A, Class B and Class C shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
22 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB PENNSYLVANIA PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 2.09% | |||
5 Years | 2.04% | |||
10 Years | 3.54% | |||
CLASS B SHARES | ||||
1 Year | 1.58% | |||
5 Years | 1.93% | |||
10 Years1 | 3.43% | |||
CLASS C SHARES | ||||
1 Year | 3.57% | |||
5 Years | 1.93% | |||
10 Years | 3.13% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 23 |
HISTORICAL PERFORMANCE
AB VIRGINIA PORTFOLIO
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2017 (unaudited)
NAV Returns | SEC Returns (reflects applicable sales charges) | SEC Yields1 | Taxable Equivalent Yields2 | |||||||||||||
CLASS A SHARES | 1.70% | 2.77% | ||||||||||||||
1 Year | 4.76% | 1.59% | ||||||||||||||
5 Years | 2.03% | 1.41% | ||||||||||||||
10 Years | 4.09% | 3.77% | ||||||||||||||
CLASS B SHARES | 0.94% | 1.53% | ||||||||||||||
1 Year | 4.08% | 1.08% | ||||||||||||||
5 Years | 1.32% | 1.32% | ||||||||||||||
10 Years3 | 3.66% | 3.66% | ||||||||||||||
CLASS C SHARES | 1.00% | 1.63% | ||||||||||||||
1 Year | 3.99% | 2.99% | ||||||||||||||
5 Years | 1.30% | 1.30% | ||||||||||||||
10 Years | 3.36% | 3.36% | ||||||||||||||
ADVISOR CLASS SHARES4 | 2.00% | 3.26% | ||||||||||||||
1 Year | 5.13% | 5.13% | ||||||||||||||
Since Inception5 | 0.70% | 0.70% |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.88%, 1.64%, 1.63% and 0.66% for Class A, Class B, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.80%, 1.55%, 1.55% and 0.55% for Class A, Class B, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before September 29, 2018 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
1 | SEC yields are calculated based on SEC guidelines for the 30-day period ended November 30, 2017. |
2 | Taxable equivalent yields are based on SEC yields and a 35% marginal federal income tax rate and maximum state taxes where applicable. |
3 | Assumes conversion of Class B shares into Class A shares after six years. |
4 | 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 Portfolios. |
5 | Inception date: 7/25/2016. |
24 | AB MUNICIPAL INCOME FUND II | abfunds.com |
HISTORICAL PERFORMANCE (continued)
AB VIRGINIA PORTFOLIO
SEC AVERAGE ANNUAL RETURNS
AS OF THE MOST RECENT CALENDAR QUARTER-END
DECEMBER 31, 2017 (unaudited)
SEC Returns (reflects applicable sales charges) | ||||
CLASS A SHARES | ||||
1 Year | 1.84% | |||
5 Years | 1.91% | |||
10 Years | 3.86% | |||
CLASS B SHARES | ||||
1 Year | 1.32% | |||
5 Years | 1.82% | |||
10 Years1 | 3.75% | |||
CLASS C SHARES | ||||
1 Year | 3.33% | |||
5 Years | 1.83% | |||
10 Years | 3.46% | |||
ADVISOR CLASS SHARES2 | ||||
1 Year | 5.37% | |||
Since Inception3 | 1.28% |
1 | Assumes conversion of Class B shares into Class A shares after six years. |
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 Portfolios. |
3 | Inception date: 7/25/2016. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 25 |
FUND EXPENSES
(unaudited)
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on a 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 second line of the table 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.
26 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FUND EXPENSES (continued)
(unaudited)
AB Arizona Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,006.60 | $ | 3.92 | 0.78 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.16 | $ | 3.95 | 0.78 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,003.70 | $ | 7.69 | 1.53 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.40 | $ | 7.74 | 1.53 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,003.70 | $ | 7.69 | 1.53 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.40 | $ | 7.74 | 1.53 | % |
AB Massachusetts Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,005.40 | $ | 3.87 | 0.77 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.21 | $ | 3.90 | 0.77 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,001.60 | $ | 7.63 | 1.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.45 | $ | 7.69 | 1.52 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,001.60 | $ | 7.63 | 1.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.45 | $ | 7.69 | 1.52 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,006.70 | $ | 2.62 | 0.52 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.46 | $ | 2.64 | 0.52 | % |
AB Minnesota Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,004.30 | $ | 4.27 | 0.85 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.81 | $ | 4.31 | 0.85 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,000.50 | $ | 8.02 | 1.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.05 | $ | 8.09 | 1.60 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,000.60 | $ | 8.02 | 1.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.05 | $ | 8.09 | 1.60 | % |
abfunds.com | AB MUNICIPAL INCOME FUND II | 27 |
FUND EXPENSES (continued)
(unaudited)
AB New Jersey Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,013.00 | $ | 4.14 | 0.82 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.96 | $ | 4.15 | 0.82 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,009.20 | $ | 7.91 | 1.57 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.20 | $ | 7.94 | 1.57 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,008.10 | $ | 7.90 | 1.57 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.20 | $ | 7.94 | 1.57 | % |
AB Ohio Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,003.70 | $ | 4.02 | 0.80 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.06 | $ | 4.05 | 0.80 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,000.00 | $ | 7.77 | 1.55 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.30 | $ | 7.84 | 1.55 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,000.00 | $ | 7.77 | 1.55 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.30 | $ | 7.84 | 1.55 | % |
AB Pennsylvania Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,005.00 | $ | 4.27 | 0.85 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,020.81 | $ | 4.31 | 0.85 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,002.20 | $ | 8.03 | 1.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.05 | $ | 8.09 | 1.60 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,001.20 | $ | 8.03 | 1.60 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.05 | $ | 8.09 | 1.60 | % |
28 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FUND EXPENSES (continued)
(unaudited)
AB Virginia Portfolio
Beginning Account Value June 1, 2017 | Ending Account Value November 30, 2017 | Expenses Paid During Period* | Annualized Expense Ratio* | |||||||||||||
Class A | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,005.80 | $ | 4.02 | 0.80 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,021.06 | $ | 4.05 | 0.80 | % | ||||||||
Class B | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,003.00 | $ | 7.78 | 1.55 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.30 | $ | 7.84 | 1.55 | % | ||||||||
Class C | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,002.10 | $ | 7.78 | 1.55 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,017.30 | $ | 7.84 | 1.55 | % | ||||||||
Advisor Class | ||||||||||||||||
Actual | $ | 1,000 | $ | 1,008.00 | $ | 2.77 | 0.55 | % | ||||||||
Hypothetical** | $ | 1,000 | $ | 1,022.31 | $ | 2.79 | 0.55 | % |
* | Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
** | Assumes 5% annual return before expenses. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 29 |
BOND RATING SUMMARY1
November 30, 2017 (unaudited)
1 | All data are as of November 30, 2017. The Portfolio’s quality rating breakdown is expressed as a percentage of the Portfolio’s total investments in municipal securities and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Portfolio considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the Pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments; such as, equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
30 | AB MUNICIPAL INCOME FUND II | abfunds.com |
BOND RATING SUMMARY1
November 30, 2017 (unaudited)
1 | All data are as of November 30, 2017. The Portfolio’s quality rating breakdown is expressed as a percentage of the Portfolio’s total investments in municipal securities and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Portfolio considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the Pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments; such as, equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 31 |
BOND RATING SUMMARY1
November 30, 2017 (unaudited)
1 | All data are as of November 30, 2017. The Portfolio’s quality rating breakdown is expressed as a percentage of the Portfolio’s total investments in municipal securities and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Portfolio considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the Pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments; such as, equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
32 | AB MUNICIPAL INCOME FUND II | abfunds.com |
BOND RATING SUMMARY1
November 30, 2017 (unaudited)
1 | All data are as of November 30, 2017. The Portfolio’s quality rating breakdown is expressed as a percentage of the Portfolio’s total investments in municipal securities and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). The quality ratings are determined by using the S&P Global Ratings (“S&P”), Moody’s Investors Services, Inc. (“Moody’s”) and Fitch Ratings, Ltd. (“Fitch”). The Portfolio considers the credit ratings issued by S&P, Moody’s and Fitch and uses the highest rating issued by the agencies. These ratings are a measure of the quality and safety of a bond or portfolio, based on the issuer’s financial condition. AAA is the highest (best) and D is the lowest (worst). If applicable, the Pre-refunded category includes bonds which are secured by U.S. Government securities and therefore are deemed high-quality investment grade by the Adviser. If applicable, Not Applicable (N/A) includes non-creditworthy investments; such as, equities, currency contracts, futures and options. If applicable, the Not Rated category includes bonds that are not rated by a nationally recognized statistical rating organization. The Adviser evaluates the creditworthiness of non-rated securities based on a number of factors including, but not limited to, cash flows, enterprise value and economic environment. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 33 |
PORTFOLIO OF INVESTMENTS
AB ARIZONA PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 99.1% | ||||||||
Long-Term Municipal Bonds – 99.1% | ||||||||
Arizona – 82.8% | ||||||||
Arizona Department of Transportation State Highway Fund Revenue | $ | 3,000 | $ | 3,349,800 | ||||
Arizona Department of Transportation State Highway Fund Revenue | 1,500 | 1,683,915 | ||||||
Arizona Game & Fish Department & Commission | 1,000 | 1,002,710 | ||||||
Arizona Health Facilities Authority | 1,000 | 999,970 | ||||||
Arizona Health Facilities Authority | 1,000 | 1,043,140 | ||||||
Arizona Health Facilities Authority | 3,000 | 3,441,060 | ||||||
Arizona State University | 2,050 | 2,331,486 | ||||||
City of Glendale AZ Water & Sewer Revenue | 2,000 | 2,268,540 | ||||||
City of Mesa AZ | 5,000 | 5,564,600 | ||||||
City of Mesa AZ Utility System Revenue | 1,000 | 1,084,550 |
34 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
City of Phoenix Civic Improvement Corp. | $ | 750 | $ | 878,790 | ||||
City of Phoenix Civic Improvement Corp. | 2,000 | 2,178,800 | ||||||
City of Show Low AZ | 105 | 105,085 | ||||||
City of Tempe AZ | 520 | 616,678 | ||||||
City of Tucson AZ Water System Revenue | 500 | 570,430 | ||||||
City of Tucson AZ Water System Revenue | 1,860 | 2,122,000 | ||||||
County of Pima AZ Sewer System Revenue | 1,000 | 1,113,980 | ||||||
AGM Series 2010 | 2,000 | 2,168,740 | ||||||
County of Pinal AZ | 4,540 | 5,193,124 | ||||||
Estrella Mountain Ranch Community Facilities District | 721 | 722,867 | ||||||
Estrella Mountain Ranch Community Facilities District | 1,192 | 1,194,003 | ||||||
Glendale Industrial Development Authority | 600 | 587,754 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 35 |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Glendale Industrial Development Authority | $ | 1,000 | $ | 1,108,010 | ||||
Glendale Municipal Property Corp. | 2,500 | 2,738,625 | ||||||
Industrial Development Authority of the City of Phoenix (The) | 250 | 286,660 | ||||||
Industrial Development Authority of the City of Phoenix (The) | 1,000 | 996,990 | ||||||
Industrial Development Authority of the City of Phoenix (The) | 2,500 | 2,754,550 | ||||||
Maricopa County Industrial Development Authority | 3,400 | 3,957,566 | ||||||
Maricopa County Industrial Development Authority | 750 | 861,233 | ||||||
Maricopa County Industrial Development Authority | 2,450 | 2,604,064 | ||||||
McAllister Academic Village LLC | 2,500 | 2,898,050 | ||||||
Northern Arizona University | 1,000 | 1,149,200 |
36 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Pima County Regional Transportation Authority | $ | 3,000 | $ | 3,324,540 | ||||
Pinal County Industrial Development Authority | 1,400 | 1,401,050 | ||||||
Salt River Project Agricultural Improvement & Power District | 1,100 | 1,329,405 | ||||||
Series 2012A | 1,500 | 1,695,840 | ||||||
Series 2015A | 2,000 | 2,327,780 | ||||||
Salt Verde Financial Corp. | 1,000 | 1,217,640 | ||||||
5.25%, 12/01/22-12/01/23 | 1,165 | 1,341,157 | ||||||
State of Arizona Lottery Revenue | 6,000 | 6,381,660 | ||||||
Student & Academic Services LLC | 1,200 | 1,333,140 | ||||||
Town of Buckeye AZ | 3,450 | 3,894,429 | ||||||
Tucson Airport Authority, Inc. | 6,475 | 6,493,713 | ||||||
Tucson Industrial Development Authority | 985 | 986,349 | ||||||
University of Arizona | 3,765 | 4,281,972 | ||||||
Western Maricopa Education Center District No 402 | 3,940 | 4,332,743 | ||||||
|
| |||||||
99,918,388 | ||||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 37 |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Delaware – 0.5% | ||||||||
Delaware State Economic Development Authority | $ | 520 | $ | 572,151 | ||||
|
| |||||||
Florida – 2.7% | ||||||||
City of Orlando FL | 1,820 | 2,189,861 | ||||||
Halifax Hospital Medical Center | 1,000 | 1,110,620 | ||||||
|
| |||||||
3,300,481 | ||||||||
|
| |||||||
Illinois – 2.1% | ||||||||
Cook County Forest Preserve District | 2,360 | 2,503,040 | ||||||
|
| |||||||
Kentucky – 0.9% | ||||||||
Kentucky Economic Development Finance Authority | 1,000 | 1,112,940 | ||||||
|
| |||||||
Louisiana – 0.5% | ||||||||
Louisiana Local Government Environmental Facilities & Community Development Auth | 500 | 557,200 | ||||||
|
| |||||||
Massachusetts – 0.7% | ||||||||
Commonwealth of Massachusetts | 700 | 665,091 | ||||||
NATL Series 2000G | 225 | 213,779 | ||||||
|
| |||||||
878,870 | ||||||||
|
| |||||||
Minnesota – 1.1% | ||||||||
Western Minnesota Municipal Power Agency | 1,130 | 1,303,240 | ||||||
|
|
38 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New York – 0.7% | ||||||||
Suffolk County Economic Development Corp. | $ | 120 | $ | 133,589 | ||||
Suffolk County Economic Development Corp. | 700 | 768,642 | ||||||
|
| |||||||
902,231 | ||||||||
|
| |||||||
North Carolina – 1.0% | ||||||||
North Carolina Medical Care Commission | 600 | 627,198 | ||||||
North Carolina Medical Care Commission | 500 | 525,615 | ||||||
|
| |||||||
1,152,813 | ||||||||
|
| |||||||
Ohio – 0.3% | ||||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | 320 | 316,102 | ||||||
|
| |||||||
Puerto Rico – 1.5% | ||||||||
Puerto Rico Housing Finance Authority | 1,855 | 1,855,000 | ||||||
|
| |||||||
Texas – 3.3% | ||||||||
North Texas Tollway Authority | 1,000 | 1,127,980 | ||||||
Series 2015B | 1,300 | 1,484,171 | ||||||
Texas Private Activity Bond Surface Transportation Corp. | 840 | 944,546 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 39 |
PORTFOLIO OF INVESTMENTS (continued)
AB ARIZONA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Texas Private Activity Bond Surface Transportation Corp. | $ | 420 | $ | 462,038 | ||||
|
| |||||||
4,018,735 | ||||||||
|
| |||||||
Washington – 1.0% | ||||||||
Port of Seattle WA | 1,000 | 1,145,800 | ||||||
|
| |||||||
Total Investments – 99.1% | 119,536,991 | |||||||
Other assets less liabilities – 0.9% | 1,093,315 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 120,630,306 | ||||||
|
|
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments by the Fund | Payments received by the Fund | Payment Frequency Paid/Received | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
USD | 3,200 | 12/29/21 | 3 Month LIBOR | 1.989 | % | | Quarterly/ Semi-Annual | | $ | (22,846 | ) | |||||||||||||
USD | 1,300 | 11/13/37 | 3 Month LIBOR | 2.602 | % | | Quarterly/ Semi-Annual | | (14,268 | ) | ||||||||||||||
|
| |||||||||||||||||||||||
$ | (37,114 | ) | ||||||||||||||||||||||
|
|
(a) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(b) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of these securities amounted to $878,870 or 0.73% of net assets. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 17.5% and 1.8%, respectively.
Glossary:
ACA – ACA Financial Guaranty Corporation
AGM – Assured Guaranty Municipal
AMBAC – Ambac Assurance Corporation
BAM – Build American Mutual
CFD – Community Facilities District
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
NATL – National Interstate Corporation
See notes to financial statements.
40 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS
AB MASSACHUSETTS PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 98.9% | ||||||||
Long-Term Municipal Bonds – 98.9% | ||||||||
Massachusetts – 83.2% | ||||||||
Boston Water & Sewer Commission | $ | 1,000 | $ | 1,063,640 | ||||
Commonwealth of Massachusetts | 10,000 | 11,745,500 | ||||||
NATL Series 2000E | 2,825 | 2,684,117 | ||||||
NATL Series 2000F | 1,225 | 1,163,909 | ||||||
Commonwealth of Massachusetts | 2,500 | 2,774,925 | ||||||
AGM Series 2005A | 2,000 | 2,049,280 | ||||||
Marthas Vineyard Land Bank | 2,830 | 3,274,678 | ||||||
Massachusetts Bay Transportation Authority | 1,670 | 1,804,493 | ||||||
Massachusetts Clean Water Trust (The) | 3,000 | 3,165,180 | ||||||
Massachusetts Department of Transportation | 6,900 | 7,360,782 | ||||||
Massachusetts Development Finance Agency | 1,285 | 1,372,778 | ||||||
Series 2009V-1 | 3,300 | 3,500,937 | ||||||
Series 2011 | 7,000 | 7,797,860 | ||||||
Massachusetts Development Finance Agency | 7,000 | 7,721,070 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 41 |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Massachusetts Development Finance Agency | $ | 4,500 | $ | 4,841,820 | ||||
Massachusetts Development Finance Agency | 3,970 | 4,378,532 | ||||||
Massachusetts Development Finance Agency | 3,250 | 3,499,405 | ||||||
Series 2017T | 1,000 | 1,171,720 | ||||||
Massachusetts Development Finance Agency | 3,755 | 4,129,486 | ||||||
Massachusetts Development Finance Agency | 3,300 | 3,394,957 | ||||||
Series 2010O-2 | 3,500 | 3,713,115 | ||||||
Massachusetts Development Finance Agency | 5,980 | 7,103,370 | ||||||
Massachusetts Development Finance Agency | 1,055 | 1,218,388 | ||||||
Massachusetts Development Finance Agency | 2,435 | 2,782,694 | ||||||
5.25%, 1/01/42 | 1,000 | 1,150,130 | ||||||
Massachusetts Development Finance Agency | 2,000 | 2,303,020 | ||||||
Massachusetts Development Finance Agency | 5,000 | 5,715,000 |
42 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Massachusetts Development Finance Agency | $ | 1,150 | $ | 1,238,803 | ||||
Massachusetts Development Finance Agency | 2,055 | 2,358,647 | ||||||
Massachusetts Development Finance Agency | 1,000 | 1,050,970 | ||||||
Massachusetts Development Finance Agency | 3,980 | 4,350,471 | ||||||
5.25%, 7/01/42 | 1,330 | 1,438,674 | ||||||
Massachusetts Development Finance Agency | 2,000 | 2,027,480 | ||||||
5.00%, 7/01/32 | 1,600 | 1,824,752 | ||||||
Massachusetts Development Finance Agency | 2,990 | 3,569,372 | ||||||
Massachusetts Development Finance Agency | 715 | 764,078 | ||||||
Series 2017 | 1,250 | 1,436,500 | ||||||
Massachusetts Development Finance Agency | 5,000 | 5,450,200 | ||||||
Massachusetts Development Finance Agency | 1,500 | 1,673,640 | ||||||
Massachusetts Development Finance Agency | 2,345 | 2,693,420 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 43 |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Massachusetts Development Finance Agency | $ | 1,460 | $ | 1,613,242 | ||||
Series 2011A | 3,225 | 3,560,613 | ||||||
Massachusetts Health & Educational Facilities Authority | 3,860 | 4,185,668 | ||||||
Massachusetts Health & Educational Facilities Authority | 210 | 210,617 | ||||||
Massachusetts Health & Educational Facilities Authority | 1,005 | 1,059,863 | ||||||
Massachusetts Health & Educational Facilities Authority | 7,025 | 7,597,127 | ||||||
Massachusetts Health & Educational Facilities Authority | 2,500 | 2,684,925 | ||||||
Massachusetts Health & Educational Facilities Authority | 1,905 | 1,942,509 | ||||||
5.375%, 6/01/27 | 3,060 | 3,122,424 | ||||||
Massachusetts Port Authority | 2,750 | 2,963,207 | ||||||
Series 2012B | 1,430 | 1,613,970 | ||||||
Series 2017A | 2,600 | 3,009,560 |
44 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Massachusetts School Building Authority | $ | 3,720 | $ | 4,150,516 | ||||
Series 2013A | 2,500 | 2,850,575 | ||||||
Series 2015B | 3,770 | 4,434,387 | ||||||
Massachusetts Water Resources Authority | 2,425 | 2,702,129 | ||||||
5.00%, 8/01/29 (Pre-refunded/ETM) | 2,000 | 2,228,560 | ||||||
Series 2016C | 8,500 | 10,144,920 | ||||||
Metropolitan Boston Transit Parking Corp. | 6,000 | 6,642,060 | ||||||
University of Massachusetts Building Authority | 2,000 | 2,284,020 | ||||||
Series 20173 | 2,500 | 2,980,125 | ||||||
|
| |||||||
204,738,810 | ||||||||
|
| |||||||
Arizona – 2.1% | ||||||||
Arizona Sports & Tourism Authority | 4,065 | 4,406,419 | ||||||
Salt Verde Financial Corp. | 660 | 803,643 | ||||||
|
| |||||||
5,210,062 | ||||||||
|
| |||||||
California – 0.2% | ||||||||
California Statewide Communities Development Authority | 360 | 370,480 | ||||||
|
| |||||||
Colorado – 0.4% | ||||||||
City & County of Denver CO | 1,000 | 1,083,460 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 45 |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Connecticut – 0.5% | ||||||||
State of Connecticut | $ | 1,000 | $ | 1,128,400 | ||||
|
| |||||||
Florida – 1.4% | ||||||||
County of Miami-Dade FL Aviation Revenue | 3,000 | 3,494,400 | ||||||
|
| |||||||
Guam – 0.5% | ||||||||
Guam Government Waterworks Authority | 1,000 | 1,119,370 | ||||||
|
| |||||||
Illinois – 1.8% | ||||||||
Illinois Finance Authority | 1,050 | 1,088,262 | ||||||
Illinois State Toll Highway Authority | 2,475 | 2,856,373 | ||||||
Village of Bolingbrook IL | 410 | 407,019 | ||||||
|
| |||||||
4,351,654 | ||||||||
|
| |||||||
Kentucky – 0.4% | ||||||||
Kentucky Economic Development Finance Authority | 1,000 | 1,084,840 | ||||||
|
| |||||||
Michigan – 0.7% | ||||||||
Michigan Public Power Agency | 1,605 | 1,710,095 | ||||||
|
| |||||||
New Jersey – 0.5% | ||||||||
New Jersey Transportation Trust Fund Authority | 1,170 | 1,303,017 | ||||||
|
|
46 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New York – 2.3% | ||||||||
Metropolitan Transportation Authority | $ | 5,065 | $ | 5,698,378 | ||||
|
| |||||||
North Carolina – 0.9% | ||||||||
North Carolina Medical Care Commission | 1,000 | 1,045,330 | ||||||
North Carolina Turnpike Authority | 1,000 | 1,157,840 | ||||||
|
| |||||||
2,203,170 | ||||||||
|
| |||||||
Ohio – 0.7% | ||||||||
County of Hamilton OH | 1,100 | 1,183,886 | ||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | 600 | 592,692 | ||||||
|
| |||||||
1,776,578 | ||||||||
|
| |||||||
Pennsylvania – 1.0% |
| |||||||
City of Philadelphia PA | 1,000 | 1,164,760 | ||||||
Pennsylvania Economic Development Financing Authority | 1,140 | 1,277,324 | ||||||
|
| |||||||
2,442,084 | ||||||||
|
| |||||||
Puerto Rico – 0.3% |
| |||||||
Puerto Rico Housing Finance Authority | 695 | 728,277 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 47 |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Texas – 1.2% |
| |||||||
North Texas Tollway Authority | $ | 1,000 | $ | 1,127,980 | ||||
Texas Private Activity Bond Surface Transportation Corp. | 1,090 | 1,225,662 | ||||||
Texas Private Activity Bond Surface Transportation Corp. | 545 | 599,549 | ||||||
|
| |||||||
2,953,191 | ||||||||
|
| |||||||
Wisconsin – 0.8% |
| |||||||
Oneida Tribe of Indians of Wisconsin | 750 | 799,395 | ||||||
Wisconsin Public Finance Authority | 1,000 | 1,129,050 | ||||||
|
| |||||||
1,928,445 | ||||||||
|
| |||||||
Total Municipal Obligations | 243,324,711 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS – 0.1% | ||||||||
Investment Companies – 0.1% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.91%(f)(g)(h) | 208,709 | 208,709 | ||||||
|
| |||||||
Total Investments – 99.0% | 243,533,420 | |||||||
Other assets less liabilities – 1.0% | 2,399,270 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 245,932,690 | ||||||
|
|
48 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MASSACHUSETTS PORTFOLIO
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 | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||
USD | 11,000 | 10/29/21 | 3 Month LIBOR | 2.022 | % | | Quarterly/ Semi-Annual | | $ | (45,468 | ) | |||||||||||||
USD | 1,910 | 9/21/37 | 3 Month LIBOR | 2.549 | % | | Quarterly/ Semi-Annual | | (35,333 | ) | ||||||||||||||
|
| |||||||||||||||||||||||
$ | (80,801 | ) | ||||||||||||||||||||||
|
|
INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||
Swap Counterparty | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Frequency Paid/Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||||
Citibank, NA | $ | 8,000 | 12/01/17 | SIFMA* | 3.792 | % | Quarterly/ Quarterly | $ | 60,668 |
* | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
(a) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of these securities amounted to $3,848,026 or 1.56% of net assets. |
(b) | Variable rate coupon, rate shown as of November 30, 2017. |
(c) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(d) | When-Issued or delayed delivery security. |
(e) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2017, the aggregate market value of these securities amounted to $1,928,445 or 0.8% of net assets. |
(f) | Affiliated investments. |
(g) | The rate shown represents the 7-day yield as of period end. |
(h) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 4.2% and 0.0%, respectively.
Glossary:
AGM – Assured Guaranty Municipal
BAM – Build American Mutual
CPIYOYX – Consumer Price Index Year Over Year Change
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
NATL – National Interstate Corporation
SRF – State Revolving Fund
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 49 |
PORTFOLIO OF INVESTMENTS
AB MINNESOTA PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 98.6% | ||||||||
Long-Term Municipal Bonds – 98.6% | ||||||||
Minnesota – 98.6% | ||||||||
Anoka-Hennepin Independent School District No 11 COP | $ | 1,695 | $ | 1,927,130 | ||||
Central Minnesota Municipal Power Agency | 2,200 | 2,405,524 | ||||||
City of Center City MN | 800 | 892,738 | ||||||
City of Duluth MN | 1,000 | 1,168,960 | ||||||
City of Maple Grove MN | 1,000 | 1,144,340 | ||||||
City of Minneapolis MN | 1,000 | 1,149,070 | ||||||
City of Minneapolis MN | 1,000 | 1,125,610 | ||||||
City of Minneapolis MN/St Paul Housing & Redevelopment Authority | 1,355 | 1,633,385 | ||||||
City of Minneapolis MN/St Paul Housing & Redevelopment Authority | 1,500 | 1,624,725 | ||||||
City of Minnetonka MN | 1,620 | 1,621,393 | ||||||
City of Rochester MN | 1,000 | 1,076,270 |
50 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MINNESOTA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
City of St Cloud MN | $ | 1,405 | $ | 1,519,100 | ||||
City of St Cloud MN | 95 | 102,039 | ||||||
City of St Louis Park MN | 1,150 | 1,220,576 | ||||||
City of St Paul MN | 2,900 | 3,358,144 | ||||||
City of White Bear Lake MN | 1,000 | 1,002,400 | ||||||
Cloquet Independent School District No 94 | 2,200 | 2,522,652 | ||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota | 610 | 652,511 | ||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota | 590 | 634,551 | ||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota | 2,000 | 2,303,120 | ||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota | 1,000 | 1,138,960 | ||||||
Housing & Redevelopment Authority of The City of St Paul Minnesota | 600 | 727,722 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 51 |
PORTFOLIO OF INVESTMENTS (continued)
AB MINNESOTA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Hutchinson Utilities Commission | $ | 420 | $ | 473,399 | ||||
Minneapolis Special School District No 1 | 3,000 | 3,615,870 | ||||||
Minneapolis-St Paul Metropolitan Airports Commission | 1,250 | 1,326,875 | ||||||
Series 2012B | 1,250 | 1,389,813 | ||||||
Minnesota Agricultural & Economic Development Board | 1,000 | 1,081,480 | ||||||
Minnesota Higher Education Facilities Authority | 445 | 471,682 | ||||||
Series 2010B | 2,770 | 2,936,089 | ||||||
Minnesota Higher Education Facilities Authority | 1,000 | 1,057,090 | ||||||
Minnesota Higher Education Facilities Authority | 1,400 | 1,552,474 | ||||||
Minnesota Higher Education Facilities Authority | 255 | 269,532 | ||||||
Series 20158 | 1,000 | 1,165,900 | ||||||
Minnesota Higher Education Facilities Authority | 1,000 | 1,051,440 | ||||||
Minnesota Municipal Power Agency | 750 | 875,145 | ||||||
New Prague Independent School District No 721 | 1,000 | 1,077,320 |
52 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB MINNESOTA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Northern Municipal Power Agency | $ | 2,260 | $ | 2,486,068 | ||||
5.00%, 1/01/24 (Pre-refunded/ETM) | 1,875 | 2,062,556 | ||||||
Series 2017 | 1,150 | 1,319,447 | ||||||
Southern Minnesota Municipal Power Agency | 3,000 | 3,485,730 | ||||||
St Paul Port Authority | 2,445 | 2,600,502 | ||||||
St Paul Port Authority | 3,945 | 4,585,944 | ||||||
University of Minnesota | 2,000 | 2,148,220 | ||||||
5.00%, 1/01/39 | 1,500 | 1,697,460 | ||||||
Waconia Independent School District No 110 | 1,545 | 1,632,586 | ||||||
Western Minnesota Municipal Power Agency | 2,500 | 2,841,125 | ||||||
|
| |||||||
Total Municipal Obligations | 74,154,667 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS – 0.3% | ||||||||
Investment Companies – 0.3% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.91%(b)(c)(d) | 197,736 | 197,736 | ||||||
|
| |||||||
Total Investments – 98.9% | 74,352,403 | |||||||
Other assets less liabilities – 1.1% | 840,043 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 75,192,446 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 53 |
PORTFOLIO OF INVESTMENTS (continued)
AB MINNESOTA PORTFOLIO
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||
Notional (000) | Termination Date | Payments made by the Fund | Payments by the Fund | Payment Frequency Paid/Received | Unrealized Appreciation/ (Depreciation) | |||||||||||||
USD | 4,210 | 12/29/21 | 3 Month LIBOR | 1.989 | % | Quarterly/ Semi-Annual | $ | (30,056 | ) |
(a) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(b) | Affiliated investments. |
(c) | The rate shown represents the 7-day yield as of period end. |
(d) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 1.5% and 0.0%, respectively.
Glossary:
AGC – Assured Guaranty Corporation
COP – Certificate of Participation
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
See notes to financial statements.
54 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS
AB NEW JERSEY PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 99.4% | ||||||||
Long-Term Municipal Bonds – 99.4% | ||||||||
New Jersey – 75.9% | ||||||||
City of Jersey City NJ | $ | 1,500 | $ | 1,750,365 | ||||
Hudson County Improvement Authority | 3,500 | 4,039,210 | ||||||
Landis Sewage Authority | 600 | 629,376 | ||||||
Morris-Union Jointure Commission COP | 3,320 | 3,725,505 | ||||||
New Jersey Economic Development Authority | 4,000 | 4,555,480 | ||||||
New Jersey Economic Development Authority | 1,000 | 1,026,440 | ||||||
New Jersey Economic Development Authority | 4,000 | 4,282,880 | ||||||
New Jersey Economic Development Authority | 1,000 | 1,179,510 | ||||||
New Jersey Economic Development Authority | 1,000 | 1,120,660 | ||||||
New Jersey Economic Development Authority | 1,000 | 1,122,100 | ||||||
5.50%, 1/01/27 | 1,000 | 1,156,500 | ||||||
New Jersey Economic Development Authority | 1,515 | 1,792,078 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 55 |
PORTFOLIO OF INVESTMENTS (continued)
AB NEW JERSEY PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New Jersey Economic Development Authority | $ | 1,165 | $ | 1,273,298 | ||||
New Jersey Educational Facilities Authority | 5,000 | 5,428,450 | ||||||
New Jersey Educational Facilities Authority | 2,500 | 2,822,050 | ||||||
New Jersey Educational Facilities Authority | 1,000 | 1,195,700 | ||||||
New Jersey Health Care Facilities Financing Authority | 1,480 | 1,744,506 | ||||||
5.25%, 7/01/31 (Pre-refunded/ETM)(b) | 320 | 375,338 | ||||||
AGC Series 2004A | 2,085 | 2,463,699 | ||||||
New Jersey Health Care Facilities Financing Authority | 45 | 45,970 | ||||||
New Jersey Health Care Facilities Financing Authority | 1,950 | 2,272,452 | ||||||
New Jersey Health Care Facilities Financing Authority | 2,100 | 2,237,676 | ||||||
New Jersey Health Care Facilities Financing Authority | 1,835 | 2,100,616 | ||||||
New Jersey Health Care Facilities Financing Authority | 1,000 | 1,144,740 |
56 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB NEW JERSEY PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New Jersey Transportation Trust Fund Authority | $ | 2,750 | $ | 3,066,567 | ||||
NATL Series 2006A | 3,400 | 3,453,448 | ||||||
New Jersey Transportation Trust Fund Authority | 1,250 | 1,363,450 | ||||||
New Jersey Turnpike Authority | 5,200 | 5,791,916 | ||||||
North Hudson Sewerage Authority/NJ | 8,875 | 7,722,492 | ||||||
Rutgers The State University of New Jersey | 4,500 | 5,141,520 | ||||||
Tobacco Settlement Financing Corp./NJ | 1,000 | 962,550 | ||||||
Union County Improvement Authority | 2,270 | 2,276,833 | ||||||
Union County Utilities Authority | 4,560 | 5,077,606 | ||||||
|
| |||||||
84,340,981 | ||||||||
|
| |||||||
California – 0.4% | ||||||||
California Statewide Communities Development Authority | 400 | 411,644 | ||||||
|
| |||||||
Idaho – 3.7% | ||||||||
Idaho Housing & Finance Association | 3,600 | 4,072,608 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 57 |
PORTFOLIO OF INVESTMENTS (continued)
AB NEW JERSEY PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Illinois – 2.0% | ||||||||
Kane Cook & DuPage Counties School District No U-46 Elgin | $ | 1,000 | $ | 1,131,040 | ||||
Metropolitan Pier & Exposition Authority | 1,000 | 1,070,220 | ||||||
|
| |||||||
2,201,260 | ||||||||
|
| |||||||
Massachusetts – 0.2% | ||||||||
Commonwealth of Massachusetts |
| 200 |
|
| 190,026 |
| ||
|
| |||||||
New York – 10.5% | ||||||||
New York State Dormitory Authority | 290 | 326,096 | ||||||
New York State Dormitory Authority | 1,750 | 1,958,058 | ||||||
Port Authority of New York & New Jersey | 4,250 | 4,733,225 | ||||||
Series 2014 | 1,100 | 1,263,713 | ||||||
Port Authority of New York & New Jersey | 3,175 | 3,342,767 | ||||||
|
| |||||||
11,623,859 | ||||||||
|
| |||||||
Ohio – 0.2% | ||||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | 280 | 276,590 | ||||||
|
| |||||||
Pennsylvania – 4.3% | ||||||||
Delaware River Port Authority | 4,530 | 4,821,513 | ||||||
|
|
58 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB NEW JERSEY PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Puerto Rico – 1.2% | ||||||||
Puerto Rico Housing Finance Authority | $ | 1,310 | $ | 1,310,000 | ||||
|
| |||||||
Texas – 1.0% | ||||||||
Texas State Public Finance Authority Charter School Finance Corp. | 1,000 | 1,134,110 | ||||||
|
| |||||||
Total Investments – 99.4% | 110,382,591 | |||||||
Other assets less liabilities – 0.6% | 667,599 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 111,050,190 | ||||||
|
|
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the | Payment Frequency Paid/Received | Unrealized Appreciation/ | |||||||||||||||||||
USD | 3,680 | 12/29/21 | 3 Month LIBOR | 1.989 | % | | Quarterly/ Semi-Annual | | $ | (26,272 | ) | |||||||||||||
USD | 1,610 | 9/21/37 | 3 Month LIBOR | 2.549 | % | | Quarterly/ Semi-Annual | | (29,784 | ) | ||||||||||||||
|
| |||||||||||||||||||||||
$ | (56,056 | ) | ||||||||||||||||||||||
|
|
(a) | Inverse floater security. |
(b) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(c) | When-Issued or delayed delivery security. |
(d) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of this security amounted to $190,026 or 0.17% of net assets. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 24.1% and 9.2%, respectively.
abfunds.com | AB MUNICIPAL INCOME FUND II | 59 |
PORTFOLIO OF INVESTMENTS (continued)
AB NEW JERSEY PORTFOLIO
Glossary:
AGC – Assured Guaranty Corporation
AGM – Assured Guaranty Municipal
COP – Certificate of Participation
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
NATL – National Interstate Corporation
See notes to financial statements.
60 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS
AB OHIO PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 99.2% | ||||||||
Long-Term Municipal Bonds – 99.2% | ||||||||
Ohio – 82.5% | ||||||||
American Municipal Power, Inc. | $ | 2,000 | $ | 2,285,560 | ||||
Buckeye Tobacco Settlement Financing Authority | 1,000 | 948,640 | ||||||
Central Ohio Solid Waste Authority | 155 | 176,167 | ||||||
City of Akron OH | 4,500 | 5,083,380 | ||||||
City of Chillicothe OH | 1,700 | 1,927,528 | ||||||
City of Cleveland OH | 2,215 | 2,522,398 | ||||||
City of Columbus OH | 3,510 | 3,886,939 | ||||||
Cleveland Municipal School District | 3,000 | 3,380,970 | ||||||
Cleveland State University | 3,000 | 3,303,630 | ||||||
County of Allen OH | 2,350 | 2,569,184 | ||||||
County of Cuyahoga OH | 3,200 | 3,530,976 | ||||||
County of Cuyahoga OH | 1,400 | 1,513,484 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 61 |
PORTFOLIO OF INVESTMENTS (continued)
AB OHIO PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Franklin OH | $ | 770 | $ | 771,540 | ||||
5.80%, 5/20/44 | 1,150 | 1,151,702 | ||||||
County of Franklin OH | 865 | 872,569 | ||||||
County of Hamilton OH | 1,625 | 1,722,662 | ||||||
County of Hamilton OH Sewer System Revenue Series 2013A | 4,305 | 4,970,338 | ||||||
County of Scioto OH | 1,000 | 1,133,680 | ||||||
Cuyahoga Community College District | 1,545 | 1,655,977 | ||||||
Dayton-Montgomery County Port Authority | 575 | 586,201 | ||||||
Franklin County Convention Facilities Authority | 1,300 | 1,528,254 | ||||||
Gallia County Local School District | 2,000 | 2,315,380 | ||||||
Kent State University | 4,005 | 4,469,746 | ||||||
Miami University/Oxford OH | 1,000 | 1,109,130 | ||||||
Mount Healthy City School District | 1,000 | 1,156,680 | ||||||
Northeast Ohio Regional Sewer District | 3,000 | 3,489,180 |
62 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB OHIO PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Ohio Air Quality Development Authority | $ | 315 | $ | 311,377 | ||||
Ohio Air Quality Development Authority | 700 | 726,411 | ||||||
Ohio Higher Educational Facility Commission | 590 | 655,885 | ||||||
Ohio Higher Educational Facility Commission | 750 | 826,830 | ||||||
Ohio University | 3,120 | 3,488,566 | ||||||
Princeton City School District | 1,000 | 1,077,690 | ||||||
5.00%, 12/01/39 | 750 | 854,115 | ||||||
Summit County Development Finance Authority | 3,760 | 4,264,630 | ||||||
Toledo-Lucas County Port Authority | 1,270 | 1,474,953 | ||||||
University of Akron (The) | 4,080 | 4,658,911 | ||||||
|
| |||||||
76,401,263 | ||||||||
|
| |||||||
California – 0.3% | ||||||||
California Pollution Control Financing Authority | 220 | 238,674 | ||||||
State of California | 5 | 5,014 | ||||||
|
| |||||||
243,688 | ||||||||
|
| |||||||
Florida – 2.8% | ||||||||
Brevard County Health Facilities Authority | 1,000 | 1,110,980 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 63 |
PORTFOLIO OF INVESTMENTS (continued)
AB OHIO PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Miami-Dade FL Aviation Revenue | $ | 1,300 | $ | 1,476,501 | ||||
|
| |||||||
2,587,481 | ||||||||
|
| |||||||
Illinois – 1.5% | ||||||||
Illinois State Toll Highway Authority | 1,250 | 1,398,687 | ||||||
|
| |||||||
Massachusetts – 0.7% | ||||||||
Commonwealth of Massachusetts | 700 | 665,091 | ||||||
|
| |||||||
New York – 5.0% | ||||||||
Metropolitan Transportation Authority | 3,365 | 3,785,793 | ||||||
Suffolk County Economic Development Corp. | 110 | 122,457 | ||||||
Suffolk County Economic Development Corp. | 635 | 697,268 | ||||||
|
| |||||||
4,605,518 | ||||||||
|
| |||||||
North Carolina – 0.4% | ||||||||
North Carolina Medical Care Commission | 375 | 394,211 | ||||||
|
| |||||||
Tennessee – 0.7% | ||||||||
Metropolitan Government Nashville & Davidson County Health & Educational Facs Bd | 630 | 688,036 | ||||||
|
| |||||||
Texas – 4.7% | ||||||||
Arlington Higher Education Finance Corp. | 1,000 | 1,130,850 |
64 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB OHIO PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
City of Houston TX | $ | 1,025 | $ | 1,161,950 | ||||
North Texas Tollway Authority | 700 | 799,169 | ||||||
Texas Private Activity Bond Surface Transportation Corp. | 740 | 832,101 | ||||||
Texas Private Activity Bond Surface Transportation Corp. | 370 | 407,033 | ||||||
|
| |||||||
4,331,103 | ||||||||
|
| |||||||
West Virginia – 0.6% | ||||||||
West Virginia Hospital Finance Authority | 600 | 554,826 | ||||||
|
| |||||||
Total Municipal Obligations | 91,869,904 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS – 0.2% | ||||||||
Investment Companies – 0.2% | ||||||||
AB Fixed Income Shares, Inc. – Government | 191,509 | 191,509 | ||||||
|
| |||||||
Total Investments – 99.4% | 92,061,413 | |||||||
Other assets less liabilities – 0.6% | 522,907 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 92,584,320 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 65 |
PORTFOLIO OF INVESTMENTS (continued)
AB OHIO PORTFOLIO
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 Received | Market Value | Upfront (Received) | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||||||||
USD | 3,150 | 10/04/21 | | 3 Month LIBOR | | 1.286% | | Quarterly/ Semi-Annual | $ | (100,180 | ) | $ | – 0 | – | $ | (100,180 | ) | |||||||||||||
USD | 3,150 | 10/04/21 | 1.286% | | 3 Month LIBOR | | | Semi-Annual/ Quarterly | 100,191 | 91,352 | 8,839 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||
$ | 11 | $ | 91,352 | $ | (91,341 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
(a) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(b) | When-Issued or delayed delivery security. |
(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 November 30, 2017, the aggregate market value of these securities amounted to $965,085 or 1.0% of net assets. |
(d) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of these securities amounted to $1,219,917 or 1.32% of net assets. |
(e) | Affiliated investments. |
(f) | The rate shown represents the 7-day yield as of period end. |
(g) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 1.3% and 0.0%, respectively.
Glossary:
AGM – Assured Guaranty Municipal
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
NATL – National Interstate Corporation
See notes to financial statements.
66 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS
AB PENNSYLVANIA PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 99.5% | ||||||||
Long-Term Municipal Bonds – 99.5% | ||||||||
Pennsylvania – 91.9% | ||||||||
Adams County Industrial Development Authority (Gettysburg College) | $ | 1,090 | $ | 1,171,543 | ||||
Allegheny County Industrial Development Authority (Residential Resources, Inc./PA) | 410 | 410,828 | ||||||
Allentown Neighborhood Improvement Zone Development Authority | 700 | 748,181 | ||||||
Beaver County Industrial Development Authority (FirstEnergy Nuclear Generation LLC) | 415 | 409,908 | ||||||
Bensalem Township School District | 3,345 | 3,872,139 | ||||||
Bucks County Water & Sewer Authority | 1,255 | 1,386,562 | ||||||
AGM Series 2015A | 1,780 | 2,052,966 | ||||||
Carlisle Area School District | 2,000 | 2,266,300 | ||||||
Cheltenham Township School District | 1,000 | 1,151,250 | ||||||
City of Philadelphia PA | 2,500 | 2,853,975 | ||||||
Series 2017 | 1,000 | 1,173,910 | ||||||
City of Philadelphia PA Water & Wastewater Revenue | 1,700 | 1,979,531 | ||||||
Commonwealth of Pennsylvania | 1,800 | 2,088,216 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 67 |
PORTFOLIO OF INVESTMENTS (continued)
AB PENNSYLVANIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Lehigh PA | $ | 1,800 | $ | 1,860,822 | ||||
Crawford County Hospital Authority | 635 | 668,382 | ||||||
Cumberland County Municipal Authority | 300 | 313,965 | ||||||
Delaware County Authority | 1,645 | 1,646,332 | ||||||
Delaware County Regional Water Quality Control Authority | 2,070 | 2,342,536 | ||||||
Delaware River Joint Toll Bridge Commission | 2,000 | 2,325,300 | ||||||
Delaware River Port Authority | 4,470 | 4,754,337 | ||||||
Hospitals & Higher Education Facilities Authority of Philadelphia (The) | 660 | 728,072 | ||||||
Lancaster County Hospital Authority/PA | 1,165 | 1,351,831 | ||||||
Montgomery County Higher Education & Health Authority | 1,100 | 1,220,879 | ||||||
Montgomery County Industrial Development Authority/PA | 735 | 803,730 |
68 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB PENNSYLVANIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Moon Industrial Development Authority | $ | 765 | $ | 826,284 | ||||
Northampton County General Purpose Authority | 2,000 | 2,275,360 | ||||||
Pennsylvania Economic Development Financing Authority | 2,000 | 2,164,160 | ||||||
Pennsylvania Higher Educational Facilities Authority | 1,460 | 1,567,164 | ||||||
Pennsylvania Higher Educational Facilities Authority | 1,000 | 1,153,220 | ||||||
Pennsylvania Higher Educational Facilities Authority | 1,800 | 2,042,838 | ||||||
Pennsylvania Higher Educational Facilities Authority | 2,000 | 2,372,340 | ||||||
Pennsylvania Industrial Development Authority | 130 | 133,071 | ||||||
Pennsylvania Turnpike Commission | 1,245 | 1,362,428 | ||||||
5.00%, 12/01/30 (Pre-refunded/ETM) | 940 | 1,028,661 | ||||||
Series 2017A | 1,250 | 1,443,425 | ||||||
Series 2017B | 1,000 | 1,135,820 | ||||||
Philadelphia Authority for Industrial Development | 675 | 719,381 | ||||||
Philadelphia Authority for Industrial Development | 400 | 413,812 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 69 |
PORTFOLIO OF INVESTMENTS (continued)
AB PENNSYLVANIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Philadelphia Authority for Industrial Development | $ | 350 | $ | 3,500 | ||||
Philadelphia Authority for Industrial Development | 1,000 | 1,165,630 | ||||||
Philadelphia Gas Works Co. | 2,000 | 2,174,060 | ||||||
Philadelphia Parking Authority (The) | 2,725 | 2,929,103 | ||||||
School District of Philadelphia (The) | 4,000 | 4,273,120 | ||||||
Scranton School District/PA | 1,800 | 2,065,263 | ||||||
Sports & Exhibition Authority of Pittsburgh and Allegheny County | 1,075 | 1,150,841 | ||||||
State Public School Building Authority | 2,000 | 2,320,970 | ||||||
Susquehanna Area Regional Airport Authority | 2,000 | 2,230,350 | ||||||
Township of Lower Paxton PA | 4,000 | 4,499,320 | ||||||
Wilkes-Barre Finance Authority | 2,500 | 2,733,100 | ||||||
|
| |||||||
83,764,716 | ||||||||
|
| |||||||
Colorado – 0.3% |
| |||||||
City & County of Denver CO | 215 | 232,944 | ||||||
|
|
70 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB PENNSYLVANIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Massachusetts – 1.9% |
| |||||||
Massachusetts School Building Authority | $ | 1,500 | $ | 1,710,345 | ||||
|
| |||||||
New York – 3.4% |
| |||||||
New York City Municipal Water Finance Authority | 1,000 | 1,145,870 | ||||||
New York City Transitional Finance Authority Future Tax Secured Revenue | 1,735 | 1,984,146 | ||||||
|
| |||||||
3,130,016 | ||||||||
|
| |||||||
Texas – 2.0% |
| |||||||
Arlington Higher Education Finance Corp. | 1,200 | 1,357,020 | ||||||
City of Houston TX Airport System Revenue | 500 | 481,480 | ||||||
|
| |||||||
1,838,500 | ||||||||
|
| |||||||
Total Investments – 99.5% | 90,676,521 | |||||||
Other assets less liabilities – 0.5% | 437,748 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 91,114,269 | ||||||
|
|
(a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2017, the market value of this security amounted to $748,181 or 0.8% of net assets. |
(b) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(c) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of this security amounted to $481,480 or 0.53% of net assets. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 10.4% and 0.0%, respectively.
Glossary:
AGM – Assured Guaranty Municipal
BAM – Build American Mutual
ETM – Escrowed to Maturity
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 71 |
PORTFOLIO OF INVESTMENTS
AB VIRGINIA PORTFOLIO
November 30, 2017 (unaudited)
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
MUNICIPAL OBLIGATIONS – 99.0% | ||||||||
Long-Term Municipal Bonds – 99.0% | ||||||||
Virginia – 73.4% | ||||||||
Arlington County Industrial Development Authority | $ | 1,270 | $ | 1,271,791 | ||||
Cherry Hill Community Development Authority | 585 | 601,883 | ||||||
Chesapeake Bay Bridge & Tunnel District | 4,000 | 4,485,120 | ||||||
Chesterfield County Economic Development Authority | 1,600 | 1,656,672 | ||||||
City of Chesapeake VA | 2,275 | 2,500,066 | ||||||
City of Hampton VA | 1,750 | 1,817,585 | ||||||
City of Newport News VA | 2,000 | 2,343,580 | ||||||
City of Richmond VA | 5,000 | 5,860,600 | ||||||
City of Richmond VA | 1,970 | 2,249,720 | ||||||
City of Richmond VA Public Utility Revenue | 4,000 | 4,769,040 | ||||||
City of Suffolk VA | 1,870 | 2,031,213 | ||||||
Series 2010A | 210 | 227,991 | ||||||
Series 2011 | 4,110 | 4,523,918 | ||||||
5.00%, 2/01/26 (Pre-refunded/ETM) | 950 | 1,048,762 |
72 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
County of Henrico VA | $ | 6,600 | $ | 7,154,400 | ||||
County of Isle Wight VA | 3,500 | 3,664,220 | ||||||
Culpeper County Economic Development Authority | 2,955 | 3,164,155 | ||||||
Dullles Town Center Community Development Authority | 1,000 | 1,002,640 | ||||||
Fairfax County Economic Development Authority | 8,635 | 9,289,878 | ||||||
Fairfax County Economic Development Authority | 1,000 | 1,164,800 | ||||||
Fairfax County Economic Development Authority | 2,000 | 2,134,140 | ||||||
Fairfax County Economic Development Authority | 3,200 | 3,556,608 | ||||||
Fairfax County Industrial Development Authority | 1,000 | 1,051,480 | ||||||
Series 2012 | 1,800 | 1,999,278 | ||||||
Series 2014A | 2,000 | 2,262,140 | ||||||
Greater Richmond Convention Center Authority | 5,000 | 5,815,880 | ||||||
Hanover County Economic Development Authority | 2,000 | 2,071,800 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 73 |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Henrico County Economic Development Authority | $ | 2,000 | $ | 2,237,420 | ||||
Lexington Industrial Development Authority | 1,500 | 1,581,735 | ||||||
Loudoun County Sanitation Authority | 3,820 | 4,071,853 | ||||||
Lynchburg Economic Development Authority | 1,750 | 1,960,035 | ||||||
Mosaic District Community Development Authority | 250 | 272,662 | ||||||
Newport News Redevelopment & Housing Authority | 1,880 | 1,882,895 | ||||||
5.65%, 3/20/44 | 1,660 | 1,661,959 | ||||||
Norfolk Economic Development Authority | 2,200 | 2,464,396 | ||||||
Prince William County Industrial Development Authority | 3,750 | 4,261,425 | ||||||
Prince William County Industrial Development Authority | 1,700 | 1,858,185 | ||||||
Richmond Redevelopment & Housing Authority | 1,000 | 1,029,780 |
74 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Roanoke County Economic Development Authority | $ | 1,750 | $ | 2,025,345 | ||||
Roanoke Economic Development Authority | 3,000 | 3,210,240 | ||||||
Suffolk Economic Development Authority | 1,000 | 1,083,740 | ||||||
Tobacco Settlement Financing Corp./VA | 2,400 | 2,312,520 | ||||||
Town of Leesburg VA | 395 | 434,366 | ||||||
5.00%, 1/15/24 | 1,645 | 1,805,256 | ||||||
Virginia College Building Authority | 5,000 | 6,021,900 | ||||||
Virginia College Building Authority | 5,000 | 5,385,200 | ||||||
Virginia College Building Authority | 1,615 | 1,762,579 | ||||||
Virginia College Building Authority | 1,000 | 1,002,300 | ||||||
Virginia Commonwealth University Health System Authority | 1,000 | 1,101,540 | ||||||
Virginia Port Authority | 6,160 | 7,020,176 | ||||||
Virginia Resources Authority | 2,260 | 2,537,166 |
abfunds.com | AB MUNICIPAL INCOME FUND II | 75 |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
5.00%, 11/01/26 | $ | 2,740 | $ | 3,070,526 | ||||
Series 2016C | 4,000 | 4,339,880 | ||||||
Virginia Resources Authority | 4,000 | 4,678,200 | ||||||
Virginia Small Business Financing Authority | 2,500 | 2,768,050 | ||||||
5.50%, 1/01/42 | 1,000 | 1,110,170 | ||||||
Virginia Small Business Financing Authority | 4,125 | 4,787,640 | ||||||
Virginia Small Business Financing Authority | 3,350 | 3,726,841 | ||||||
Winchester Economic Development Authority | 3,500 | 3,981,230 | ||||||
|
| |||||||
167,166,570 | ||||||||
|
| |||||||
Arizona – 2.3% | ||||||||
Arizona Sports & Tourism Authority | 3,945 | 4,276,341 | ||||||
Salt Verde Financial Corp. | 705 | 858,436 | ||||||
|
| |||||||
5,134,777 | ||||||||
|
| |||||||
California – 0.3% | ||||||||
California Statewide Communities Development Authority | 660 | 679,213 | ||||||
|
| |||||||
Colorado – 0.6% | ||||||||
City & County of Denver CO Airport System Revenue | 1,220 | 1,370,755 | ||||||
|
|
76 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
District of Columbia – 9.1% | ||||||||
Metropolitan Washington Airports Authority | $ | 5,130 | $ | 5,277,077 | ||||
Series 2012A | 2,480 | 2,761,281 | ||||||
Series 2016A | 1,200 | 1,386,840 | ||||||
Metropolitan Washington Airports Authority | 4,300 | 5,286,764 | ||||||
Washington Metropolitan Area Transit Authority | 5,095 | 6,121,318 | ||||||
|
| |||||||
20,833,280 | ||||||||
|
| |||||||
Florida – 0.7% | ||||||||
Pinellas County Educational Facilities Authority | 400 | 427,684 | ||||||
5.25%, 10/01/30 | 1,000 | 1,067,110 | ||||||
|
| |||||||
1,494,794 | ||||||||
|
| |||||||
Illinois – 1.0% | ||||||||
Metropolitan Pier & Exposition Authority | 2,200 | 2,354,484 | ||||||
|
| |||||||
Massachusetts – 0.5% | ||||||||
Commonwealth of Massachusetts | 1,250 | 1,187,663 | ||||||
|
| |||||||
Michigan – 0.7% | ||||||||
Michigan Public Power Agency | 1,575 | 1,678,131 | ||||||
|
| |||||||
Minnesota – 0.5% | ||||||||
Western Minnesota Municipal Power Agency | 1,000 | 1,153,310 | ||||||
|
| |||||||
Nevada – 0.4% | ||||||||
City of Carson City NV | 760 | 858,382 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 77 |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
New York – 3.5% |
| |||||||
Metropolitan Transportation Authority Series 2011D | $ | 2,735 | $ | 3,077,012 | ||||
5.00%, 11/15/29 (Pre-refunded/ETM) | 3,010 | 3,386,401 | ||||||
Suffolk County Economic Development Corp. | 185 | 205,949 | ||||||
Suffolk County Economic Development Corp. | 1,090 | 1,196,885 | ||||||
|
| |||||||
7,866,247 | ||||||||
|
| |||||||
North Carolina – 0.5% |
| |||||||
North Carolina Medical Care Commission | 1,000 | 1,045,330 | ||||||
|
| |||||||
Ohio – 0.3% |
| |||||||
Ohio Water Development Authority Water Pollution Control Loan Fund | 600 | 592,692 | ||||||
|
| |||||||
Puerto Rico – 0.7% |
| |||||||
Puerto Rico Housing Finance Authority | 1,580 | 1,655,650 | ||||||
|
| |||||||
Texas – 2.5% |
| |||||||
North Texas Tollway Authority | 1,300 | 1,484,171 | ||||||
Tarrant County Cultural Education Facilities Finance Corp. | 1,150 | 1,204,464 |
78 | AB MUNICIPAL INCOME FUND II | abfunds.com |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
Principal Amount (000) | U.S. $ Value | |||||||
| ||||||||
Texas Private Activity Bond Surface Transportation Corp. | $ | 1,110 | $ | 1,248,151 | ||||
Texas Private Activity Bond Surface Transportation Corp. | 555 | 610,550 | ||||||
Texas Private Activity Bond Surface Transportation Corp. | 1,000 | 1,176,760 | ||||||
|
| |||||||
5,724,096 | ||||||||
|
| |||||||
Washington – 0.2% |
| |||||||
Washington Higher Education Facilities Authority | 400 | 435,452 | ||||||
|
| |||||||
Wisconsin – 1.8% |
| |||||||
Wisconsin Health & Educational Facilities Authority | 2,700 | 3,095,280 | ||||||
Wisconsin Public Finance Authority | 1,000 | 1,112,060 | ||||||
|
| |||||||
4,207,340 | ||||||||
|
| |||||||
Total Municipal Obligations | 225,438,166 | |||||||
|
| |||||||
Shares | ||||||||
SHORT-TERM INVESTMENTS – 0.0% | ||||||||
Investment Companies – 0.0% | ||||||||
AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.91%(f)(g)(h) | 37,206 | 37,206 | ||||||
|
| |||||||
Total Investments – 99.0% | 225,475,372 | |||||||
Other assets less liabilities – 1.0% | 2,229,632 | |||||||
|
| |||||||
Net Assets – 100.0% | $ | 227,705,004 | ||||||
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 79 |
PORTFOLIO OF INVESTMENTS (continued)
AB VIRGINIA PORTFOLIO
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||||||
Notional Amount (000) | Termination Date | Payments made by the Fund | Payments by the Fund | Payment Frequency Paid/ Received | Unrealized Appreciation/ (Depreciation) | |||||||||||||||||
USD | 2,350 | 9/21/37 | 3 Month LIBOR | 2.549 | % | Quarterly/ Semi-Annual | $ | (43,472 | ) | |||||||||||||
USD | 2,300 | 11/13/37 | 3 Month LIBOR | 2.602 | Quarterly/ Semi-Annual | (25,244 | ) | |||||||||||||||
|
| |||||||||||||||||||||
$ | (68,716 | ) | ||||||||||||||||||||
|
|
INTEREST RATE SWAPS (see Note D)
Rate Type | ||||||||||||||||||
Swap | Notional Amount (000) | Termination Date | Payments made by the Fund | Payments received by the Fund | Payment Received | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citibank, NA | $ | 7,000 | 12/01/17 | SIFMA* | 3.792% | Quarterly/ Quarterly | $ | 53,085 |
* | Variable interest rate based on the Securities Industry & Financial Markets Association (SIFMA) Municipal Swap Index. |
(a) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2017, the aggregate market value of these securities amounted to $3,394,242 or 1.5% of net assets. |
(b) | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
(c) | Indicates a security that has a zero coupon that remains in effect until a predetermined date at which time the stated coupon rate becomes effective until final maturity. |
(d) | An auction rate security whose interest rate resets at each auction date. Auctions are typically held every week or month. The rate shown is as of November 30, 2017 and the aggregate market value of this security amounted to $1,187,663 or 0.52% of net assets. |
(e) | When-Issued or delayed delivery security. |
(f) | Affiliated investments. |
(g) | The rate shown represents the 7-day yield as of period end. |
(h) | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
As of November 30, 2017, the Fund’s percentages of investments in municipal bonds that are insured and in insured municipal bonds that have been pre-refunded or escrowed to maturity are 2.0% and 0.0%, respectively.
Glossary:
AGM – Assured Guaranty Municipal
EDA – Economic Development Agency
ETM – Escrowed to Maturity
LIBOR – London Interbank Offered Rates
NATL – National Interstate Corporation
SRF – State Revolving Fund
See notes to financial statements.
80 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF ASSETS & LIABILITIES
November 30, 2017 (unaudited)
AB Arizona | AB Massachusetts | |||||||
Assets | ||||||||
Investments in securities, at value | ||||||||
Unaffiliated issuers (cost $115,137,108 and $232,443,744, respectively) | $ | 119,536,991 | $ | 243,324,711 | ||||
Affiliated issuers (cost $0 and $208,709, respectively) | – 0 | – | 208,709 | |||||
Cash collateral due from broker | 127,863 | 271,919 | ||||||
Interest receivable | 2,191,591 | 3,457,484 | ||||||
Receivable for shares of beneficial interest sold | 27,578 | 444,977 | ||||||
Affiliated dividends receivable | 88 | 548 | ||||||
Unrealized appreciation on interest rate swaps | – 0 | – | 60,668 | |||||
|
|
|
| |||||
Total assets | 121,884,111 | 247,769,016 | ||||||
|
|
|
| |||||
Liabilities | ||||||||
Due to custodian | 950,046 | 18,218 | ||||||
Payable for shares of beneficial interest redeemed | 106,516 | 294,039 | ||||||
Distribution fee payable | 36,515 | 66,013 | ||||||
Dividends payable | 32,205 | 107,972 | ||||||
Advisory fee payable | 24,575 | 70,925 | ||||||
Payable for variation margin on exchange traded swaps | 10,879 | 24,790 | ||||||
Administrative fee payable | 5,362 | 6,166 | ||||||
Transfer Agent fee payable | 3,030 | 7,965 | ||||||
Payable for investment securities purchased | – 0 | – | 1,129,300 | |||||
Accrued expenses | 84,677 | 110,938 | ||||||
|
|
|
| |||||
Total liabilities | 1,253,805 | 1,836,326 | ||||||
|
|
|
| |||||
Net Assets | $ | 120,630,306 | $ | 245,932,690 | ||||
|
|
|
| |||||
Composition of Net Assets | ||||||||
Shares of beneficial interest, at par | $ | 108,974 | $ | 218,930 | ||||
Additional paid-in capital | 117,176,104 | 234,481,029 | ||||||
Distributions in excess of net investment income | (38,023 | ) | (330,629 | ) | ||||
Accumulated net realized gain (loss) on investment transactions | (979,518 | ) | 702,526 | |||||
Net unrealized appreciation on investments | 4,362,769 | 10,860,834 | ||||||
|
|
|
| |||||
$ | 120,630,306 | $ | 245,932,690 | |||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 81 |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—unlimited shares authorized, $.01 par value
AB Arizona Portfolio | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
Class A | $ | 101,769,544 | 9,191,374 | $ | 11.07 | * | ||||||
| ||||||||||||
Class B | $ | 8,527 | 771 | $ | 11.06 | |||||||
| ||||||||||||
Class C | $ | 18,852,235 | 1,705,229 | $ | 11.06 | |||||||
| ||||||||||||
AB Massachusetts Portfolio | ||||||||||||
| ||||||||||||
Class A | $ | 155,523,576 | 13,838,858 | $ | 11.24 | * | ||||||
| ||||||||||||
Class B | $ | 85,696 | 7,638 | $ | 11.22 | |||||||
| ||||||||||||
Class C | $ | 40,566,762 | 3,616,154 | $ | 11.22 | |||||||
| ||||||||||||
Advisor Class | $ | 49,756,656 | 4,430,387 | $ | 11.23 | |||||||
|
* | The maximum offering price per share for Class A of AB Arizona Portfolio and AB Massachusetts Portfolio were $11.41 and $11.59, respectively, which reflects a sales charge of 3.00%. |
See notes to financial statements.
82 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF ASSETS & LIABILITIES (continued)
AB Minnesota | AB New Jersey | |||||||
Assets | ||||||||
Investments in securities, at value | ||||||||
Unaffiliated issuers (cost $70,931,744 and $103,178,810, respectively) | $ | 74,154,667 | $ | 110,382,591 | ||||
Affiliated issuers (cost $197,736 and $0, respectively) | 197,736 | – 0 | – | |||||
Cash collateral due from broker | 71,798 | 153,385 | ||||||
Interest receivable | 971,010 | 1,709,703 | ||||||
Receivable for shares of beneficial interest sold | 34,104 | 1,089,288 | ||||||
Affiliated dividends receivable | 5 | 14 | ||||||
|
|
|
| |||||
Total assets | 75,429,320 | 113,334,981 | ||||||
|
|
|
| |||||
Liabilities | ||||||||
Due to custodian | 2,972 | 116,412 | ||||||
Payable for shares of beneficial interest redeemed | 86,603 | 141,537 | ||||||
Custody fee payable | 44,810 | 45,849 | ||||||
Audit and tax fee payable | 22,909 | 22,905 | ||||||
Distribution fee payable | 21,850 | 32,445 | ||||||
Dividends payable | 18,261 | 55,664 | ||||||
Advisory fee payable | 9,113 | 23,518 | ||||||
Payable for variation margin on exchange traded swaps | 6,589 | 13,078 | ||||||
Administrative fee payable | 5,923 | 6,112 | ||||||
Transfer Agent fee payable | 2,973 | 3,193 | ||||||
Payable for investment securities purchased | – 0 | – | 1,803,572 | |||||
Accrued expenses | 14,871 | 20,506 | ||||||
|
|
|
| |||||
Total liabilities | 236,874 | 2,284,791 | ||||||
|
|
|
| |||||
Net Assets | $ | 75,192,446 | $ | 111,050,190 | ||||
|
|
|
| |||||
Composition of Net Assets | ||||||||
Shares of beneficial interest, at par | $ | 73,523 | $ | 113,924 | ||||
Additional paid-in capital | 71,920,661 | 107,048,020 | ||||||
Distributions in excess of net investment income | (52,510 | ) | (59,911 | ) | ||||
Accumulated net realized gain (loss) on investment transactions | 57,905 | (3,199,568 | ) | |||||
Net unrealized appreciation on investments | 3,192,867 | 7,147,725 | ||||||
|
|
|
| |||||
$ | 75,192,446 | $ | 111,050,190 | |||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 83 |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—unlimited shares authorized, $.01 par value
AB Minnesota Portfolio | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
Class A | $ | 65,439,352 | 6,399,542 | $ | 10.23 | * | ||||||
| ||||||||||||
Class B | $ | 28,878 | 2,822 | $ | 10.23 | |||||||
| ||||||||||||
Class C | $ | 9,724,216 | 949,966 | $ | 10.24 | |||||||
| ||||||||||||
AB New Jersey Portfolio | ||||||||||||
| ||||||||||||
Class A | $ | 95,388,043 | 9,786,479 | $ | 9.75 | * | ||||||
| ||||||||||||
Class B | $ | 190,634 | 19,558 | $ | 9.75 | |||||||
| ||||||||||||
Class C | $ | 15,471,513 | 1,586,332 | $ | 9.75 | |||||||
|
* | The maximum offering price per share for Class A of AB Minnesota Portfolio and AB New Jersey Portfolio were $10.55 and $10.05, respectively, which reflects a sales charge of 3.00%. |
See notes to financial statements.
84 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF ASSETS & LIABILITIES (continued)
AB Ohio | AB Pennsylvania | |||||||
Assets | ||||||||
Investments in securities, at value | ||||||||
Unaffiliated issuers (cost $86,943,324 and $86,485,296, respectively) | $ | 91,869,904 | $ | 90,676,521 | ||||
Affiliated issuers (cost $191,509 and $0, respectively) | 191,509 | – 0 | – | |||||
Interest receivable | 1,429,716 | 1,141,923 | ||||||
Receivable for shares of beneficial interest sold | 61,977 | 49,144 | ||||||
Affiliated dividends receivable | 104 | 755 | ||||||
|
|
|
| |||||
Total assets | 93,553,210 | 91,868,343 | ||||||
|
|
|
| |||||
Liabilities | ||||||||
Due to custodian | – 0 | – | 513,233 | |||||
Payable for investment securities purchased | 700,000 | – 0 | – | |||||
Payable for shares of beneficial interest redeemed | 98,297 | 75,066 | ||||||
Custody fee payable | 47,352 | 44,474 | ||||||
Dividends payable | 30,573 | 28,823 | ||||||
Distribution fee payable | 27,125 | 25,355 | ||||||
Advisory fee payable | 13,893 | 16,521 | ||||||
Administrative fee payable | 5,923 | 5,693 | ||||||
Transfer Agent fee payable | 2,990 | 4,151 | ||||||
Payable for variation margin on exchange traded swaps | 37 | – 0 | – | |||||
Accrued expenses | 42,700 | 40,758 | ||||||
|
|
|
| |||||
Total liabilities | 968,890 | 754,074 | ||||||
|
|
|
| |||||
Net Assets | $ | 92,584,320 | $ | 91,114,269 | ||||
|
|
|
| |||||
Composition of Net Assets | ||||||||
Shares of beneficial interest, at par | $ | 93,063 | $ | 87,245 | ||||
Additional paid-in capital | 92,849,722 | 87,895,747 | ||||||
Distributions in excess of net investment income | (20,554 | ) | (45,614 | ) | ||||
Accumulated net realized loss on investment transactions | (5,173,150 | ) | (1,014,334 | ) | ||||
Net unrealized appreciation on investments | 4,835,239 | 4,191,225 | ||||||
|
|
|
| |||||
$ | 92,584,320 | $ | 91,114,269 | |||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 85 |
STATEMENT OF ASSETS & LIABILITIES (continued)
Net Asset Value Per Share—unlimited shares authorized, $.01 par value
AB Ohio Portfolio | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
Class A | $ | 79,838,285 | 8,024,606 | $ | 9.95 | * | ||||||
| ||||||||||||
Class B | $ | 25,860 | 2,601 | $ | 9.94 | |||||||
| ||||||||||||
Class C | $ | 12,720,175 | 1,279,118 | $ | 9.94 | |||||||
| ||||||||||||
AB Pennsylvania Portfolio | ||||||||||||
| ||||||||||||
Class A | $ | 80,734,848 | 7,730,934 | $ | 10.44 | * | ||||||
| ||||||||||||
Class B | $ | 46,146 | 4,417 | $ | 10.45 | |||||||
| ||||||||||||
Class C | $ | 10,333,275 | 989,128 | $ | 10.45 | |||||||
|
* | The maximum offering price per share for Class A of AB Ohio Portfolio and AB Pennsylvania Portfolio were $10.26 and $10.76, respectively, which reflects a sales charge of 3.00%. |
See notes to financial statements.
86 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF ASSETS & LIABILITIES (continued)
AB Virginia | ||||
Assets | ||||
Investments in securities, at value | ||||
Unaffiliated issuers (cost $215,338,870) | $ | 225,438,166 | ||
Affiliated issuers (cost $37,206) | 37,206 | |||
Cash collateral due from broker | 290,692 | |||
Interest receivable | 2,929,790 | |||
Receivable for shares of beneficial interest sold | 519,185 | |||
Unrealized appreciation on interest rate swaps | 53,085 | |||
Affiliated dividends receivable | 455 | |||
|
| |||
Total assets | 229,268,579 | |||
|
| |||
Liabilities | ||||
Due to custodian | 27,276 | |||
Payable for investment securities purchased | 854,369 | |||
Payable for shares of beneficial interest redeemed | 277,485 | |||
Dividends payable | 128,004 | |||
Advisory fee payable | 68,723 | |||
Distribution fee payable | 64,112 | |||
Payable for variation margin on exchange traded swaps | 20,780 | |||
Transfer Agent fee payable | 6,247 | |||
Administrative fee payable | 5,604 | |||
Accrued expenses | 110,975 | |||
|
| |||
Total liabilities | 1,563,575 | |||
|
| |||
Net Assets | $ | 227,705,004 | ||
|
| |||
Composition of Net Assets | ||||
Shares of beneficial interest, at par | $ | 205,337 | ||
Additional paid-in capital | 219,869,425 | |||
Distributions in excess of net investment income | (299,953 | ) | ||
Accumulated net realized loss on investment transactions | (2,153,470 | ) | ||
Net unrealized appreciation on investments | 10,083,665 | |||
|
| |||
$ | 227,705,004 | |||
|
|
Net Asset Value Per Share—unlimited shares authorized, $.01 par value
AB Virginia Portfolio | Net Assets | Shares Outstanding | Net Asset Value | |||||||||
| ||||||||||||
Class A | $ | 149,248,354 | 13,453,281 | $ | 11.09 | * | ||||||
| ||||||||||||
Class B | $ | 63,757 | 5,756 | $ | 11.08 | |||||||
| ||||||||||||
Class C | $ | 40,589,518 | 3,668,474 | $ | 11.06 | |||||||
| ||||||||||||
Advisor Class | $ | 37,803,375 | 3,406,226 | $ | 11.10 | |||||||
|
* | The maximum offering price per share for Class A of AB Virginia Portfolio was $11.43, which reflects a sales charge of 3.00%. |
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 87 |
STATEMENT OF OPERATIONS
Six Months Ended November 30, 2017 (unaudited)
AB Arizona | AB Massachusetts | |||||||
Investment Income | ||||||||
Interest | $ | 2,281,123 | $ | 4,560,833 | ||||
Dividends – Affiliated issuers | 4,901 | 1,967 | ||||||
|
|
|
| |||||
Total income | 2,286,024 | 4,562,800 | ||||||
|
|
|
| |||||
Expenses | ||||||||
Advisory fee (see Note B) | 277,656 | 561,677 | ||||||
Distribution fee – Class A | 129,690 | 197,798 | ||||||
Distribution fee – Class B | 1,010 | 448 | ||||||
Distribution fee – Class C | 97,244 | 219,818 | ||||||
Transfer agency – Class A | 19,480 | 27,505 | ||||||
Transfer agency – Class B | 45 | 25 | ||||||
Transfer agency – Class C | 3,744 | 7,667 | ||||||
Transfer agency – Advisor Class | – 0 | – | 8,233 | |||||
Custodian | 43,207 | 52,961 | ||||||
Administrative | 32,795 | 32,410 | ||||||
Audit and tax | 21,974 | 22,924 | ||||||
Legal | 16,778 | 16,836 | ||||||
Trustees’ fees | 13,683 | 13,683 | ||||||
Printing | 6,012 | 12,308 | ||||||
Registration fees | 4,485 | 7,923 | ||||||
Miscellaneous | 5,222 | 7,898 | ||||||
|
|
|
| |||||
Total expenses | 673,025 | 1,190,114 | ||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (119,270 | ) | (123,494 | ) | ||||
|
|
|
| |||||
Net expenses | 553,755 | 1,066,620 | ||||||
|
|
|
| |||||
Net investment income | 1,732,269 | 3,496,180 | ||||||
|
|
|
| |||||
Realized and Unrealized Gain (Loss) on Investment Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions | 121,780 | 612,367 | ||||||
Swaps | (58,279 | ) | 27,655 | |||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | (995,573 | ) | (2,621,595 | ) | ||||
Swaps | (17,896 | ) | (209,512 | ) | ||||
|
|
|
| |||||
Net loss on investment transactions | (949,968 | ) | (2,191,085 | ) | ||||
|
|
|
| |||||
Net Increase in Net Assets from Operations | $ | 782,301 | $ | 1,305,095 | ||||
|
|
|
|
See notes to financial statements.
88 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF OPERATIONS (continued)
AB Minnesota | AB New Jersey | |||||||
Investment Income | ||||||||
Interest | $ | 1,417,283 | $ | 2,219,264 | ||||
Dividends – Affiliated issuers | 1,525 | 1,668 | ||||||
|
|
|
| |||||
Total income | 1,418,808 | 2,220,932 | ||||||
|
|
|
| |||||
Expenses | ||||||||
Advisory fee (see Note B) | 175,755 | 249,580 | ||||||
Distribution fee – Class A | 84,503 | 117,928 | ||||||
Distribution fee – Class B | 157 | 1,011 | ||||||
Distribution fee – Class C | 52,396 | 81,898 | ||||||
Transfer agency – Class A | 19,125 | 22,037 | ||||||
Transfer agency – Class B | 21 | 48 | ||||||
Transfer agency – Class C | 3,213 | 3,941 | ||||||
Custodian | 40,383 | 41,147 | ||||||
Administrative | 32,546 | 32,440 | ||||||
Audit and tax | 22,918 | 22,919 | ||||||
Legal | 16,778 | 16,778 | ||||||
Trustees’ fees | 13,682 | 13,625 | ||||||
Printing | 7,425 | 8,199 | ||||||
Registration fees | 5,384 | 1,520 | ||||||
Miscellaneous | 4,176 | 4,643 | ||||||
|
|
|
| |||||
Total expenses | 478,462 | 617,714 | ||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (107,425 | ) | (101,156 | ) | ||||
|
|
|
| |||||
Net expenses | 371,037 | 516,558 | ||||||
|
|
|
| |||||
Net investment income | 1,047,771 | 1,704,374 | ||||||
|
|
|
| |||||
Realized and Unrealized Gain (Loss) on Investment Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions | 197,648 | 378,309 | ||||||
Swaps | 36,585 | (77,178 | ) | |||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | (867,783 | ) | (685,046 | ) | ||||
Swaps | (110,520 | ) | (4,927 | ) | ||||
|
|
|
| |||||
Net loss on investment transactions | (744,070 | ) | (388,842 | ) | ||||
|
|
|
| |||||
Net Increase in Net Assets from Operations | $ | 303,701 | $ | 1,315,532 | ||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 89 |
STATEMENT OF OPERATIONS (continued)
AB Ohio | AB Pennsylvania | |||||||
Investment Income | ||||||||
Interest | $ | 1,695,683 | $ | 1,739,684 | ||||
Dividends – Affiliated issuers | 2,207 | 1,868 | ||||||
|
|
|
| |||||
Total income | 1,697,890 | 1,741,552 | ||||||
|
|
|
| |||||
Expenses | ||||||||
Advisory fee (see Note B) | 214,504 | 210,064 | ||||||
Distribution fee – Class A | 102,608 | 103,051 | ||||||
Distribution fee – Class B | 131 | 277 | ||||||
Distribution fee – Class C | 66,111 | 54,327 | ||||||
Transfer agency – Class A | 21,743 | 25,504 | ||||||
Transfer agency – Class B | 13 | 40 | ||||||
Transfer agency – Class C | 3,692 | 3,479 | ||||||
Custodian | 41,423 | 40,264 | ||||||
Administrative | 32,546 | 32,656 | ||||||
Audit and tax | 22,918 | 20,687 | ||||||
Legal | 16,778 | 16,777 | ||||||
Trustees’ fees | 13,683 | 13,683 | ||||||
Printing | 8,359 | 7,919 | ||||||
Registration fees | 1,547 | 1,662 | ||||||
Miscellaneous | 4,710 | 4,313 | ||||||
|
|
|
| |||||
Total expenses | 550,766 | 534,703 | ||||||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (120,313 | ) | (97,410 | ) | ||||
|
|
|
| |||||
Net expenses | 430,453 | 437,293 | ||||||
|
|
|
| |||||
Net investment income | 1,267,437 | 1,304,259 | ||||||
|
|
|
| |||||
Realized and Unrealized Gain (Loss) on Investment Transactions | ||||||||
Net realized gain (loss) on: | ||||||||
Investment transactions | 117,613 | 490,714 | ||||||
Swaps | (3,374 | ) | 24,519 | |||||
Net change in unrealized appreciation/depreciation of: | ||||||||
Investments | (1,047,595 | ) | (1,371,714 | ) | ||||
Swaps | (201 | ) | (15,738 | ) | ||||
|
|
|
| |||||
Net loss on investment transactions | (933,557 | ) | (872,219 | ) | ||||
|
|
|
| |||||
Net Increase in Net Assets from Operations | $ | 333,880 | $ | 432,040 | ||||
|
|
|
|
See notes to financial statements.
90 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF OPERATIONS (continued)
AB Virginia | ||||
Investment Income | ||||
Interest | $ | 4,179,630 | ||
Dividends – Affiliated issuers | 2,758 | |||
|
| |||
Total income | 4,182,388 | |||
|
| |||
Expenses | ||||
Advisory fee (see Note B) | 514,686 | |||
Distribution fee – Class A | 188,909 | |||
Distribution fee – Class B | 454 | |||
Distribution fee – Class C | 207,267 | |||
Transfer agency – Class A | 28,362 | |||
Transfer agency – Class B | 36 | |||
Transfer agency – Class C | 8,024 | |||
Transfer agency – Advisor Class | 6,764 | |||
Custodian | 53,262 | |||
Administrative | 32,659 | |||
Audit and tax | 22,923 | |||
Legal | 16,780 | |||
Trustees’ fees | 13,683 | |||
Printing | 12,359 | |||
Registration fees | 2,964 | |||
Miscellaneous | 7,569 | |||
|
| |||
Total expenses | 1,116,701 | |||
Less: expenses waived and reimbursed by the Adviser (see Note B) | (91,665 | ) | ||
|
| |||
Net expenses | 1,025,036 | |||
|
| |||
Net investment income | 3,157,352 | |||
|
| |||
Realized and Unrealized Gain (Loss) on Investment Transactions | ||||
Net realized gain (loss) on: |
| |||
Investment transactions | 1,027,192 | |||
Swaps | (29,161 | ) | ||
Net change in unrealized appreciation/depreciation of: |
| |||
Investments | (2,786,492 | ) | ||
Swaps | (64,181 | ) | ||
|
| |||
Net loss on investment transactions | (1,852,642 | ) | ||
|
| |||
Net Increase in Net Assets from Operations | $ | 1,304,710 | ||
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 91 |
STATEMENT OF CHANGES IN NET ASSETS
AB Arizona | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,732,269 | $ | 3,742,411 | ||||
Net realized gain on investment transactions | 63,501 | 375,648 | ||||||
Net change in unrealized appreciation/depreciation of investments | (1,013,469 | ) | (2,852,622 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 782,301 | 1,265,437 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (1,511,380 | ) | (3,183,783 | ) | ||||
Class B | (2,178 | ) | (8,658 | ) | ||||
Class C | (210,532 | ) | (561,339 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net decrease | (3,793,935 | ) | (4,119,215 | ) | ||||
|
|
|
| |||||
Total decrease | (4,735,724 | ) | (6,607,558 | ) | ||||
Net Assets | ||||||||
Beginning of period | 125,366,030 | 131,973,588 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($38,023) and ($46,202), respectively) | $ | 120,630,306 | $ | 125,366,030 | ||||
|
|
|
|
See notes to financial statements.
92 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB Massachusetts | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 3,496,180 | $ | 6,924,779 | ||||
Net realized gain on investment transactions | 640,022 | 762,502 | ||||||
Net change in unrealized appreciation/depreciation of investments | (2,831,107 | ) | (6,351,370 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 1,305,095 | 1,335,911 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (2,382,545 | ) | (5,441,060 | ) | ||||
Class B | (1,017 | ) | (2,732 | ) | ||||
Class C | (498,590 | ) | (1,226,343 | ) | ||||
Advisor Class | (773,147 | ) | (557,378 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net increase (decrease) | (3,505,068 | ) | 13,778,541 | |||||
|
|
|
| |||||
Total increase (decrease) | (5,855,272 | ) | 7,886,939 | |||||
Net Assets | ||||||||
Beginning of period | 251,787,962 | 243,901,023 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($330,629) and ($171,510), respectively) | $ | 245,932,690 | $ | 251,787,962 | ||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 93 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB Minnesota | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,047,771 | $ | 2,167,020 | ||||
Net realized gain (loss) on investment transactions | 234,233 | (128,351 | ) | |||||
Net change in unrealized appreciation/depreciation of investments | (978,303 | ) | (1,551,227 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 303,701 | 487,442 | ||||||
Dividends and Distributions to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (945,137 | ) | (1,887,191 | ) | ||||
Class B | (321 | ) | (764 | ) | ||||
Class C | (107,160 | ) | (316,509 | ) | ||||
Net realized gain on investment transactions | ||||||||
Class A | – 0 | – | (146,776 | ) | ||||
Class B | ��� 0 | – | (83 | ) | ||||
Class C | – 0 | – | (33,548 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net decrease | (2,694,390 | ) | (3,039,798 | ) | ||||
|
|
|
| |||||
Total decrease | (3,443,307 | ) | (4,937,227 | ) | ||||
Net Assets | ||||||||
Beginning of period | 78,635,753 | 83,572,980 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($52,510) and ($47,663), respectively) | $ | 75,192,446 | $ | 78,635,753 | ||||
|
|
|
|
See notes to financial statements.
94 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB New Jersey | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,704,374 | $ | 3,516,388 | ||||
Net realized gain on investment transactions | 301,131 | 962,805 | ||||||
Net change in unrealized appreciation/depreciation of investments | (689,973 | ) | (2,718,058 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 1,315,532 | 1,761,135 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (1,502,625 | ) | (2,837,102 | ) | ||||
Class B | (2,460 | ) | (6,197 | ) | ||||
Class C | (199,289 | ) | (714,715 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net increase (decrease) | 1,462,269 | (5,967,060 | ) | |||||
|
|
|
| |||||
Total increase (decrease) | 1,073,427 | (7,763,939 | ) | |||||
Net Assets | ||||||||
Beginning of period | 109,976,763 | 117,740,702 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($59,911) and ($59,911), respectively) | $ | 111,050,190 | $ | 109,976,763 | ||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 95 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB Ohio | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,267,437 | $ | 2,730,090 | ||||
Net realized gain on investment transactions | 114,239 | 342,263 | ||||||
Net change in unrealized appreciation/depreciation of investments | (1,047,796 | ) | (2,290,103 | ) | ||||
Contributions from Adviser (see Note B) | – 0 | – | 249 | |||||
|
|
|
| |||||
Net increase in net assets from operations | 333,880 | 782,499 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (1,124,008 | ) | (2,242,271 | ) | ||||
Class B | (261 | ) | (768 | ) | ||||
Class C | (131,567 | ) | (498,664 | ) | ||||
Transactions in Shares of Beneficial Interest | �� | |||||||
Net decrease | (3,637,285 | ) | (15,474,468 | ) | ||||
|
|
|
| |||||
Total decrease | (4,559,241 | ) | (17,433,672 | ) | ||||
Net Assets | ||||||||
Beginning of period | 97,143,561 | 114,577,233 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($20,554) and ($32,155), respectively) | $ | 92,584,320 | $ | 97,143,561 | ||||
|
|
|
|
See notes to financial statements.
96 | AB MUNICIPAL INCOME FUND II | abfunds.com |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB Pennsylvania | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 1,304,259 | $ | 2,655,492 | ||||
Net realized gain on investment transactions | 515,233 | 1,170,224 | ||||||
Net change in unrealized appreciation/depreciation of investments | (1,387,452 | ) | (2,576,288 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 432,040 | 1,249,428 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (1,189,086 | ) | (2,207,696 | ) | ||||
Class B | (592 | ) | (1,436 | ) | ||||
Class C | (115,926 | ) | (446,407 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net decrease | (2,930,741 | ) | (839,189 | ) | ||||
|
|
|
| |||||
Total decrease | (3,804,305 | ) | (2,245,300 | ) | ||||
Net Assets | ||||||||
Beginning of period | 94,918,574 | 97,163,874 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($45,614) and ($44,269), respectively) | $ | 91,114,269 | $ | 94,918,574 | ||||
|
|
|
|
See notes to financial statements.
abfunds.com | AB MUNICIPAL INCOME FUND II | 97 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
AB Virginia | ||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||
Increase (Decrease) in Net Assets from Operations | ||||||||
Net investment income | $ | 3,157,352 | $ | 6,542,651 | ||||
Net realized gain on investment transactions | 998,031 | 2,055,509 | ||||||
Net change in unrealized appreciation/depreciation of investments | (2,850,673 | ) | (6,519,297 | ) | ||||
|
|
|
| |||||
Net increase in net assets from operations | 1,304,710 | 2,078,863 | ||||||
Dividends to Shareholders from | ||||||||
Net investment income | ||||||||
Class A | (2,226,439 | ) | (5,248,781 | ) | ||||
Class B | (1,009 | ) | (2,612 | ) | ||||
Class C | (457,529 | ) | (1,206,472 | ) | ||||
Advisor Class | (576,773 | ) | (316,528 | ) | ||||
Transactions in Shares of Beneficial Interest | ||||||||
Net decrease | (238,792 | ) | (11,562,507 | ) | ||||
|
|
|
| |||||
Total decrease | (2,195,832 | ) | (16,258,037 | ) | ||||
Net Assets | ||||||||
Beginning of period | 229,900,836 | 246,158,873 | ||||||
|
|
|
| |||||
End of period (including distributions in excess of net investment income of ($299,953) and ($195,555), respectively) | $ | 227,705,004 | $ | 229,900,836 | ||||
|
|
|
|
See notes to financial statements.
98 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS
November 30, 2017 (unaudited)
NOTE A
Significant Accounting Policies
AB Municipal Income Fund II (the “Fund”) which is a Massachusetts Business Trust, is registered under the Investment Company Act of 1940, as a diversified, open-end management investment company. The Fund operates as a series company currently comprised of seven portfolios: AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio (the “Portfolios”). Each series is considered to be a separate entity for financial reporting and tax purposes. Each Portfolio offers Class A, Class B and Class C shares. Class T shares have been authorized but currently are not offered. Effective July 25, 2016, AB Massachusetts Portfolio and AB Virginia Portfolio commenced offering of Advisor Class Shares. Class T shares for each Portfolio have been authorized but currently are not offered. Advisor Class shares for AB Arizona Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio and AB Pennsylvania Portfolio have been authorized but currently are not offered. Class A shares are sold with a front-end sales charge of up to 3% for purchases up to $500,000; purchases of $500,000 or more are not subject to a sales charge. With respect to purchases of $500,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class B shares are currently sold with a contingent deferred sales charge which declines from 3% to zero depending on the period of time the shares are held. Effective January 31, 2009, sales of Class B shares of the Portfolios to new investors were suspended. Class B shares will only be issued (i) upon the exchange of Class B shares from another AB mutual fund, (ii) for purposes of dividend reinvestment, (iii) through the Portfolio’s Automatic Investment Program (the “Program”) for accounts that established the Program prior to January 31, 2009, and (iv) for purchases of additional shares by Class B shareholders as of January 31, 2009. The ability to establish a new Program for accounts containing Class B shares was suspended as of January 31, 2009. Class B shares will automatically convert to Class A shares six years after the end of the calendar month of purchase. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Effective April 10, 2017, Class C shares will automatically convert to Class A shares ten years after the end of the calendar month of purchase. All five 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
abfunds.com | AB MUNICIPAL INCOME FUND II | 99 |
NOTES TO FINANCIAL STATEMENTS (continued)
and expenses during the reporting period. Actual results could differ from those estimates. Each Portfolio 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 Portfolios.
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 Fund’s Board of Trustees (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the
100 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
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 Portfolios may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolios value their 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 Portfolios generally value many of their 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 Portfolios 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 Portfolios. Unobservable inputs reflect the Portfolio’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.) |
abfunds.com | AB MUNICIPAL INCOME FUND II | 101 |
NOTES TO FINANCIAL STATEMENTS (continued)
• | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following tables summarize the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of November 30, 2017:
AB Arizona Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 112,100,371 | $ | 7,436,620 | $ | 119,536,991 | |||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | – 0 | – | 112,100,371 | 7,436,620 | 119,536,991 | |||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (37,114 | ) | – 0 | – | (37,114 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | – 0 | – | $ | 112,063,257 | $ | 7,436,620 | $ | 119,499,877 | |||||||
|
|
|
|
|
|
|
|
102 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Massachusetts Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 240,499,584 | $ | 2,825,127 | $ | 243,324,711 | |||||||
Short-Term Investments | 208,709 | – 0 | – | – 0 | – | 208,709 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 208,709 | 240,499,584 | 2,825,127 | 243,533,420 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Interest Rate Swaps | – 0 | – | 60,668 | – 0 | – | 60,668 | ||||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (80,801 | ) | – 0 | – | (80,801 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | 208,709 | $ | 240,479,451 | $ | 2,825,127 | $ | 243,513,287 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AB Minnesota Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 73,030,474 | $ | 1,124,193 | $ | 74,154,667 | |||||||
Short-Term Investments | 197,736 | – 0 | – | – 0 | – | 197,736 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 197,736 | 73,030,474 | 1,124,193 | 74,352,403 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (30,056 | ) | – 0 | – | (30,056 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | 197,736 | $ | 73,000,418 | $ | 1,124,193 | $ | 74,322,347 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AB New Jersey Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 108,654,717 | $ | 1,727,874 | $ | 110,382,591 | |||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | – 0 | – | 108,654,717 | 1,727,874 | 110,382,591 | |||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (56,056 | ) | – 0 | – | (56,056 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | – 0 | – | $ | 108,598,661 | $ | 1,727,874 | $ | 110,326,535 | |||||||
|
|
|
|
|
|
|
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 103 |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Ohio Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 88,991,888 | $ | 2,878,016 | $ | 91,869,904 | |||||||
Short-Term Investments | 191,509 | – 0 | – | – 0 | – | 191,509 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 191,509 | 88,991,888 | 2,878,016 | 92,061,413 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | 100,191 | – 0 | – | 100,191 | (b) | |||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (100,180 | ) | – 0 | – | (100,180 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | 191,509 | $ | 88,991,899 | $ | 2,878,016 | $ | 92,061,424 | ||||||||
|
|
|
|
|
|
|
| |||||||||
AB Pennsylvania Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 86,151,349 | $ | 4,525,172 | $ | 90,676,521 | |||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | – 0 | – | 86,151,349 | 4,525,172 | 90,676,521 | |||||||||||
Other Financial Instruments(a) | – 0 | – | – 0 | – | – 0 | – | – 0 | – | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | – 0 | – | $ | 86,151,349 | $ | 4,525,172 | $ | 90,676,521 | |||||||
|
|
|
|
|
|
|
| |||||||||
AB Virginia Portfolio | ||||||||||||||||
Investments in Securities: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets: | ||||||||||||||||
Long-Term Municipal Bonds | $ | – 0 | – | $ | 203,790,804 | $ | 21,647,362 | $ | 225,438,166 | |||||||
Short-Term Investments | 37,206 | – 0 | – | – 0 | – | 37,206 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Investments in Securities | 37,206 | 203,790,804 | 21,647,362 | 225,475,372 | ||||||||||||
Other Financial Instruments(a): | ||||||||||||||||
Assets: | ||||||||||||||||
Interest Rate Swaps | – 0 | – | 53,085 | – 0 | – | 53,085 | ||||||||||
Liabilities: | ||||||||||||||||
Centrally Cleared Interest Rate Swaps | – 0 | – | (68,716 | ) | – 0 | – | (68,716 | )(b) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total(c) | $ | 37,206 | $ | 203,775,173 | $ | 21,647,362 | $ | 225,459,741 | ||||||||
|
|
|
|
|
|
|
|
104 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
(a) | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
(b) | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. Exchange-traded swaps with upfront premiums are presented here as market value. |
(c) | There were no transfers between any levels during the reporting period. |
As of November 30, 2017, all Level 3 securities were priced by third party vendors.
The Portfolios recognize all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser established the Committee to oversee the pricing and valuation of all securities held in the Portfolios. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and any third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
abfunds.com | AB MUNICIPAL INCOME FUND II | 105 |
NOTES TO FINANCIAL STATEMENTS (continued)
3. Taxes
It is each Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’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 Portfolio’s financial statements.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolios is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Each Portfolio may buy and sell securities from other affiliated funds in accordance with the requirements of Rule 17a-7 of the Investment Company Act of 1940. Each Portfolio has adopted procedures to ensure that all such transactions are done in accordance with the requirements of Rule 17a-7. During the six months ended November 30, 2017, the Portfolios did not engage in such transactions. Investment gains and losses are determined on the identified cost basis. The Portfolios amortize premiums and accrete original issue discounts and market discounts as adjustments to interest income.
5. Class Allocations
All income earned and expenses incurred by the Portfolios are borne on a pro-rata basis by each settled class of shares, based on the proportionate interest in each Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to the 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.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.
106 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, each Portfolio pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5 billion, of each Portfolio’s average daily net assets. Such 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 the total portfolio operating expenses as a percentage of daily average net assets on an annual basis (the “Expense Caps”) as follows:
Effective January 30, 2015 | ||||||||||||
Portfolio | Class A | Class B | Class C | |||||||||
AB Arizona | .78 | % | 1.53 | % | 1.53 | % | ||||||
AB Massachusetts | .77 | % | 1.52 | % | 1.52 | % | ||||||
AB Minnesota | .85 | % | 1.60 | % | 1.60 | % | ||||||
AB New Jersey | .82 | % | 1.57 | % | 1.57 | % | ||||||
AB Ohio | .80 | % | 1.55 | % | 1.55 | % | ||||||
AB Pennsylvania | .85 | % | 1.60 | % | 1.60 | % | ||||||
AB Virginia | .80 | % | 1.55 | % | 1.55 | % |
Effective July 25, 2016 | ||||
Portfolio | Advisor Class | |||
AB Massachusetts | .52 | % | ||
AB Virginia | .55 | % |
The Expense Caps will extend through September 29, 2018 and then may be extended by the Adviser for additional one year terms. For the six months ended November 30, 2017, such reimbursements/waivers amounted to $118,064, $123,001, $107,066, $100,743, $119,744, $96,962 and $91,011 for AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio, respectively.
Pursuant to the investment advisory agreement, each Portfolio may reimburse the Adviser for certain legal and accounting services provided to each Portfolio by the Adviser. For the six months ended November 30, 2017, the reimbursement for such services amounted to $32,795, $32,410, $32,546, $32,440, $32,546, $32,656 and $32,659 for AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio, respectively.
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NOTES TO FINANCIAL STATEMENTS (continued)
During the year ended May 31, 2017, the Adviser reimbursed the AB Ohio Portfolio $249 for trading losses incurred due to a trade entry error.
The Portfolios compensate 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 Portfolios. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. For the six months ended November 30, 2017, such compensation retained by ABIS amounted to: $9,050, $14,952, $9,102, $9,304, $9,008, $9,874 and $14,122 for AB Arizona Portfolio, AB Massachusetts Portfolio, AB Minnesota Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio, respectively.
AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Portfolio’s shares. The Distributor has advised the Portfolios that it has retained front-end sales charges from the sale of Class A shares and received contingent deferred sales charges imposed upon redemptions by shareholders of Class A, Class B and Class C shares for each Portfolio for the six months ended November 30, 2017 as follows:
Front-End Sales Charges | Contingent Deferred Sales Charges | |||||||||||||||
Portfolio | Class A | Class A | Class B | Class C | ||||||||||||
AB Arizona | $ | 119 | $ | – 0 | – | $ | – 0 | – | $ | 1,021 | ||||||
AB Massachusetts | – 0 | – | 2,870 | – 0 | – | 1,610 | ||||||||||
AB Minnesota | – 0 | – | – 0 | – | – 0 | – | 356 | |||||||||
AB New Jersey | – 0 | – | 103 | – 0 | – | 50 | ||||||||||
AB Ohio | 2 | – 0 | – | – 0 | – | 222 | ||||||||||
AB Pennsylvania | 111 | – 0 | – | – 0 | – | 277 | ||||||||||
AB Virginia | 60 | – 0 | – | – 0 | – | 927 |
The Portfolios may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. In connection with the investment by the Portfolios in the Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolios in an amount equal to each Portfolios’ pro rata share of the effective advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolios as an acquired fund fee and expense. For the six months ended November 30, 2017 such waiver amounted to:
Portfolio | Amount | Portfolio | Amount | |||||||
Arizona | $ | 1,206 | Ohio | $ | 569 | |||||
Massachusetts | 493 | Pennsylvania | 448 | |||||||
Minnesota | 359 | Virginia | 654 | |||||||
New Jersey | 413 |
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NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the Portfolio’s transactions in AB mutual funds for the six months ended November 30, 2017 is as follows:
AB ARIZONA PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 803 | $ | 8,507 | $ | 9,310 | $ | – 0 | – | $ | 5 |
AB MASSACHUSETTS PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | – 0 | – | $ | 10,017 | $ | 9,808 | $ | 209 | $ | 2 |
AB MINNESOTA PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | – 0 | – | $ | 7,247 | $ | 7,049 | $ | 198 | $ | 2 |
AB NEW JERSEY PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | – 0 | – | $ | 5,722 | $ | 5,722 | $ | – 0 | – | $ | 2 |
AB OHIO PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 793 | $ | 5,391 | $ | 5,992 | $ | 192 | $ | 2 |
AB PENNSYLVANIA PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | – 0 | – | $ | 10,302 | $ | 10,302 | $ | – 0 | – | $ | 2 |
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NOTES TO FINANCIAL STATEMENTS (continued)
AB VIRGINIA PORTFOLIO | ||||||||||||||||||||
Fund | Market Value 5/31/17 (000) | Purchases at Cost (000) | Sales Proceeds (000) | Market Value 11/30/17 (000) | Dividend Income (000) | |||||||||||||||
Government Money Market Portfolio | $ | 539 | $ | 15,012 | $ | 15,514 | $ | 37 | $ | 3 |
NOTE C
Distribution Services Agreement
The Portfolios have adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Portfolios pay distribution and servicing fees to the Distributor at an annual rate of up to .30% of the Portfolio’s average daily net assets attributable to Class A shares and 1% of the Portfolio’s average daily net assets attributable to both Class B and Class C shares. Effective January 30, 2015, payments under the Agreement in respect of Class A shares are limited to an annual rate of .25% of Class A shares’ average daily net assets. 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 Portfolio’s operations, the distributor has incurred expenses in excess of the distribution costs reimbursed by each Portfolio as follows:
Portfolio | Class B | Class C | ||||||
AB Arizona | $ | �� 3,375,451 | $ | 2,258,307 | ||||
AB Massachusetts | 3,327,954 | 4,099,491 | ||||||
AB Minnesota | 2,638,754 | 2,869,450 | ||||||
AB New Jersey | 5,235,315 | 3,819,147 | ||||||
AB Ohio | 4,270,933 | 4,083,900 | ||||||
AB Pennsylvania | 3,518,709 | 3,597,281 | ||||||
AB Virginia | 3,534,114 | 3,475,590 |
While such costs may be recovered from the Portfolios 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 Portfolio’s shares.
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NOTES TO FINANCIAL STATEMENTS (continued)
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the six months ended November 30, 2017, were as follows:
Portfolio | Purchases | Sales | ||||||
AB Arizona | $ | 4,207,151 | $ | 5,516,761 | ||||
AB Massachusetts | 20,224,620 | 20,373,226 | ||||||
AB Minnesota | 7,123,716 | 10,331,603 | ||||||
AB New Jersey | 7,987,591 | 5,787,886 | ||||||
AB Ohio | 2,637,354 | 4,122,347 | ||||||
AB Pennsylvania | 13,114,466 | 14,139,719 | ||||||
AB Virginia | 21,569,745 | 20,167,184 |
There were no purchases or sales of U.S. government and government agency obligations for the six months ended November 30, 2017.
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 | Net Unrealized Appreciation | |||||||||||||||
Portfolio | Appreciation | (Depreciation) | ||||||||||||||
AB Arizona | $ | 115,137,108 | $ | 4,560,182 | $ | (197,413 | ) | $ | 4,362,769 | |||||||
AB Massachusetts | 232,652,453 | 11,302,207 | (441,373 | ) | 10,860,834 | |||||||||||
AB Minnesota | 71,129,480 | 3,260,820 | (67,953 | ) | 3,192,867 | |||||||||||
AB New Jersey | 103,178,810 | 7,256,832 | (109,107 | ) | 7,147,725 | |||||||||||
AB Ohio | 87,134,833 | 5,030,364 | (195,125 | ) | 4,835,239 | |||||||||||
AB Pennsylvania | 86,485,296 | 4,595,924 | (404,699 | ) | 4,191,225 | |||||||||||
AB Virginia | 215,376,076 | 10,485,571 | (401,906 | ) | 10,083,665 |
1. Derivative Financial Instruments
Each Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolios, as well as the methods in which they may be used are:
• | Swaps |
Each Portfolio may enter into swaps to hedge its exposure to interest rates or credit risk. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or
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NOTES TO FINANCIAL STATEMENTS (continued)
received by the Portfolios in accordance with the terms of the respective swaps to provide value and recourse to the Portfolios or their 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 Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio 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 Portfolio and the counterparty and by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Portfolios enters into a centrally cleared swap, each Portfolio 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 Portfolios agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such
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NOTES TO FINANCIAL STATEMENTS (continued)
receipts or payments are known as variation margin and are recorded by the Portfolios 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 Portfolios record 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:
Each Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Portfolios hold fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Portfolios may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Portfolios 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 Portfolios 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 Portfolios anticipate purchasing at a later date. Interest rate swaps involve the exchange by a Portfolio 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 Portfolios receiving or paying, as the case may be, only the net amount of the two payments).
During the six months ended November 30, 2017, the Portfolios held interest rate swaps for hedging purposes.
The Portfolios typically enter 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 Portfolios typically may offset with the OTC counterparty certain derivative
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NOTES TO FINANCIAL STATEMENTS (continued)
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 Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolios decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s OTC counterparty has the right to terminate such transaction and require the Portfolios to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by the OTC counterparty table below.
During the six months ended November 30, 2017, the Portfolios had entered into the following derivatives:
AB Arizona Portfolio | ||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||||
Interest rate contracts | | Receivable/Payable for variation margin on exchange traded swaps | | $ | 37,114 | * | ||||||||
|
| |||||||||||||
Total | $ | 37,114 | ||||||||||||
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
Derivative Type | Location of Gain or (Loss) on Derivatives Within Statement of Operations | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (58,279 | ) | $ | (17,896 | ) | |||
|
|
|
| |||||||
Total | $ | (58,279 | ) | $ | (17,896 | ) | ||||
|
|
|
|
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NOTES TO FINANCIAL STATEMENTS (continued)
AB Massachusetts Portfolio | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on exchange traded swaps | $ | 80,801 | * | ||||||||
Interest rate contracts | Unrealized appreciation on interest rate swaps | $ | 60,668 | |||||||||
|
|
|
| |||||||||
Total | $ | 60,668 | $ | 80,801 | ||||||||
|
|
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
Derivative Type | Location of Gain or (Loss) | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | 27,655 | $ | (209,512 | ) | ||||
|
|
|
| |||||||
Total | $ | 27,655 | $ | (209,512 | ) | |||||
|
|
|
|
AB Minnesota Portfolio | ||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||||
Interest rate contracts | | Receivable/Payable for variation margin on exchange traded swaps | | $ | 30,056 | * | ||||||||
|
| |||||||||||||
Total | $ | 30,056 | ||||||||||||
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
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NOTES TO FINANCIAL STATEMENTS (continued)
Derivative Type | Location of Gain or (Loss) | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | 36,585 | $ | (110,520 | ) | ||||
|
|
|
| |||||||
Total | $ | 36,585 | $ | (110,520 | ) | |||||
|
|
|
|
AB New Jersey Portfolio | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on exchange traded swaps | $ | 56,056 | * | ||||||||
|
| |||||||||||
Total | $ | 56,056 | ||||||||||
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (77,178 | ) | $ | (4,927 | ) | |||
|
|
|
| |||||||
Total | $ | (77,178 | ) | $ | (4,927 | ) | ||||
|
|
|
|
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NOTES TO FINANCIAL STATEMENTS (continued)
AB Ohio Portfolio | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on exchange traded swaps | $ | 8,839 | * | Receivable/Payable for variation margin on exchange traded swaps | $ | 100,180 | * | ||||
|
|
|
| |||||||||
Total | $ | 8,839 | $ | 100,180 | ||||||||
|
|
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (3,374 | ) | $ | (201 | ) | |||
|
|
|
| |||||||
Total | $ | (3,374 | ) | $ | (201 | ) | ||||
|
|
|
|
AB Pennsylvania Portfolio | ||||||||||
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | 24,519 | $ | (15,738 | ) | ||||
|
|
|
| |||||||
Total | $ | 24,519 | $ | (15,738 | ) | |||||
|
|
|
|
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NOTES TO FINANCIAL STATEMENTS (continued)
AB Virginia Portfolio | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Derivative Type | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Interest rate contracts | Receivable/Payable for variation margin on exchange traded swaps | $ | 68,716 | * | ||||||||
Interest rate contracts | Unrealized appreciation on interest rate swaps | $ | 53,085 |
| ||||||||
|
|
|
| |||||||||
Total | $ | 53,085 | $ | 68,716 | ||||||||
|
|
|
|
* | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
Derivative Type | Location of | Realized Gain or (Loss) on Derivatives | Change in Unrealized Appreciation or (Depreciation) | |||||||
Interest rate contracts | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | $ | (29,161 | ) | $ | (64,181 | ) | |||
|
|
|
| |||||||
Total | $ | (29,161 | ) | $ | (64,181 | ) | ||||
|
|
|
|
The following tables represent the average monthly volume of the Portfolio’s derivative transactions during the six months ended November 30, 2017:
AB Arizona Portfolio | ||||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 6,142,857 |
AB Massachusetts Portfolio | ||||
Interest Rate Swaps: | ||||
Average notional amount | $8,000,000 | |||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 15,797,143 |
AB Minnesota Portfolio | ||||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 8,338,571 |
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NOTES TO FINANCIAL STATEMENTS (continued)
AB New Jersey Portfolio | ||||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 6,227,143 |
AB Ohio Portfolio | ||||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 8,934,000 | (a) |
(a) | Positions were open for four months during the period. |
AB Pennsylvania Portfolio | ||||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 6,177,500 | (a) |
(a) | Positions were open for three months during the period. |
AB Virginia Portfolio | ||||
Interest Rate Swaps: | ||||
Average notional amount | $ | 7,000,000 | ||
Centrally Cleared Interest Rate Swaps: | ||||
Average notional amount | $ | 5,607,143 |
For financial reporting purposes, the Portfolios do 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 tables present the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements and net of the related collateral received/pledged by the Portfolios as of November 30, 2017. Exchange-traded derivatives are not subject to netting arrangements and as such are excluded from the tables.
Massachusetts Portfolio | ||||||||||||||||||||
Counterparty | Derivative Assets Subject to a MA | Derivative Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivatives Assets | |||||||||||||||
OTC Derivatives: |
| |||||||||||||||||||
Citibank, NA | $ | 60,668 | $ | – 0 | – | $ | – 0 | – | $ | (60,668 | ) | $ | – 0 | – | ||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 60,668 | $ | – 0 | – | $ | – 0 | – | $ | (60,668 | ) | $ | – 0 | –^ | ||||||
|
|
|
|
|
|
|
|
|
|
* | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 119 |
NOTES TO FINANCIAL STATEMENTS (continued)
Virginia Portfolio | ||||||||||||||||||||
Counterparty | Derivative Assets Subject to a MA | Derivative Available for Offset | Cash Collateral Received* | Security Collateral Received* | Net Amount of Derivatives Assets | |||||||||||||||
OTC Derivatives: |
| |||||||||||||||||||
Citibank, NA | $ | 53,085 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 53,085 | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 53,085 | $ | – 0 | – | $ | – 0 | – | $ | – 0 | – | $ | 53,085 | ^ | ||||||
|
|
|
|
|
|
|
|
|
|
* | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
^ | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
NOTE E
Shares of Beneficial Interest
Transactions in shares of beneficial interest for each Portfolio were as follows:
AB Arizona Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 636,332 | 1,100,025 | $ | 7,101,454 | $ | 12,311,299 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 76,317 | 160,453 | 850,119 | 1,792,410 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 32,676 | 700 | 366,945 | 7,935 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 11,503 | 307,025 | 128,581 | 3,392,629 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1,022,155 | ) | (1,443,203 | ) | (11,421,147 | ) | (16,046,439 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (265,327 | ) | 125,000 | $ | (2,974,048 | ) | $ | 1,457,834 | ||||||||||||||||
| ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 26 | 54 | $ | 300 | $ | 600 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 21 | 24 | 231 | 266 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (32,705 | ) | (701 | ) | (366,945 | ) | (7,935 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (13 | ) | (1 | ) | (137 | ) | (12 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (32,671 | ) | (624 | ) | $ | (366,551 | ) | $ | (7,081 | ) | ||||||||||||||
|
120 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Arizona Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 95,414 | 219,265 | $ | 1,063,247 | $ | 2,472,980 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 11,277 | 30,841 | 125,447 | 344,069 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (11,520 | ) | (307,582 | ) | (128,581 | ) | (3,392,629 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (135,767 | ) | (448,669 | ) | (1,513,449 | ) | (4,994,388 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (40,596 | ) | (506,145 | ) | $ | (453,336 | ) | $ | (5,569,968 | ) | ||||||||||||||
|
AB Massachusetts Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 867,977 | 2,795,470 | $ | 9,837,599 | $ | 31,895,218 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 124,135 | 276,039 | 1,404,130 | 3,146,808 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 608 | 6,542 | 6,911 | 75,026 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 222,312 | 450,716 | 2,516,823 | 5,066,052 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1,830,147 | ) | (5,378,918 | ) | (20,736,109 | ) | (60,747,306 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (615,115 | ) | (1,850,151 | ) | $ | (6,970,646 | ) | $ | (20,564,202 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | – 0 | – | 677 | $ | – 0 | – | $ | 7,895 | ||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 90 | 238 | 1,017 | 2,718 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (609 | ) | (6,553 | ) | (6,911 | ) | (75,026 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | – 0 | – | – 0 | –(a) | – 0 | – | (3 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (519 | ) | (5,638 | ) | $ | (5,894 | ) | $ | (64,416 | ) | ||||||||||||||
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 121 |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Massachusetts Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||
Shares sold | 96,325 | 440,216 | $ | 1,090,542 | $ | 5,056,751 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 34,225 | 81,587 | 386,493 | 927,854 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (222,706 | ) | (451,520 | ) | (2,516,823 | ) | (5,066,052 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (311,910 | ) | (751,748 | ) | (3,529,623 | ) | (8,494,892 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (404,066 | ) | (681,465 | ) | $ | (4,569,411 | ) | $ | (7,576,339 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Advisor Class(b) |
| |||||||||||||||||||||||
Shares sold | 1,509,598 | 4,135,112 | $ | 17,093,873 | $ | 46,633,149 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 32,410 | 17,543 | 366,415 | 197,304 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (831,479 | ) | (432,797 | ) | (9,419,405 | ) | (4,846,955 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 710,529 | 3,719,858 | $ | 8,040,883 | $ | 41,983,498 | ||||||||||||||||||
|
(a) | Amount is less than one share. |
(b) | Commenced distribution on July 25, 2016. |
AB Minnesota Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 397,823 | 1,071,113 | $ | 4,099,821 | $ | 11,103,795 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 63,648 | 135,538 | 654,420 | 1,401,490 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 1,206 | 35 | 12,372 | 365 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 18,378 | 335,264 | 189,898 | 3,426,395 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (629,446 | ) | (1,387,689 | ) | (6,476,787 | ) | (14,183,034 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (148,391 | ) | 154,261 | $ | (1,520,276 | ) | $ | 1,749,011 | ||||||||||||||||
|
122 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Minnesota Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 19 | 2,878 | $ | 200 | $ | 30,573 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 31 | 82 | 319 | 846 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (1,205 | ) | (35 | ) | (12,372 | ) | (365 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (11 | ) | (337 | ) | (123 | ) | (3,546 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (1,166 | ) | 2,588 | $ | (11,976 | ) | $ | 27,508 | ||||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 32,698 | 111,276 | $ | 337,616 | $ | 1,150,730 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 8,509 | 26,206 | 87,572 | 271,125 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (18,360 | ) | (334,936 | ) | (189,898 | ) | (3,426,395 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (135,537 | ) | (273,470 | ) | (1,397,428 | ) | (2,811,777 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (112,690 | ) | (470,924 | ) | $ | (1,162,138 | ) | $ | (4,816,317 | ) | ||||||||||||||
|
AB New Jersey Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 607,576 | 1,080,629 | $ | 5,941,499 | $ | 10,498,136 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 80,678 | 151,049 | 788,621 | 1,475,050 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 2,494 | 5,871 | 24,411 | 57,688 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 133,185 | 888,253 | 1,302,518 | 8,589,410 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (493,142 | ) | (1,471,390 | ) | (4,830,389 | ) | (14,294,640 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 330,791 | 654,412 | $ | 3,226,660 | $ | 6,325,644 | ||||||||||||||||||
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 123 |
NOTES TO FINANCIAL STATEMENTS (continued)
AB New Jersey Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 64 | 7,026 | $ | 625 | $ | 66,994 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 98 | 632 | 956 | 6,181 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (2,494 | ) | (5,871 | ) | (24,411 | ) | (57,688 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1 | ) | (8,257 | ) | (5 | ) | (79,399 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (2,333 | ) | (6,470 | ) | $ | (22,835 | ) | $ | (63,912 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 46,919 | 128,727 | $ | 459,206 | $ | 1,264,018 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 14,170 | 48,451 | 138,600 | 473,329 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (133,112 | ) | (887,336 | ) | (1,302,518 | ) | (8,589,410 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (105,866 | ) | (555,556 | ) | (1,036,844 | ) | (5,376,729 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (177,889 | ) | (1,265,714 | ) | $ | (1,741,556 | ) | $ | (12,228,792 | ) | ||||||||||||||
|
AB Ohio Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 172,427 | 739,282 | $ | 1,732,145 | $ | 7,419,537 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 70,233 | 137,228 | 703,372 | 1,377,207 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 214 | 1,011 | 2,152 | 10,220 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 237 | 1,009,140 | 2,365 | 10,030,848 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (520,451 | ) | (2,163,901 | ) | (5,223,319 | ) | (21,470,790 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (277,340 | ) | (277,240 | ) | $ | (2,783,285 | ) | $ | (2,632,978 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 180 | 371 | $ | 1,800 | $ | 3,720 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 26 | 73 | 261 | 733 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (215 | ) | (1,012 | ) | (2,152 | ) | (10,220 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | – 0 | – | (1,945 | ) | – 0 | – | (19,256 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (9 | ) | (2,513 | ) | $ | (91 | ) | $ | (25,023 | ) | ||||||||||||||
|
124 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Ohio Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 36,791 | 101,274 | $ | 369,485 | $ | 1,019,011 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 9,623 | 34,774 | 96,295 | 348,688 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (237 | ) | (1,009,140 | ) | (2,365 | ) | (10,030,848 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (131,261 | ) | (416,302 | ) | (1,317,324 | ) | (4,153,318 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (85,084 | ) | (1,289,394 | ) | $ | (853,909 | ) | $ | (12,816,467 | ) | ||||||||||||||
|
AB Pennsylvania Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 113,751 | 883,934 | $ | 1,197,525 | $ | 9,182,275 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 66,548 | 122,547 | 698,875 | 1,290,087 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 564 | 1,547 | 5,941 | 16,307 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 33,020 | 802,935 | 348,349 | 8,366,586 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (414,201 | ) | (864,472 | ) | (4,362,133 | ) | (9,041,367 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase (decrease) | (200,318 | ) | 946,491 | $ | (2,111,443 | ) | $ | 9,813,888 | ||||||||||||||||
| ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 154 | 317 | $ | 1,621 | $ | 3,340 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 49 | 117 | 520 | 1,237 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (564 | ) | (1,547 | ) | (5,941 | ) | (16,307 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1,059 | ) | 1 | (11,116 | ) | (7 | ) | |||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (1,420 | ) | (1,112 | ) | $ | (14,916 | ) | $ | (11,737 | ) | ||||||||||||||
|
abfunds.com | AB MUNICIPAL INCOME FUND II | 125 |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Pennsylvania Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 11,575 | 115,785 | $ | 121,924 | $ | 1,232,989 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 8,703 | 31,897 | 91,439 | 335,821 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (32,995 | ) | (802,935 | ) | (348,349 | ) | (8,366,586 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (63,587 | ) | (368,614 | ) | (669,396 | ) | (3,843,564 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (76,304 | ) | (1,023,867 | ) | $ | (804,382 | ) | $ | (10,641,340 | ) | ||||||||||||||
|
AB Virginia Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Class A | ||||||||||||||||||||||||
Shares sold | 461,980 | 1,554,345 | $ | 5,160,247 | $ | 17,443,300 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 107,311 | 249,634 | 1,197,403 | 2,797,677 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class B | 2,236 | 1,670 | 24,951 | 18,786 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted from Class C | 13,798 | 841,423 | 154,091 | 9,314,552 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (1,403,440 | ) | (5,050,725 | ) | (15,701,967 | ) | (56,085,933 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (818,115 | ) | (2,403,653 | ) | $ | (9,165,275 | ) | $ | (26,511,618 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||
Shares sold | 90 | 299 | $ | 1,000 | $ | 3,350 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 77 | 208 | 865 | 2,328 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (2,240 | ) | (1,673 | ) | (24,951 | ) | (18,786 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (2,077 | ) | (11 | ) | (23,197 | ) | (128 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (4,150 | ) | (1,177 | ) | $ | (46,283 | ) | $ | (13,236 | ) | ||||||||||||||
| ||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||
Shares sold | 124,325 | 269,384 | $ | 1,385,126 | $ | 3,028,595 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 31,140 | 81,253 | 346,552 | 907,301 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares converted to Class A | (13,835 | ) | (843,709 | ) | (154,091 | ) | (9,314,552 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (220,742 | ) | (695,233 | ) | (2,462,372 | ) | (7,707,330 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net decrease | (79,112 | ) | (1,188,305 | ) | $ | (884,785 | ) | $ | (13,085,986 | ) | ||||||||||||||
|
126 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Virginia Portfolio | ||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, 2017 | |||||||||||||||||||||
|
| |||||||||||||||||||||||
Advisor Class(a) | ||||||||||||||||||||||||
Shares sold | 1,009,480 | 2,826,630 | $ | 11,306,425 | $ | 31,347,927 | ||||||||||||||||||
| ||||||||||||||||||||||||
Shares issued in reinvestment of dividends | 29,405 | 14,808 | 328,253 | 164,105 | ||||||||||||||||||||
| ||||||||||||||||||||||||
Shares redeemed | (158,860 | ) | (315,237 | ) | (1,777,127 | ) | (3,463,699 | ) | ||||||||||||||||
| ||||||||||||||||||||||||
Net increase | 880,025 | 2,526,201 | $ | 9,857,551 | $ | 28,048,333 | ||||||||||||||||||
|
(a) | Commenced distribution on July 25, 2016. |
NOTE F
Risks Involved in Investing in the Portfolios
Credit Risk — An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security and accrued interest. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Municipal Market Risk — This is the risk that special factors may adversely affect the value of municipal securities and have a significant effect on the yield or value of the Portfolios’ investments in municipal securities. These factors include economic conditions, political or legislative changes, uncertainties related to the tax status of municipal securities, or the rights of investors in these securities. The Portfolios of the Fund are State Portfolios that may invest a large portion of their assets in a particular state’s municipal securities and their various political subdivisions. To the extent that these Portfolios invest more of their assets in a particular state’s municipal securities, these Portfolios may be vulnerable to events adversely affecting that state, including economic, political and regulatory occurrences, court decisions, terrorism and catastrophic natural disasters, such as hurricanes or earthquakes. These Portfolios’ investments in certain municipal securities with principal and interest payments that are made from the revenues of a specific project or facility, and not general tax revenues, may have increased risks. Factors affecting the project or facility, such as local business or economic conditions, could have a significant effect on the project’s ability to make payments of principal and interest on these securities.
abfunds.com | AB MUNICIPAL INCOME FUND II | 127 |
NOTES TO FINANCIAL STATEMENTS (continued)
In addition, recent tax law changes could have a material impact on the value of municipal securities. Changes in tax rates or the treatment of income from municipal securities, among other things, could negatively affect the municipal securities markets.
The Portfolios may invest in municipal securities of issuers in Puerto Rico or other US territories and their governmental agencies and municipalities, which are exempt from federal, state, and, where applicable, local income taxes. These municipal securities may have more risks than those of other US issuers of municipal securities. Like many US states and municipalities, Puerto Rico experienced a significant downturn during the recent recession. Puerto Rico’s downturn was particularly severe, and Puerto Rico continues to face a very challenging economic and fiscal environment. If the general economic situation in Puerto Rico continues to persist or worsens, the volatility and credit quality of Puerto Rican municipal securities could continue to be adversely affected, and the market for such securities may experience continued volatility.
Interest Rate Risk — Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. The Portfolios may be subject to a heightened interest rate risk due to rising rates as the current period of historically low interest rates may be ending. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk — Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to the full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
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 Portfolio’s assets can decline as can the value of the Portfolio’s distributions. This risk is significantly greater for fixed-income securities with longer maturities.
Liquidity Risk — Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Portfolios. Causes of liquidity risk may include low trading
128 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
volumes, large positions and heavy redemptions of portfolio shares. Over recent years, liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline. Municipal securities may have more liquidity risk than other fixed-income securities because they trade less frequently and the market for municipal securities is generally smaller than many other markets.
Derivatives Risk — The Portfolios may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolios, 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.
Tax Risk — There is no guarantee that the income on the Portfolios’ municipal securities will be exempt from regular federal income and state income taxes. Unfavorable legislation, adverse interpretations by federal or state authorities, litigation or noncompliant conduct by the issuer of a municipal security could affect the tax-exempt status of municipal securities. If the Internal Revenue Service or a state authority determines that an issuer of a municipal security has not complied with applicable requirements, interest from the security could become subject to regular federal income tax and/or state personal income tax, possibly retroactively to the date the security was issued, the value of the security could decline significantly, and a portion of the distributions to Portfolio shareholders could be recharacterized as taxable. Recent federal legislation included reductions in tax rates for individuals, with relatively larger reductions in tax rates for corporations. These tax rate reductions may reduce the demand for municipal bonds which could reduce the value of municipal bonds held by the Portfolios.
Indemnification Risk — In the ordinary course of business, the Portfolios enter into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolios have not had prior claims or losses pursuant to these indemnification provisions and expect the risk of loss thereunder to be remote. Therefore, the Portfolios have not accrued any liability in connection with these indemnification provisions.
abfunds.com | AB MUNICIPAL INCOME FUND II | 129 |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE G
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolios, participate in a $280 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in connection with abnormal redemption activity. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Portfolios did not utilize the Facility during the six months ended November 30, 2017.
NOTE H
Distributions to Shareholders
The tax character of distributions to be paid for the year ending May 31, 2018 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended May 31, 2017 and May 31, 2016 were as follows:
AB Arizona Portfolio | 2017 | 2016 | ||||||
Ordinary income | $ | 16,896 | $ | 17,423 | ||||
|
|
|
| |||||
Total taxable distributions | 16,896 | 17,423 | ||||||
Tax exempt distributions | 3,736,884 | 3,880,882 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 3,753,780 | $ | 3,898,305 | ||||
|
|
|
| |||||
AB Massachusetts Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 267,815 | $ | 253,184 | ||||
Long-term capital gains | 9,793 | – 0 | – | |||||
|
|
|
| |||||
Total taxable distributions | 277,608 | 253,184 | ||||||
Tax exempt distributions | 6,949,905 | 6,875,031 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 7,227,513 | $ | 7,128,215 | ||||
|
|
|
| |||||
AB Minnesota Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 41,050 | $ | 116,840 | ||||
Long-term capital gains | 179,048 | 3,454 | ||||||
|
|
|
| |||||
Total taxable distributions | 220,098 | 120,294 | ||||||
Tax exempt distributions | 2,164,773 | 2,328,742 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 2,384,871 | $ | 2,449,036 | ||||
|
|
|
| |||||
AB New Jersey Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 50,312 | $ | 117,128 | ||||
|
|
|
| |||||
Total taxable distributions | 50,312 | 117,128 | ||||||
Tax exempt distributions | 3,507,702 | 3,646,685 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 3,558,014 | $ | 3,763,813 | ||||
|
|
|
|
130 | AB MUNICIPAL INCOME FUND II | abfunds.com |
NOTES TO FINANCIAL STATEMENTS (continued)
AB Ohio Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 20,424 | $ | 130,039 | ||||
|
|
|
| |||||
Total taxable distributions | 20,424 | 130,039 | ||||||
Tax exempt distributions | 2,721,279 | 3,113,376 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 2,741,703 | $ | 3,243,415 | ||||
|
|
|
| |||||
AB Pennsylvania Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 4,643 | $ | 4,793 | ||||
|
|
|
| |||||
Total taxable distributions | 4,643 | 4,793 | ||||||
Tax exempt distributions | 2,650,896 | 2,808,486 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 2,655,539 | $ | 2,813,279 | ||||
|
|
|
| |||||
AB Virginia Portfolio | 2017 | 2016 | ||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 222,332 | $ | 238,512 | ||||
|
|
|
| |||||
Total taxable distributions | 222,332 | 238,512 | ||||||
Tax exempt distributions | 6,552,061 | 6,753,361 | ||||||
|
|
|
| |||||
Total distributions paid | $ | 6,774,393 | $ | 6,991,873 | ||||
|
|
|
|
As of May 31, 2017, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Portfolio | Undistributed Ordinary Income(a) | Undistributed Long-Term Gains | Accumulated Capital and Losses(b) | Unrealized Appreciation/ (Depreciation)(c) | Total Accumulated Earnings/ (Deficit)(d) | |||||||||||||||
AB Arizona | $ | – 0 | – | $ | – 0 | – | $ | (1,043,018 | ) | $ | 5,364,897 | $ | 4,321,879 | |||||||
AB Massachusetts | – 0 | – | 62,504 | – 0 | – | 13,622,996 | 13,685,500 | |||||||||||||
AB Minnesota | – 0 | – | – 0 | – | (149,850 | ) | 4,115,867 | 3,966,017 | ||||||||||||
AB New Jersey | – 0 | – | – 0 | – | (3,494,615 | ) | 7,831,614 | 4,336,999 | ||||||||||||
AB Ohio | – 0 | – | – 0 | – | (5,287,389 | ) | 5,883,035 | 595,646 | ||||||||||||
AB Pennsylvania | 31,084 | – 0 | – | (1,529,567 | ) | 5,578,677 | 4,080,194 | |||||||||||||
AB Virginia | – 0 | – | – 0 | – | (3,151,501 | ) | 12,881,093 | 9,729,592 |
(a) | These amounts represent 100% tax exempt income. |
(b) | At May 31, 2017, AB Arizona Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio had capital loss carryforwards for federal income tax purposes. During the fiscal period, AB Arizona Portfolio, AB Massachusetts Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio, AB Pennsylvania Portfolio and AB Virginia Portfolio utilized capital loss carryforwards of $375,451, $386,016, $908,422, $319,973, $1,170,174 and $1,815,914, respectively, to offset current year net realized gains. AB Minnesota Portfolio had a post-October short-term capital loss deferral of $149,850. These losses are deemed to arise on June 1, 2017. |
(c)The | differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of swaps, the tax deferral of losses on wash sales, the tax treatment of tender option bonds. |
(d)The | differences between book-basis and tax-basis components of accumulated earnings/(deficit) are attributable primarily to the tax treatment of defaulted securities and dividends payable to shareholders. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 131 |
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 incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-December 22, 2010 capital losses must be utilized prior to the earlier capital losses, which are subject to expiration. Post-December 22, 2010 capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
As of May 31, 2017, certain Portfolios had net capital loss carryforwards which will expire as follows:
Portfolio | Short-Term Amount | Long-Term Amount | Expiration | |||||||||
AB Arizona | $ | 607,308 | $ | 435,710 | No expiration | |||||||
AB New Jersey | 236,173 | n/a | 2018 | |||||||||
AB New Jersey | 95,620 | n/a | 2019 | |||||||||
AB New Jersey | 2,265,339 | 897,483 | No expiration | |||||||||
AB Ohio | 1,649,250 | 3,638,139 | No expiration | |||||||||
AB Pennsylvania | 1,981 | 1,527,586 | No expiration | |||||||||
AB Virginia | 1,700,051 | 1,451,450 | No expiration |
NOTE I
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities (the “ASU”) which amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The ASU does not require any accounting change for debt securities held at a discount; the discount continues to be amortized to maturity. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. At this time, management is evaluating the implications of these changes on the financial statements.
NOTE J
Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
132 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Arizona Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.16 | $ 11.36 | $ 11.01 | $ 11.05 | $ 10.72 | $ 11.41 | $ 10.95 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .16 | .34 | .35 | .25 | .40 | .40 | .43 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.09 | ) | (.20 | ) | .35 | (.04 | ) | .33 | (.69 | ) | .46 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .07 | .14 | .70 | .21 | .73 | (.29 | ) | .89 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.34 | ) | (.35 | ) | (.25 | ) | (.40 | ) | (.40 | ) | (.43 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.07 | $ 11.16 | $ 11.36 | $ 11.01 | $ 11.05 | $ 10.72 | $ 11.41 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .66 | % | 1.28 | % | 6.50 | % | 1.94 | % | 6.90 | % | (2.65 | )% | 8.27 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $101,770 | $105,539 | $106,037 | $104,489 | $107,843 | $117,342 | $140,768 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .78 | %^ | .78 | % | .78 | % | .80 | %^ | .79 | % | .79 | % | .79 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | .97 | %^ | .97 | % | .96 | % | 1.00 | %^ | .99 | % | .93 | % | .95 | % | ||||||||||||||
Net investment income(b) | 2.93 | %^ | 3.04 | % | 3.17 | % | 3.43 | %^ | 3.65 | % | 3.54 | % | 3.85 | % | ||||||||||||||
Portfolio turnover rate | 3 | % | 12 | % | 11 | % | 21 | % | 15 | % | 24 | % | 17 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 133 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Arizona Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.14 | $ 11.35 | $ 10.99 | $ 11.03 | $ 10.70 | $ 11.39 | $ 10.93 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .26 | .27 | .20 | .32 | .32 | .35 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.08 | ) | (.21 | ) | .36 | (.04 | ) | .33 | (.69 | ) | .46 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .04 | .05 | .63 | .16 | .65 | (.37 | ) | .81 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.26 | ) | (.27 | ) | (.20 | ) | (.32 | ) | (.32 | ) | (.35 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.06 | $ 11.14 | $ 11.35 | $ 10.99 | $ 11.03 | $ 10.70 | $ 11.39 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .37 | % | .44 | % | 5.81 | % | 1.45 | % | 6.17 | % | (3.34 | )% | 7.54 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $8 | $373 | $387 | $412 | $546 | $769 | $1,933 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.53 | %^ | 1.53 | % | 1.53 | % | 1.53 | %^ | 1.49 | % | 1.49 | % | 1.49 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.73 | %^ | 1.73 | % | 1.71 | % | 1.72 | %^ | 1.70 | % | 1.63 | % | 1.67 | % | ||||||||||||||
Net investment income(b) | 2.18 | %^ | 2.30 | % | 2.43 | % | 2.72 | %^ | 2.96 | % | 2.83 | % | 3.17 | % | ||||||||||||||
Portfolio turnover | 3 | % | 12 | % | 11 | % | 21 | % | 15 | % | 24 | % | 17 | % |
See | footnote summary on pages 155-156. |
134 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Arizona Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 11.14 | $ 11.35 | $ 10.99 | $ 11.03 | $ 10.70 | $ 11.39 | $ 10.93 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .26 | .27 | .20 | .32 | .32 | .35 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.08 | ) | (.21 | ) | .36 | (.04 | ) | .33 | (.69 | ) | .46 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .04 | .05 | .63 | .16 | .65 | (.37 | ) | .81 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.26 | ) | (.27 | ) | (.20 | ) | (.32 | ) | (.32 | ) | (.35 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.06 | $ 11.14 | $ 11.35 | $ 10.99 | $ 11.03 | $ 10.70 | $ 11.39 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .37 | % | .44 | % | 5.81 | % | 1.45 | % | 6.17 | % | (3.34 | )% | 7.54 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s | $18,852 | $19,454 | $25,550 | $24,900 | $25,203 | $30,060 | $35,464 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.53 | %^ | 1.53 | % | 1.53 | % | 1.53 | %^ | 1.49 | % | 1.49 | % | 1.49 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.72 | %^ | 1.72 | % | 1.71 | % | 1.72 | %^ | 1.70 | % | 1.63 | % | 1.65 | % | ||||||||||||||
Net investment income(b) | 2.18 | %^ | 2.29 | % | 2.43 | % | 2.71 | %^ | 2.96 | % | 2.84 | % | 3.16 | % | ||||||||||||||
Portfolio turnover | 3 | % | 12 | % | 11 | % | 21 | % | 15 | % | 24 | % | 17 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 135 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Massachusetts Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.35 | $ 11.61 | $ 11.37 | $ 11.36 | $ 11.05 | $ 11.87 | $ 11.28 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .16 | .33 | .35 | .24 | .37 | .37 | .39 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.24 | ) | .25 | .02 | .33 | (.76 | ) | .61 | ||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .06 | .09 | .60 | .26 | .70 | (.39 | ) | 1.00 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.17 | ) | (.35 | ) | (.36 | ) | (.25 | ) | (.39 | ) | (.39 | ) | (.41 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.17 | ) | (.35 | ) | (.36 | ) | (.25 | ) | (.39 | ) | (.43 | ) | (.41 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.24 | $ 11.35 | $ 11.61 | $ 11.37 | $ 11.36 | $ 11.05 | $ 11.87 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .54 | % | .78 | % | 5.38 | % | 2.26 | % | 6.42 | % | (3.38 | )% | 8.98 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $155,523 | $163,988 | $189,259 | $188,934 | $194,274 | $202,230 | $233,271 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | .77 | %^ | .77 | % | .77 | % | .80 | %^ | .82 | % | .82 | % | .82 | % | ||||||||||||||
Expenses, before waivers/reimbursements | .87 | %^ | .88 | % | .87 | % | .90 | %^ | .91 | % | .88 | % | .88 | % | ||||||||||||||
Net investment income(b) | 2.88 | %^ | 2.92 | % | 3.04 | % | 3.10 | %^ | 3.35 | % | 3.18 | % | 3.33 | % | ||||||||||||||
Portfolio turnover rate | 8 | % | 13 | % | 15 | % | 12 | % | 9 | % | 19 | % | 6 | % |
See | footnote summary on pages 155-156. |
136 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Massachusetts Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, | $ 11.33 | $ 11.59 | $ 11.35 | $ 11.34 | $ 11.03 | $ 11.85 | $ 11.25 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .25 | .27 | .18 | .30 | .29 | .31 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.25 | ) | .25 | .02 | .32 | (.76 | ) | .62 | ||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .02 | – 0 | – | .52 | .20 | .62 | (.47 | ) | .93 | |||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.13 | ) | (.26 | ) | (.28 | ) | (.19 | ) | (.31 | ) | (.31 | ) | (.33 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.13 | ) | (.26 | ) | (.28 | ) | (.19 | ) | (.31 | ) | (.35 | ) | (.33 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.22 | $ 11.33 | $ 11.59 | $ 11.35 | $ 11.34 | $ 11.03 | $ 11.85 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .16 | % | .03 | % | 4.61 | % | 1.77 | % | 5.70 | % | (4.05 | )% | 8.34 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of | $86 | $93 | $160 | $399 | $656 | $1,426 | $2,223 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.52 | %^ | 1.52 | % | 1.52 | % | 1.52 | %^ | 1.52 | % | 1.52 | % | 1.52 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.64 | %^ | 1.63 | % | 1.64 | % | 1.63 | %^ | 1.61 | % | 1.58 | % | 1.60 | % | ||||||||||||||
Net investment income(b) | 2.14 | %^ | 2.17 | % | 2.32 | % | 2.39 | %^ | 2.69 | % | 2.49 | % | 2.66 | % | ||||||||||||||
Portfolio turnover | 8 | % | 13 | % | 15 | % | 12 | % | 9 | % | 19 | % | 6 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 137 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Massachusetts Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, | $ 11.33 | $ 11.59 | $ 11.35 | $ 11.34 | $ 11.03 | $ 11.85 | $ 11.26 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .25 | .26 | .18 | .30 | .29 | .31 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | (.10 | ) | (.25 | ) | .26 | .02 | .32 | (.76 | ) | .61 | ||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .02 | – 0 | – | .52 | .20 | .62 | (.47 | ) | .92 | |||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.13 | ) | (.26 | ) | (.28 | ) | (.19 | ) | (.31 | ) | (.31 | ) | (.33 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.13 | ) | (.26 | ) | (.28 | ) | (.19 | ) | (.31 | ) | (.35 | ) | (.33 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.22 | $ 11.33 | $ 11.59 | $ 11.35 | $ 11.34 | $ 11.03 | $ 11.85 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .16 | % | .03 | % | 4.61 | % | 1.77 | % | 5.70 | % | (4.06 | )% | 8.24 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s | $40,567 | $45,530 | $54,482 | $53,570 | $54,108 | $64,298 | $70,889 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.52 | %^ | 1.52 | % | 1.52 | % | 1.52 | %^ | 1.52 | % | 1.52 | % | 1.52 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.62 | %^ | 1.63 | % | 1.63 | % | 1.63 | %^ | 1.61 | % | 1.59 | % | 1.59 | % | ||||||||||||||
Net investment income(b) | 2.14 | %^ | 2.17 | % | 2.29 | % | 2.39 | %^ | 2.67 | % | 2.49 | % | 2.64 | % | ||||||||||||||
Portfolio turnover | 8 | % | 13 | % | 15 | % | 12 | % | 9 | % | 19 | % | 6 | % |
See | footnote summary on pages 155-156. |
138 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Massachusetts Portfolio | ||||||||
Advisor Class | ||||||||
Six Months Ended November 30, 2017 (unaudited) | July 25, 2016(f) to May 31, 2017 | |||||||
Net asset value, beginning of period | $ 11.34 | $ 11.72 | ||||||
|
| |||||||
Income From Investment Operations | ||||||||
Net investment income(b)(c) | .18 | .30 | ||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.36 | ) | ||||
|
| |||||||
Net increase (decrease) in net asset value from operations | .08 | (.06 | ) | |||||
|
| |||||||
Less: Dividends | ||||||||
Dividends from net investment income | (.19 | ) | (.32 | ) | ||||
|
| |||||||
Net asset value, end of period | $ 11.23 | $ 11.34 | ||||||
|
| |||||||
Total Return | ||||||||
Total investment return based on net asset value(d) | .67 | % | (.48 | )% | ||||
Ratios/Supplemental Data | ||||||||
Net assets, end of period (000’s omitted) | $49,757 | $42,177 | ||||||
Ratio to average net assets of: | ||||||||
Expenses, net of waivers/reimbursements^ | .52 | % | .52 | % | ||||
Expenses, before waivers/reimbursements^ | .62 | % | .65 | % | ||||
Net investment income^(b) | 3.14 | % | 3.22 | % | ||||
Portfolio turnover rate | 8 | % | 13 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 139 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Minnesota Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, | $ 10.33 | $ 10.54 | $ 10.33 | $ 10.46 | $ 10.13 | $ 10.72 | $ 10.35 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .14 | .29 | .31 | .20 | .31 | .31 | .35 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.19 | ) | .22 | (.06 | ) | .35 | (.54 | ) | .38 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .04 | .10 | .53 | .14 | .66 | (.23 | ) | .73 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.29 | ) | (.32 | ) | (.21 | ) | (.33 | ) | (.32 | ) | (.36 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.02 | ) | – 0 | – | (.06 | ) | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.14 | ) | (.31 | ) | (.32 | ) | (.27 | ) | (.33 | ) | (.36 | ) | (.36 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.23 | $ 10.33 | $ 10.54 | $ 10.33 | $ 10.46 | $ 10.13 | $ 10.72 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .43 | % | 1.03 | % | 5.24 | % | 1.37 | % | 6.60 | % | (2.24 | )% | 7.17 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $65,439 | $67,611 | $67,380 | $70,197 | $69,595 | $72,221 | $85,035 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .85 | %^ | .85 | % | .86 | % | .88 | %^ | .90 | % | .90 | % | .91 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.12 | %^ | 1.11 | % | 1.08 | % | 1.08 | %^ | 1.09 | % | 1.02 | % | 1.02 | % | ||||||||||||||
Net investment income(b) | 2.78 | %^ | 2.77 | % | 2.94 | % | 2.90 | %^ | 3.04 | % | 2.93 | % | 3.29 | % | ||||||||||||||
Portfolio turnover | 9 | % | 12 | % | 10 | % | 11 | % | 19 | % | 17 | % | 14 | % |
See | footnote summary on pages 155-156. |
140 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Minnesota Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 10.33 | $ 10.55 | $ 10.33 | $ 10.45 | $ 10.12 | $ 10.71 | $ 10.35 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .11 | .21 | .23 | .15 | .24 | .24 | .28 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.19 | ) | .23 | (.05 | ) | .35 | (.54 | ) | .37 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .01 | .02 | .46 | .10 | .59 | (.30 | ) | .65 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.22 | ) | (.24 | ) | (.16 | ) | (.26 | ) | (.25 | ) | (.29 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.02 | ) | – 0 | – | (.06 | ) | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.24 | ) | (.24 | ) | (.22 | ) | (.26 | ) | (.29 | ) | (.29 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.23 | $ 10.33 | $ 10.55 | $ 10.33 | $ 10.45 | $ 10.12 | $ 10.71 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .05 | % | .18 | % | 4.55 | % | .98 | % | 5.86 | % | (2.92 | )% | 6.33 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $29 | $41 | $15 | $34 | $91 | $128 | $196 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.61 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.96 | %^ | 1.92 | % | 1.84 | % | 1.82 | %^ | 1.81 | % | 1.73 | % | 1.94 | % | ||||||||||||||
Net investment income(b) | 2.03 | %^ | 2.03 | % | 2.20 | % | 2.18 | %^ | 2.34 | % | 2.23 | % | 2.62 | % | ||||||||||||||
Portfolio turnover | 9 | % | 12 | % | 10 | % | 11 | % | 19 | % | 17 | % | 14 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 141 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Minnesota Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 10.34 | $ 10.55 | $ 10.34 | $ 10.47 | $ 10.14 | $ 10.73 | $ 10.36 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .11 | .21 | .23 | .15 | .24 | .24 | .27 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.18 | ) | .23 | (.06 | ) | .35 | (.54 | ) | .39 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .01 | .03 | .46 | .09 | .59 | (.30 | ) | .66 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.22 | ) | (.25 | ) | (.16 | ) | (.26 | ) | (.25 | ) | (.29 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | (.02 | ) | – 0 | – | (.06 | ) | – 0 | – | (.04 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.24 | ) | (.25 | ) | (.22 | ) | (.26 | ) | (.29 | ) | (.29 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.24 | $ 10.34 | $ 10.55 | $ 10.34 | $ 10.47 | $ 10.14 | $ 10.73 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .06 | % | .27 | % | 4.45 | % | .88 | % | 5.86 | % | (2.92 | )% | 6.41 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $9,724 | $10,984 | $16,178 | $15,680 | $16,126 | $19,064 | $22,445 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.60 | %^ | 1.60 | % | 1.61 | % | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.61 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.88 | %^ | 1.85 | % | 1.84 | % | 1.81 | %^ | 1.79 | % | 1.72 | % | 1.72 | % | ||||||||||||||
Net investment income(b) | 2.03 | %^ | 2.01 | % | 2.18 | % | 2.17 | %^ | 2.34 | % | 2.23 | % | 2.58 | % | ||||||||||||||
Portfolio turnover | 9 | % | 12 | % | 10 | % | 11 | % | 19 | % | 17 | % | 14 | % |
See | footnote summary on pages 155-156. |
142 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB New Jersey Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 9.78 | $ 9.93 | $ 9.67 | $ 9.76 | $ 9.55 | $ 10.22 | $ 9.71 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .16 | .32 | .32 | .22 | .35 | .33 | .37 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.03 | ) | (.14 | ) | .28 | (.08 | ) | .22 | (.66 | ) | .52 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .13 | .18 | .60 | .14 | .57 | (.33 | ) | .89 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.16 | ) | (.33 | ) | (.34 | ) | (.23 | ) | (.36 | ) | (.34 | ) | (.38 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.75 | $ 9.78 | $ 9.93 | $ 9.67 | $ 9.76 | $ 9.55 | $ 10.22 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | 1.30 | % | 1.82 | % | 6.27 | % | 1.43 | % | 6.04 | % | (3.30 | )% | 9.29 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $95,388 | $92,494 | $87,365 | $90,559 | $100,039 | $113,048 | $122,671 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | .82 | %^ | .82 | % | .82 | % | .85 | %^ | .87 | % | .87 | % | .87 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.00 | %^ | 1.01 | % | .99 | % | 1.00 | %^ | 1.00 | % | .95 | % | .96 | % | ||||||||||||||
Net investment income(b) | 3.19 | %^ | 3.29 | % | 3.33 | % | 3.42 | %^ | 3.62 | % | 3.34 | % | 3.70 | % | ||||||||||||||
Portfolio turnover | 5 | % | 8 | % | 14 | % | 2 | % | 16 | % | 30 | % | 14 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 143 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB New Jersey Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 9.78 | $ 9.93 | $ 9.67 | $ 9.76 | $ 9.55 | $ 10.22 | $ 9.71 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .25 | .25 | .18 | .28 | .26 | .30 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.03 | ) | (.14 | ) | .27 | (.09 | ) | .22 | (.66 | ) | .52 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .09 | .11 | .52 | .09 | .50 | (.40 | ) | .82 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.26 | ) | (.26 | ) | (.18 | ) | (.29 | ) | (.27 | ) | (.31 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.75 | $ 9.78 | $ 9.93 | $ 9.67 | $ 9.76 | $ 9.55 | $ 10.22 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .92 | % | 1.10 | % | 5.48 | % | .95 | % | 5.32 | % | (3.97 | )% | 8.53 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s | $191 | $214 | $282 | $365 | $466 | $978 | $1,997 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.57 | %^ | 1.57 | % | 1.57 | % | 1.57 | %^ | 1.57 | % | 1.57 | % | 1.57 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.75 | %^ | 1.76 | % | 1.78 | % | 1.73 | %^ | 1.71 | % | 1.65 | % | 1.68 | % | ||||||||||||||
Net investment income(b) | 2.43 | %^ | 2.53 | % | 2.58 | % | 2.70 | %^ | 2.94 | % | 2.62 | % | 3.02 | % | ||||||||||||||
Portfolio turnover | 5 | % | 8 | % | 14 | % | 2 | % | 16 | % | 30 | % | 14 | % |
See | footnote summary on pages 155-156. |
144 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB New Jersey Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months Ended November 30, 2017 (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 9.79 | $ 9.93 | $ 9.67 | $ 9.77 | $ 9.55 | $ 10.23 | $ 9.72 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .25 | .25 | .18 | .28 | .26 | .30 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.04 | ) | (.14 | ) | .27 | (.10 | ) | .23 | (.67 | ) | .52 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .08 | .11 | .52 | .08 | .51 | (.41 | ) | .82 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.25 | ) | (.26 | ) | (.18 | ) | (.29 | ) | (.27 | ) | (.31 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.75 | $ 9.79 | $ 9.93 | $ 9.67 | $ 9.77 | $ 9.55 | $ 10.23 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .81 | % | 1.15 | % | 5.47 | % | .84 | % | 5.41 | % | (4.07 | )% | 8.52 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $15,471 | $17,269 | $30,094 | $28,419 | $29,694 | $32,846 | $37,604 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.57 | %^ | 1.57 | % | 1.57 | % | 1.57 | %^ | 1.57 | % | 1.57 | % | 1.57 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.75 | %^ | 1.76 | % | 1.74 | % | 1.72 | %^ | 1.70 | % | 1.65 | % | 1.66 | % | ||||||||||||||
Net investment income(b) | 2.43 | %^ | 2.53 | % | 2.58 | % | 2.70 | %^ | 2.91 | % | 2.64 | % | 2.99 | % | ||||||||||||||
Portfolio turnover | 5 | % | 8 | % | 14 | % | 2 | % | 16 | % | 30 | % | 14 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 145 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Ohio Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 10.05 | $ 10.20 | $ 9.89 | $ 9.93 | $ 9.80 | $ 10.58 | $ 10.21 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .14 | .28 | .29 | .21 | .34 | .34 | .37 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.15 | ) | .32 | (.03 | ) | .14 | (.72 | ) | .38 | |||||||||||||||||
Contributions from Adviser | – 0 | – | .00 | (g) | .00 | – 0 | – | – 0 | – | – 0 | – | – 0 | – | |||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .04 | .13 | .61 | .18 | .48 | (.38 | ) | .75 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.14 | ) | (.28 | ) | (.30 | ) | (.22 | ) | (.35 | ) | (.35 | ) | (.38 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.05 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.14 | ) | (.28 | ) | (.30 | ) | (.22 | ) | (.35 | ) | (.40 | ) | (.38 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.95 | $ 10.05 | $ 10.20 | $ 9.89 | $ 9.93 | $ 9.80 | $ 10.58 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .37 | % | 1.29 | % | 6.29 | % | 1.76 | % | 5.04 | % | (3.77 | )% | 7.47 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $79,838 | $83,417 | $87,480 | $86,775 | $87,685 | $103,466 | $120,573 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | .80 | %^ | .80 | % | .80 | % | .83 | %^ | .85 | % | .86 | % | .86 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.05 | %^ | 1.03 | % | .99 | % | 1.01 | %^ | 1.02 | % | .96 | % | .97 | % | ||||||||||||||
Net investment income(b) | 2.76 | %^ | 2.76 | % | 2.90 | % | 3.11 | %^ | 3.50 | % | 3.27 | % | 3.55 | % | ||||||||||||||
Portfolio turnover | 3 | % | 5 | % | 13 | % | 14 | % | 17 | % | 26 | % | 27 | % |
See | footnote summary on pages 155-156. |
146 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Ohio Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 10.04 | $ 10.18 | $ 9.88 | $ 9.92 | $ 9.79 | $ 10.57 | $ 10.20 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .10 | .20 | .22 | .16 | .28 | .26 | .30 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.14 | ) | .31 | (.03 | ) | .14 | (.71 | ) | .38 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | – 0 | – | .06 | .53 | .13 | .42 | (.45 | ) | .68 | |||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.20 | ) | (.23 | ) | (.17 | ) | (.29 | ) | (.28 | ) | (.31 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.05 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.10 | ) | (.20 | ) | (.23 | ) | (.17 | ) | (.29 | ) | (.33 | ) | (.31 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.94 | $ 10.04 | $ 10.18 | $ 9.88 | $ 9.92 | $ 9.79 | $ 10.57 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | 0 | % | .65 | % | 5.40 | % | 1.28 | % | 4.32 | % | (4.43 | )% | 6.74 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $26 | $26 | $52 | $144 | $209 | $810 | $1,833 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | %^ | 1.55 | % | 1.56 | % | 1.55 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.84 | %^ | 1.85 | % | 1.75 | % | 1.75 | %^ | 1.72 | % | 1.66 | % | 1.70 | % | ||||||||||||||
Net investment income(b) | 2.02 | %^ | 2.00 | % | 2.18 | % | 2.39 | %^ | 2.85 | % | 2.57 | % | 2.90 | % | ||||||||||||||
Portfolio turnover | 3 | % | 5 | % | 13 | % | 14 | % | 17 | % | 26 | % | 27 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 147 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Ohio Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 10.04 | $ 10.19 | $ 9.88 | $ 9.92 | $ 9.80 | $ 10.58 | $ 10.20 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .10 | .20 | .22 | .16 | .27 | .27 | .30 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.15 | ) | .32 | (.03 | ) | .14 | (.73 | ) | .39 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | – 0 | – | .05 | .54 | .13 | .41 | (.46 | ) | .69 | |||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.10 | ) | (.20 | ) | (.23 | ) | (.17 | ) | (.29 | ) | (.27 | ) | (.31 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.05 | ) | – 0 | – | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.10 | ) | (.20 | ) | (.23 | ) | (.17 | ) | (.29 | ) | (.32 | ) | (.31 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 9.94 | $ 10.04 | $ 10.19 | $ 9.88 | $ 9.92 | $ 9.80 | $ 10.58 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | 0 | % | .53 | % | 5.50 | % | 1.28 | % | 4.21 | % | (4.44 | )% | 6.83 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $12,720 | $13,701 | $27,045 | $29,673 | $31,409 | $37,947 | $43,943 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements(e) | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | %^ | 1.55 | % | 1.56 | % | 1.56 | % | ||||||||||||||
Expenses, before waivers/reimbursements(e) | 1.80 | %^ | 1.78 | % | 1.74 | % | 1.74 | %^ | 1.72 | % | 1.66 | % | 1.67 | % | ||||||||||||||
Net investment income(b) | 2.01 | %^ | 2.00 | % | 2.15 | % | 2.39 | %^ | 2.81 | % | 2.58 | % | 2.86 | % | ||||||||||||||
Portfolio turnover | 3 | % | 5 | % | 13 | % | 14 | % | 17 | % | 26 | % | 27 | % |
See | footnote summary on pages 155-156. |
148 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Pennsylvania Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 10.54 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | $ 10.43 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .15 | .31 | .32 | .22 | .34 | .34 | .37 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.16 | ) | .28 | (.01 | ) | .35 | (.75 | ) | .53 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .05 | .15 | .60 | .21 | .69 | (.41 | ) | .90 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.15 | ) | (.31 | ) | (.32 | ) | (.22 | ) | (.34 | ) | (.34 | ) | (.37 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | (.09 | ) | (.01 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.15 | ) | (.31 | ) | (.32 | ) | (.22 | ) | (.37 | ) | (.43 | ) | (.38 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.44 | $ 10.54 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .50 | % | 1.41 | % | 5.83 | % | 1.99 | % | 6.93 | % | (3.82 | )% | 8.74 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $80,735 | $83,620 | $74,734 | $78,907 | $82,402 | $88,199 | $105,045 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | .85 | % ^ | .85 | % | .85 | % | .88 | % ^ | .90 | % | .92 | % | .95 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.06 | %^ | 1.05 | % | 1.03 | % | 1.04 | %^ | 1.07 | % | 1.01 | % | .99 | % | ||||||||||||||
Net investment income(b) | 2.88 | %^ | 2.91 | % | 3.02 | % | 3.10 | %^ | 3.29 | % | 3.23 | % | 3.44 | % | ||||||||||||||
Portfolio turnover rate | 14 | % | 24 | % | 11 | % | 2 | % | 25 | % | 17 | % | 20 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 149 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Pennsylvania Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 10.54 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | $ 10.43 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .11 | .23 | .24 | .17 | .27 | .27 | .29 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.09 | ) | (.16 | ) | .28 | (.01 | ) | .34 | (.75 | ) | .53 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .02 | .07 | .52 | .16 | .61 | (.48 | ) | .82 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.23 | ) | (.24 | ) | (.17 | ) | (.26 | ) | (.27 | ) | (.29 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | (.09 | ) | (.01 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.23 | ) | (.24 | ) | (.17 | ) | (.29 | ) | (.36 | ) | (.30 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.45 | $ 10.54 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .22 | % | .65 | % | 5.04 | % | 1.50 | % | 6.19 | % | (4.49 | )% | 7.99 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $46 | $62 | $74 | $168 | $340 | $901 | $1,699 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | %^ | 1.60 | % | 1.62 | % | 1.65 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.89 | %^ | 1.79 | % | 1.88 | % | 1.79 | %^ | 1.78 | % | 1.72 | % | 1.71 | % | ||||||||||||||
Net investment income(b) | 2.13 | %^ | 2.15 | % | 2.28 | % | 2.38 | %^ | 2.62 | % | 2.51 | % | 2.77 | % | ||||||||||||||
Portfolio turnover | 14 | % | 24 | % | 11 | % | 2 | % | 25 | % | 17 | % | 20 | % |
See | footnote summary on pages 155-156. |
150 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Pennsylvania Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of | $ 10.55 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | $ 10.44 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .11 | .23 | .24 | .17 | .26 | .27 | .29 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.15 | ) | .28 | (.01 | ) | .35 | (.75 | ) | .52 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .01 | .08 | .52 | .16 | .61 | (.48 | ) | .81 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.11 | ) | (.23 | ) | (.24 | ) | (.17 | ) | (.26 | ) | (.27 | ) | (.29 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.03 | ) | (.09 | ) | (.01 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.11 | ) | (.23 | ) | (.24 | ) | (.17 | ) | (.29 | ) | (.36 | ) | (.30 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 10.45 | $ 10.55 | $ 10.70 | $ 10.42 | $ 10.43 | $ 10.11 | $ 10.95 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .12 | % | .74 | % | 5.04 | % | 1.49 | % | 6.19 | % | (4.49 | )% | 7.88 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $10,333 | $11,237 | $22,356 | $21,635 | $22,057 | $23,789 | $28,555 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | %^ | 1.60 | % | 1.62 | % | 1.65 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.81 | %^ | 1.79 | % | 1.78 | % | 1.77 | %^ | 1.77 | % | 1.71 | % | 1.69 | % | ||||||||||||||
Net investment income(b) | 2.13 | %^ | 2.15 | % | 2.27 | % | 2.38 | %^ | 2.59 | % | 2.53 | % | 2.74 | % | ||||||||||||||
Portfolio turnover | 14 | % | 24 | % | 11 | % | 2 | % | 25 | % | 17 | % | 20 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 151 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Virginia Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.19 | $ 11.39 | $ 11.11 | $ 11.13 | $ 10.70 | $ 11.61 | $ 11.12 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .16 | .32 | .34 | .23 | .36 | .34 | .37 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.09 | ) | (.18 | ) | .29 | (.01 | ) | .44 | (.81 | ) | .56 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .07 | .14 | .63 | .22 | .80 | (.47 | ) | .93 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.17 | ) | (.34 | ) | (.35 | ) | (.24 | ) | (.37 | ) | (.35 | ) | (.38 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.09 | ) | (.06 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.17 | ) | (.34 | ) | (.35 | ) | (.24 | ) | (.37 | ) | (.44 | ) | (.44 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.09 | $ 11.19 | $ 11.39 | $ 11.11 | $ 11.13 | $ 10.70 | $ 11.61 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .58 | % | 1.23 | % | 5.77 | % | 1.94 | % | 7.60 | % | (4.21 | )% | 8.55 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $149,248 | $159,689 | $189,953 | $181,642 | $173,381 | $186,429 | $228,317 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | .80 | %^ | .80 | % | .80 | % | .80 | %^ | .80 | % | .77 | % | .72 | % | ||||||||||||||
Expenses, before waivers/reimbursements | .88 | %^ | .88 | % | .87 | % | .90 | %^ | .92 | % | .88 | % | .89 | % | ||||||||||||||
Net investment income(b) | 2.86 | %^ | 2.89 | % | 3.02 | % | 3.05 | %^ | 3.29 | % | 2.98 | % | 3.28 | % | ||||||||||||||
Portfolio turnover rate | 9 | % | 16 | % | 7 | % | 5 | % | 8 | % | 16 | % | 23 | % |
See | footnote summary on pages 155-156. |
152 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Virginia Portfolio | ||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.17 | $ 11.37 | $ 11.09 | $ 11.11 | $ 10.68 | $ 11.59 | $ 11.10 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .24 | .26 | .17 | .29 | .26 | .29 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.09 | ) | (.19 | ) | .29 | (.01 | ) | .43 | (.81 | ) | .56 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase | .03 | .05 | .55 | .16 | .72 | (.55 | ) | .85 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.25 | ) | (.27 | ) | (.18 | ) | (.29 | ) | (.27 | ) | (.30 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.09 | ) | (.06 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.12 | ) | (.25 | ) | (.27 | ) | (.18 | ) | (.29 | ) | (.36 | ) | (.36 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.08 | $ 11.17 | $ 11.37 | $ 11.09 | $ 11.11 | $ 10.68 | $ 11.59 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .30 | % | .48 | % | 4.99 | % | 1.46 | % | 6.87 | % | (4.88 | )% | 7.83 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $64 | $111 | $126 | $340 | $668 | $1,267 | $2,083 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.52 | %^ | 1.50 | % | 1.47 | % | 1.42 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.67 | %^ | 1.64 | % | 1.65 | % | 1.63 | %^ | 1.62 | % | 1.59 | % | 1.61 | % | ||||||||||||||
Net investment income(b) | 2.13 | %^ | 2.15 | % | 2.28 | % | 2.34 | %^ | 2.63 | % | 2.28 | % | 2.62 | % | ||||||||||||||
Portfolio turnover | 9 | % | 16 | % | 7 | % | 5 | % | 8 | % | 16 | % | 23 | % |
See | footnote summary on pages 155-156. |
abfunds.com | AB MUNICIPAL INCOME FUND II | 153 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Virginia Portfolio | ||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, beginning of period | $ 11.16 | $ 11.36 | $ 11.08 | $ 11.10 | $ 10.67 | $ 11.59 | $ 11.09 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Income From Investment Operations | ||||||||||||||||||||||||||||
Net investment income(b)(c) | .12 | .24 | .25 | .17 | .28 | .26 | .29 | |||||||||||||||||||||
Net realized and unrealized gain (loss) on investment transactions | (.10 | ) | (.19 | ) | .30 | (.01 | ) | .44 | (.82 | ) | .57 | |||||||||||||||||
|
| |||||||||||||||||||||||||||
Net increase (decrease) in net asset value from operations | .02 | .05 | .55 | .16 | .72 | (.56 | ) | .86 | ||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Less: Dividends and Distributions | ||||||||||||||||||||||||||||
Dividends from net investment income | (.12 | ) | (.25 | ) | (.27 | ) | (.18 | ) | (.29 | ) | (.27 | ) | (.30 | ) | ||||||||||||||
Distributions from net realized gain on investment transactions | – 0 | – | – 0 | – | – 0 | – | – 0 | – | – 0 | – | (.09 | ) | (.06 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Total dividends and distributions | (.12 | ) | (.25 | ) | (.27 | ) | (.18 | ) | (.29 | ) | (.36 | ) | (.36 | ) | ||||||||||||||
|
| |||||||||||||||||||||||||||
Net asset value, end of period | $ 11.06 | $ 11.16 | $ 11.36 | $ 11.08 | $ 11.10 | $ 10.67 | $ 11.59 | |||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total Return | ||||||||||||||||||||||||||||
Total investment return based on net asset value(d) | .21 | % | .48 | % | 5.00 | % | 1.46 | % | 6.88 | % | (4.97 | )% | 7.91 | % | ||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||||||||||||||
Net assets, end of period (000’s omitted) | $40,590 | $41,823 | $56,080 | $54,359 | $55,038 | $59,194 | $73,102 | |||||||||||||||||||||
Ratio to average net assets of: | ||||||||||||||||||||||||||||
Expenses, net of waivers/reimbursements | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.53 | %^ | 1.50 | % | 1.47 | % | 1.42 | % | ||||||||||||||
Expenses, before waivers/reimbursements | 1.63 | %^ | 1.63 | % | 1.62 | % | 1.63 | %^ | 1.62 | % | 1.59 | % | 1.59 | % | ||||||||||||||
Net investment income(b) | 2.12 | %^ | 2.15 | % | 2.28 | % | 2.34 | %^ | 2.60 | % | 2.29 | % | 2.59 | % | ||||||||||||||
Portfolio turnover rate | 9 | % | 16 | % | 7 | % | 5 | % | 8 | % | 16 | % | 23 | % |
See | footnote summary on pages 155-156. |
154 | AB MUNICIPAL INCOME FUND II | abfunds.com |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
AB Virginia Portfolio | ||||||||
Advisor Class | ||||||||
Six Months 2017 (unaudited) | July 25, 2016(f) to May 31, 2017 | |||||||
|
| |||||||
Net asset value, beginning of period | $ 11.19 | $ 11.49 | ||||||
|
| |||||||
Income From Investment Operations | ||||||||
Net investment income(b)(c) | .17 | .30 | ||||||
Net realized and unrealized gain (loss) on investment transactions | (.08 | ) | (.29 | ) | ||||
|
| |||||||
Net increase in net asset value from operations | .09 | .01 | ||||||
|
| |||||||
Less: Dividends | ||||||||
Dividends from net investment income | (.18 | ) | (.31 | ) | ||||
|
| |||||||
Net asset value, end of period | $ 11.10 | $ 11.19 | ||||||
|
| |||||||
Total Return | ||||||||
Total investment return based on net asset value(d) | .80 | % | .14 | % | ||||
Ratios/Supplemental Data | ||||||||
Net assets, end of period (000’s omitted) | $37,803 | $28,278 | ||||||
Ratio to average net assets of: | ||||||||
Expenses, net of waivers/reimbursements^ | .55 | % | .55 | % | ||||
Expenses, before waivers/reimbursements^ | .63 | % | .66 | % | ||||
Net investment income(b)^ | 3.11 | % | 3.24 | % | ||||
Portfolio turnover rate | 9 | % | 16 | % |
(a) | The Portfolio changed its fiscal year end from September 30 to May 31. |
(b) | Net of fees waived and expenses reimbursed by the Adviser. |
(c) | Based on average shares outstanding. |
(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) | The expense ratios presented below exclude interest expense: |
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
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| |||||||||||||||
AB Arizona Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Net of waivers | .78 | % | .78 | % | .78 | % | .78 | %^ | .78 | % | .78 | % | .78 | % | ||||||||||||||
Before waivers | .97 | % | .97 | % | .96 | % | .97 | %^ | .98 | % | .92 | % | .94 | % | ||||||||||||||
Class B | ||||||||||||||||||||||||||||
Net of waivers | 1.53 | % | 1.53 | % | 1.53 | % | 1.50 | %^ | 1.48 | % | 1.48 | % | 1.48 | % | ||||||||||||||
Before waivers | 1.73 | % | 1.73 | % | 1.71 | % | 1.70 | %^ | 1.68 | % | 1.63 | % | 1.66 | % | ||||||||||||||
Class C | ||||||||||||||||||||||||||||
Net of waivers | 1.53 | % | 1.53 | % | 1.53 | % | 1.50 | %^ | 1.48 | % | 1.48 | % | 1.48 | % | ||||||||||||||
Before waivers | 1.72 | % | 1.72 | % | 1.71 | % | 1.70 | %^ | 1.68 | % | 1.63 | % | 1.64 | % |
abfunds.com | AB MUNICIPAL INCOME FUND II | 155 |
FINANCIAL HIGHLIGHTS (continued)
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each Period
Six Months (unaudited) | Year Ended May 31, | October 1, 2014 to May 31, 2015(a) | Year Ended September 30, | |||||||||||||||||||||||||
2017 | 2016 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
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| |||||||||||||||
AB Minnesota Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Net of waivers | .85 | %^ | .85 | % | .85 | % | .88 | %^ | .90 | % | .90 | % | .90 | % | ||||||||||||||
Before waivers | 1.12 | %^ | 1.11 | % | 1.08 | % | 1.08 | %^ | 1.09 | % | 1.02 | % | 1.02 | % | ||||||||||||||
Class B | ||||||||||||||||||||||||||||
Net of waivers | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | % | ||||||||||||||
Before waivers | 1.96 | %^ | 1.92 | % | 1.84 | % | 1.82 | %^ | 1.81 | % | 1.73 | % | 1.94 | % | ||||||||||||||
Class C | ||||||||||||||||||||||||||||
Net of waivers | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | %^ | 1.60 | % | 1.60 | % | 1.60 | % | ||||||||||||||
Before waivers | 1.88 | %^ | 1.85 | % | 1.83 | % | 1.81 | %^ | 1.79 | % | 1.72 | % | 1.72 | % | ||||||||||||||
AB Ohio Portfolio | ||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||
Net of waivers | .80 | %^ | .80 | % | .80 | % | .83 | %^ | .85 | % | .85 | % | .85 | % | ||||||||||||||
Before waivers | 1.05 | %^ | 1.03 | % | .99 | % | 1.01 | %^ | 1.01 | % | .96 | % | .96 | % | ||||||||||||||
Class B | ||||||||||||||||||||||||||||
Net of waivers | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | % | ||||||||||||||
Before waivers | 1.84 | %^ | 1.85 | % | 1.75 | % | 1.75 | %^ | 1.72 | % | 1.66 | % | 1.69 | % | ||||||||||||||
Class C | ||||||||||||||||||||||||||||
Net of waivers | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | %^ | 1.55 | % | 1.55 | % | 1.55 | % | ||||||||||||||
Before waivers | 1.80 | %^ | 1.78 | % | 1.74 | % | 1.74 | %^ | 1.72 | % | 1.66 | % | 1.66 | % |
(f) | Commencement of distributions. |
(g) | Amount is less than $.005. |
^ | Annualized. |
See notes to financial statements.
156 | AB MUNICIPAL INCOME FUND II | abfunds.com |
BOARD OF TRUSTEES
Marshall C. Turner, Jr.(1) , Chairman
Michael J. Downey(1)
William H. Foulk, Jr.(1)
Nancy P. Jacklin(1)
Robert M. Keith, President and Chief Executive Officer
Carol C. McMullen(1)
Garry L. Moody(1)
Earl D. Weiner(1)
OFFICERS
Robert (“Guy”) B. Davidson III(2), Senior Vice President
Fred S. Cohen(2), Vice President
Terrance T. Hults(2), Vice President
Matthew J. Norton(2), Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Phyllis J. Clarke, Controller
Vincent S. Noto, Chief Compliance Officer
Custodian and Accounting Agent State Street Bank and Trust Company
Principal Underwriter AllianceBernstein Investments, Inc.
Legal Counsel Seward & Kissel LLP | Independent Registered Public Accounting Firm Ernst & Young LLP
Transfer Agent AllianceBernstein Investor |
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 Portfolios’ portfolios are made by the Municipal Bond Investment Team. Fred S. Cohen, Robert “Guy” B. Davidson III, Terrance T. Hults and Matthew J. Norton are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolios’ portfolios. |
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Information Regarding the Review and Approval of the Advisory Agreement in Respect of Each Fund
The disinterested trustees (the “directors”) of AB Municipal Income Fund II (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser in respect of each of the portfolios listed below (each, a “Fund” and collectively, the “Funds”) at a meeting held on October 31-November 2, 2017 (the “Meeting”):
• | AB Arizona Portfolio |
• | AB Massachusetts Portfolio |
• | AB Minnesota Portfolio |
• | AB New Jersey Portfolio |
• | AB Ohio Portfolio |
• | AB Pennsylvania Portfolio |
• | AB Virginia Portfolio |
Prior to approval of the continuance of the Advisory Agreement in respect of each Fund, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed an independent evaluation prepared by the Company’s Senior Officer (who is also the Company’s Independent Compliance Officer), who acted as their independent fee consultant, of the reasonableness of the advisory fee in respect of each Fund, in which the Senior Officer concluded that the contractual fee for each Fund was reasonable. The directors also discussed the proposed continuances in private sessions with counsel and the Company’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Funds 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 Funds.
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
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the advisory fee in respect of each Fund. 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 each Fund and the overall arrangements between each 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 has dedicated to performing services for each Fund. The directors noted that the Adviser from time to time reviews each Fund’s investment strategies and from time to time proposes changes intended to improve a Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of each Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that each Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to such 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 in respect of a Fund, result in a higher rate of total compensation from such Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Company’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of each 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 each of the Funds 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 each Fund to the Adviser for calendar years 2015 and 2016 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Company’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all
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revenues and expenses of the Adviser’s relationships with the Funds, including those relating to its subsidiaries that provide transfer agency and distribution services to the Funds. 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 relationships with the Funds before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with each Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Funds, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Funds’ principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Funds’ shares; and transfer agency fees paid by the Funds 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 Funds.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for each Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an analytical service that is not affiliated with the Adviser (the “15(c) service provider”), showing the performance of the Class A Shares of each 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 of each Fund against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2017 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that each Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by each Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates paid by other funds in the same category as such 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 each Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
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The Adviser informed the directors that there were no institutional products managed by it that have a substantially similar investment style to any of the Funds.
The directors also considered the total expense ratio of the Class A shares of each Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The expense ratio of each Fund was based on the Fund’s latest fiscal year and the directors considered the effects of any fee waivers and/or expense reimbursements as a result of the Adviser’s expense cap. The directors noted that it was likely that the expense ratios of some of the other funds in each 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 Funds by others. Based on their review, the directors concluded that the expense ratios for AB Arizona Portfolio, AB Massachusetts Portfolio, AB New Jersey Portfolio, AB Ohio Portfolio and AB Virginia Portfolio were acceptable. The directors noted that the expense ratio for each of AB Minnesota Portfolio and AB Pennsylvania Portfolio was above the median. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that each Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Funds contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Funds, 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 Funds’ shareholders would benefit from a sharing of economies of scale in the event a Fund’s net assets exceed a breakpoint in the future.
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This page is not part of the Shareholder Report or the Financial Statements.
AB FAMILY OF FUNDS
US EQUITY
US CORE
Core Opportunities Fund
FlexFee™ US Thematic Portfolio
Select US Equity Portfolio
US GROWTH
Concentrated Growth Fund
Discovery Growth Fund
FlexFee™ Large Cap Growth Portfolio
Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
US VALUE
Discovery Value Fund
Equity Income Fund
Relative Value Fund
Small Cap Value Portfolio
Value Fund
INTERNATIONAL/ GLOBAL EQUITY
INTERNATIONAL/ GLOBAL CORE
Global Core Equity Portfolio
International Portfolio
International Strategic Core Portfolio
Sustainable Global Thematic Fund
Tax-Managed International Portfolio
Tax-Managed Wealth Appreciation Strategy
Wealth Appreciation Strategy
INTERNATIONAL/ GLOBAL GROWTH
Concentrated International Growth Portfolio
Sustainable International Thematic Fund1
INTERNATIONAL/ GLOBAL EQUITY (continued)
INTERNATIONAL/ GLOBAL VALUE
Asia ex-Japan 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 Portfolio
National Portfolio
Arizona Portfolio
California Portfolio
Massachusetts Portfolio
Minnesota Portfolio
New Jersey Portfolio
New York Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
TAXABLE
Bond Inflation Strategy
FlexFee™ International Bond Portfolio
Global Bond Fund
High Income Fund
High Yield Portfolio
Income Fund
Intermediate Bond Portfolio
Limited Duration High Income Portfolio
Short Duration Portfolio
ALTERNATIVES
All Market Real Return Portfolio
Credit Long/Short Portfolio
Global Real Estate Investment Fund
Select US Long/Short Portfolio
Unconstrained Bond Fund
MULTI-ASSET
All Market Income Portfolio
All Market Total Return Portfolio1
Conservative Wealth Strategy
Emerging Markets Multi-Asset Portfolio
Global Risk Allocation Fund
Tax-Managed All Market Income Portfolio1
TARGET-DATE
Multi-Manager Select Retirement Allocation Fund
Multi-Manager Select 2010 Fund
Multi-Manager Select 2015 Fund
Multi-Manager Select 2020 Fund
Multi-Manager Select 2025 Fund
Multi-Manager Select 2030 Fund
Multi-Manager Select 2035 Fund
Multi-Manager Select 2040 Fund
Multi-Manager Select 2045 Fund
Multi-Manager Select 2050 Fund
Multi-Manager Select 2055 Fund
CLOSED-END FUNDS
Alliance California Municipal Income Fund
AllianceBernstein Global High Income Fund
AllianceBernstein National Municipal Income Fund
We also offer Government Money Market Portfolio1, which serves as the money market fund exchange vehicle for the AB mutual funds. An investment in Government Money Market Portfolio is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
1 | Prior to April 17, 2017, Tax-Managed All Market Income Portfolio was named Tax-Managed Balanced Wealth Strategy; prior to April 24, 2017, All Market Total Return Portfolio was named Balanced Wealth Strategy; prior to November 10, 2017, Government Money Market Portfolio was named Government Exchange Reserves; prior to January 8, 2018, Sustainable International Thematic Fund was named International Growth Fund. |
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AB MUNICIPAL INCOME FUND II
1345 Avenue of the Americas
New York, NY 10105
800 221 5672
MIFII-0152-1117
ITEM 2. | CODE OF ETHICS. |
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the registrant.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the registrant.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the registrant.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable to the registrant.
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.
ITEM 11. | CONTROLS AND PROCEDURES. |
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no changes in the registrant’s internal controls over financial reporting that occurred during the second fiscal quarter of the period that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
ITEM 12. | EXHIBITS. |
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. | DESCRIPTION OF EXHIBIT | |
12 (b) (1) | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (b) (2) | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12 (c) | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AB Municipal Income Fund II, Inc.
By: | /s/ Robert M. Keith | |
Robert M. Keith | ||
President | ||
Date: | January 26, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Robert M. Keith | |
Robert M. Keith | ||
President | ||
Date: | January 26, 2018 |
By: | /s/ Joseph J. Mantineo | |
Joseph J. Mantineo | ||
Treasurer and Chief Financial Officer | ||
Date: | January 26, 2018 |