AB Bond Fund, Inc. - AB Inflation Strategies
PROSPECTUS | JANUARY 31, 2024
The AB Inflation Strategies
(Shares Offered—Exchange Ticker Symbol)
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AB Bond Inflation Strategy
(Class
A–ABNAX; Class C–ABNCX; Advisor Class–ABNYX; Class R–ABNRX;
Class K–ABNKX; Class I–ANBIX; Class Z–ABNZX;
Class 1–ABNOX; Class 2–ABNTX) |
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AB Municipal Bond Inflation Strategy
(Class
A–AUNAX; Class C–AUNCX; Advisor Class–AUNYX; Class 1–AUNOX;
Class 2–AUNTX) |
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AB All Market Real Return Portfolio
(Class
A–AMTAX; Class C–ACMTX; Advisor Class–AMTYX; Class R–AMTRX;
Class K–AMTKX; Class I–AMTIX; Class Z–AMTZX; Class
1–AMTOX) |
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The
Securities and Exchange Commission and the Commodity Futures Trading Commission
have not approved or disapproved these securities or passed upon the adequacy of
this Prospectus. Any representation to the contrary is a criminal offense.
Investment
Products Offered
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Ø Are Not
FDIC Insured
Ø May
Lose Value
Ø Are Not Bank Guaranteed |
TABLE
OF CONTENTS
SUMMARY
INFORMATION
AB
Bond Inflation Strategy
INVESTMENT
OBJECTIVE
The
Fund’s investment objective is to maximize real return without assuming what the
Adviser considers to be undue risk.
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. You may be required to pay
commissions and/or other forms of compensation to a broker for transactions in
Advisor Class shares, which are not reflected in the tables or the examples
below. You may
qualify for sales charge reductions if you and members of your family invest, or
agree to invest in the future, at least $100,000 in AB Mutual
Funds. More information about these and other discounts is
available from your financial intermediary and in Investing in the Funds—Sales
Charge Reduction Programs for Class A Shares on page 39 of this Prospectus,
in Appendix C—Financial Intermediary Waivers of this Prospectus and in Purchase
of Shares—Sales Charge Reduction Programs for Class A Shares on page 116 of
the Fund’s Statement of Additional Information (“SAI”).
Shareholder Fees (fees paid directly from your
investment)
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Class A Shares |
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Class C Shares |
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Advisor Class Shares |
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Class R, K, I, Z, 1 and
2 Shares(c) |
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
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2.25% |
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None |
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None |
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None |
Maximum
Deferred Sales Charge (Load)
(as
a percentage of offering price or redemption proceeds, whichever is
lower) |
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None(a) |
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1.00%(b) |
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None |
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None |
Exchange
Fee |
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None |
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None |
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None |
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None |
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
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Class A |
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Class C |
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Advisor Class |
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Class R(c) |
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Class K(c) |
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Class I |
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Class Z |
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Class 1 |
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Class 2 |
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Management
Fees |
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.50% |
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.50% |
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.50% |
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.50% |
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.50% |
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.50% |
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.50% |
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.50% |
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.50% |
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Distribution
and/or Service (12b-1) Fees |
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.25% |
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1.00% |
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None |
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.50% |
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.25% |
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None |
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None |
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.10% |
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None |
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Other
Expenses: |
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Transfer
Agent |
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.13% |
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.13% |
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.13% |
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.26% |
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.29% |
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.12% |
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.02% |
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.02% |
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.02% |
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Interest
Expense |
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.11% |
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.12% |
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.12% |
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.11% |
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.11% |
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.11% |
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.10% |
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.11% |
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.11% |
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Other
Expenses(d) |
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.10% |
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.10% |
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.10% |
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.10% |
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.10% |
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.10% |
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.12% |
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.10% |
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.10% |
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Total
Other Expenses |
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.34% |
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.35% |
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.35% |
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.47% |
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.50% |
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.33% |
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.24% |
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.23% |
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.23% |
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Total
Annual Fund Operating Expenses Including Interest Expense Before
Waiver |
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1.09% |
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1.85% |
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.85% |
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1.47% |
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1.25% |
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.83% |
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.74% |
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.83% |
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.73% |
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Fee
Waiver and/or Expense Reimbursement(e) |
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(.23)% |
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(.23)% |
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(.23)% |
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(.36)% |
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(.39)% |
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(.22)% |
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(.14)% |
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(.12)% |
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(.12)% |
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Total
Annual Fund Operating Expenses Including Interest Expense After Fee Waiver
and/or Expense Reimbursement(f) |
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.86% |
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1.62% |
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.62% |
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1.11% |
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.86% |
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.61% |
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.60% |
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.71% |
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.61% |
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(a) |
Purchases of Class A shares in amounts of $500,000 or
more, or by certain group retirement plans, may be subject to a 1%,
18-month contingent deferred sales charge (“CDSC”), which may be subject
to waiver in certain
circumstances. |
(b) |
For Class C shares,
the CDSC is 0% after the first year. Class C shares automatically
convert to Class A shares after eight
years. |
(c) |
Class
R shares and Class K shares are no longer offered to new investors.
Outstanding Class R shares and Class K shares will be liquidated on or
about May 21, 2024. |
(d) |
“Other
Expenses” includes acquired fund fees and expenses totaling less than
.01%. |
(e) |
The
Adviser has contractually agreed to waive its management fees and/or bear
certain expenses of the Fund until January 31, 2025 to the extent
necessary to prevent total Fund operating expenses (excluding
extraordinary expenses, interest expense, and acquired fund fees and
expenses other than the advisory fees of any AB Funds in which the
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4
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Fund
may invest), on an annualized basis, from exceeding .75%, 1.50%, .50%,
1.00%, .75%, .50%, .50%, .60% and .50% of average daily net assets,
respectively, for Class A, Class C, Advisor Class, Class R,
Class K, Class I, Class Z, Class 1 and Class 2 shares. In
connection with the Fund’s investments in AB Government Money Market
Portfolio (the “Money Market Portfolio”) (except for the investment of any
cash collateral from securities lending), the Adviser has contractually
agreed to waive its management fee from the Fund and/or reimburse other
expenses of the Fund in an amount equal to the Fund’s pro rata share of
the Money Market Portfolio’s effective management fee. Each of the
agreements will remain in effect until January 31, 2025 and
may only be terminated or changed with the consent of the Fund’s Board of
Directors. In addition, each of the agreements will be automatically
extended for one-year terms unless the Adviser provides notice of
termination to the Fund at least 60 days prior to the end of the period.
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(f) |
If
interest expense were excluded, net expenses would be as follows:
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Class A |
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Class C |
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Advisor Class |
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Class R |
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Class K |
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Class I |
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Class Z |
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Class 1 |
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Class 2 |
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.75% |
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1.50% |
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.50% |
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1.00% |
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.75% |
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.50% |
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.50% |
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.60% |
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.50% |
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Examples
The
Examples are intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Examples assume that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year, that the Fund’s operating expenses stay
the same and that any fee waiver and/or expense limitation is in effect for only
the first year. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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Class A |
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Class C |
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Advisor Class |
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Class R |
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Class K |
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Class I |
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Class Z |
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Class 1 |
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Class 2 |
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After
1 Year |
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$ |
311 |
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$ |
265 |
* |
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$ |
63 |
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$ |
113 |
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$ |
88 |
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$ |
62 |
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$ |
61 |
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$ |
73 |
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$ |
62 |
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After
3 Years |
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$ |
541 |
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$ |
559 |
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$ |
248 |
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$ |
429 |
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$ |
358 |
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$ |
243 |
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$ |
222 |
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$ |
253 |
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$ |
221 |
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After
5 Years |
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$ |
791 |
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$ |
979 |
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$ |
449 |
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$ |
769 |
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$ |
649 |
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$ |
439 |
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$ |
398 |
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$ |
449 |
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$ |
394 |
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After
10 Years |
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$ |
1,504 |
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$ |
1,951 |
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$ |
1,028 |
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$ |
1,727 |
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$ |
1,477 |
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$ |
1,005 |
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$ |
905 |
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$ |
1,014 |
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$ |
895 |
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* |
If
you did not redeem your shares at the end of the period, your expenses
would be decreased by approximately $100.
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Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys or sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction costs, which are not
reflected in the Annual Fund Operating Expenses or in the Examples, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 125% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES
The
Fund seeks real return. Real return is the rate of return after adjusting for
inflation.
The
Fund pursues its objective by investing principally in inflation-indexed
securities (such as Treasury Inflation-Protected Securities (“TIPS”) or
inflation-indexed securities from issuers other than the U.S. Treasury) or by
gaining inflation protection through derivatives transactions, such as inflation
(CPI) swaps or total return swaps linked to TIPS. In deciding whether to
purchase inflation-indexed securities or use inflation-linked derivatives
transactions, the Adviser considers the relative costs and efficiency of each
method. In addition, in seeking to maximize real return, the Fund may also
invest in other fixed-income investments, such as U.S. and non-U.S. Government
securities, corporate fixed-income securities and mortgage-related securities,
as well as derivatives linked to such securities. Under normal circumstances,
the Fund invests at least 80% of its net assets in fixed-income securities.
While the Fund expects to invest principally in investment-grade securities, it
may invest up to 15% of its total assets in fixed-income securities rated BB or
B or the equivalent by at least one nationally recognized statistical rating
organization (or deemed by the Adviser to be of comparable credit quality),
which are not investment-grade (“junk bonds”).
Inflation-indexed
securities are fixed-income securities structured to provide protection against
inflation. Their principal value and/or the interest paid on them are adjusted
to reflect official inflation measures. The inflation measure for TIPS is the
Consumer Price Index for Urban Consumers, or the CPI. The Fund may also invest
in other inflation-indexed securities, issued by both U.S. and non-U.S. issuers,
and in derivative instruments linked to these securities.
The
Fund may invest in derivatives, such as options, futures contracts, forwards, or
swaps. The Fund intends to use leverage for investment purposes. To do this, the
Fund expects to enter into (i) reverse repurchase agreement transactions
and use the cash made available from these transactions to make additional
investments in fixed-income securities in accordance with the Fund’s investment
policies and (ii) total return swaps. In determining when and to what
extent to employ leverage or enter into derivatives transactions, the Adviser
considers factors such as the relative risks and returns expected of potential
investments and the costs of such transactions. The Adviser considers the impact
of reverse repurchase agreements, swaps and other derivatives in making its
assessments of the Fund’s risks. The resulting exposures to markets, sectors,
issuers or specific securities will be continuously monitored by the Adviser.
5
The
Adviser selects securities for purchase or sale based on its assessment of the
securities’ risk and return characteristics as well as the securities’ impact on
the overall risk and return characteristics of the Fund. In making this
assessment, the Adviser takes into account various factors, including the credit
quality and sensitivity to interest rates of the securities under consideration
and of the Fund’s other holdings.
The
Fund may also invest in loan participations and assignments, structured
securities, mortgage-backed and other asset-backed securities, variable,
floating, and inverse floating-rate instruments, and preferred stock, and may
use other investment techniques.
The
Fund may invest in fixed-income securities of any maturity and duration. If the
rating of a fixed-income security falls below investment-grade, the Fund will
not be obligated to sell the security and may continue to hold it if, in the
Adviser’s opinion, the investment is appropriate under the circumstances.
PRINCIPAL
RISKS
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Market Risk: The value of the Fund’s
assets will fluctuate as the market or markets in which the Fund invests
fluctuate. The value of the Fund’s investments may decline, sometimes
rapidly and unpredictably, simply because of economic changes or other
events, including public health crises (including the occurrence of a
contagious disease or illness) and regional and global conflicts, that
affect large portions of the market.
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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. |
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Interest Rate Risk: Changes in interest
rates will affect the value of investments in fixed-income securities.
When interest rates rise, the value of existing investments in
fixed-income securities tends to fall and this decrease in value may not
be offset by higher income from new investments. Interest rate risk is
generally greater for fixed-income securities with longer maturities or
durations. The Fund may be subject to a greater risk of rising interest
rates than would normally be the case due to the recent end of a period of
historically low rates and the effects of potential central bank monetary
policy, and government fiscal policy, initiatives and market reactions to
those initiatives. |
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Duration Risk: Duration is a measure that
relates the expected price volatility of a fixed-income security to
changes in interest rates. The duration of a fixed-income security may be
shorter than or equal to full maturity of a fixed-income security.
Fixed-income securities with longer durations have more risk and will
decrease in price as interest rates rise.
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• |
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Inflation Risk: This is the risk that the
value of assets or income from investments will be less in the future as
inflation decreases the value of money. As inflation increases, the value
of the Fund’s assets can decline as can the value of the Fund’s
distributions. This risk is significantly greater for fixed-income
securities with longer maturities. Although the Fund invests principally
in inflation-indexed securities, the value of its securities may be
vulnerable to changes in expectations of inflation or interest rates.
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• |
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Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. A short position in a
derivative instrument involves the risk of a theoretically unlimited
increase in the value of the underlying asset, reference rate or index,
which could cause the Fund to suffer a potentially unlimited loss.
Derivatives, especially over-the-counter derivatives, are also subject to
counterparty risk, which is the risk that the counterparty (the party on
the other side of the transaction) on a derivative transaction will be
unable or unwilling to honor its contractual obligations to the Fund.
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• |
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Foreign (Non-U.S.) Risk: Investments in
securities of non-U.S. issuers may involve more risk than those of U.S.
issuers. These securities may fluctuate more widely in price and may be
more difficult to trade due to adverse market, economic, political,
regulatory or other factors. |
• |
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Currency Risk: Fluctuations in currency
exchange rates may negatively affect the value of the Fund’s investments
or reduce its returns. |
• |
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Mortgage-Related and/or Other Asset-Backed
Securities Risk: Investments in mortgage-related and other
asset-backed securities are subject to certain additional risks. The value
of these securities may be particularly sensitive to changes in interest
rates. These risks include “extension risk”, which is the risk that, in
periods of rising interest rates, issuers may delay the payment of
principal, and “prepayment risk”, which is the risk that in periods of
falling interest rates, issuers may pay principal sooner than expected,
exposing the Fund to a lower rate of return upon reinvestment of
principal. Mortgage-backed securities offered by non-governmental issuers
and other asset-backed securities may be subject to other risks, such as
higher rates of default in the mortgages or assets backing the securities
or risks associated with the nature and servicing of mortgages or assets
backing the securities. |
6
• |
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Leverage Risk: To the extent the Fund
uses leveraging techniques, its net asset value (“NAV”) may be more
volatile because leverage tends to exaggerate the effect of changes in
interest rates and any increase or decrease in the value of the Fund’s
investments. |
• |
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Illiquid Investments Risk: Illiquid
investments risk exists when certain investments are or become difficult
to purchase or sell. Difficulty in selling such investments may result in
sales at disadvantageous prices affecting the value of your investment in
the Fund. Causes of illiquid investments risk may include low trading
volumes, large positions and heavy redemptions of Fund shares. Illiquid
investments risk may be higher in a rising interest rate environment, when
the value and liquidity of fixed-income securities generally go down.
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• |
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Active Trading Risk: The Fund expects to
engage in active and frequent trading of its portfolio securities and its
portfolio turnover rate may greatly exceed 100%. A higher rate of
portfolio turnover increases transaction costs, which may negatively
affect the Fund’s return. In addition, a high rate of portfolio turnover
may result in substantial short-term gains, which may have adverse tax
consequences for Fund shareholders.
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• |
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Management Risk: The Fund is subject to
management risk because it is an actively-managed investment fund. The
Adviser will apply its investment techniques and risk analyses in making
investment decisions, but there is no guarantee that its techniques will
produce the intended results. Some of these techniques may incorporate, or
rely upon, quantitative models, but there is no guarantee that these
models will generate accurate forecasts, reduce risk or otherwise perform
as expected. |
As
with all investments, you may lose money by investing in the Fund.
BAR
CHART AND PERFORMANCE INFORMATION
The
bar chart and performance information provide an indication of the historical
risk of an investment in the Fund by showing:
• |
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how the Fund’s
performance changed from year to year over ten years;
and |
• |
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how the Fund’s average
annual returns for one, five and ten years compare to those of a
broad-based securities market
index. |
You
may obtain updated performance information on the website at www.abfunds.com (click on
“Investments—Mutual Funds”) or, for Class 1 and Class 2 shares, at www.bernstein.com (click on
“Investments—Mutual Fund Performance at a Glance”).
The
Fund’s past performance before and after taxes, of course, does not necessarily
indicate how it will perform in the future.
Bar
Chart
The
annual returns in the bar chart are for the Fund’s Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was
up 7.40%, 2nd quarter, 2020; and
Worst Quarter was
down -5.00%, 1st quarter, 2020.
7
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2023)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Class A* |
|
Return Before Taxes |
|
|
2.47% |
|
|
|
3.21% |
|
|
|
2.30% |
|
| |
|
|
|
|
Return After Taxes on Distributions |
|
|
0.71% |
|
|
|
1.70% |
|
|
|
1.16% |
|
| |
|
|
|
|
Return
After Taxes on Distributions and Sale of Fund Shares |
|
|
1.44% |
|
|
|
1.85% |
|
|
|
1.28% |
|
Class C |
|
Return
Before Taxes |
|
|
3.04% |
|
|
|
2.89% |
|
|
|
1.77% |
|
Advisor Class |
|
Return
Before Taxes |
|
|
5.11% |
|
|
|
3.94% |
|
|
|
2.80% |
|
Class R |
|
Return
Before Taxes |
|
|
4.55% |
|
|
|
3.42% |
|
|
|
2.30% |
|
Class K |
|
Return
Before Taxes |
|
|
4.85% |
|
|
|
3.66% |
|
|
|
2.54% |
|
Class I |
|
Return
Before Taxes |
|
|
5.20% |
|
|
|
3.95% |
|
|
|
2.80% |
|
Class Z** |
|
Return
Before Taxes |
|
|
5.15% |
|
|
|
3.95% |
|
|
|
2.80% |
|
Class 1 |
|
Return
Before Taxes |
|
|
5.07% |
|
|
|
3.85% |
|
|
|
2.70% |
|
Class 2 |
|
Return
Before Taxes |
|
|
5.07% |
|
|
|
3.93% |
|
|
|
2.79% |
|
Bloomberg
TIPS 1-10 Year Index
(reflects
no deduction for fees, taxes or expenses) |
|
|
4.36% |
|
|
|
3.43% |
|
|
|
2.31% |
|
|
– |
Are shown for Class A
shares only and will vary for the other Classes of shares because these
Classes have different expense
ratios; |
|
– |
Are an estimate, which is
based on the highest historical individual federal marginal income tax
rates, and do not reflect the impact of state and local
taxes; actual after-tax
returns depend on an individual investor’s tax situation and are likely to
differ from those shown; and |
|
– |
Are not relevant to
investors who hold fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement
accounts. |
** |
Inception
date for Class Z shares is 12/11/2014. The performance
of the Fund’s Class Z shares for periods prior to this share class’s
inception is the performance of the Fund’s Class A shares, adjusted
to reflect the expenses of the Class Z shares.
|
INVESTMENT
ADVISER
AllianceBernstein
L.P. is the investment adviser for the Fund.
PORTFOLIO
MANAGERS
The
following table lists the persons responsible for day-to-day management of the
Fund’s portfolio:
|
|
|
| |
Employee |
|
Length of Service |
|
Title |
Michael Canter |
|
Since 2016 |
|
Senior Vice President of the Adviser |
|
| |
Michael Rosborough |
|
Since February 2023 |
|
Senior Vice President of the Adviser |
|
| |
Serena Zhou |
|
Since January 2024 |
|
Senior Vice President of the
Adviser |
ADDITIONAL
INFORMATION
For
important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page 19 in this Prospectus.
8
AB
Municipal Bond Inflation Strategy
INVESTMENT
OBJECTIVE
The
Fund’s investment objective is to maximize real after‑tax return for investors
subject to federal income taxes, without undue risk to
principal.
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. You may be required to pay
commissions and/or other forms of compensation to a broker for transactions in
Advisor Class shares, which are not reflected in the tables or
the examples below. You may
qualify for sales charge reductions if you and members of your family invest, or
agree to invest in the future, at least $100,000 in AB Mutual
Funds. More information about these and other discounts is
available from your financial intermediary and in Investing in the Funds—Sales
Charge Reduction Programs for Class A Shares on page 39 of this Prospectus,
in Appendix C—Financial Intermediary Waivers of this Prospectus and in Purchase
of Shares—Sales Charge Reduction Programs for Class A Shares on page 116 of
the Fund’s Statement of Additional Information
(“SAI”).
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
|
| |
|
|
Class A Shares |
|
Class C Shares |
|
Advisor Class Shares |
|
Class 1 and 2 Shares |
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
3.00% |
|
None |
|
None |
|
None |
Maximum
Deferred Sales Charge (Load)
(as
a percentage of offering price or redemption proceeds, whichever is
lower) |
|
None(a) |
|
1.00%(b) |
|
None |
|
None |
Exchange
Fee |
|
None |
|
None |
|
None |
|
None |
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Class A |
|
|
Class C |
|
|
Advisor Class |
|
|
Class 1 |
|
|
Class 2 |
|
Management
Fees |
|
|
.50% |
|
|
|
.50% |
|
|
|
.50% |
|
|
|
.50% |
|
|
|
.50% |
|
|
|
|
|
| |
Distribution
and/or Service (12b‑1) Fees |
|
|
.25% |
|
|
|
1.00% |
|
|
|
None |
|
|
|
.10% |
|
|
|
None |
|
|
|
|
|
| |
Other
Expenses: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Transfer
Agent |
|
|
.05% |
|
|
|
.05% |
|
|
|
.05% |
|
|
|
.01% |
|
|
|
.01% |
|
Interest
Expense |
|
|
.00% |
(c) |
|
|
.01% |
|
|
|
.00% |
(c) |
|
|
.01% |
|
|
|
.01% |
|
Other
Expenses |
|
|
.05% |
|
|
|
.04% |
|
|
|
.05% |
|
|
|
.04% |
|
|
|
.04% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Expenses |
|
|
.10% |
|
|
|
.10% |
|
|
|
.10% |
|
|
|
.06% |
|
|
|
.06% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses Including Interest Expense Before
Waiver |
|
|
.85% |
|
|
|
1.60% |
|
|
|
.60% |
|
|
|
.66% |
|
|
|
.56% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee
Waiver and/or Expense Reimbursement(d) |
|
|
(.10)% |
|
|
|
(.09)% |
|
|
|
(.10)% |
|
|
|
(.05)% |
|
|
|
(.05)% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses Including Interest Expense After Fee Waiver
and/or Expense Reimbursement(e) |
|
|
.75% |
|
|
|
1.51% |
|
|
|
.50% |
|
|
|
.61% |
|
|
|
.51% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchases of Class A shares in amounts of $500,000 or
more, or by certain group retirement plans, may be subject to a 1%, 1‑year
contingent deferred sales charge (“CDSC”), which may be subject to waiver
in certain
circumstances. |
(b) |
For Class C shares,
the CDSC is 0% after the first year. Class C shares automatically
convert to Class A shares after eight
years. |
(c) |
Amount
is less than .005%. |
(d) |
The
Adviser has contractually agreed to waive its management fees and/or bear
certain expenses of the Fund until January 31, 2025 to the extent
necessary to prevent total Fund operating expenses (excluding
extraordinary expenses, interest expense, and acquired fund fees and
expenses other than the advisory fees of any AB Funds in which the Fund
may invest), on an annualized basis, from exceeding .75%, 1.50%, .50%,
.60% and .50% of average daily net assets, respectively, for Class A,
Class C, Advisor Class, Class 1 and Class 2 shares.
The agreement will remain in effect until January 31, 2025 and
may only be terminated or changed with the consent of the Fund’s Board of
Directors. In addition, the agreement will be automatically extended for
one‑year terms unless the Adviser provides notice of termination to the
Fund at least 60 days prior to the end of the
period. |
(e) |
If
interest expense were excluded, net expenses would be as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Class A |
|
|
Class C |
|
|
Advisor Class |
|
|
Class 1 |
|
|
Class 2 |
|
|
.75% |
|
|
|
1.50% |
|
|
|
.50% |
|
|
|
.60% |
|
|
|
.50% |
|
9
Examples
The
Examples are intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Examples assume that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year, that the Fund’s operating expenses stay
the same and that any fee waiver and/or expense limitation is in effect for only
the first year. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Class A |
|
|
Class C |
|
|
Advisor Class |
|
|
Class 1 |
|
|
Class 2 |
|
|
|
|
|
| |
After
1 Year |
|
$ |
374 |
|
|
$ |
254 |
* |
|
$ |
51 |
|
|
$ |
62 |
|
|
$ |
52 |
|
|
|
|
|
| |
After
3 Years |
|
$ |
553 |
|
|
$ |
496 |
|
|
$ |
182 |
|
|
$ |
206 |
|
|
$ |
174 |
|
|
|
|
|
| |
After
5 Years |
|
$ |
748 |
|
|
$ |
862 |
|
|
$ |
325 |
|
|
$ |
363 |
|
|
$ |
308 |
|
|
|
|
|
| |
After
10 Years |
|
$ |
1,309 |
|
|
$ |
1,691 |
|
|
$ |
740 |
|
|
$ |
818 |
|
|
$ |
697 |
|
* |
If
you did not redeem your shares at the end of the period, your expenses
would be decreased by approximately
$100. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys or sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction costs, which are not
reflected in the Annual Fund Operating Expenses or in the Examples, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 26% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES
The
Fund seeks real after-tax return for investors subject to federal income taxes.
Real return is the rate of return after adjusting for inflation. The Fund
pursues its objective by investing principally in high-quality, predominantly
investment-grade, municipal securities that pay interest exempt from federal
taxation. As a fundamental policy, the Fund will invest at least 80% of its net
assets in municipal securities. These securities may be subject to the federal
alternative minimum tax (“AMT”) for some
taxpayers.
The
Fund will invest at least 80% of its total assets in fixed-income securities
rated A or better or the equivalent by one or more nationally recognized
statistical rating organizations (or deemed to be of comparable credit quality
by the Adviser). The Fund may invest up to 20% of its total assets in below
investment grade fixed-income securities (“junk bonds”). If the rating of a
fixed-income security falls below investment grade, the Fund will not be
obligated to sell the security and may continue to hold it if, in the Adviser’s
opinion, the investment is appropriate under the
circumstances.
The
Adviser selects securities for purchase or sale based on its assessment of the
securities’ risk and return characteristics as well as the securities’ impact on
the overall risk and return characteristics of the Fund. In making this
assessment, the Adviser takes into account various factors, including the credit
quality and sensitivity to interest rates of the securities under consideration
and of the Fund’s other holdings. The Fund may invest in fixed-income securities
with any maturity and duration.
To
provide inflation protection, the Fund will typically enter into inflation
swaps. The Fund may use other inflation-indexed instruments. Payments to the
Fund pursuant to swaps will result in taxable income, either ordinary income or
capital gains, rather than income exempt from federal income taxation. It is
expected that the Fund’s primary use of derivatives will be for the purpose of
inflation protection.
The
Fund may also invest in:
• |
|
zero-coupon
municipal securities and variable, floating and inverse floating-rate
municipal securities; |
• |
|
certain
types of mortgage-related securities;
and |
• |
|
derivatives,
such as options, futures contracts, forwards and
swaps. |
The
Fund may utilize leverage for investment purposes through the use of tender
option bond (“TOB”) transactions. The Adviser considers the impact of TOB
transactions, swaps and other derivatives in making its assessments of the
Fund’s risks. The resulting exposures to markets, sectors, issuers or specific
securities will be continuously monitored by the
Adviser.
PRINCIPAL
RISKS
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the market or markets in which the Fund invests
fluctuate. The value of the Fund’s investments may decline, sometimes
rapidly and unpredictably, simply because of economic changes or other
events, including public health crises (including the occurrence of a
contagious disease or illness) and regional and global conflicts, that
affect large portions of the
market. |
10
• |
|
Credit Risk: An issuer or guarantor of a
fixed-income security, or the counterparty to a derivatives or other
contract, may be unable or unwilling to make timely payments of interest
or principal, or to otherwise honor its obligations. The issuer or
guarantor may default, causing a loss of the full principal amount of a
security and accrued interest. The degree of risk for a particular
security may be reflected in its credit rating. There is the possibility
that the credit rating of a fixed-income security may be downgraded after
purchase, which may adversely affect the value of the security.
Investments in fixed-income securities with lower ratings tend to have a
higher probability that an issuer will default or fail to meet its payment
obligations. |
• |
|
Municipal Market Risk: This is the risk
that special factors may adversely affect the value of municipal
securities and have a significant effect on the yield or value of the
Fund’s investments in municipal securities. These factors include economic
conditions, political or legislative changes, public health crises,
uncertainties related to the tax status of municipal securities, and the
rights of investors in these securities. To the extent that the Fund
invests more of its assets in a particular state’s municipal securities,
the Fund is vulnerable to events adversely affecting that state, including
economic, political and regulatory occurrences, court decisions,
terrorism, public health crises (including the occurrence of a contagious
disease or illness) and catastrophic natural disasters, such as
hurricanes, fires or earthquakes. The Fund’s investments in certain
municipal securities with principal and interest payments that are made
from the revenues of a specific project or facility, and not general tax
revenues, may have increased risks. Factors affecting 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, changes in tax rates or the treatment of income from certain types of
municipal securities, among other things, could negatively affect the municipal
securities markets.
• |
|
Interest Rate Risk: Changes in interest
rates will affect the value of investments in fixed-income securities.
When interest rates rise, the value of existing investments in
fixed-income securities tends to fall and this decrease in value may not
be offset by higher income from new investments. Interest rate risk is
generally greater for fixed-income securities with longer maturities or
durations. The Fund may be subject to a greater risk of rising interest
rates than would normally be the case due to the recent end of a period of
historically low rates and the effects of potential central bank monetary
policy, and government fiscal policy, initiatives and market reactions to
those initiatives. |
• |
|
Duration Risk: Duration is a measure that
relates the expected price volatility of a fixed-income security to
changes in interest rates. The duration of a fixed-income security may be
shorter than or equal to full maturity of a fixed-income security.
Fixed-income securities with longer durations have more risk and will
decrease in price as interest rates
rise. |
• |
|
Inflation Risk: This is the risk that the
value of assets or income from investments will be less in the future as
inflation decreases the value of money. As inflation increases, the value
of the Fund’s assets can decline as can the value of the Fund’s
distributions. This risk is significantly greater for fixed-income
securities with longer
maturities. |
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. A short position in a
derivative instrument involves the risk of a theoretically unlimited
increase in the value of the underlying asset, reference rate or index,
which could cause the Fund to suffer a potentially unlimited loss.
Derivatives, especially over-the-counter derivatives, are also subject to
counterparty risk, which is the risk that the counterparty (the party on
the other side of the transaction) on a derivative transaction will be
unable or unwilling to honor its contractual obligations to the
Fund. |
• |
|
Leverage Risk: To the extent the Fund
uses leveraging techniques, such as TOBs, its net asset value (“NAV”) may
be more volatile because leverage tends to exaggerate the effect of
changes in interest rates and any increase or decrease in the value of the
Fund’s investments. |
• |
|
Illiquid Investments Risk: Illiquid
investments risk exists when certain investments are or become difficult
to purchase or sell. Difficulty in selling such investments may result in
sales at disadvantageous prices affecting the value of your investment in
the Fund. Causes of illiquid investments risk may include low trading
volumes, large positions and heavy redemptions of Fund shares. Illiquid
investments risk may be higher in a rising interest rate environment, when
the value and liquidity of fixed-income securities generally go
down. |
• |
|
Management Risk: The Fund is subject to
management risk because it is an actively-managed investment fund. The
Adviser will apply its investment techniques and risk analyses in making
investment decisions, but there is no guarantee that its techniques will
produce the intended results. Some of these techniques may incorporate, or
rely upon, quantitative models, but there is no guarantee that these
models will generate accurate forecasts, reduce risk or otherwise perform
as expected. |
As
with all investments, you may lose money by investing in the
Fund.
11
BAR
CHART AND PERFORMANCE INFORMATION
The
bar chart and performance information provide an indication of the historical
risk of an investment in the Fund by
showing:
• |
|
how the Fund’s
performance changed from year to year over ten years;
and |
• |
|
how the Fund’s average
annual returns for one, five and ten years compare to those of a
broad-based securities market
index. |
You
may obtain updated performance information on the website at www.abfunds.com (click on
“Investments—Mutual Funds”) or, for Class 1 and Class 2 shares, at www.bernstein.com (click on
“Investments—Mutual Fund Performance at a
Glance”).
The
Fund’s past performance before and after taxes, of course, does not necessarily
indicate how it will perform in the
future.
Bar
Chart
The
annual returns in the bar chart are for the Fund’s Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was
up 4.29%, 2nd quarter, 2020; and
Worst Quarter was
down -6.55%, 1st quarter, 2020.
Performance Table
Average Annual Total
Returns
(For
the periods ended December 31, 2023)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Class A* |
|
Return Before Taxes |
|
|
1.69% |
|
|
|
2.71% |
|
|
|
1.97% |
|
|
|
|
|
Return After Taxes on Distributions |
|
|
1.56% |
|
|
|
2.65% |
|
|
|
1.92% |
|
| |
|
|
|
|
Return
After Taxes on Distributions and Sale of Fund Shares |
|
|
1.77% |
|
|
|
2.47% |
|
|
|
1.88% |
|
Class C |
|
Return
Before Taxes |
|
|
3.12% |
|
|
|
2.57% |
|
|
|
1.53% |
|
Advisor
Class |
|
Return
Before Taxes |
|
|
5.16% |
|
|
|
3.61% |
|
|
|
2.55% |
|
Class 1 |
|
Return
Before Taxes |
|
|
5.02% |
|
|
|
3.48% |
|
|
|
2.44% |
|
Class
2 |
|
Return
Before Taxes |
|
|
5.12% |
|
|
|
3.60% |
|
|
|
2.55% |
|
Bloomberg
TIPS 1-10 Year Index
(reflects
no deduction for fees, taxes or expenses) |
|
|
4.36% |
|
|
|
3.43% |
|
|
|
2.31% |
|
|
– |
Are shown for Class A
shares only and will vary for the other Classes of shares because
these Classes have different expense
ratios; |
|
– |
Are an estimate, which is
based on the highest historical individual federal marginal income tax
rates, and do not reflect the impact of state and local
taxes; actual after-tax
returns depend on an individual investor’s tax situation and are likely to
differ from those shown; and |
|
– |
Are not relevant to
investors who hold fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement
accounts. |
12
INVESTMENT
ADVISER
AllianceBernstein
L.P. is the investment adviser for the Fund.
PORTFOLIO
MANAGERS
The
following table lists the persons responsible for day-to-day management of the
Fund’s portfolio:
|
|
|
| |
Employee |
|
Length of Service |
|
Title |
Daryl Clements |
|
Since 2022 |
|
Senior Vice President of the Adviser |
|
| |
Matthew J. Norton |
|
Since 2016 |
|
Senior Vice President of the Adviser |
|
| |
Andrew D. Potter |
|
Since 2017 |
|
Vice President of the
Adviser |
ADDITIONAL
INFORMATION
For
important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page 19 in this Prospectus.
13
AB
All Market Real Return Portfolio
INVESTMENT
OBJECTIVE
The
Fund’s investment objective is to maximize real return over inflation.
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. You may be required to pay
commissions and/or other forms of compensation to a broker for transactions in
Advisor Class shares, which are not reflected in the tables or the examples
below. You may
qualify for sales charge reductions if you and members of your family invest, or
agree to invest in the future, at least $100,000 in AB Mutual
Funds. More information about these and other discounts is
available from your financial intermediary and in Investing in the Funds—Sales
Charge Reduction Programs for Class A Shares on page 39 of this Prospectus,
in Appendix C—Financial Intermediary Waivers of this Prospectus and in Purchase
of Shares—Sales Charge Reduction Programs for Class A Shares on page 116 of
the Fund’s Statement of Additional Information (“SAI”).
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
|
| |
|
|
Class A
Shares |
|
Class C
Shares |
|
Advisor Class
Shares |
|
Class
R, K, I, Z and 1
Shares(c) |
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
4.25% |
|
None |
|
None |
|
None |
Maximum
Deferred Sales Charge (Load)
(as
a percentage of offering price or redemption proceeds, whichever is
lower) |
|
None(a) |
|
1.00%(b) |
|
None |
|
None |
Exchange
Fee |
|
None |
|
None |
|
None |
|
None |
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Class A |
|
|
Class C |
|
|
Advisor Class |
|
|
Class R(c) |
|
|
Class K(c) |
|
|
Class I |
|
|
Class Z |
|
|
Class 1 |
|
Management
Fees |
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
.75% |
|
|
|
|
|
|
|
|
| |
Distribution
and/or Service (12b-1) Fees |
|
|
.25% |
|
|
|
1.00% |
|
|
|
None |
|
|
|
.50% |
|
|
|
.25% |
|
|
|
None |
|
|
|
None |
|
|
|
.25% |
|
|
|
|
|
|
|
|
| |
Other
Expenses: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Transfer
Agent |
|
|
.11% |
|
|
|
.11% |
|
|
|
.11% |
|
|
|
.26% |
|
|
|
.20% |
|
|
|
.03% |
|
|
|
.02% |
|
|
|
.02% |
|
Other
Expenses |
|
|
.10% |
|
|
|
.11% |
|
|
|
.10% |
|
|
|
.10% |
|
|
|
.10% |
|
|
|
.09% |
|
|
|
.11% |
|
|
|
.10% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Expenses |
|
|
.21% |
|
|
|
.22% |
|
|
|
.21% |
|
|
|
.36% |
|
|
|
.30% |
|
|
|
.12% |
|
|
|
.13% |
|
|
|
.12% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired
Fund Fees and Expenses |
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
|
|
.06% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses |
|
|
1.27% |
|
|
|
2.03% |
|
|
|
1.02% |
|
|
|
1.67% |
|
|
|
1.36% |
|
|
|
.93% |
|
|
|
.94% |
|
|
|
1.18% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee
Waiver and/or Expense Reimbursement(d) |
|
|
(.03)% |
|
|
|
(.04)% |
|
|
|
(.03)% |
|
|
|
(.09)% |
|
|
|
(.03)% |
|
|
|
(.03)% |
|
|
|
(.03)% |
|
|
|
(.03)% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
|
1.24% |
|
|
|
1.99% |
|
|
|
.99% |
|
|
|
1.58% |
|
|
|
1.33% |
|
|
|
.90% |
|
|
|
.91% |
|
|
|
1.15% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Purchases of Class A shares in amounts of $1,000,000 or
more, or by certain group retirement plans, may be subject to a 1%, 1-year
contingent deferred sales charge (“CDSC”), which may be subject to waiver
in certain
circumstances. |
(b) |
For Class C shares,
the CDSC is 0% after the first year. Class C shares automatically
convert to Class A shares after eight
years. |
(c) |
Class
R shares and Class K shares are no longer offered to new investors.
Outstanding Class R shares and Class K shares will be liquidated on or
about May 21, 2024. |
(d) |
The
Adviser has contractually agreed to waive its management fees and/or bear
certain expenses of the Fund until January 31, 2025 to the extent
necessary to prevent total Fund operating expenses (excluding
extraordinary expenses, interest expense, and acquired fund fees and
expenses other than the advisory fees of any AB Funds in which the Fund
may invest), on an annualized basis, from exceeding 1.30%, 2.05%, 1.05%,
1.55%, 1.30%, 1.05%, 1.05% and 1.30% of average daily net assets,
respectively, for Class A, Class C, Advisor Class, Class R,
Class K, Class I, Class Z and Class 1 shares. In connection
with the Fund’s investments in AB Government Money Market Portfolio (the
“Money Market Portfolio”) (except for the investment of any cash
collateral from securities lending), the Adviser has contractually agreed
to waive its management fee from the Fund and/or reimburse other expenses
of the Fund in an amount equal to the Fund’s pro rata share of the Money
Market Portfolio’s effective management fee, as included in “Acquired Fund
Fees and Expenses”. Each of the agreements will remain in effect until
January 31, 2025 and
may only be terminated or changed with the consent of the Fund’s Board of
Directors. In addition, each of the agreements will be automatically
extended for one-year terms unless the Adviser provides notice of
termination to the Fund at least 60 days prior to the end of the period.
|
14
Examples
The
Examples are intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The Examples assume that you invest
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year, that the Fund’s operating expenses stay
the same and that any fee waiver and/or expense limitation is in effect for only
the first year. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Class A |
|
|
Class C |
|
|
Advisor Class |
|
|
Class R |
|
|
Class K |
|
|
Class I |
|
|
Class Z |
|
|
Class 1 |
|
|
|
|
|
|
|
|
| |
After
1 Year |
|
$ |
546 |
|
|
$ |
302 |
* |
|
$ |
101 |
|
|
$ |
161 |
|
|
$ |
135 |
|
|
$ |
92 |
|
|
$ |
93 |
|
|
$ |
117 |
|
|
|
|
|
|
|
|
| |
After
3 Years |
|
$ |
808 |
|
|
$ |
633 |
|
|
$ |
322 |
|
|
$ |
518 |
|
|
$ |
428 |
|
|
$ |
293 |
|
|
$ |
297 |
|
|
$ |
372 |
|
|
|
|
|
|
|
|
| |
After
5 Years |
|
$ |
1,090 |
|
|
$ |
1,089 |
|
|
$ |
560 |
|
|
$ |
899 |
|
|
$ |
742 |
|
|
$ |
512 |
|
|
$ |
517 |
|
|
$ |
646 |
|
|
|
|
|
|
|
|
| |
After
10 Years |
|
$ |
1,891 |
|
|
$ |
2,160 |
|
|
$ |
1,245 |
|
|
$ |
1,969 |
|
|
$ |
1,632 |
|
|
$ |
1,140 |
|
|
$ |
1,152 |
|
|
$ |
1,429 |
|
* |
If
you did not redeem your shares at the end of the period, your expenses
would be decreased by approximately $100.
|
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys or sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These transaction costs, which are not
reflected in the Annual Fund Operating Expenses or in the Examples, affect the
Fund’s performance. During the most recent fiscal year, the Fund’s portfolio
turnover rate was 69% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES
The
Fund seeks to maximize real return. Real return is the rate of return after
adjusting for inflation.
The
Fund pursues an aggressive investment strategy involving a variety of asset
classes. The Fund invests primarily in instruments that the Adviser expects to
outperform broad equity indices during periods of rising inflation. Under normal
circumstances, the Fund expects to invest its assets principally in the
following instruments that, in the judgment of the Adviser, are affected
directly or indirectly by the level and change in rate of inflation:
inflation-indexed fixed-income securities, such as Treasury Inflation-Protected
Securities (“TIPS”) and similar bonds issued by governments outside of the
United States; commodities; commodity-related equity securities; real estate
equity securities; inflation sensitive equity securities, which the Fund defines
as equity securities of companies that the Adviser believes have the ability to
pass along increasing costs to consumers and maintain or grow margins in rising
inflation environments, including equity securities of utilities
and infrastructure-related companies (“inflation sensitive equities”);
securities and derivatives linked to the price of other assets (such as
commodities, stock indices and real estate); and currencies. The Fund expects
its investments in fixed-income securities to have a broad range of maturities
and quality levels.
The
Fund seeks inflation protection from investments around the globe, both in
developed and emerging market countries. In selecting securities for purchase
and sale, the Adviser utilizes its qualitative and quantitative resources to
determine overall inflation sensitivity, asset allocation, and security
selection. The Adviser assesses the securities’ risks and inflation sensitivity
as well as the securities’ impact on the overall risks and inflation sensitivity
of the Fund. When its analysis indicates that changes are necessary, the Adviser
intends to implement them through a combination of changes to underlying
positions and the use of inflation swaps and other types of derivatives, such as
interest rate swaps.
The
Fund anticipates that its targeted investment mix, other than its investments in
inflation-indexed fixed-income securities, will focus on commodity-related
equity securities, commodities and commodity derivatives, real estate equity
securities and inflation sensitive equities to provide a balance between
expected return and inflation protection. The Fund may vary its investment
allocations among these asset classes, at times significantly. Its commodities
investments will include significant exposure to energy commodities, but will
also include agricultural products, and industrial and precious metals, such as
gold. The Fund’s investments in real estate equity securities will include real
estate investment trusts (“REITs”) and other real estate-related securities.
The
Fund invests in both U.S. and non-U.S. Dollar-denominated equity or
fixed-income securities. The Fund may invest in currencies for hedging or for
investment purposes, both in the spot market and through long or short positions
in currency-related derivatives. The Fund does not ordinarily expect to hedge
its foreign currency exposure because it will be balanced by investments in
U.S. Dollar-denominated securities, although it may hedge the exposure
under certain circumstances.
The
Fund may enter into derivatives, such as options, futures contracts, forwards,
swaps or structured notes, to a significant extent, subject to the limits of
applicable law. The Fund intends to use leverage for investment purposes through
the use of cash made available by derivatives transactions to make other
investments in accordance with its investment policies. In determining when and
to what extent to employ leverage or enter into derivatives transactions, the
Adviser considers factors such as the relative risks and returns expected of
potential investments and the cost of such transactions. The Adviser considers
the impact of derivatives in making its assessments of the Fund’s risks. The
resulting exposures to markets, sectors, issuers or specific securities will be
continuously monitored by the Adviser.
15
The
Fund may seek to gain exposure to physical commodities traded in the commodities
markets through use of a variety of derivative instruments, including
investments in commodity index-linked notes. The Adviser expects to seek
exposure to commodities and commodity-related instruments and derivatives
primarily through investments in AllianceBernstein Cayman Inflation Strategy,
Ltd., a wholly-owned subsidiary of the Fund organized under the laws of the
Cayman Islands (the “Subsidiary”). The Subsidiary is advised by the Adviser and
has the same investment objective and substantially similar investment policies
and restrictions as the Fund except that the Subsidiary, unlike the Fund, may
invest, without limitation, in commodities and commodity-related instruments.
The Fund is subject to the risks associated with the commodities, derivatives
and other instruments in which the Subsidiary invests, to the extent of its
investment in the Subsidiary. The Fund limits its investment in the Subsidiary
to no more than 25% of its net assets. Investment in the Subsidiary is expected
to provide the Fund with commodity exposure within the limitations of federal
tax requirements that apply to the Fund.
PRINCIPAL
RISKS
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the market or markets in which the Fund invests
fluctuate. The value of the Fund’s investments may decline, sometimes
rapidly and unpredictably, simply because of economic changes or other
events, including public health crises (including the occurrence of a
contagious disease or illness) and regional and global conflicts, that
affect large portions of the market. It includes the risk that a
particular style of investing may be underperforming the market generally.
|
• |
|
Credit Risk: An issuer or guarantor of a
fixed-income security, or the counterparty to a derivatives or other
contract, may be unable or unwilling to make timely payments of interest
or principal, or to otherwise honor its obligations. The issuer or
guarantor may default, causing a loss of the full principal amount of a
security and accrued interest. The degree of risk for a particular
security may be reflected in its credit rating. There is the possibility
that the credit rating of a fixed-income security may be downgraded after
purchase, which may adversely affect the value of the security.
Investments in fixed-income securities with lower ratings tend to have a
higher probability that an issuer will default or fail to meet its payment
obligations. |
• |
|
Interest Rate Risk: Changes in interest
rates will affect the value of investments in fixed-income securities.
When interest rates rise, the value of existing investments in
fixed-income securities tends to fall and this decrease in value may not
be offset by higher income from new investments. Interest rate risk is
generally greater for fixed-income securities with longer maturities or
durations. The Fund may be subject to a greater risk of rising interest
rates than would normally be the case due to the recent end of a period of
historically low rates and the effects of potential central bank monetary
policy, and government fiscal policy, initiatives and market reactions to
those initiatives. |
• |
|
Commodity Risk: Investing in commodities
and commodity-linked derivative instruments, either directly or through
the Subsidiary, may subject the Fund to greater volatility than
investments in traditional securities. The value of commodity-linked
derivative instruments may be affected by changes in overall market
movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, such as drought,
floods, weather, livestock disease, embargoes, tariffs and international
economic, political and regulatory developments.
|
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. A short position in a
derivative instrument involves the risk of a theoretically unlimited
increase in the value of the underlying asset, reference rate or index,
which could cause the Fund to suffer a potentially unlimited loss.
Derivatives, especially over-the-counter derivatives, are also subject to
counterparty risk, which is the risk that the counterparty (the party on
the other side of the transaction) on a derivative transaction will be
unable or unwilling to honor its contractual obligations to the Fund.
|
• |
|
Real Estate Risk: The Fund’s investments
in real estate securities have many of the same risks as direct ownership
of real estate, including the risk that the value of real estate could
decline due to a variety of factors that affect the real estate market
generally. Investments in REITs may have additional risks. REITs are
dependent on the capability of their managers, may have limited
diversification, and could be significantly affected by changes in taxes.
|
• |
|
Investment in Other Investment Companies Risk:
As with other investments, investments in other investment
companies are subject to market and selection risk. In addition,
shareholders of the Fund bear both their proportionate share of expenses
in the Fund (including management fees) and, indirectly, the expenses of
the investment companies in which the Fund invests (to the extent these
expenses are not waived or reimbursed by the Adviser).
|
• |
|
Leverage Risk: To the extent the Fund
uses leveraging techniques, its net asset value (“NAV”) may be more
volatile because leverage tends to exaggerate the effect of changes in
interest rates and any increase or decrease in the value of the Fund’s
investments. |
• |
|
Inflation Risk: This is the risk that the
value of assets or income from investments will be less in the future as
inflation decreases the value of money. As inflation increases, the value
of the Fund’s assets can decline as can the value of the Fund’s
distributions. This risk is significantly greater for fixed-income
securities with longer maturities.
|
16
• |
|
Illiquid Investments Risk: Illiquid
investments risk exists when certain investments are or become difficult
to purchase or sell. Difficulty in selling such investments may result in
sales at disadvantageous prices affecting the value of your investment in
the Fund. Causes of illiquid investments risk may include low trading
volumes and large positions. Foreign fixed-income securities may have more
illiquid investments risk because secondary trading markets for these
securities may be smaller and less well-developed and the securities may
trade less frequently than domestic securities. Illiquid investments risk
may be higher in a rising interest rate environment, when the value and
liquidity of fixed-income securities generally go down.
|
• |
|
Foreign (Non-U.S.) Risk: Investments in
securities of non-U.S. issuers may involve more risk than those of U.S.
issuers. These securities may fluctuate more widely in price and may be
more difficult to trade due to adverse market, economic, political,
regulatory or other factors. |
• |
|
Currency Risk: Fluctuations in currency
exchange rates may negatively affect the value of the Fund’s investments
or reduce its returns. |
• |
|
Subsidiary Risk: By investing in the
Subsidiary, the Fund is indirectly exposed to the risks associated with
the Subsidiary’s investments. The derivatives and other investments held
by the Subsidiary are generally similar to those that are permitted to be
held by the Fund and are subject to the same risks that apply to similar
investments if held directly by the Fund. The Subsidiary is not registered
under the Investment Company Act of 1940, as amended (the “1940 Act”),
and, unless otherwise noted in this Prospectus, is not subject to all of
the investor protections of the 1940 Act. However, the Fund wholly owns
and controls the Subsidiary, and the Fund and the Subsidiary are managed
by the Adviser, making it unlikely the Subsidiary will take actions
contrary to the interests of the Fund or its shareholders.
|
• |
|
Management Risk: The Fund is subject to
management risk because it is an actively-managed investment fund. The
Adviser will apply its investment techniques and risk analyses in making
investment decisions, but there is no guarantee that its techniques will
produce the intended results. Some of these techniques may incorporate, or
rely upon, quantitative models, but there is no guarantee that these
models will generate accurate forecasts, reduce risk or otherwise perform
as expected. |
As
with all investments, you may lose money by investing in the Fund.
BAR
CHART AND PERFORMANCE INFORMATION
The
bar chart and performance information provide an indication of the historical
risk of an investment in the Fund by showing:
• |
|
how the Fund’s
performance changed from year to year over ten years;
and |
• |
|
how the Fund’s average
annual returns for one, five and ten years compare to those of a
broad-based securities market
index. |
You
may obtain updated performance information on the website at www.abfunds.com (click on
“Investments—Mutual Funds”) or, for Class 1 shares, at www.bernstein.com (click on
“Investments—Mutual Fund Performance at a Glance”).
The
Fund’s past performance before and after taxes, of course, does not necessarily
indicate how it will perform in the
future.
Bar
Chart
The
annual returns in the bar chart are for the Fund’s Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was
up 14.05%, 2nd quarter, 2020; and
Worst Quarter was
down -25.74%, 1st quarter, 2020.
17
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2023)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
1 Year |
|
|
5 Years |
|
|
10 Years |
|
Class A* |
|
Return Before Taxes |
|
|
0.01% |
|
|
|
6.83% |
|
|
|
0.94% |
|
|
|
|
|
Return After Taxes on Distributions** |
|
|
-1.34% |
|
|
|
5.17% |
|
|
|
-0.17% |
|
| |
|
|
|
|
Return
After Taxes on Distributions and Sale of Fund Shares** |
|
|
-0.02% |
|
|
|
4.87% |
|
|
|
0.38% |
|
Class C |
|
Return
Before Taxes |
|
|
2.75% |
|
|
|
6.97% |
|
|
|
0.64% |
|
Advisor Class |
|
Return
Before Taxes |
|
|
4.77% |
|
|
|
8.05% |
|
|
|
1.66% |
|
Class R |
|
Return
Before Taxes |
|
|
4.26% |
|
|
|
7.47% |
|
|
|
1.12% |
|
Class K |
|
Return
Before Taxes |
|
|
4.46% |
|
|
|
7.75% |
|
|
|
1.39% |
|
Class I |
|
Return
Before Taxes |
|
|
4.91% |
|
|
|
8.20% |
|
|
|
1.79% |
|
Class Z*** |
|
Return
Before Taxes |
|
|
4.92% |
|
|
|
8.21% |
|
|
|
1.80% |
|
Class 1 |
|
Return
Before Taxes |
|
|
4.59% |
|
|
|
7.93% |
|
|
|
1.55% |
|
MSCI
All Country World Commodity Producers Index
(reflects
no deduction for fees, taxes or expenses) |
|
|
3.64% |
|
|
|
9.77% |
|
|
|
2.97% |
|
Bloomberg
Commodity Index#
(reflects
no deduction for fees, taxes or expenses) |
|
|
-7.91% |
|
|
|
7.23% |
|
|
|
-1.11% |
|
Bloomberg
10+ Year U.S. TIPS Index#
(reflects
no deduction for fees, taxes or expenses) |
|
|
1.16% |
|
|
|
1.63% |
|
|
|
2.30% |
|
|
– |
Are shown for Class A
shares only and will vary for the other Classes of shares because these
Classes have different expense
ratios; |
|
– |
Are an estimate, which is
based on the highest historical individual federal marginal income tax
rates, and do not reflect the impact of state and local
taxes; actual after-tax
returns depend on an individual investor’s tax situation and are likely to
differ from those shown; and |
|
– |
Are not relevant to
investors who hold fund shares through tax-deferred arrangements such as
401(k) plans or individual retirement
accounts. |
** |
After-tax returns are based on
information available to the Fund as of the date of this
Prospectus. |
*** |
Inception
date for Class Z shares is 01/31/2014. The performance
of the Fund’s Class Z shares for periods prior to this share class’s
inception is the performance of the Fund’s Class A shares, adjusted
to reflect the expenses of the Class Z shares.
|
# |
The information for the Bloomberg Commodity
Index and Bloomberg 10+ Year U.S. TIPS Index is presented to show how the
Fund’s performance compares with the returns of an index of securities
similar to those in which the Fund
invests. |
INVESTMENT
ADVISER
AllianceBernstein
L.P. is the investment adviser for the Fund.
PORTFOLIO
MANAGERS
The
following table lists the persons responsible for day-to-day management of the
Fund’s portfolio:
|
|
|
| |
Employee |
|
Length of Service |
|
Title |
Vinod Chathlani |
|
Since 2015 |
|
Senior Vice President of the Adviser |
|
| |
Daniel J. Loewy |
|
Since 2015 |
|
Senior Vice President of the Adviser |
|
| |
Leon Zhu |
|
Since 2018 |
|
Senior Vice President of the
Adviser |
ADDITIONAL
INFORMATION
For
important information about the purchase and sale of Fund shares, tax
information and financial intermediary compensation, please turn to ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES, page 19 in this Prospectus.
18
ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES
|
• |
|
PURCHASE
AND SALE OF FUND SHARES |
AB Bond Inflation Strategy and AB All Market Real Return Portfolio each no
longer offer Class R or Class K shares to new investors. Outstanding Class R
shares and Class K shares of each Fund will be liquidated on or about
May 21, 2024.
Purchase
Minimums
The
following table describes the initial and subsequent minimum purchase amounts
for each class of shares, which are subject to waiver in certain
circumstances.
|
|
|
| |
|
|
Initial |
|
Subsequent |
Class A/Class
C shares, including traditional IRAs and Roth IRAs |
|
$2,500 |
|
$50 |
Automatic
Investment Program |
|
None |
|
$50
If
initial minimum investment is
less
than $2,500, then $200
monthly
until account balance
reaches
$2,500 |
Advisor
Class shares (only available to fee-based programs or through other
limited arrangements and certain commission-based brokerage
arrangements) |
|
None |
|
None |
Class A,
Class R, Class K, Class I and Class Z shares are
available at NAV, without an initial sales charge, to 401(k) plans, 457
plans, employer-sponsored 403(b) plans, profit-sharing and money purchase
pension plans, defined benefit plans, and non-qualified deferred
compensation plans and, for Class Z shares, to persons participating
in certain fee-based programs sponsored by a financial intermediary, where
in each case plan level or omnibus accounts are held on the books of a
Fund. |
|
None |
|
None |
Class
1 shares (only available to private clients of Sanford C. Bernstein &
Co. LLC (“Bernstein”)) |
|
$5,000 |
|
None |
Class 2
shares (available to the Adviser’s institutional clients or through other
limited arrangements) |
|
$5,000,000 |
|
None |
Class
2 shares (available to private clients of Bernstein who have a
fixed-income account of at least $3,000,000) |
|
None |
|
None |
You
may sell (redeem) your shares each day the New York Stock Exchange (the
“Exchange”) is open. You may sell your shares through your financial
intermediary or by mail (AllianceBernstein Investor Services, Inc., P.O.
Box 786003, San Antonio, TX 78278-6003) or telephone ((800)
221-5672).
Each
Fund may make capital gains distributions, which may be subject to federal
income taxes and taxable as ordinary income or capital gains, and may also be
subject to state and local taxes. Each Fund may pay income dividends. For AB Bond Inflation Strategy and AB All Market Real Return Portfolio, these
dividends may be subject to federal income taxes and state and local taxes. For
AB Municipal Bond Inflation Strategy,
these dividends may be exempt from federal income tax, except to the extent the
Fund invests in swap transactions, but may be subject to alternative minimum tax
(“AMT”) and state and local income taxes.
|
• |
|
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES |
Class
1 and Class 2 shares of the Funds are offered through the Adviser’s private
client channel and institutional channel and are generally not sold through
intermediaries. If you purchase shares of a Fund through a broker-dealer or
other financial intermediary (such as a bank), the Fund and its related
companies may pay the intermediary for the sale of Fund shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other financial intermediary and your salesperson to recommend
the Fund over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
19
ADDITIONAL
INFORMATION ABOUT THE FUNDS’ STRATEGIES, RISKS AND INVESTMENTS
This
section of the Prospectus provides additional information about the investment
strategies, practices and related risks, including principal and non-principal
strategies and risks, of AB Bond Inflation
Strategy (“Bond Inflation Strategy”), AB
Municipal Bond Inflation Strategy (“Municipal Bond Inflation Strategy”)
and AB All Market Real Return Portfolio
(“All Market Real Return Portfolio” and together with Bond Inflation Strategy
and Municipal Bond Inflation Strategy, the “Funds”). This Prospectus does not
describe all of a Fund’s investment practices that are non-principal strategies
or all of the related risks of such strategies; additional information about
each Fund’s risks and investments can be found in the Funds’ SAI. The registered
investment companies for which the Adviser serves as investment adviser are
referred to collectively as the “AB Fund Complex”, while all of these investment
companies, except Bernstein Fund, Inc., Sanford C. Bernstein Fund, Inc. and AB
Multi-Manager Alternative Fund, are referred to collectively as the “AB Funds”.
A list of the current AB Mutual Funds is available in the Funds’
SAI.
ESG
Integration
The
following applies to the Bond Inflation
Strategy and Municipal Bond Inflation
Strategy. The Adviser integrates environmental, social and corporate
governance (“ESG”) considerations into its research and investments analysis
with the goal of maximizing return and considering risk within the Fund’s
investment objective and strategies. Combining third-party ESG data with its own
views and research, the Adviser analyzes the ESG practices of companies and
issuers to identify potentially material ESG factors that can vary across
companies and issuers. ESG considerations may include but are not limited
to environmental impact, corporate governance and ethical business practices.
ESG considerations may not be applicable to all types of instruments or
investments.
Market
Risk
The
market value of a security may move up or down, sometimes rapidly and
unpredictably. These fluctuations may cause a security to be worth less than the
price originally paid for it, or less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy or the
market as a whole. Global economies and financial markets are increasingly
interconnected, which increases the probabilities that conditions in one country
or region might adversely impact issuers in a different country or region.
Conditions affecting the general economy, including interest rate levels and
political, social, or economic instability at the local, regional, or global
level may also affect the market value of a security. Health crises, such as
pandemic and epidemic diseases, as well as other incidents that interrupt the
expected course of events, such as natural disasters, including fires,
earthquakes and flooding, war or civil disturbance, acts of terrorism, supply
chain disruptions, power outages and other unforeseeable and external events,
and the public response to or fear of such diseases or events, have had, and may
in the future have, an adverse effect on a Fund’s investments and net asset
value and can lead to increased market volatility. For example, the diseases or
events themselves or any preventative or protective actions that governments may
take in respect of such diseases or events may result in periods of business
disruption, inability to obtain raw materials, supplies and component parts, and
reduced or disrupted operations for a Fund’s portfolio companies. The occurrence
and pendency of such diseases or events could adversely affect the economies and
financial markets either in specific countries or worldwide. Rates of inflation
have recently risen. The value of assets or income from an investment may be
worth less in the future as inflation decreases the value of money. As inflation
increases, the real value of the Funds’ assets may decline.
Derivatives
Each
Fund may, but is not required to, use derivatives for hedging or other risk
management purposes or as part of its investment strategies. Derivatives are
financial contracts whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. A Fund may use derivatives to earn
income and enhance returns, to hedge or adjust the risk profile of its
investments, to replace more traditional direct investments and to obtain
exposure to otherwise inaccessible markets.
There
are four principal types of derivatives—options, futures contracts, forwards and
swaps—each of which is described below. Derivatives include listed and cleared
transactions where a Fund’s derivative trade counterparty is an exchange or
clearinghouse and non-cleared bilateral “over-the-counter” transactions that are
privately negotiated and where a Fund’s derivative trade counterparty is a
financial institution. Exchange-traded or cleared derivatives transactions tend
to be subject to less counterparty credit risk than those that are bilateral and
privately negotiated.
A
Fund’s use of derivatives may involve risks that are different from, or possibly
greater than, the risks associated with investing directly in securities or
other more traditional instruments. These risks include the risk that the value
of a derivative instrument may not correlate perfectly, or at all, with the
value of the assets, reference rates, or indices that they are designed to
track. Other risks include: the possible absence of a liquid secondary market
for a particular instrument and possible exchange-imposed price fluctuation
limits, either of which may make it difficult or impossible to close out a
position when desired; and the risk that the counterparty will not perform its
obligations. Certain derivatives may have a leverage component and involve
leverage risk. Adverse changes in the value or level of the underlying asset,
note or index can result in a loss substantially greater than a Fund’s
investment (in some cases, the potential loss is unlimited).
20
The
Funds’ investments in derivatives may include, but are not limited to, the
following:
• |
|
Forward Contracts—A forward contract is
an agreement that obligates one party to buy, and the other party to sell,
a specific quantity of an underlying commodity or other tangible asset for
an agreed-upon price at a future date. A forward contract generally is
settled by physical delivery of the commodity or tangible asset to an
agreed-upon location (rather than settled by cash), or is rolled forward
into a new forward contract or, in the case of a non-deliverable forward,
by a cash payment at maturity. The Funds’ investments in forward contracts
may include the following: |
|
– |
Forward
Currency Exchange Contracts. Bond
Inflation Strategy and All Market
Real Return Portfolio may purchase or sell forward currency
exchange contracts for hedging purposes to minimize the risk from adverse
changes in the relationship between the U.S. Dollar and other
currencies or for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under “Other
Derivatives and Strategies—Currency Transactions”. A Fund, for example,
may enter into a forward contract as a transaction hedge (to “lock in” the
U.S. Dollar price of a non-U.S. Dollar security), as a position
hedge (to protect the value of securities the Fund owns that are
denominated in a foreign currency against substantial changes in the value
of the foreign currency) or as a cross-hedge (to protect the value of
securities the Fund owns that are denominated in a foreign currency
against substantial changes in the value of that foreign currency by
entering into a forward contract for a different foreign currency that is
expected to change in the same direction as the currency in which the
securities are denominated). |
• |
|
Futures Contracts and Options on Futures
Contracts—A futures contract is a standardized, exchange-traded
agreement that obligates the buyer to buy and the seller to sell a
specified quantity of an underlying asset (or settle for cash the value of
a contract based on an underlying asset, rate or index) at a specific
price on the contract maturity date. Options on futures contracts are
options that call for the delivery of futures contracts upon exercise. A
Fund may purchase or sell futures contracts and options thereon to hedge
against changes in interest rates, securities (through index futures or
options) or currencies. A Fund may also purchase or sell futures contracts
for foreign currencies or options thereon for non-hedging purposes as a
means of making direct investments in foreign currencies, as described
below under “Other Derivatives and Strategies—Currency
Transactions”. |
• |
|
Options—An option is an agreement that,
for a premium payment or fee, gives the option holder (the buyer) the
right but not the obligation to buy (a “call option”) or sell (a “put
option”) the underlying asset (or settle for cash an amount based on an
underlying asset, rate or index) at a specified price (the exercise price)
during a period of time or on a specified date. Investments in options are
considered speculative. In purchasing an option on an underlying asset, a
Fund would be in a position to realize a gain if, during the option
period, the price of the underlying asset increased (in the case of a
call) or decreased (in the case of a put) by an amount in excess of the
premium paid. A Fund may lose the premium paid for them if the price of
the underlying security or other asset decreased or remained the same (in
the case of a call option) or increased or remained the same (in the case
of a put option). If a put or call option purchased by a Fund were
permitted to expire without being sold or exercised, its premium would
represent a loss to the Fund. The Funds’ investments in options include
the following: |
|
– |
Options
on Municipal and U.S. Government Securities. In an effort to increase
current income and to reduce fluctuations in NAV, Bond Inflation Strategy and Municipal Bond Inflation Strategy may
write covered and uncovered put and call options and purchase put and call
options on municipal securities, U.S. Government securities and financial
indices or reference rates. A Fund may also enter into options on the
yield “spread” or yield differential between two securities. In contrast
to other types of options, this option is based on the difference between
the yields of designated securities, futures contracts or other
instruments. In addition, a Fund may write covered straddles. A straddle
is a combination of a call and a put written on the same underlying
security. |
A
Fund that purchases or writes privately-negotiated options on securities will
effect such transactions only with investment dealers and other financial
institutions (such as commercial banks or savings and loan institutions) deemed
creditworthy by the Adviser. The Adviser has adopted procedures for monitoring
the creditworthiness of such counterparties.
|
– |
Options
on Securities. Similar to options on municipal and U.S. Government
securities, a Fund may purchase or write a put or call option on other
securities. A Fund may write covered options, which means writing an
option for securities the Fund owns, and uncovered
options. |
|
– |
Options
on Securities Indices. An option on a securities index is similar to an
option on municipal and U.S. Government securities except that, rather
than taking or making delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the
chosen index is greater than (in the case of a call) or less than (in the
case of a put) the exercise price of the option. |
|
– |
Options
on Foreign Currencies. Bond Inflation
Strategy and All Market Real Return
Portfolio may invest in options on foreign currencies that are
privately negotiated or traded on U.S. or foreign exchanges for hedging
purposes to protect against declines in the U.S. Dollar value of
foreign currency denominated securities held by the Funds and against
increases in the U.S. Dollar cost of securities to be acquired. The
purchase of an option on a |
21
|
foreign
currency may constitute an effective hedge against fluctuations in
exchange rates, although if rates move adversely, a Fund may forfeit the
entire amount of the premium plus related transaction costs. A Fund may
also invest in options on foreign currencies for non-hedging purposes as a
means of making direct investments in foreign currencies, as described
below under “Other Derivatives and Strategies—Currency
Transactions”. |
• |
|
Swap Transactions—A swap is an agreement
that obligates two parties to exchange a series of cash flows at specified
intervals (payment dates) based upon or calculated by reference to changes
in specified prices or rates (e.g., interest rates in the case of
interest rate swaps or currency exchange rates in the case of
currency swaps) for a specified amount of an underlying asset (the
“notional” principal amount). Generally, the notional principal amount is
used solely to calculate the payment stream, but is not exchanged. Most
swaps are entered into on a net basis (i.e., the two payment streams are netted
out, with a Fund receiving or paying, as the case may be, only the net
amount of the two payments). Certain standardized swaps, including certain
interest rate swaps and credit default swaps, are subject to mandatory
central clearing and are required to be executed through a regulated swap
execution facility. 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. Funds post initial and variation margin
to support their obligations under cleared swaps by making payments to
their clearing member FCMs. Central clearing is intended to reduce
counterparty credit risks and increase liquidity, but central clearing
does not make swap transactions risk free. The Securities and Exchange
Commission (the “Commission”) may adopt similar clearing and execution
requirements in respect of certain security-based swaps under its
jurisdiction. Privately negotiated swap agreements are two-party contracts
entered into primarily by institutional investors and are not cleared
through a third-party, nor are these required to be executed on a
regulated swap execution facility. The Funds’ investments in swap
transactions include the following: |
|
– |
Interest
Rate Swaps, Swaptions, Caps and Floors. Interest rate swaps involve the
exchange by a Fund with another party of payments calculated by reference
to specified interest rates (e.g.,
an exchange of floating-rate payments for fixed-rate payments). Unless
there is a counterparty default, the risk of loss to a Fund from interest
rate swap transactions is limited to the net amount of interest payments
that the Fund is contractually obligated to make. If the counterparty to
an interest rate swap transaction defaults, a Fund’s risk of loss consists
of the net amount of interest payments that the Fund contractually is
entitled to receive. |
An
option on a swap, also called a “swaption”, is an option that gives the buyer
the right, but not the obligation, to enter into a swap on a future date in
exchange for paying a market-based “premium”. A receiver swaption gives the
owner the right to receive the total return of a specified asset, reference
rate, or index. A payer swaption gives the owner the right to pay the total
return of a specified asset, reference rate, or index. Swaptions also include
options that allow an existing swap to be terminated or extended by one of the
counterparties.
The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed-upon principal
amount from the party selling the interest rate floor. It may be more difficult
for a Fund to trade or close out interest rate caps and floors in comparison to
other types of swaps.
There
is no limit on the amount of interest rate transactions that may be entered into
by a Fund. The value of these transactions will fluctuate based on changes in
interest rates.
Interest
rate swap, swaption, cap and floor transactions may be used in an effort to
preserve a return or spread on a particular investment or a portion of a Fund’s
portfolio or to protect against an increase in the price of securities a Fund
anticipates purchasing at a later date.
|
– |
Inflation
(CPI) Swaps. Inflation swap agreements are contracts in which one party
agrees to pay the cumulative percentage increase in a price index (the
Consumer Price Index with respect to CPI swaps) over the term of the swap
(with some lag on the inflation index), and the other pays a compounded
fixed rate. Inflation swap agreements may be used to protect the NAV of a
Fund against an unexpected change in the rate of inflation measured by an
inflation index since the value of these agreements is expected to
increase if inflation increases. |
|
– |
Credit
Default Swaps. The “buyer” in a credit default swap contract is obligated
to pay the “seller” a periodic stream of payments over the term of the
contract in return for a contingent payment upon the occurrence of a
credit event with respect to an underlying reference obligation.
Generally, a credit event means bankruptcy, failure to pay, obligation
acceleration or restructuring. A Fund may be either the buyer or seller in
the transaction. If a Fund is a seller, the Fund receives a fixed rate of
income throughout the term of the contract, which typically is between one
month and ten years, provided that no credit event occurs. If a credit
event occurs, a Fund, as seller, typically must pay the contingent payment
to the buyer, which will be either (i) the “par value” (face amount)
of the reference obligation, in which case the Fund will receive the
reference obligation in return or (ii) an amount equal to the
difference between the face amount and the
current |
22
|
market
value of the reference obligation. As a buyer, if a credit event occurs,
the Fund would be the receiver of such contingent payments, either
delivering the reference obligation in exchange for the full notional
(face) value of a reference obligation that may have little or no value,
or receiving a payment equal to the difference between the face amount and
the current market value of the obligation. The current market value of
the reference obligation is typically determined via an auction process
sponsored by the International Swaps and Derivatives Association, Inc. The
periodic payments previously received by the Fund, coupled with the value
of any reference obligation received, may be less than the full amount it
pays to the buyer, resulting in a loss to the Fund. If the reference
obligation is a defaulting security, physical delivery of the security
will cause the Fund to hold a defaulted security. If a Fund is a buyer and
no credit event occurs, the Fund will lose its periodic stream of payments
over the term of the contract. However, if a credit event occurs, the
buyer typically receives full notional value for a reference obligation
that may have little or no value. |
Credit
default swaps may involve greater risks than if a Fund had invested in the
reference obligation directly. Credit default swaps are subject to general
market risk and credit risk, and may be illiquid.
|
– |
Currency
Swaps. Bond Inflation Strategy and
All Market Real Return Portfolio
may invest in currency swaps for hedging purposes to protect against
adverse changes in exchange rates between the U.S. Dollar and other
currencies or for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under “Other
Derivatives and Strategies—Currency Transactions”. Currency swaps involve
the exchange by a Fund with another party of a series of payments in
specified currencies. Currency swaps may be bilateral and privately
negotiated with the Fund expecting to achieve an acceptable degree of
correlation between its portfolio investments and its currency swaps
position. Currency swaps may involve the exchange of actual principal
amounts of currencies by the counterparties at the initiation, and again
upon the termination, of the transaction. |
|
– |
Total
Return Swaps. A Fund may enter into total return swaps, under which one
party agrees to pay the other the total return of a defined underlying
asset, such as a security or basket of securities, or non-asset reference,
such as a securities index, during the specified period in return for
periodic payments based on a fixed or variable interest rate or the total
return from different underlying assets or references. Total return swaps
could result in losses if the underlying asset or reference does not
perform as anticipated. Total return swaps may reflect a leveraged
investment and incorporate borrowing costs which are borne by the Fund.
There is no guarantee that the Fund’s investment via a total return swap
will deliver returns in excess of the embedded borrowing costs and,
accordingly, the Fund’s performance may be less than would be achieved by
a direct investment in the underlying reference
asset. |
• |
|
Other
Derivatives and Strategies |
|
– |
Commodity-Linked
Derivative Instruments. All Market Real
Return Portfolio may invest in commodity-linked derivative
instruments, including swaps, commodity options, futures contracts and
options on futures contracts. The value of a commodity-linked derivative
investment generally is based upon the price movements of a physical
commodity (such as energy, mineral, or agricultural products), an
intangible commodity (such as an emission allowance or carbon credit), a
commodity futures contract, a subset of commodities, a subset of commodity
futures contracts or commodity index, or another economic variable tied or
linked to the value of commodities or the commodities
markets. |
As
described below under “Investments in Wholly-Owned Subsidiary”, the Fund gains
exposure to commodities markets by investing in AllianceBernstein Cayman
Inflation Strategy, Ltd., a wholly-owned subsidiary of the Fund organized under
the laws of the Cayman Islands (the “Subsidiary”). The Subsidiary enters into
commodity-linked derivative instruments, including swaps, commodity options,
futures contracts and options on futures contracts. The Subsidiary may also
invest directly in commodities.
|
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Currency
Transactions. Bond Inflation Strategy
and All Market Real Return
Portfolio may invest in non-U.S. Dollar-denominated securities
on a currency hedged or un-hedged basis. The Adviser may actively manage a
Fund’s currency exposures and may seek investment opportunities by taking
long or short positions in currencies through the use of currency-related
derivatives, including forward currency exchange contracts, futures
contracts and options on futures contracts, swaps and options. The Adviser
may enter into transactions for investment opportunities when it
anticipates that a foreign currency will appreciate or depreciate in value
but securities denominated in that currency are not held by a Fund and do
not present attractive investment opportunities. Such transactions may
also be used when the Adviser believes that it may be more efficient than
a direct investment in a foreign currency-denominated security. A Fund may
also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate
prevailing in the currency exchange market for buying or selling
currencies). |
Event-Linked
Securities
Event-linked
securities are variable-rate or fixed-rate fixed-income securities or types of
equity securities for which the return of principal and payment of interest are
contingent on the severity or non-occurrence of various specified catastrophic
events, which may be specific trigger events or a diversified group of events,
such as hurricanes, typhoons, wind events or earthquakes. The most common type
of event-linked fixed-income bonds are known as “catastrophe” or “cat” bonds.
If
23
the
trigger events do not occur, a Fund will recover its principal and interest. If
a trigger event occurs, a Fund may lose a portion or its entire principal
invested in the securities. These securities are generally illiquid and may be
rated below investment-grade or the unrated equivalent and have the same or
equivalent risks as higher yield debt securities (“junk bonds”).
Forward
Commitments
Forward
commitments for the purchase or sale of securities may include purchases on a
when-issued basis or purchases or sales on a delayed delivery basis. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring or approval of a proposed financing by
appropriate authorities (i.e., a “when,
as and if issued” trade).
Bond Inflation Strategy and Municipal Bond Inflation Strategy may invest in
TBA—mortgage-backed securities. A TBA or “To Be Announced” trade represents a
contract for the purchase or sale of mortgage-backed securities to be delivered
at a future agreed-upon date; however, the specific mortgage pool numbers or the
number of pools that will be delivered to fulfill the trade obligation or terms
of the contract are unknown at the time of the trade. Mortgage pools (including
fixed-rate or variable-rate mortgages) guaranteed by the Government National
Mortgage Association, or GNMA, the Federal National Mortgage Association, or
FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently
allocated to the TBA transactions.
When
forward commitments with respect to fixed-income securities are negotiated, the
price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but payment for and delivery of the securities take place at
a later date. Securities purchased or sold under a forward commitment are
subject to market fluctuation and no interest or dividends accrue to the
purchaser prior to the settlement date. There is the risk of loss if the value
of either a purchased security declines before the settlement date or the
security sold increases before the settlement date. The use of forward
commitments helps a Fund to protect against anticipated changes in interest
rates and prices.
Illiquid
Securities
Each
Fund limits its investments in illiquid securities to 15% of its net assets.
Under Rule 22e-4 under the Investment Company Act of 1940, as amended (the “1940
Act”), the term “illiquid securities” means any security or investment that a
Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment.
A
Fund that invests in illiquid securities may not be able to sell such securities
and may not be able to realize their full value upon sale. Restricted securities
(securities subject to legal or contractual restrictions on resale) may be
illiquid. Some restricted securities (such as securities issued pursuant to
Rule 144A under the Securities Act of 1933 (“Rule 144A Securities”) or
certain commercial paper) may be more difficult to trade than other types of
securities.
Inflation-Indexed
Securities
Inflation-indexed
securities are fixed-income securities whose value is periodically adjusted
according to the rate of inflation. If the index measuring inflation falls, the
principal value of these securities will be adjusted downward, and consequently
the interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced.
The
value of inflation-indexed securities tends to react to changes in real interest
rates. In general, the price of inflation-indexed securities can fall when real
interest rates rise, and can rise when real interest rates fall. In addition,
the value of these securities can fluctuate based on fluctuations in
expectations of inflation. Interest payments on these securities can be
unpredictable and will vary as the principal and/or interest is adjusted for
inflation.
Treasury
Inflation-Protected Securities (“TIPS”), which are issued by the U.S. Treasury,
use the CPI as the inflation measure. The principal of a TIPS increases with
inflation and decreases with deflation, as measured by the CPI. When a TIPS
matures, the holder is paid the adjusted principal or original principal,
whichever is greater. TIPS pay interest twice a year, at a fixed rate, which is
determined by auction at the time the TIPS are issued. The rate is applied to
the adjusted principal; so, like the principal, interest payments rise with
inflation and fall with deflation. TIPS are issued in terms of 5, 10, and
30 years.
Insured
Bonds
Municipal Bond Inflation Strategy 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 the issuer of the security with little value given to the
insurance feature. In purchasing such insured securities, the Adviser currently
evaluates the risk and return of municipal securities through its own
research.
Investment
in Below Investment-Grade Fixed-Income Securities
Below
investment-grade fixed-income securities (commonly called “junk bonds”) are
those rated Ba1 or lower by Moody’s Investors Service, Inc. (“Moody’s”), or BB+
or lower by S&P Global Ratings (“S&P”) or Fitch Ratings (“Fitch”), or
the equivalent by any other nationally recognized statistical rating
organization (“NRSRO”), as well as unrated securities considered by the Adviser
to be of comparable quality. For a description of credit ratings, see Appendix
A—Bond Ratings.
Investments
in below investment-grade securities are subject to greater risk of loss of
principal and interest than higher-rated securities. These securities are also
generally considered to be
24
subject
to greater market risk than higher-rated securities. The capacity of issuers of
these securities to pay interest and repay principal is more likely to weaken
than is that of issuers of higher-rated securities in times of deteriorating
economic conditions or rising interest rates. In addition, below
investment-grade securities may be more susceptible to real or perceived adverse
economic conditions than investment-grade securities.
The
market for these securities may be thinner and less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. To the extent that there is no established secondary
market for these securities, a Fund may experience difficulty in valuing such
securities and, in turn, the Fund’s assets.
Investment
in Exchange-Traded Funds and Other Investment Companies
A
Fund may invest in shares of exchange-traded funds (“ETFs”), including AB ETFs,
subject to the restrictions and limitations of the 1940 Act, or any
applicable rules, exemptive orders or regulatory guidance thereunder. ETFs are
pooled investment vehicles that seek to track the performance of a specific
index or implement actively-managed investment strategies. Index ETFs will not
track their underlying indices precisely since the ETFs have expenses and may
need to hold a portion of their assets in cash, unlike the underlying indices,
and the ETFs may not invest in all of the securities in the underlying indices
in the same proportion as the indices for varying reasons. Unlike index ETFs,
actively-managed ETFs generally seek to outperform a benchmark index and
typically have higher expenses than index ETFs, which expenses reduce investment
returns. There are numerous types of index ETFs and actively-managed ETFs,
including those offering exposure to broad or narrow segments of the equity,
fixed-income, commodities and foreign currencies markets. A Fund will incur
transaction costs when buying and selling ETF shares, and indirectly bear the
expenses of the ETFs. In addition, the market value of an ETF’s shares, which is
based on supply and demand in the market for the ETF’s shares, may differ from
its NAV. Accordingly, there may be times when an ETF’s shares trade at a
discount or premium to its NAV.
The
Funds may invest, and have invested from time to time, in investment companies
other than ETFs, including AB Mutual Funds, as permitted by the 1940 Act or the
rules and regulations or exemptive orders thereunder. As with ETF investments,
if the Fund acquires shares in other investment companies, shareholders would
bear, indirectly, the expenses of such investment companies (which may include
management and advisory fees), which to the extent not waived or reimbursed,
would be in addition to the Fund’s expenses. The Funds intend to invest
uninvested cash balances in an affiliated money market fund as permitted by
Rule 12d1-1 under the 1940 Act. A Fund’s investments in other investment
companies, including ETFs, subject the Fund indirectly to the underlying risks
of those investment companies.
Investments
in Wholly-Owned Subsidiary
Investments
in the Subsidiary are expected to provide All
Market Real Return Portfolio with exposure to the commodities markets
within the limitations of Subchapter M of the U.S. Internal Revenue Code of
1986, as amended (the “Code”) and Internal Revenue Service (“IRS”) revenue
rulings. Federal tax requirements limit the extent to which the Fund may invest
directly in commodity-linked swaps or certain other commodity-linked
derivatives. The Subsidiary, on the other hand, may invest in these
commodity-linked derivatives without limitations. See “Dividends, Distributions
and Taxes” below for further information.
The
Subsidiary enters into commodity-linked derivative instruments, including swaps,
commodity options, futures contracts and options on futures contracts. Although
All Market Real Return Portfolio may
enter into these commodity-linked derivative instruments directly, the Fund
typically gains exposure to these derivative instruments indirectly by investing
in the Subsidiary. To the extent that the Adviser believes that these
commodity-linked derivative instruments are better suited to provide exposure to
the commodities markets than commodity index-linked notes, the Fund’s
investments in the Subsidiary will likely increase.
The
Subsidiary will also invest in the AB Government Money Market Portfolio,
inflation-indexed securities and other fixed-income instruments, which are
intended to serve as margin or collateral for the Subsidiary’s derivatives
positions. To the extent that the Fund invests in the Subsidiary, it may be
subject to the risks associated with those derivative instruments and other
securities, which are discussed elsewhere in this Prospectus. While the
Subsidiary is expected to obtain its commodities exposure through derivatives
transactions, it may in the future hold physical commodities.
While
the Subsidiary may be considered similar to an investment company, it is not
registered under the 1940 Act and, unless otherwise noted in this Prospectus, is
not subject to all of the investor protections of the 1940 Act. The Subsidiary
has the same investment objective as the Fund and is subject to the same
investment policies and restrictions as the Fund, including those related to
leverage and liquidity, except that the Subsidiary may invest without limitation
in commodities and commodity-linked instruments. The Subsidiary is also subject
to the same valuation, brokerage, and compliance policies and procedures as the
Fund. The Fund and the Subsidiary test compliance with certain restrictions on a
consolidated basis. In addition, the Fund wholly owns and controls the
Subsidiary and the Adviser acts as investment adviser to the Fund and the
Subsidiary. The Subsidiary’s financial statements are consolidated with the
Fund’s financial statements which are included in the Fund’s annual and
semi-annual reports to shareholders. Changes in the laws of the United States
and/or the Cayman Islands could result in the inability of the Fund and/or the
Subsidiary to operate as described in this Prospectus and the SAI and could
adversely affect the Fund.
LIBOR
Replacement Risk
A
Fund may be exposed to debt securities, derivatives or other financial
instruments that recently transitioned from the London Interbank Offered Rate
(“LIBOR”) as a benchmark or reference rate for various interest rate
calculations. The use of LIBOR was phased out in June 2023 and transitioned to
the
25
Secured
Overnight Financing Rate (“SOFR”). SOFR is a broad measure of the cost of
borrowing cash overnight collateralized by U.S. Treasury securities in the
repurchase agreement (repo) market. There can be no assurance that instruments
linked to SOFR will have the same volume or liquidity as did the market for
LIBOR-linked financial instruments prior to LIBOR’s discontinuance or
unavailability.
Loan
Participations and Assignments
A
Fund may invest in loans (which may be syndicated) to corporate, governmental or
other borrowers, either by participating as co-lender at the time the loan is
originated or by buying an interest in the loan in the secondary market from a
financial institution or institutional investor. The financial status of an
institution interposed between a Fund and a borrower may affect the ability of
the Fund to receive principal and interest payments.
The
success of a Fund may depend on the skill with which an agent bank administers
the terms of the corporate loan agreements, monitors borrower compliance with
covenants, collects principal, interest and fee payments from borrowers and,
where necessary, enforces creditor remedies against borrowers. Agent banks
typically have broad discretion in enforcing loan agreements.
The
lack of a liquid secondary market may have an adverse impact on the value of
loan participations and assignments and a Fund’s ability to dispose of such
investments when necessary to meet the Fund’s liquidity needs in response to a
specific economic event such as a deterioration in the creditworthiness of the
borrower. The lack of a liquid secondary market for loan assignments and
participations also may make it more difficult for the Fund to assign a value to
these investments for purposes of valuing the Fund’s portfolio and calculating
its asset value.
Loans
of Portfolio Securities
For
the purpose of achieving income, a Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions (“borrowers”) to the
extent permitted under the 1940 Act or the rules and regulations thereunder (as
such statute, rules or regulations may be amended from time to time) or by
guidance regarding interpretations of or exemptive orders under the
1940 Act. Under a Fund’s securities lending program, all securities loans
will be secured continuously by cash collateral and/or non-cash collateral.
Non-cash collateral will include only securities issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities. The loans will be
made only to borrowers deemed by the Adviser to be creditworthy, and when, in
the judgment of the Adviser, the consideration that can be earned at that time
from securities loans justifies the attendant risk. If a loan is collateralized
by cash, the Fund will be compensated for the loan from a portion of the net
return from the interest earned on the collateral after a rebate paid to the
borrower (in some cases this rebate may be a “negative rebate”, or fee paid by
the borrower to the Fund in connection with the loan). If the Fund receives
non-cash collateral, the Fund will receive a fee from the borrower generally
equal to a negotiated percentage of the market value of the loaned securities.
For its services, the securities lending agent receives a fee from the
Fund.
A
Fund will have the right to call a loan and obtain the securities loaned at any
time on notice to the borrower within the normal and customary settlement time
for the securities. While the securities are on loan, the borrower is obligated
to pay the Fund amounts equal to any income or other distributions from the
securities. The Fund will not have the right to vote any securities during the
existence of a loan, but will have the right to recall loaned securities in
order to exercise voting or other ownership rights. When the Fund lends its
securities, its investment performance will continue to reflect changes in the
value of securities loaned.
A
Fund will invest any cash collateral in shares of a money market fund approved
by the Fund’s Board of Directors (the “Board”) and expected to be managed by the
Adviser. Any such investment will be at the Fund’s risk. A Fund may pay
reasonable finders’, administrative, and custodial fees in connection with a
loan.
Principal
risks of lending portfolio securities include that the borrower will fail to
return the loaned securities upon termination of the loan and that the value of
the collateral will not be sufficient to replace the loaned securities.
Mortgage-Related,
Other Asset-Backed Securities and Structured Securities
A
Fund may invest in mortgage-related or other asset-backed securities.
Mortgage-related securities include mortgage pass-through securities,
collateralized mortgage obligations (“CMOs”), commercial mortgage-backed
securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed
securities (“SMBS”) and other securities that directly or indirectly represent a
participation in or are secured by and payable from mortgage loans on real
property. These securities may be issued or guaranteed by the U.S. Government or
one of its sponsored entities or may be issued by private organizations.
The
value of mortgage-related or other asset-backed securities may be particularly
sensitive to changes in prevailing interest rates. Early payments of principal
on some mortgage-related securities may occur during periods of falling mortgage
interest rates and expose a Fund to a lower rate of return upon reinvestment of
principal. Early payments associated with mortgage-related securities cause
these securities to experience significantly greater price and yield volatility
than is experienced by traditional fixed-income securities. During periods of
rising interest rates, a reduction in prepayments may increase the effective
life of mortgage-related securities, subjecting them to greater risk of decline
in market value in response to rising interest rates. If the life of a
mortgage-related security is inaccurately predicted, a Fund may not be able to
realize the rate of return it expected.
One
type of SMBS has one class receiving all of the interest from the mortgage
assets (the interest-only, or “IO” class), while the other class will receive
all of the principal (the principal-only, or “PO” class). The yield to maturity
on an IO class is extremely sensitive to the rate of principal payments
26
(including
prepayments) on the underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on a Fund’s yield to maturity from
these securities.
Another
type of mortgage-related security, known as a Government Sponsored Enterprise
(“GSE”) Risk-Sharing Bond or Credit Risk Transfer Security (“CRT”), is issued by
GSEs (and sometimes banks or mortgage insurers) and structured without any
government or GSE guarantee in respect of borrower defaults or underlying
collateral. The risks associated with an investment in CRTs differ from the
risks associated with an investment in mortgage-backed securities issued by GSEs
because, in CRTs, some or all of the credit risk associated with the underlying
mortgage loans is transferred to the end-investor.
A
Fund may invest in collateralized debt obligations (“CDOs”), which include
collateralized bond obligations (“CBOs”), collateralized loan obligations
(“CLOs”), and other similarly structured securities. CBOs and CLOs are types of
asset-backed securities. A CBO is a trust that is backed by a diversified pool
of high-risk, below investment-grade fixed-income securities. A CLO is a trust
typically collateralized by a pool of loans, which may include, among others,
domestic and foreign senior secured loans, senior unsecured loans, and
subordinate corporate loans, including loans that may be rated below
investment-grade or equivalent unrated loans.
A
Fund may invest in other asset-backed securities. The securitization techniques
used to develop mortgage-related securities are applied to a broad range of
financial assets. Through the use of trusts and special purpose corporations,
various types of assets, including automobile loans and leases, credit card
receivables, home equity loans, equipment leases and trade receivables, are
securitized in structures similar to the structures used in mortgage
securitizations.
A
Fund may invest in various types of structured securities and basket securities.
Structured securities are securities issued in structured financing
transactions, which generally involve aggregating types of debt assets in a pool
or special purpose entity and then issuing new securities. Types of structured
financings include securities described elsewhere in this Prospectus, such as
mortgage-related and other asset-backed securities. A Fund’s investments include
investments in structured securities that represent interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of particular debt obligations. This type of restructuring
involves the deposit with or purchase by an entity, such as a corporation or
trust, of specified instruments (such as commercial bank loans or high-yield
bonds) and the issuance by that entity of one or more classes of structured
securities backed by, or representing interests in, the underlying instruments.
The cash flow on the underlying instruments may be apportioned among the newly
issued structured securities to create securities with different investment
characteristics, such as varying maturities, payment priorities and interest
rate provisions, and the extent of the payments made with respect to structured
securities is dependent on the extent of the cash flow from the underlying
instruments. Structured securities of a given class may be either subordinated
or unsubordinated to the payment of another class. Subordinated structured
securities typically have higher yields and present greater risks than
unsubordinated structured securities.
Basket
securities in which a Fund may invest may consist of entities organized and
operated for the purpose of holding a basket of other securities. Baskets
involving debt obligations may be designed to represent the characteristics of
some portion of the debt securities market or the entire debt market.
Municipal
Securities
Municipal Bond Inflation Strategy invests in
municipal securities. The two principal classifications of municipal securities
are bonds and notes. Municipal bonds are intended to meet longer-term capital
needs while municipal notes are intended to fulfill short-term capital needs.
Municipal notes generally have original maturities not exceeding one year.
Municipal notes include tax anticipation notes, revenue anticipation notes, bond
anticipation notes, variable-rate demand obligations, and tax-exempt commercial
paper.
Municipal
securities are typically classified as “general obligation” or “revenue” or
“special obligation” bonds. General obligation bonds are secured by the issuer’s
pledge of its full faith, credit, and taxing power for the payment of principal
and interest. Revenue or special obligation bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other tax, but not from general
tax revenues. Municipal Bond Inflation
Strategy may invest more than 25% of its net assets in revenue bonds,
which generally do not have the pledge of the credit of the issuer. The payment
of the principal and interest on revenue bonds is dependent solely on the
ability of the user of the facilities financed by the bonds to meet its
financial obligations and the pledge, if any, of real and personal property
financed as security for such payment. The Fund may invest more than 25% of its
total assets in securities or obligations that are related in such a way that
business or political developments or changes affecting one such security could
also affect the others (for example, securities with interest that is paid from
projects of a similar type).
The
Fund may invest in municipal lease obligations. A municipal lease obligation is
not backed by the full faith and credit of the issuing municipality, but is
usually backed by the municipality’s pledge to make annual appropriations for
lease payments. Thus, it is possible that a municipality will not appropriate
money for lease payments. Additionally, some municipal lease obligations may
allow for lease cancellation prior to the maturity date of the security.
Municipal lease obligations may be less readily marketable than other municipal
securities and some may be illiquid.
Current
federal tax law distinguishes between municipal securities issued to finance
certain private activities (“private activity bonds”) and other municipal
securities. Private activity bonds, most of which are AMT-subject bonds and are
also revenue bonds, include bonds issued to finance such projects as airports,
housing projects, resource recovery programs, solid waste disposal facilities,
and student loan programs.
27
Preferred
Stock
A
Fund may invest in preferred stock. Preferred stock is a class of capital stock
that typically pays dividends at a specified rate. Preferred stock is generally
senior to common stock but is subordinated to any debt the issuer has
outstanding. Accordingly, preferred stock dividends are not paid until all debt
obligations are first met. Preferred stock may be subject to more fluctuations
in market value, due to changes in market participants’ perceptions of the
issuer’s ability to continue to pay dividends, than debt of the same issuer.
These investments include convertible preferred stock, which includes an option
for the holder to convert the preferred stock into the issuer’s common stock
under certain conditions, among which may be the specification of a future date
when the conversion must begin, a certain number of shares of common stock per
share of preferred stock, or a certain price per share for the common stock.
Convertible preferred stock tends to be more volatile than non-convertible
preferred stock, because its value is related to the price of the issuer’s
common stock as well as the dividends payable on the preferred stock.
Real
Estate Investment Trusts (“REITs”)
All Market Real Return Portfolio invests in
REITs from time to time. REITs are pooled investment vehicles that invest
primarily in income-producing real estate or real estate-related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest and principal payments. Similar to investment companies such as the
Funds, REITs are not taxed on income distributed to shareholders, provided they
comply with several requirements of the Code. The Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the Fund invests in
addition to the expenses incurred directly by the Fund.
Repurchase
Agreements and Buy/Sell Back Transactions
A
Fund may enter into repurchase agreements. In a repurchase agreement
transaction, the Fund buys a security and simultaneously agrees to sell it back
to the counterparty at a specified price in the future. However, a repurchase
agreement is economically similar to a secured loan, in that the Fund lends cash
to a counterparty for a specific term, normally a day or a few days, and is
given acceptable collateral (the purchased securities) to hold in case the
counterparty does not repay the loan. The difference between the purchase price
and the repurchase price of the securities reflects an agreed-upon “interest
rate”. Given that the price at which a Fund will sell the collateral back is
specified in advance, a Fund is not exposed to price movements on the collateral
unless the counterparty defaults. If the counterparty defaults on its obligation
to buy back the securities at the maturity date and the liquidation value of the
collateral is less than the outstanding loan amount, a Fund would suffer a loss.
In order to further mitigate any potential credit exposure to the counterparty,
if the value of the securities falls below a specified level that is linked to
the loan amount during the life of the agreement, the counterparty must provide
additional collateral to support the loan.
A
Fund may enter into buy/sell back transactions, which are similar to repurchase
agreements. In this type of transaction, a Fund enters a trade to buy securities
at one price and simultaneously enters a trade to sell the same securities at
another price on a specified date. Similar to a repurchase agreement, the
repurchase price is higher than the sale price and reflects current interest
rates. Unlike a repurchase agreement, however, the buy/sell back transaction is
considered two separate transactions.
Reverse
Repurchase Agreements and Dollar Rolls
Bond Inflation Strategy and All Market Real Return Portfolio may enter
into reverse repurchase agreements and dollar rolls, subject to the Funds’
limitations on borrowings. A reverse repurchase agreement or dollar roll
involves the sale of a security by a Fund and its agreement to repurchase the
instrument at a specified time and price, and may be considered a form of
borrowing for some purposes. Reverse repurchase agreements, dollar rolls and
other forms of borrowings may create leveraging risk for a Fund. In addition,
reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase may decline below the
purchase price.
Dollar
rolls involve sales by a Fund of securities for delivery in the current month
and the Fund’s simultaneously contracting to repurchase substantially similar
(same type and coupon) securities on a specified future date. During the roll
period, a Fund forgoes principal and interest paid on the securities. A Fund is
compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the “drop”) as well
as by the interest earned on the cash proceeds of the initial sale.
Reverse
repurchase agreements and dollar rolls involve the risk that the market value of
the securities a Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or becomes insolvent, a
Fund’s use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund’s obligation to repurchase the securities.
Rights
and Warrants
Rights
and warrants are option securities permitting their holders to subscribe for
other securities. Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants do not carry with them
dividend or voting rights with respect to the underlying securities, or any
rights in the assets of the issuer. As a result, an investment in rights and
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not necessarily
change with the value of the underlying securities, and a right or a warrant
ceases to have value if it is not exercised prior to its expiration date.
28
Short
Sales
A
Fund may make short sales as a part of overall portfolio management or to offset
a potential decline in the value of a security. A short sale involves the sale
of a security that a Fund does not own, or if the Fund owns the security, is not
to be delivered upon consummation of the sale. When a Fund makes a short sale of
a security that it does not own, it must borrow from a broker-dealer the
security sold short and deliver the security to the broker-dealer upon
conclusion of the short sale.
If
the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a short-term
capital gain. Although a Fund’s gain is limited to the price at which it sold
the security short, its potential loss is theoretically unlimited because there
is a theoretically unlimited potential for the price of a security sold short to
increase.
Standby
Commitment Agreements
Standby
commitment agreements are similar to put options that commit a Fund, for a
stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement, a Fund is paid a commitment fee, regardless of whether the
security ultimately is issued. A Fund will enter into such agreements only for
the purpose of investing in the security underlying the commitment at a yield
and price considered advantageous to the Fund and unavailable on a firm
commitment basis. There is no guarantee that a security subject to a standby
commitment will be issued. In addition, the value of the security, if issued, on
the delivery date may be more or less than its purchase price. Since the
issuance of the security is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the
Fund.
Sovereign
Debt Obligations
No
established secondary markets may exist for many sovereign debt obligations.
Reduced secondary market liquidity may have an adverse effect on the market
price and a Fund’s ability to dispose of particular instruments when necessary
to meet its liquidity requirements or in response to specific economic events
such as a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain sovereign debt obligations may also make it more
difficult for a Fund to obtain accurate market quotations for the purpose of
valuing its portfolio. Market quotations are generally available on many
sovereign debt obligations only from a limited number of dealers and may not
represent firm bids of those dealers or prices for actual sales.
By
investing in sovereign debt obligations, a Fund will be exposed to the direct or
indirect consequences of political, social, and economic changes in various
countries. Political changes in a country may affect the willingness of a
foreign government to make or provide for timely payments of its obligations.
The country’s economic status, as reflected in, among other things, its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government’s ability to honor its obligations. In addition,
countries that issue debt obligations denominated in a foreign currency and
countries that do not have their own currency (e.g., Eurozone countries) may have a higher
risk of default than other countries.
The
Funds are permitted to invest in sovereign debt obligations of issuers that are
not current in the payment of interest or principal or are in default so long as
the Adviser believes it to be consistent with the Funds’ investment objectives.
The Funds may have limited legal recourse in the event of a default with respect
to certain sovereign debt obligations they hold. For example, remedies from
defaults on certain sovereign debt obligations, unlike those on private debt,
must, in some cases, be pursued in the courts of the defaulting party itself.
Legal recourse therefore may be significantly diminished. Bankruptcy,
moratorium, and other similar laws applicable to issuers of sovereign debt
obligations may be substantially different from those applicable to issuers of
private debt obligations. The political context, expressed as the willingness of
an issuer of sovereign debt obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.
Structured
Products
A
Fund may invest in certain hybrid derivatives-type investments that combine
features of a traditional stock or bond with those of, for example, a futures
contract or an option. These investments include structured notes and indexed
securities, commodity-linked notes and commodity index-linked notes and
credit-linked securities. The performance of the structured product, which is
generally a fixed-income security, is tied (positively or negatively) to the
price or prices of an unrelated reference indicator such as a security or basket
of securities, currencies, commodities, a securities or commodities index or a
credit default swap or other kinds of swaps. The structured product may not pay
interest or protect the principal invested. The structured product or its
interest rate may be a multiple of the reference indicator and, as a result, may
be leveraged and move (up or down) more rapidly than the reference indicator.
Investments in structured products may provide a more efficient and less
expensive means of investing in underlying securities, commodities or other
derivatives, but may potentially be more volatile and carry greater trading and
market risk than investments in traditional securities. The purchase of a
structured product also exposes a Fund to the credit risk of the issuer of the
structured product.
Structured
notes are derivative debt instruments. The interest rate or principal of these
notes is determined by reference to an unrelated indicator (for example, a
currency, security, or index thereof) unlike a typical note where the borrower
agrees to make fixed or floating interest payments and to pay a fixed sum at
maturity. Indexed securities may include structured notes as
29
well
as securities other than debt securities, the interest or principal of which is
determined by an unrelated indicator.
Commodity-linked
notes and commodity index-linked notes provide exposure to the commodities
markets. These are derivative securities with one or more commodity-linked
components that have payment features similar to commodity futures contracts,
commodity options, commodity indices or similar instruments. Commodity-linked
products may be either equity or debt securities, leveraged or unleveraged, and
have both security and commodity-like characteristics. A portion of the value of
these instruments may be derived from the value of a commodity, futures
contract, index or other economic variable.
A
Fund may also invest in certain hybrid derivatives-type investments that combine
features of a traditional bond with those of certain derivatives such as a
credit default swap, an interest rate swap or other securities. These
investments include credit-linked securities. The issuers of these securities
frequently are limited purpose trusts or other special purpose vehicles that
invest in a derivative instrument or basket of derivative instruments in order
to provide exposure to certain fixed-income markets. For instance, a Fund may
invest in credit-linked securities as a cash management tool to gain exposure to
a certain market or to remain fully invested when more traditional
income-producing securities are not available. The performance of the structured
product, which is generally a fixed-income security, is linked to the receipt of
payments from the counterparties to the derivatives instruments or other
securities. A Fund’s investments in credit-linked securities are indirectly
subject to the risks associated with derivative instruments, including, among
others, credit risk, default risk, counterparty risk, interest rate risk and
leverage risk. These securities are generally structured as Rule 144A Securities
so that they may be freely traded among qualified institutional buyers. However,
changes in the market for credit-linked securities or the availability of
willing buyers may result in reduced liquidity for the securities.
Tender
Option Bond (“TOB”) Transactions
Municipal Bond Inflation Strategy may enter
into and has, from time to time, entered into TOB transactions in which the Fund
transfers one or more municipal securities into a special purpose entity (the
“Trust”). The Fund receives cash and a residual interest security (sometimes
referred to as “inverse floaters”) issued by the Trust in return. The Trust
simultaneously issues securities, which pay an interest rate that is reset each
week based on an index of high-grade short-term demand notes. These securities,
sometimes referred to as “floaters”, are bought by third parties, including
tax-exempt money market funds, and can be tendered by these holders to a
liquidity provider at par, unless certain events occur. The floaters typically
have first priority on the cash flow from the underlying municipal securities
held by the Trust, and the remaining cash flow, less certain expenses, is paid
to holders of the inverse floaters. The interest rate payable on the inverse
floaters bears an inverse relationship to the interest rate on the floaters.
Under certain circumstances, the Trust may be terminated or collapsed, either by
the Fund or upon the occurrence of certain events, such as a downgrade in the
credit quality of the underlying municipal securities or in the event holders of
the floaters tender their securities to the liquidity provider. The Fund
continues to earn all the interest from the transferred municipal securities
less the amount of interest paid on the floaters and the expenses of the Trust,
which may include payments to the trustee and the liquidity provider and
organizational costs. The Fund receives cash proceeds from the Trust’s sale of
the floaters as consideration for the transferred municipal securities and uses
the cash proceeds for investment purposes (e.g., the purchase of longer-term municipal
securities), which involves leverage risk.
To
the extent that a Fund, rather than a third-party bank or financial institution,
serves as the sponsor of a TOB trust, the Fund’s duties and responsibilities
under such an arrangement may give rise to certain risks including compliance,
securities law and operational risks.
For
a discussion of the risks of TOBs, see “Borrowings and Leverage” below.
Unrated
Securities
A
Fund may invest in unrated securities when the Adviser believes that the
financial condition of the issuers of such securities, or the protection
afforded by the terms of the securities themselves, limits the risk to the Fund
to a degree comparable to that of rated securities that are consistent with the
Fund’s objective and policies.
Variable,
Floating and Inverse Floating-Rate Instruments
Variable
and floating-rate securities pay interest at rates that are adjusted
periodically, according to a specified formula. A “variable” interest rate
adjusts at predetermined intervals (e.g., daily, weekly or monthly), while a
“floating” interest rate adjusts whenever a specified benchmark rate (such as
the bank prime lending rate) changes.
Bond Inflation Strategy and Municipal Bond Inflation Strategy may also
invest in inverse floating-rate debt instruments (“inverse floaters”). The
interest rate on an inverse floater resets in the opposite direction from the
market rate of interest to which the inverse floater is indexed. An inverse
floater may have greater volatility in market value, in that, during periods of
rising interest rates, the market values of inverse floaters will tend to
decrease more rapidly than those of fixed-rate securities.
Zero-Coupon
and Principal-Only Securities
Zero-coupon
securities and principal-only (PO) securities are debt securities that have been
issued without interest coupons or stripped of their unmatured interest coupons,
and include receipts or certificates representing interests in such stripped
debt obligations and coupons. Such a security pays no interest to its holder
during its life. Its value to an investor consists of the difference between its
face value at the time of maturity and the price for which it was acquired,
which is generally an amount significantly less than its face value. Such
securities usually trade at a deep discount from their face or par value and are
subject to greater fluctuations in market value in response to changing interest
rates than debt obligations of comparable
30
maturities
and credit quality that make current distributions of interest. On the other
hand, because there are no periodic interest payments to be reinvested prior to
maturity, these securities eliminate reinvestment risk and “lock in” a rate of
return to maturity.
ADDITIONAL
RISKS AND OTHER CONSIDERATIONS
Investments
in the Funds involve the risk considerations described below. Certain of these
risks may be heightened when investing in emerging markets.
Borrowings
and Leverage
A
Fund may use borrowings for investment purposes, subject to its investment
policies and procedures and to the applicable statutory or regulatory
requirements, by entering into transactions such as reverse repurchase
agreements, derivatives transactions or, for Municipal Bond Inflation Strategy, TOBs.
Borrowings by a Fund result in leveraging of the Fund’s shares.
Utilization
of leverage, which is usually considered speculative, involves certain risks to
a Fund’s shareholders. These include a higher volatility of the NAV of the
Fund’s shares of common stock and the relatively greater effect of changes in
the value of the Fund’s portfolio on the NAV of the shares caused by favorable
or adverse changes in market conditions or interest rates. In the case of
borrowings for investment purposes, so long as the Fund is able to realize a net
return on the leveraged portion of its investment portfolio that is higher than
the interest expense paid on borrowings, the effect of leverage will be to cause
the Fund’s shareholders to realize a higher net return than if the Fund were not
leveraged. If the interest expense on borrowings or other costs of leverage
approach the net return on the Fund’s investment portfolio or investments made
through leverage, as applicable, the benefit of leverage to the Fund’s
shareholders will be reduced. If the interest expense on borrowings or other
costs of leverage were to exceed the net return to the Fund, a Fund’s use of
leverage could result in a lower rate of net return than if the Fund were not
leveraged. Similarly, the effect of leverage in a declining market could
normally be a greater decrease in NAV than if the Fund were not leveraged.
During
periods of rising short-term interest rates, the interest paid on floaters in
TOBs would increase, which may adversely affect Municipal Bond Inflation Strategy’s net return.
If rising short-term rates coincide with a period of rising long-term rates, the
value of securities with longer-term maturities purchased with the proceeds of
leverage provided by TOBs would decline, adversely affecting the Fund’s NAV. In
certain circumstances, adverse changes in interest rates or other events could
cause a TOB trust to terminate or collapse, potentially requiring the Fund to
liquidate the longer-term securities at unfavorable prices to meet the Trust’s
outstanding obligations.
In
the case of All Market Real Return
Portfolio, the Subsidiary may also use leverage for investment
transactions with similar risks. The Fund will be exposed to these risks through
its investments in the Subsidiary.
Rule
18f-4 under the 1940 Act imposes limits on a fund’s utilization of certain
derivatives and other forms of leverage. Rule 18f-4, among other things,
permits a fund to treat TOBs (and other similar financing transactions) either
as borrowings (subject to asset coverage requirements under the 1940 Act) or as
“derivatives transactions” subject to certain risk-based limits of
Rule 18f-4.
Foreign
(Non-U.S.) Securities
Investing
in securities of non-U.S. issuers involves special risks and considerations not
typically associated with investing in U.S. securities. The securities markets
of many foreign countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. Investments in securities of non-U.S.
issuers may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. Sanctions and other similar
actions imposed by the U.S. or a foreign country, including those against
specific issuers and individuals, may restrict, and in some cases have
restricted, a Fund’s ability to purchase or sell foreign securities or access
income received on foreign securities, or may require a Fund to divest its
holdings of foreign securities, which could adversely affect, and in some cases
have adversely affected, the value and liquidity of such holdings. The
imposition of sanctions and other similar actions could also adversely affect
global sectors and economies and thereby negatively affect the value of a Fund’s
investments beyond any direct exposure to the countries or regions subject to
the sanctions. In addition, the securities markets of some foreign countries may
be closed on certain days (e.g., local
holidays) when the Funds are open for business. On such days, a Fund may be
unable to add to or exit its positions in foreign securities traded in such
markets even though it may otherwise be attractive to do so.
Securities
registration, custody, and settlement may in some instances be subject to delays
and legal and administrative uncertainties. Foreign investment in the securities
markets of certain foreign countries is restricted or controlled to varying
degrees. These restrictions or controls may at times limit or preclude
investment in certain securities and may increase the cost and expenses of Bond Inflation Strategy and All Market Real Return Portfolio. In addition,
the repatriation of investment income, capital or the proceeds of sales of
securities from certain of the countries is controlled under regulations,
including in some cases the need for certain advance government notification or
authority, and if a deterioration occurs in a country’s balance of payments, the
country could impose temporary restrictions on foreign capital remittances.
Income from certain investments held by a Fund could be reduced by foreign
income taxes, including withholding taxes.
A
Fund also could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures or seek local governmental
31
approvals
or other actions, any of which may involve additional costs to the Fund. These
factors may affect the liquidity of a Fund’s investments in any country and the
Adviser will monitor the effect of any such factor or factors on the Fund’s
investments. Transaction costs, including brokerage commissions for transactions
both on and off the securities exchanges, in many foreign countries are
generally higher than in the United States.
Issuers
of securities in foreign jurisdictions are generally not subject to the same
degree of regulation as are U.S. issuers with respect to such matters as insider
trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of non-U.S. issuers than to
investors in U.S. securities. Substantially less information is publicly
available about certain non-U.S. issuers than is available about most U.S.
issuers.
The
economies of individual foreign countries may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product or
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, public health crises
(including the occurrence of a contagious disease or illness), revolutions, wars
or diplomatic developments could affect adversely the economy of a foreign
country. In the event of nationalization, expropriation, or other confiscation,
a Fund could lose its entire investment in securities in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Funds than that provided by U.S. laws.
The
United Kingdom (“U.K.”) formally withdrew from the European Union (“EU”) on
January 31, 2020. The U.K. and the EU negotiated an agreement
governing their future trading and security relationships. This agreement became
effective on a provisional basis on January 1, 2021 and entered into full
force on May 1, 2021. The U.K. and the EU also negotiated a Memorandum of
Understanding (“MoU”), which creates a framework for voluntary regulatory
cooperation in financial services between the U.K. and the EU. The impact on the
U.K. and European economies and the broader global economy of the uncertainties
associated with implementing the agreement and MoU are significant and could
have an adverse effect on the value of a Fund’s investments and its
NAV. These uncertainties include an increase in the regulatory and customs
requirements imposed on cross-border trade between the U.K. and the EU, the
negotiation and implementation of additional arrangements between the U.K. and
the EU affecting important parts of the economy (such as financial services),
volatility and illiquidity in markets, currency fluctuations, the renegotiation
of other existing trading and cross-border cooperation arrangements (whether
economic, tax, fiscal, legal, regulatory or otherwise) of the U.K. and the EU,
and potentially lower growth for companies in the U.K., Europe and
globally.
In
addition, military conflicts and wars, such as Russia’s large-scale invasion of
Ukraine and the war between Israel and Hamas, and responses to such conflicts by
governments and intergovernmental organizations have resulted, and may continue
to result, in market disruptions in the regions and globally. Future market
disruptions are impossible to predict, but could be significant and have a
severe adverse effect on the regions and beyond, including significant negative
impacts on the economy and the markets for certain securities and commodities,
such as oil and natural gas.
Investments
in securities of companies in emerging markets involve special risks. There are
approximately 100 countries identified by the World Bank (International Bank for
Reconstruction and Development) as Low Income, Lower Middle Income and Upper
Middle Income countries that are generally regarded as emerging markets.
Emerging market countries that the Adviser currently considers for investment
include:
|
|
|
| |
Argentina
Bangladesh
Belize
Brazil
Bulgaria
Chile
China
Colombia
Croatia
Czech
Republic
Dominican Republic
Ecuador
Egypt
El Salvador
Gabon
Georgia
Ghana
Greece |
|
Hungary
India
Indonesia
Iraq
Ivory
Coast
Jamaica
Jordan
Kazakhstan
Kenya
Lebanon
Lithuania
Malaysia
Mexico
Mongolia
Nigeria
Pakistan
Panama
Peru |
|
Philippines
Poland
Qatar
Saudi
Arabia
Senegal
Serbia
South Africa
South Korea
Sri
Lanka
Taiwan
Thailand
Turkey
Ukraine
United
Arab Emirates
Uruguay
Venezuela
Vietnam |
Countries
may be added to or removed from this list at any time.
Investing
in emerging market securities involves risks different from, and greater than,
risks of investing in domestic securities or in the securities of issuers
domiciled in developed, foreign countries. These risks include: smaller market
capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign investment;
and the imposition of capital controls, which may restrict a Fund’s ability to
repatriate investment income and capital. In addition, foreign investors may be
required to register the proceeds of sales and future economic or political
crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization or creation of government
monopolies. The currencies of emerging market countries may experience
significant declines against the U.S. Dollar, and devaluation may occur
subsequent to investments in these currencies by a Fund. Inflation and
rapid
32
fluctuations
in inflation rates have had, and may continue to have, negative effects on the
economies and securities markets of certain emerging market countries.
Additional
risks of emerging market securities may include: greater social, economic and
political uncertainty and instability; more substantial governmental involvement
in the economy; less governmental supervision and regulation; unavailability of
currency hedging techniques; companies that are newly organized and small; less
developed legal systems with fewer security holder rights and practical remedies
to pursue claims, including class actions or fraud claims; the limited ability
of U.S. authorities to bring and enforce actions against non-U.S. companies and
non-U.S. persons; and differences in the nature and quality of financial
information, including (i) auditing and financial reporting standards,
which may result in unavailability or unreliability of material information
about issuers and (ii) the risk that the Public Company Accounting
Oversight Board (“PCAOB”) may not be able to inspect audit practices and work
conducted by PCAOB-registered audit firms in certain emerging market countries,
such as China. Thus there can be no assurance that the quality of financial
reporting or the audits conducted by such audit firms of U.S.-listed emerging
market companies meet PCAOB standards. Furthermore, in December 2021, the
Commission finalized rules to implement the Holding Foreign Companies
Accountable Act, which requires the Commission to prohibit the trading of
securities of foreign issuers (including those based in China) on a national
securities exchange or through any other method regulated by the Commission
(including through over-the-counter trading) if the PCAOB is unable to inspect
the work papers of the auditors of such companies for three years. To the extent
a Fund invests in the securities of a company whose securities become subject to
such a trading prohibition, the Fund’s ability to transact in such securities,
and the liquidity of the securities, as well as their market price, would likely
be adversely affected. A Fund would also have to seek other markets in which to
transact in such securities, which could increase the Fund’s costs. In addition,
emerging securities markets may have different clearance and settlement
procedures, which may be unable to keep pace with the volume of securities
transactions or otherwise make it difficult to engage in such transactions.
Settlement problems may cause a Fund to miss attractive investment
opportunities, hold a portion of its assets in cash pending investment, or be
delayed in disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security.
Foreign
(Non-U.S.) Currencies
Bond Inflation Strategy and All Market Real Return Portfolio may invest a
substantial portion of their assets in securities denominated in, and receiving
revenues in, foreign currencies and will be adversely affected by reductions in
the value of those currencies relative to the U.S. Dollar. Foreign currency
exchange rates may fluctuate significantly. They are determined by supply and
demand in the foreign exchange markets, the relative merits of investments in
different countries, actual or perceived changes in interest rates, and other
complex factors. Currency exchange rates also can be affected unpredictably by
intervention (or the failure to intervene) by U.S. or foreign governments or
central banks or by currency controls or political developments. In light of
these risks, a Fund may engage in certain currency hedging transactions, as
described above, which involve certain special risks.
A
Fund may also invest directly in foreign currencies for non-hedging purposes on
a spot basis (i.e., cash) or through
derivatives transactions, such as forward currency exchange contracts, futures
contracts and options thereon, swaps and options as described above. These
investments will be subject to the same risks. In addition, currency exchange
rates may fluctuate significantly over short periods of time, causing a Fund’s
NAV to fluctuate.
Management
Risk – Quantitative Models
The
Adviser may use investment techniques that incorporate, or rely upon,
quantitative models. These models may not work as intended and may not enable a
Fund to achieve its investment objective. In addition, certain models may be
constructed using data from external providers, and these inputs may be
incorrect or incomplete, thus potentially limiting the effectiveness of the
models. Finally, the Adviser may change, enhance and update its models and its
usage of existing models at its discretion.
Future
Developments
A
Fund may take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be developed,
to the extent such investment practices are consistent with the Fund’s
investment objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those involved in the
activities described above.
Changes
in Investment Objective and Policies
The
Funds are each a series of AB Bond Fund,
Inc. with one Board. The Board may change a Fund’s investment objective
without shareholder approval. A Fund will provide shareholders with 60 days’
prior written notice of any change to the Fund’s investment objective. Bond Inflation Strategy has a policy to invest
at least 80% of its net assets in fixed-income securities and will not change
this policy without 60 days’ prior written notice to shareholders. Municipal Bond Inflation Strategy has a
fundamental policy to invest at least 80% of its net assets in municipal
securities and will not change this policy without shareholder approval. Unless
otherwise noted, all other investment policies of the Funds may be changed
without shareholder approval.
Temporary
Defensive Position
For
temporary defensive purposes in an attempt to respond to adverse market,
economic, political or other conditions, Bond
Inflation Strategy may reduce its position in fixed-income securities and
invest in, without limit, certain types of short-term, liquid, high-grade or
high-quality debt securities, Municipal Bond
Inflation Strategy may invest without limit in high-quality municipal
notes, variable-rate demand obligations, or in taxable cash equivalents. For
temporary defensive purposes in an attempt to respond to adverse market,
33
economic,
political or other conditions, All Market Real
Return Portfolio may reduce its position in equity securities and invest
in, without limit, certain types of short-term, liquid, high-grade or
high-quality debt securities. While a Fund is investing for temporary defensive
purposes, it may not meet its investment objective.
Portfolio
Holdings
A
description of each Fund’s policies and procedures with respect to the
disclosure of each Fund’s portfolio securities is available in the Funds’
SAI.
Cyber
Security Risk
As
the use of the Internet and other technologies has become more prevalent in the
course of business, the Funds and their service providers, including the
Adviser, have become more susceptible to operational and financial risks
associated with cyber security. Cyber security incidents can result from
deliberate attacks such as gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software
coding) for purposes of misappropriating assets or sensitive information,
corrupting data, or causing operational disruption, or from unintentional
events, such as the inadvertent release of confidential information. Cyber
security failures or breaches of a Fund or its service providers or the issuers
of securities in which the Fund invests have the ability to cause disruptions
and impact business operations, potentially resulting in financial losses, the
inability of Fund shareholders to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs, and/or additional compliance costs.
While measures have been developed which are designed to reduce the risks
associated with cyber security incidents, there can be no assurance that those
measures will be effective, particularly since a Fund does not control the cyber
security defenses or plans of its service providers, financial intermediaries
and companies with which those entities do business and companies in which the
Fund invests.
Cyber
security incidents, both intentional and unintentional, may allow an
unauthorized party to gain access to Fund or shareholder assets, Fund or
customer data (including private shareholder information), or proprietary
information, or cause a Fund, the Adviser, and/or a Fund’s service providers
(including, but not limited to, fund accountants, custodians, sub-custodians,
transfer agents and financial intermediaries) to suffer data breaches, data
corruption or lose operational functionality, or prevent Fund shareholders from
purchasing, redeeming, or exchanging shares or receiving distributions. The
Funds and the Adviser have limited ability to prevent or mitigate cyber security
incidents affecting third-party service providers. Cyber security incidents may
result in financial losses to a Fund and its shareholders, and substantial costs
may be incurred in seeking to prevent or minimize future cyber security
incidents.
34
INVESTING
IN THE FUNDS
This
section discusses how to buy, sell or redeem, or exchange different classes of
shares of the Funds that are offered in this Prospectus. Bond Inflation Strategy offers nine classes of shares, All Market Real Return Portfolio offers eight
classes of shares and Municipal Bond Inflation
Strategy offers five classes of shares through this Prospectus. AB Bond Inflation Strategy and AB All Market Real Return Portfolio each no
longer offer Class R or Class K shares to new investors.
The
NAV of each of the Funds is disclosed daily on the Fund’s website or through the
investor’s online account information at www.abfunds.com and/or by calling
(800) 221-5672.
Each
share class represents an investment in the same portfolio of securities, but
the classes may have different sales charges and bear different ongoing
distribution expenses. For additional information on the differences between the
different classes of shares and factors to consider when choosing among them,
please see “The Different Share Class Expenses” and “Choosing a Share
Class” below. Only Class A shares offer
Quantity Discounts on sales charges, as described below.
To
effect an order for the purchase, exchange or redemption of a Fund’s shares, the
Fund must receive the order in “proper form.” Proper form generally means that
your instructions:
• |
|
Are
signed and dated by the person(s) authorized in accordance with the Fund’s
policies and procedures to access the account and request
transactions; |
• |
|
Include
the fund and account number; and |
• |
|
Include
the amount of the transaction (stated in dollars, shares, or
percentage). |
Written
instructions also must include:
• |
|
Medallion
signature guarantees or notarized signatures, if required for the type of
transaction. (Requirements are detailed on AllianceBernstein Investor
Services, Inc., or ABIS, service forms; Please contact ABIS with any
questions) |
• |
|
Any
supporting documentation that may be required. |
The
Funds reserve the right, without notice, to revise the requirements for proper
form.
HOW
TO BUY SHARES
The
purchase of the Funds’ shares is priced at the next-determined NAV after your
order is received in proper form by ABIS or after an order is received in
accordance with procedures applicable to the institutional clients of the
Adviser (please contact your institutional representative for additional
information) and private clients of Bernstein (see “Class 1 and Class 2 Shares –
Shares Available to Private Clients of Bernstein” below).
Class A
and Class C Shares – Shares Available to Retail Investors
You
may purchase a Fund’s Class A or Class C shares through financial
intermediaries, such as broker-dealers or banks. You also may purchase shares
directly from the Funds’ principal underwriter, AllianceBernstein Investments,
Inc., or ABI, if you are: (i) making an initial investment and the Fund has
received and accepted a completed Mutual Fund Application identifying a
financial intermediary with which ABI has an agreement; (ii) an existing
Fund shareholder with an account held directly with a Fund; or (iii) an
employee of the Adviser or any of its affiliates. These purchases may be subject
to an initial sales charge, an asset-based sales charge or CDSC as described
below.
|
Purchase
Minimums and Maximums |
Minimums:*
|
|
|
| |
—Initial: |
|
$ |
2,500 |
|
—Subsequent: |
|
$ |
50 |
|
* |
Purchase
minimums may not apply to some accounts established in connection with the
Automatic Investment Program and to some retirement-related investment
programs. These investment minimums do not apply to persons participating
in a fee-based program or “Mutual Fund Only” brokerage program which is
sponsored and maintained by a registered broker-dealer or other financial
intermediary with omnibus account or “network level” account arrangements
with a Fund. |
Maximum
Individual Purchase Amount:
|
|
|
| |
—Class A
shares |
|
|
None |
|
—Class C
shares: |
|
|
| |
—Bond
Inflation Strategy |
|
$ |
500,000 |
|
—Municipal
Bond Inflation Strategy |
|
$ |
500,000 |
|
—All
Market Real Return Portfolio |
|
$ |
1,000,000 |
|
Class Z
Shares – Shares Available to Persons Participating in Certain Fee-Based
Programs
Class Z
shares are available to persons participating in certain fee-based programs
sponsored and maintained by registered broker-dealers or other financial
intermediaries with omnibus account arrangements with a Fund.
Other
Purchase Information
Your
broker or financial advisor must receive your purchase request by the Fund
Closing Time, which is the close of regular trading on any day the Exchange is
open (ordinarily, 4:00 p.m., Eastern time, but sometimes earlier, as in the
case of scheduled half-day trading or unscheduled suspensions of trading), for
you to receive the next-determined NAV, less any applicable initial sales
charge.
If
you are an existing Fund shareholder and you have completed the appropriate
section of the Mutual Fund Application, you may purchase additional shares by
telephone with payment by electronic funds transfer in amounts not exceeding
$500,000. ABIS must receive and confirm telephone requests before the Fund
Closing Time, to receive that day’s public offering price. Call
(800) 221-5672 to arrange a transfer from your bank account.
Shares
of the Funds are generally available for purchase in the United States, Puerto
Rico, Guam, American Samoa and the U.S. Virgin Islands. Except to the extent
otherwise permitted by a Fund, the Funds will only accept purchase orders
directly from U.S. citizens with a U.S. address (including an APO or
35
FPO
address) or resident aliens with a U.S. address (including an APO or FPO
address) and a U.S. taxpayer identification number (i.e., W-9 tax status). Subject to the
requirements of local law applicable to the offering of Fund shares, U.S.
citizens (i.e., W-9 tax status) residing
in foreign countries are permitted to purchase shares of the Funds through their
accounts at U.S. registered broker-dealers and other similar U.S. financial
intermediaries, provided the broker-dealer or intermediary has an agreement with
the Funds’ distributor permitting it to accept orders for the purchase and sale
of Fund shares.
The
Funds will not accept purchase orders (including orders for the purchase of
additional shares) from foreign persons or entities or from resident aliens who,
to the knowledge of a Fund, have reverted to non-resident status (e.g., a resident alien who has a non-U.S.
address at time of purchase).
Tax-Deferred
Accounts
Class A
shares are also available to the following tax-deferred arrangements:
• |
|
Traditional
and Roth IRAs (minimums listed in the table above
apply); |
• |
|
SEPs,
SAR-SEPs, SIMPLE IRAs, and individual 403(b) plans (no investment
minimum); and |
• |
|
AllianceBernstein-sponsored
Coverdell Education Savings Accounts ($2,000 initial investment minimum,
$150 Automatic Investment Program monthly
minimum). |
Class C
shares are available to AllianceBernstein Link, AllianceBernstein Individual
401(k), AllianceBernstein SIMPLE IRA plans with less than $250,000 in plan
assets and 100 employees, and to group retirement plans with plan assets of less
than $1,000,000.
Advisor
Class Shares
You
may purchase Advisor Class shares through your financial advisor at NAV.
Advisor Class shares may be purchased and held solely:
• |
|
through
accounts established under a fee-based program, sponsored and maintained
by a registered broker-dealer or other financial intermediary and approved
by ABI; |
• |
|
through
a defined contribution employee benefit plan (e.g., a 401(k) plan) that purchases
shares directly without the involvement of a financial intermediary;
and |
• |
|
by
investment advisory clients of, and certain other persons associated with,
the Adviser and its affiliates or the Funds. |
Advisor
Class shares may also be available on brokerage platforms of firms that
have agreements with ABI to offer such shares when acting solely on an agency
basis for the purchase or sale of such shares. If you transact in Advisor
Class shares through one of these programs, you may be required to pay a
commission and/or other forms of compensation to the broker. Shares of a Fund
are available in other share classes that have different fees and
expenses.
The
Funds’ SAI has more detailed information about who may purchase and hold Advisor
Class shares.
Class A,
Class R, Class K, Class I and Class Z Shares – Shares
Available to Group Retirement Plans
AB Bond Inflation Strategy and AB All Market Real Return Portfolio each
suspended sales of Class K and Class R shares to new investors, effective
November 3, 2023. Underlying shareholders who currently hold Class R or
Class K shares though “group retirement plans” (as defined below) may continue
to purchase such shares until May 16, 2024. Each Fund expects to liquidate
all assets corresponding to its Class R and Class K shares and make liquidating
distributions to its respective Class R and Class K shareholders on or about
May 21, 2024.
Class A,
Class R, Class K, Class I and Class Z shares are available
at NAV, without an initial sales charge, to 401(k) plans, 457 plans,
employer-sponsored 403(b) plans, profit-sharing and money purchase pension
plans, defined benefit plans, and non-qualified deferred compensation plans
where plan level or omnibus accounts are held on the books of a Fund (“group
retirement plans”). Class I and Class Z shares are also available to
certain institutional clients of the Adviser that invest at least $2,000,000 in
a Fund.
Class A
shares are also available at NAV to the AllianceBernstein Link,
AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans
but only if such plans have at least $250,000 in plan assets and 100 employees,
and to certain defined contribution retirement plans that do not have plan level
or omnibus accounts on the books of a Fund.
Class R,
Class K, Class I and Class Z shares generally are not available
to retail non-retirement accounts, traditional and Roth IRAs, Coverdell
Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs and
individual 403(b) plans. Class I shares are not currently available to
group retirement plans in the AllianceBernstein-sponsored programs known as the
“Informed Choice” programs.
Class 1
and Class 2 Shares – Shares Available to Private Clients of Bernstein
A
Fund’s Class 1 shares are sold only to the private clients (“Clients”) of
Bernstein by Bernstein registered representatives (“Bernstein Advisors”). The
minimum initial investment for Class 1 shares is $5,000. There is no
minimum amount for subsequent investments in the same Fund although the Fund
reserves the right to impose a minimum investment amount. There is no minimum
amount for reinvestment of dividends and distributions declared by a Fund in the
shares of the Fund.
Class 2
shares are offered to Clients who have at least a $3,000,000 fixed-income
account with Bernstein. There is no minimum amount for initial or subsequent
investments in the same Fund although a Fund reserves the right to impose a
minimum investment amount. There is no minimum amount for reinvestment of
dividends and distributions declared by a Fund in the shares of the Fund.
Asset Allocation. Bernstein may, at a Client’s
request, maintain a specified percentage of the Client’s assets in one or more
of the Funds, or vary the percentage based on Bernstein’s opinion of a client’s
asset allocation. In keeping with these Client
36
mandates
or for tax considerations, Bernstein may, without additional instructions from
the Client, purchase or sell shares of any Fund from time to time.
Unless
you inform Bernstein otherwise, the cash balances in any account carried by
Bernstein that is invested solely in a single Fund will be invested in the same
Fund without regard to the minimum investment requirement.
Procedures. To purchase shares, you must open a
discretionary account with a Bernstein Advisor (unless you currently have an
account with Bernstein) and pay for the requested shares. With respect to
discretionary accounts, Bernstein has the authority and responsibility to
formulate an investment strategy on your behalf, including which securities to
buy and sell, when to buy and sell, and in what amounts, in accordance with
agreed-upon objectives. Payment may be made by wire transfer or check. All
checks should be made payable to the particular Fund in which you are purchasing
shares. Payment must be made in U.S. Dollars. All purchase orders will be
confirmed in writing.
Class 2
Shares – Shares Available to the Adviser’s Institutional Clients
Class 2
shares are offered to the Adviser’s institutional clients or through other
limited arrangements. The minimum investment by institutions is
$5,000,000.
You
can purchase Class 2 shares at NAV without an initial or CDSC. This means
that the full amount of your purchase is invested in the Fund.
Class 2
shares do not convert to any other class of shares of the Funds.
Required
Information
A
Fund is required by law to obtain, verify and record certain personal
information from you or persons authorized to act on your behalf in order to
establish an account. Required information includes name, date of birth,
physical address and taxpayer identification number (for most investors, your
social security number). A Fund may also ask to see other identifying documents.
If you do not provide the information, a Fund will not be able to open your
account. If a Fund is unable to verify your identity, or that of another
person(s) authorized to act on your behalf, or if the Fund believes it has
identified potentially criminal activity, the Fund reserves the right to take
action it deems appropriate or as required by law, which may include closing
your account. If you are not a U.S. citizen or resident alien, your account must
be affiliated with a Financial Industry Regulatory Authority, or FINRA, member
firm.
A
Fund is required to withhold 24% of taxable dividends, capital gains
distributions, and redemptions paid to any shareholder who has not provided the
Fund with his or her correct taxpayer identification number. To avoid this, you
must provide your correct taxpayer identification number on your Mutual Fund
Application.
General
IRA
custodians, plan sponsors, plan fiduciaries, plan recordkeepers, and other
financial intermediaries may establish their own eligibility requirements as to
the purchase, sale or exchange of Fund shares, including minimum and maximum
investment requirements. A Fund is not responsible for, and has no control over,
the decisions of any plan sponsor, fiduciary or other financial intermediary to
impose such differing requirements.
ABI
or Bernstein may refuse any order to purchase shares. Each Fund reserves the
right to suspend the sale of its shares to the public in response to conditions
in the securities markets or for other reasons.
THE
DIFFERENT SHARE CLASS EXPENSES
This
section describes the different expenses of investing in each class and explains
factors to consider when choosing a class of shares. The expenses can include
distribution and/or service (Rule 12b-1) fees, initial sales charges and/or
CDSCs. Only Class A shares offer Quantity
Discounts as described below.
Asset-Based
Sales Charges or Distribution and/or Service (Rule 12b-1) Fees
WHAT
IS A RULE 12b-1 FEE?
A
Rule 12b-1 fee is a fee deducted from a Fund’s assets that is used to pay for
personal service, maintenance of shareholder accounts and distribution costs,
such as advertising and compensation of financial intermediaries. Each Fund has
adopted a plan under Commission Rule 12b-1 that allows the Fund to pay
asset-based sales charges or distribution and/or service (Rule 12b-1) fees
for the distribution and sale of its shares. The amount of each share class’s
Rule 12b-1 fee, if any, is disclosed below and in the Fund’s fee table included
in the Summary Information section above.
The
amount of these fees for each class of the Fund’s shares is:
|
|
|
|
| |
|
|
Distribution and/or Service
(Rule 12b-1) Fee (as a Percentage of Aggregate Average Daily Net Assets) |
Class A |
|
|
|
0.25 |
%* |
Class C |
|
|
|
1.00 |
% |
Advisor
Class |
|
|
|
None |
|
Class R |
|
|
|
0.50 |
% |
Class K |
|
|
|
0.25 |
% |
Class I |
|
|
|
None |
|
Class Z |
|
|
|
None |
|
Class 1 |
|
|
|
0.25 |
%** |
Class 2 |
|
|
|
None |
|
* |
The
maximum fee allowed under the Rule 12b-1 Plan for the Class A shares
of the Funds is .30% of the aggregate average daily net assets. The Board
currently limits the payments to 0.25%. |
** |
The
maximum fee allowed under the Rule 12b-1 Plan for the Class 1 shares
of All Market Real Return Portfolio
is .25% of the aggregate average daily net assets, and the maximum
fee allowed under the Rule 12b-1 Plans for the Class 1 shares of each
of Bond Inflation Strategy and Municipal Bond Inflation Strategy is
.10% of the aggregate average daily net
assets. |
Because
these fees are paid out of a Fund’s assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of
37
sales
fees. Class C and Class R shares are subject to higher Rule 12b-1
fees than Class A, Class K or Class 1 shares. Class C shares are
subject to these higher fees for a period of eight years, after which they
convert to Class A shares. Share classes with higher Rule 12b-1 fees will
have a higher expense ratio, pay correspondingly lower dividends and may have a
lower NAV (and returns). All or some of these fees are paid to financial
intermediaries, which may include your financial advisor’s firm. ABI retains
these fees for certain shareholder accounts, including those held directly with
a Fund (with no associated financial intermediary).
Sales
Charges
Class A Shares. You can purchase
Class A shares at their public offering price (or cost), which is NAV plus
an initial sales charge of up to 4.25% of the offering price for All Market Real Return Portfolio; up to 3.00%
of the offering price for Municipal Bond
Inflation Strategy; and up to 2.25% of the offering price for Bond Inflation Strategy. Any applicable sales
charge will be deducted directly from your investment.
The
initial sales charge you pay each time you buy Class A shares differs
depending on the amount you invest and may be reduced or eliminated for larger
purchases as indicated below. These discounts, which are also known as Breakpoints or Quantity Discounts, can reduce
or, in some cases, eliminate the initial sales charges that would otherwise
apply to your investment in Class A shares.
The
sales charge schedule of Class A share Quantity Discounts is as follows for All Market Real Return Portfolio:
|
|
|
|
|
|
|
|
|
| |
|
|
Initial Sales
Charge |
Amount Purchased |
|
as % of
Net Amount
Invested |
|
as % of
Offering
Price |
Up
to $100,000 |
|
|
|
4.44 |
% |
|
|
|
4.25 |
% |
$100,000
up to $250,000 |
|
|
|
3.36 |
| |
|
|
3.25 |
|
$250,000
up to $500,000 |
|
|
|
2.30 |
| |
|
|
2.25 |
|
$500,000
up to $1,000,000 |
|
|
|
1.78 |
| |
|
|
1.75 |
|
$1,000,000
and above |
|
|
|
0.00 |
| |
|
|
0.00 |
|
The
sales charge schedule of Class A share Quantity Discounts is as follows for Bond Inflation Strategy:
|
|
|
|
|
|
|
|
|
| |
|
|
Initial Sales Charge |
Amount Purchased |
|
as %
of Net Amount Invested |
|
as %
of Offering Price |
Up
to $100,000 |
|
|
|
2.30 |
% |
|
|
|
2.25 |
% |
$100,000
up to $250,000 |
|
|
|
2.04 |
| |
|
|
2.00 |
|
$250,000
up to $500,000 |
|
|
|
1.27 |
| |
|
|
1.25 |
|
$500,000
and above |
|
|
|
0.00 |
| |
|
|
0.00 |
|
The
sales charge schedule of Class A share Quantity Discounts is as follows for Municipal Bond Inflation Strategy:
|
|
|
|
|
|
|
|
|
| |
|
|
Initial Sales Charge |
Amount Purchased |
|
as
% of
Net Amount
Invested |
|
as
% of
Offering
Price |
Up
to $100,000 |
|
|
|
3.09 |
% |
|
|
|
3.00 |
% |
$100,000
up to $250,000 |
|
|
|
2.04 |
| |
|
|
2.00 |
|
$250,000
up to $500,000 |
|
|
|
1.01 |
| |
|
|
1.00 |
|
$500,000
and above |
|
|
|
0.00 |
| |
|
|
0.00 |
|
Except
as noted below, purchases of Class A shares in the amount of $500,000 or
more or, for All Market Real Return
Portfolio, $1,000,000 or more, or by AllianceBernstein or
non-AllianceBernstein sponsored group retirement plans are not subject to an
initial sales charge, but may be subject to a 1% CDSC if redeemed or terminated
within one year (18 months for Bond Inflation
Strategy).
Class A share purchases not subject to sales
charges. A Fund may sell its Class A shares at NAV without an
initial sales charge or CDSC to some categories of investors, including:
• |
|
persons
participating in a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary, under which
persons pay an asset-based fee for services in the nature of investment
advisory or administrative services or clients of broker-dealers or other
financial intermediaries who purchase Class A shares for their own
accounts through self-directed brokerage accounts with the broker-dealers
or other financial intermediaries that may or may not charge a transaction
fee to its customers; |
• |
|
plan
participants who roll over amounts distributed from employer maintained
retirement plans to AllianceBernstein-sponsored IRAs where the plan is a
client of or serviced by the Adviser’s Institutional Investment Management
Division or Bernstein Global Wealth Management Division, including
subsequent contributions to those IRAs; |
• |
|
certain
other investors, such as investment management clients of the Adviser or
its affiliates, including clients and prospective clients of the Adviser’s
Institutional Investment Management Division, employees of selected
dealers authorized to sell the Fund’s shares, and employees of the
Adviser; or |
• |
|
persons
participating in a “Mutual Fund Only” brokerage program, sponsored and
maintained by a registered broker-dealer or other financial
intermediary. |
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from a Fund or through a financial
intermediary. Intermediaries may have different policies and procedures
regarding the availability of front-end sales load waivers and discounts or CDSC
waivers. In all instances, it is the purchaser’s responsibility to notify a Fund
or the purchaser’s financial intermediary at the time of purchase of any
relationship or other facts qualifying the purchaser for sales charge waivers or
discounts. For waivers and discounts not
available through a particular intermediary, shareholders will have to purchase
Fund shares directly from the Fund or through another intermediary to receive
these waivers or discounts.
Please
see the Funds’ SAI for more information about purchases of Class A shares
without sales charges.
Certain
intermediaries impose different eligibility criteria for sales load waivers and
discounts, which are described in Appendix C—Financial Intermediary
Waivers.
Class C Shares. You can purchase
Class C shares at NAV without an initial sales charge. This means that the
full amount
38
of
your purchase is invested in a Fund. Your investment is subject to a 1% CDSC if
you redeem your shares within one year. If you exchange your shares for the
Class C shares of another AB Mutual Fund, the 1% CDSC also will apply to
the Class C shares received. The 1-year period for the CDSC begins with the
date of your original purchase, not the date of the exchange for the other
Class C shares.
Class C
shares purchased for cash automatically convert to Class A shares eight
years after the end of the month of your purchase. If you purchase shares by
exchange for the Class C shares of another AB Mutual Fund, the conversion
period runs from the date of your original purchase.
HOW
IS THE CDSC CALCULATED?
The
CDSC is applied to the lesser of NAV at the time of redemption or the original
cost of shares being redeemed (or, as to Fund shares acquired through an
exchange, the cost of the AB Mutual Fund shares originally purchased for cash).
This means that no sales charge is assessed on increases in NAV above the
initial purchase price. Shares obtained from dividend or distribution
reinvestment are not subject to the CDSC. In determining the CDSC, it will be
assumed that the redemption is, first, of any shares not subject to a CDSC and,
second, of shares held the longest.
Advisor Class, Class R, Class K,
Class I, Class Z, Class 1 and Class 2 Shares. These
classes of shares are not subject to any initial sales charge or CDSC, although
your financial advisor may charge a fee.
SALES
CHARGE REDUCTION PROGRAMS FOR CLASS A SHARES
This
section includes important information about sales charge reduction programs
available to investors in Class A shares and describes information or
records you may need to provide to a Fund or your financial intermediary in
order to be eligible for sales charge reduction programs. Your financial
intermediary may have different policies and procedures regarding eligibility
for sales charge reduction programs. See Appendix C—Financial Intermediary
Waivers.
Information
about Quantity Discounts and sales charge reduction programs also is available
free of charge and in a clear and prominent format on our website at www.abfunds.com (click on
“Investments—Mutual Funds”, then select the Fund, then click on
“Literature—Understanding Sales Charges & Expenses”).
Rights
of Accumulation
To
determine if a new investment in Class A shares is eligible for a Quantity Discount, a shareholder can combine
the value of the new investment in a Fund with the higher of cost or NAV of
existing investments in the Fund and any other AB Mutual Fund. The AB Mutual
Funds use the higher of cost or current NAV of your existing investments when
combining them with your new investment.
Combined
Purchase Privileges
A
shareholder may qualify for a Quantity
Discount by combining purchases of shares of a Fund into a single
“purchase”. A “purchase” means a single purchase or concurrent purchases of
shares of a Fund or any other AB Mutual Fund by:
• |
|
an
individual, his or her spouse or domestic partner, or the individual’s
children under the age of 21 purchasing shares for his, her or their own
account(s); |
• |
|
a
trustee or other fiduciary purchasing shares for a single trust, estate or
single fiduciary account with one or more beneficiaries
involved; |
• |
|
the
employee benefit plans of a single employer; or |
• |
|
any
company that has been in existence for at least six months or has a
purpose other than the purchase of shares of the
Fund. |
Letter
of Intent
An
investor may not immediately invest a sufficient amount to reach a Quantity Discount, but may plan to make one or
more additional investments over a period of time that, in the end, would
qualify for a Quantity Discount. For
these situations, the Funds offer a Letter of
Intent, which permits new investors to express the intention, in writing,
to invest at least $100,000 in Class A shares of a Fund or any other AB
Mutual Fund within 13 months. The Funds will then apply the Quantity Discount to each of the investor’s
purchases of Class A shares that would apply to the total amount stated in
the Letter of Intent. In the event an
existing investor chooses to initiate a Letter
of Intent, the AB Mutual Funds will use the higher of cost or current NAV
of the investor’s existing investments and of those accounts with which
investments are combined via Combined Purchase
Privileges toward the fulfillment of the Letter of Intent. For example, if the combined
cost of purchases totaled $80,000 and the current NAV of all applicable accounts
is $85,000 at the time a $100,000 Letter of
Intent is initiated, the subsequent investment of an additional $15,000
would fulfill the Letter of Intent. If an
investor fails to invest the total amount stated in the Letter of Intent, the Funds will retroactively
collect the sales charge otherwise applicable by redeeming shares in the
investor’s account at their then current NAV. Investors qualifying for Combined Purchase Privileges may purchase
shares under a single Letter of
Intent.
Required
Shareholder Information and Records
In
order for shareholders to take advantage of sales charge reductions, a
shareholder or his or her financial intermediary must notify a Fund that the
shareholder qualifies for a reduction. Without notification, a Fund is unable to
ensure that the reduction is applied to the shareholder’s account. A shareholder
may have to provide information or records to his or her financial intermediary
or a Fund to verify eligibility for breakpoint privileges or other sales charge
waivers. This may include information or records, including account statements,
regarding shares of a Fund or other AB Mutual Funds held in:
• |
|
all
of the shareholder’s accounts at the Funds or a financial intermediary;
and |
39
• |
|
accounts
of related parties of the shareholder, such as members of the same family,
at any financial intermediary. |
CDSC
WAIVERS AND OTHER PROGRAMS
Here
Are Some Ways To Avoid Or
Minimize
Charges On Redemption.
CDSC
Waivers
The
Funds will waive the CDSCs on redemptions of shares in the following
circumstances, among others:
• |
|
permitted
exchanges of shares; |
• |
|
following
the death or disability of a shareholder; |
• |
|
if
the redemption represents a minimum required distribution from an IRA or
other retirement plan to a shareholder who has attained the age of 73;
or |
• |
|
a
group retirement plan or to accommodate a plan participant’s or
beneficiary’s direction to reallocate his or her plan account among other
investment alternatives available under a group retirement
plan. |
Please
see the Funds’ SAI for a list of additional circumstances under which a Fund
will waive the CDSCs on redemptions of shares.
Your
financial intermediary may have different policies and procedures regarding
eligibility for CDSC Waivers. See Appendix C—Financial Intermediary
Waivers.
Other
Programs
Dividend
Reinvestment Program
Unless
you specifically have elected to receive dividends or distributions in cash,
they will automatically be reinvested, without an initial sales charge or CDSC,
in the same class of additional shares of a Fund. If you elect to receive
distributions in cash, you will only receive a check if the amount of the
distribution is equal to or exceeds $25.00. Distributions of less than $25.00
will automatically be reinvested in shares of the Fund. To receive distributions
of less than $25.00 in cash, you must have bank instructions associated to your
account so that distributions can be delivered to you electronically via
Electronic Funds Transfer using the Automated Clearing House or “ACH”. In
addition, the Fund may reinvest your distribution check (and future checks) in
additional shares of the Fund if your check (i) is returned as
undeliverable or (ii) remains uncashed for nine months.
Dividend
Direction Plan
A
shareholder who already maintains accounts in more than one AB Mutual Fund may
direct the automatic investment of income dividends and/or capital gains by one
Fund, in any amount, without the payment of any sales charges, in shares of any
eligible class of one or more other AB Mutual Fund(s) in which the shareholder
maintains an account.
Automatic
Investment Program
The
Automatic Investment Program allows investors to purchase shares of a Fund
through pre-authorized transfers of funds from the investor’s bank account.
Under the Automatic Investment Program, an investor may (i) make an initial
purchase of at least $2,500 and invest at least $50 monthly or (ii) make an
initial purchase of less than $2,500 and commit to a monthly investment of $200
or more until the investor’s account balance is $2,500 or more.
Reinstatement
Privilege
A
shareholder who has redeemed all or any portion of his or her Class A
shares may reinvest all or any portion of the proceeds from the redemption in
Class A shares of any AB Mutual Fund at NAV without any sales charge, if
the reinvestment is made within 120 calendar days after the redemption
date.
Systematic
Withdrawal Plan
The
Funds offer a systematic withdrawal plan that permits the redemption of
Class A or Class C shares without payment of a CDSC. Under this plan,
redemptions equal to 1% a month, 2% every two months or 3% a quarter of the
value of a Fund account would be free of a CDSC. The Class A and
Class C shares held the longest would be redeemed first.
CHOOSING
A SHARE CLASS
Each
share class represents an interest in the same portfolio of securities, but each
class has its own sales charge and expense structure, allowing you to choose the
class that best fits your situation. In choosing a class of shares, you should
consider:
• |
|
the
amount you intend to invest; |
• |
|
how
long you expect to own shares; |
• |
|
expenses
associated with owning a particular class of
shares; |
• |
|
whether
you qualify for any reduction or waiver of sales charges (for example, if
you are making a large investment that qualifies for a Quantity Discount, you might consider
purchasing Class A shares); and |
• |
|
whether
a share class is available for purchase (Class R, K and I shares are
only offered to group retirement plans, not individuals; Class 1 shares
are only offered to private clients of Bernstein; and Class 2 shares are
only offered to private clients of Bernstein, the Adviser’s institutional
clients and through other limited
arrangements). |
Among
other things, Class A shares, with their lower Rule 12b-1 fees, are
designed for investors with a long-term investing time frame. Class C
shares should not be considered as a long-term investment because they are
subject to a higher distribution fee for eight years. Class C shares do
not, however, have an initial sales charge or a CDSC so long as the shares are
held for one year or more. Class C shares are designed for investors with a
short-term investing time frame.
A
transaction, service, administrative or other similar fee may be charged by your
broker-dealer, agent or other financial intermediary, with respect to the
purchase, sale or exchange of Class A, Class C, Advisor Class,
Class Z, Class 1 or Class 2 shares made through your financial advisor, or
in connection with participating on the intermediary’s platform. Financial
intermediaries, a fee-based program, or, for group retirement plans, a plan
sponsor or plan fiduciary, also may impose requirements on the purchase, sale or
exchange of shares that
40
are
different from, or in addition to, those imposed by the Funds, including
requirements as to the minimum initial and subsequent investment amounts. In
addition, group retirement plans may not offer all classes of shares of the
Funds. The Funds are not responsible for, and have no control over, the decision
of any financial intermediary, plan sponsor or fiduciary to impose such
differing requirements.
You
should consult your financial advisor for assistance in choosing a class of Fund
shares.
PAYMENTS
TO FINANCIAL ADVISORS AND THEIR FIRMS
Financial
intermediaries market and sell shares of the Funds. These financial
intermediaries employ financial advisors and receive compensation for selling
shares of the Funds. This compensation is paid from various sources, including
any sales charge, CDSC and/or Rule 12b-1 fee that you or the Funds may pay.
Your individual financial advisor may receive some or all of the amounts paid to
the financial intermediary that employs him or her.
WHAT
IS A FINANCIAL INTERMEDIARY?
A
financial intermediary is a firm that receives compensation for selling shares
of the Funds offered in this Prospectus and/or provides services to the Funds’
shareholders. Financial intermediaries may include, among others, your broker,
your financial planner or advisor, banks and insurance companies. Financial
intermediaries may employ financial advisors who deal with you and other
investors on an individual basis.
All
or a portion of the initial sales charge that you pay is paid by ABI to
financial intermediaries selling Class A shares. ABI may also pay financial
intermediaries a fee of up to 1% on purchases of Class A shares that are
sold without an initial sales charge.
ABI
pays, at the time of your purchase, a commission to financial intermediaries in
an amount equal to 1% of your investment for sales of Class C shares.
For
Class A, Class C, Class R and Class K shares, up to 100% of
the Rule 12b-1 fees applicable to these classes of shares each year may be
paid to financial intermediaries.
Your
financial advisor’s firm receives compensation from the Funds, ABI and/or the
Adviser in several ways from various sources, which include some or all of the
following:
|
- |
upfront
sales commissions; |
|
|
- |
additional
distribution support; |
|
|
- |
defrayal
of costs for educational seminars and training; and |
|
|
- |
payments
related to providing shareholder recordkeeping and/or transfer agency
services. |
|
Please
read this Prospectus carefully for information on this compensation.
Other
Payments for Distribution Services and Educational Support
In
addition to the commissions paid to or charged by financial intermediaries at
the time of sale and Rule 12b-1 fees, some or all of which are paid to
financial intermediaries (and, in turn, may be paid to your financial advisor),
ABI, at its expense, currently provides additional payments to firms that sell
shares of the AB Mutual Funds. The Adviser and its affiliates, at their own
expense, provide similar payments to firms for providing distribution,
marketing, promotional, educational and other services to the AB ETFs. Although
the individual components may be higher and the total amount of payments made to
each qualifying firm in any given year may vary, the total amount paid to a
financial intermediary in connection with the services and the sale of shares of
the AB Funds will generally not exceed the sum of (a) 0.25% of the current
year’s fund sales by that firm and (b) 0.10% of average daily net assets
attributable to that firm over the year. These sums include payments for
distribution and analytical data pertaining to AB Funds by financial advisors of
these firms and to reimburse directly or indirectly the costs incurred by these
firms and their employees in connection with educational seminars and training
efforts about the AB Funds for the firms’ employees and/or their clients and
potential clients. The costs and expenses associated with these efforts may
include travel, lodging, entertainment and meals. The Adviser, ABI and their
affiliates may pay for “ticket” or other transactional charges.
For
2024, additional payments by the Adviser and ABI and their affiliates to these
firms for distribution services and educational support related to the AB Funds
are expected to be approximately 0.04% of the average monthly assets of the AB
Funds, or approximately $26 million. For 2023, the Adviser and ABI and
their affiliates estimate that they will have paid approximately 0.04% of the
average monthly assets of the AB Funds or approximately $25 million for
distribution services and educational support related to the AB Funds.
A
number of factors are considered in determining the additional payments,
including each firm’s AB Fund sales, assets and redemption rates, and the
willingness and ability of the firm to give the Adviser and ABI and their
affiliates access to its financial advisors for educational and marketing
purposes. In some cases, firms will include the AB Funds on a “preferred list”.
The goal is to make the financial advisors who interact with current and
prospective investors and shareholders more knowledgeable about the AB Funds so
that they can provide suitable information and advice about the funds and
related investor services.
The
Funds and ABI also make payments for recordkeeping and other transfer agency
services to financial intermediaries that sell AB Fund shares. Please see
“Management of the Funds—Transfer Agency and Retirement Plan Services” below.
These expenses paid by the Funds are included in “Other Expenses” under “Fees
and Expenses of the Fund—Annual Fund Operating Expenses” in the Summary
Information at the beginning of this Prospectus.
41
If
one mutual fund sponsor makes greater distribution assistance payments than
another, your financial advisor and his or her firm may have an incentive to
recommend one fund complex over another. Similarly, if your financial advisor or
his or her firm receives more distribution assistance for one share class versus
another, then they may have an incentive to recommend that class.
Please
speak with your financial advisor to learn more about the total amounts paid to
your financial advisor and his or her firm by the Funds, the Adviser, ABI and by
sponsors of other mutual funds he or she may recommend to you. You should also
consult disclosures made by your financial advisor at the time of
purchase.
As
of the date of this Prospectus, ABI anticipates that the firms that will receive
additional payments for distribution services and/or educational support
include:
American
Enterprise Investment Services
Cadaret,
Grant & Co.
Citigroup
Global Markets
Citizens
Securities
Equitable
Advisors
Great-West
Life & Annuity Insurance Co.
Institutional
Cash Distributors
John
Hancock Retirement Plan Services
JP
Morgan Securities
Lincoln
Financial Advisors Corp.
Lincoln
Financial Securities Corp.
LPL
Financial
Merrill
Lynch
Morgan
Stanley
Northwestern
Mutual Investment Services
One
America
PNC
Investments
Principal
Life
Raymond
James
RBC
Wealth Management
Robert
W. Baird
Rockefeller
Financial, LLC
The
Standard Retirement Services
Truist
Investment Services
UBS
Financial Services
US
Bancorp Investments
Wells
Fargo Advisors
Although
the Funds may use brokers and dealers that sell shares of the Funds to effect
portfolio transactions, the Funds do not consider the sale of AB Fund shares as
a factor when selecting brokers or dealers to effect portfolio
transactions.
HOW
TO EXCHANGE SHARES
You
may exchange your Class A, Class C, Advisor Class, Class R, Class K,
Class I and Class Z shares for shares of the same class of other AB Mutual Funds
provided that the other fund offers the same class of shares and, in the case of
retirement plans, is an investment option under the plan. Exchanges of shares
are made at the next-determined NAV, without sales or service charges, after
your order is received in proper form. All exchanges are subject to the minimum
investment restrictions set forth in the prospectus for the AB Mutual Fund whose
shares are being acquired. You may request an exchange either directly or
through your financial intermediary or, in the case of retirement plan
participants, by following the procedures specified by your plan sponsor or plan
recordkeeper. In order to receive a day’s NAV, ABIS must receive and confirm
your telephone exchange request by the Fund Closing Time, on that day. The Funds
may modify, restrict or terminate the exchange privilege on 60 days’
written notice.
Private
clients of Bernstein may exchange Class 1 and Class 2 shares for shares of the
same class of certain other AB Funds that offer the same classes of shares. Your
exchange of shares is priced at the next-determined NAV after your order is
received in proper form by the Fund. You may request an exchange by contacting
your Bernstein Advisor. The Funds may modify, restrict or terminate the exchange
privilege on 60 days’ written notice.
HOW
TO SELL OR REDEEM SHARES
You
may “redeem” your shares (i.e., sell
your shares to a Fund) on any day the Exchange is open, either directly or
through your financial intermediary or, in the case of retirement plan
participants, by following the procedures specified by your plan sponsor or plan
recordkeeper. For Advisor Class and Class Z shares, if you are in
doubt about what procedures or documents are required by your fee-based program
or employee benefit plan to sell your shares, you should contact your financial
advisor.
Private
clients of Bernstein may “redeem” shares on any day the Exchange is open by
sending a written request to Bernstein or their Bernstein Advisor. Your
signature must appear on your written redemption order and must be guaranteed by
a financial institution that meets Bernstein’s requirements (such as a
commercial bank that is a member of the Federal Deposit Insurance Corporation, a
trust company, a member firm of a domestic securities exchange or other
institution). An authorized person at the guarantor institution must sign the
guarantee and “Signature Guaranteed” must appear with the signature. Signature
guarantees by notaries or institutions that do not provide reimbursement in the
case of fraud are not acceptable. Signature guarantees may be waived by
Bernstein in certain instances. Bernstein may waive the requirement that a
redemption request must be in writing. Bernstein may request further
documentation from corporations, executors, administrators, trustees or
guardians.
Your
sale price will be the next-determined NAV, less any applicable CDSC, after the
Fund receives your redemption request in proper form or after a redemption
request is received in accordance with the procedures applicable to the
institutional clients of the Adviser (please contact your
42
institutional
representative for additional information). Each Fund expects that it will
typically take one to three business days following the receipt of your
redemption request in proper form (or in accordance with the procedures
applicable to the institutional clients of the Adviser) to pay out redemption
proceeds. However, while not expected, payment of redemption proceeds may take
up to seven days from the day your request is received in proper form (or in
accordance with the procedures applicable to the institutional clients of the
Adviser) by the Fund by the Fund Closing Time. For private clients of Bernstein,
the sales proceeds will be held in your account with Bernstein unless you have
previously provided alternative written instructions. If you recently purchased
your shares by check or electronic funds transfer, your redemption payment may
be delayed until the Fund is reasonably satisfied that the check or electronic
funds transfer has been collected (which may take up to 10 days).
Each
Fund expects, under normal circumstances, to use cash or cash equivalents held
by the Fund to satisfy redemption requests. The Fund may also determine to sell
portfolio assets to meet such requests. Under certain circumstances, including
stressed market conditions, the Fund may determine to pay a redemption request
by accessing a bank line of credit or by distributing wholly or partly in kind
securities from its portfolio, instead of cash.
Sale In-Kind. Each Fund normally pays proceeds
of a sale of Fund shares in cash. However, each Fund has reserved the right to
pay the sale price in whole or in part by a distribution in-kind of securities
in lieu of cash. If the redemption payment is made in-kind, the securities
received will be subject to market risk and may decline in value. In addition,
you may incur brokerage commissions if you elect to sell the securities for
cash. For more information, see the Funds’ SAI.
Automatic
Sale of Your Shares – For Class 1
Under
certain circumstances, the Adviser may redeem your Class 1 shares of a Fund
without your consent. Maintaining small shareholder accounts is costly.
Accordingly, if you make a sale that reduces the value of your account to less
than $1,000, the Adviser may, on at least 60 days’ prior written notice, sell
your remaining Class 1 shares in the Fund and close your account. The
Adviser will not close your account if you increase your account balance to
$1,000 during the 60-day notice period.
Automatic
Sale of Your Shares – For Class 2
Under
certain circumstances, the Adviser may redeem your Class 2 shares of a Fund
without your consent. Maintaining small shareholder accounts is costly.
Accordingly, if you make a sale that reduces the value of your account to less
than $250,000, the Adviser may, on at least 60 days’ prior written notice, sell
your remaining Class 2 shares in the Fund and close your account. The
Adviser will not close your account if you increase your account balance to
$250,000 during the 60-day notice period.
Systematic
Withdrawal Plan – Private Clients of Bernstein
A
systematic withdrawal plan enables shareholders to sell shares automatically at
regular monthly intervals. In general, for Class 1 and Class 2 shares, a
systematic withdrawal plan is available only to shareholders who own book-entry
shares worth $25,000 or more. The proceeds of these sales will be sent directly
to you or your designee. The use of this service is at the Funds’ discretion.
For further information, call your Bernstein Advisor at
(212) 486-5800.
Selling
Shares Through Your Financial Intermediary, Retirement Plan, Broker or Other
Financial Advisor
Your
financial intermediary, plan recordkeeper, broker or other financial advisor
must receive your sales request by the Fund Closing Time for you to receive that
day’s NAV, less any applicable CDSC. Your financial intermediary, plan sponsor
or plan recordkeeper is responsible for submitting all necessary documentation
to the Fund and may charge you a fee for this service.
Selling
Shares Directly to a Fund (Except for Private Clients of Bernstein)
By
Mail:
• |
|
Send
a signed letter of instruction or stock power, along with certificates,
to: |
AllianceBernstein
Investor Services, Inc.
P.O.
Box 786003
San
Antonio, TX 78278-6003
• |
|
For
certified or overnight deliveries, send to: |
AllianceBernstein
Investor Services, Inc.
8000
IH 10 W, 13th floor
San
Antonio, TX 78230
• |
|
For
your protection, a bank, a member firm of a national stock exchange or
another eligible guarantor institution must guarantee signatures. Stock
power forms are available from your financial intermediary, ABIS and many
commercial banks. Additional documentation is required for the sale of
shares by corporations, intermediaries, fiduciaries and surviving joint
owners. If you have any questions about these procedures, contact
ABIS. |
By
Telephone:
• |
|
You
may redeem your shares for which no stock certificates have been issued by
telephone request. Call ABIS at (800) 221-5672 with instructions on
how you wish to receive your sale proceeds. |
• |
|
ABIS
must receive and confirm a telephone redemption request by the Fund
Closing Time, for you to receive that day’s NAV, less any applicable
CDSC. |
• |
|
For
your protection, ABIS will request personal or other information from you
to verify your identity and will generally record the calls. Neither the
Funds nor the Adviser, ABIS, ABI or other Fund agent will be liable for
any loss, injury, damage or expense as a result of acting upon telephone
instructions purporting to be on your behalf that ABIS reasonably believes
to be genuine. |
• |
|
If
you have selected electronic funds transfer in your Mutual Fund
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you. |
43
• |
|
Redemption
requests by electronic funds transfer or check may not exceed $100,000 per
Fund account per day. |
• |
|
Telephone
redemption is not available for shares held in nominee or “street name”
accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous
30 calendar days. |
FREQUENT
PURCHASES AND REDEMPTIONS OF FUND SHARES
The
Board has adopted policies and procedures designed to detect and deter frequent
purchases and redemptions of Fund shares or excessive or short-term trading that
may disadvantage long-term Fund shareholders. These policies are described
below. There is no guarantee that the Funds will be able to detect excessive or
short-term trading or to identify shareholders engaged in such practices,
particularly with respect to transactions in omnibus accounts. Shareholders
should be aware that application of these policies may have adverse
consequences, as described below, and should avoid frequent trading in Fund
shares through purchases, sales and exchanges of shares. Each Fund reserves the
right to restrict, reject or cancel, without any prior notice, any purchase or
exchange order for any reason, including any purchase or exchange order accepted
by any shareholder’s financial intermediary.
Risks Associated With Excessive or Short-Term Trading
Generally. While the Funds will try to prevent market timing by utilizing
the procedures described below, these procedures may not be successful in
identifying or stopping excessive or short-term trading in all circumstances. By
realizing profits through short-term trading, shareholders that engage in rapid
purchases and sales or exchanges of a Fund’s shares dilute the value of shares
held by long-term shareholders. Volatility resulting from excessive purchases
and sales or exchanges of Fund shares, especially involving large dollar
amounts, may disrupt efficient portfolio management and cause a Fund to sell
portfolio securities at inopportune times to raise cash to accommodate
redemptions relating to short-term trading activity. In particular, a Fund may
have difficulty implementing its long-term investment strategies if it is forced
to maintain a higher level of its assets in cash to accommodate significant
short-term trading activity. In addition, a Fund may incur increased
administrative and other expenses due to excessive or short-term trading,
including increased brokerage costs and realization of taxable capital
gains.
Funds
that may invest significantly in securities of foreign issuers may be
particularly susceptible to short-term trading strategies. This is because
securities of foreign issuers are typically traded on markets that close well
before the time a Fund ordinarily calculates its NAV (ordinarily at
4:00 p.m., Eastern time), which gives rise to the possibility that
developments may have occurred in the interim that would affect the value of
these securities. The time zone differences among international stock markets
can allow a shareholder engaging in a short-term trading strategy to exploit
differences in Fund share prices that are based on closing prices of securities
of foreign issuers established some time before a Fund calculates its own share
price (referred to as “time zone arbitrage”). Each Fund has procedures, referred
to as fair value pricing, designed to adjust closing market prices of securities
of foreign issuers to reflect what is believed to be the fair value of those
securities at the time a Fund calculates its NAV. While there is no assurance,
the Funds expect that the use of fair value pricing, in addition to the
short-term trading policies discussed below, will significantly reduce a
shareholder’s ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.
A
shareholder engaging in a short-term trading strategy may also target a Fund
irrespective of its investments in securities of foreign issuers. Any Fund that
invests in securities that are, among other things, thinly traded or traded
infrequently, or that have a limited public float, has the risk that the current
market price for the securities may not accurately reflect current market
values. A shareholder may seek to engage in short-term trading to take advantage
of these pricing differences (referred to as “price arbitrage”). The Funds may
be adversely affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases
and exchanges of shares of the Funds should be made for investment purposes
only. The Funds seek to prevent patterns of excessive purchases and sales of
Fund shares to the extent they are detected by the procedures described below,
subject to each Fund’s ability to monitor purchase, sale and exchange activity.
The Funds reserve the right to modify this policy, including any surveillance or
account blocking procedures established from time to time to effectuate this
policy, at any time without notice.
• |
|
Transaction Surveillance Procedures. The
Funds, through their agents, ABI and ABIS, maintain surveillance
procedures to detect excessive or short-term trading in Fund shares. This
surveillance process involves several factors, which include scrutinizing
transactions in Fund shares that exceed certain monetary thresholds or
numerical limits within a specified period of time. Generally, more than
two exchanges of Fund shares during any 60-day period or purchases of
shares followed by a sale within 60 days will be identified by these
surveillance procedures. For purposes of these transaction surveillance
procedures, the Funds may consider trading activity in multiple accounts
under common ownership, control or influence. Trading activity identified
by either, or a combination, of these factors, or as a result of any other
information available at the time, will be evaluated to determine whether
such activity might constitute excessive or short-term trading. With
respect to managed or discretionary accounts for which the account owner
gives his/her broker, investment adviser or other third-party authority to
buy and sell Fund shares, the Funds may consider trades initiated by the
account owner, such as trades initiated in connection with bona fide cash
management purposes, separately in their analysis. These surveillance
procedures may be modified from time to time, as necessary or appropriate
to improve the detection of excessive or short-term trading or to address
specific circumstances. |
44
• |
|
Account Blocking Procedures. If the Funds
determine, in their sole discretion, that a particular transaction or
pattern of transactions identified by the transaction surveillance
procedures described above is excessive or short-term trading in nature,
the Funds will take remedial actions that may include issuing a warning,
revoking certain account-related activities (such as the ability to place
purchase, sale and exchange orders over the internet or by phone) or
prohibiting or “blocking” future purchase or exchange activity. However,
sales of Fund shares back to a Fund or redemptions will continue to be
permitted in accordance with the terms of the Fund’s current Prospectus.
As a result, unless the shareholder redeems his or her shares, which may
have consequences if the shares have declined in value, a CDSC is
applicable or adverse tax consequences may result, the shareholder may be
“locked” into an unsuitable investment. A blocked account will generally
remain blocked for 90 days. Subsequent detections of excessive or
short-term trading may result in an indefinite account block, or an
account block until the account holder or the associated broker, dealer or
other financial intermediary provides evidence or assurance acceptable to
the Fund that the account holder did not or will not in the future engage
in excessive or short-term trading. |
• |
|
Applications of Surveillance Procedures and
Restrictions to Omnibus Accounts. Omnibus account arrangements are
common forms of holding shares of the Funds, particularly among certain
brokers, dealers and other financial intermediaries, including sponsors of
retirement plans. The Funds apply their surveillance procedures to these
omnibus account arrangements. As required by Commission rules, the Funds
have entered into agreements with all of their financial intermediaries
that require the financial intermediaries to provide the Funds, upon the
request of the Funds or their agents, with individual account level
information about their transactions. |
If
the Funds detect excessive trading through their monitoring of omnibus accounts,
including trading at the individual account level, the financial intermediaries
will also execute instructions from the Funds to take actions to curtail the
activity, which may include applying blocks to accounts to prohibit future
purchases and exchanges of Fund shares. For certain retirement plan accounts,
the Funds may request that the retirement plan or other intermediary revoke the
relevant participant’s privilege to effect transactions in Fund shares via the
internet or telephone, in which case the relevant participant must submit future
transaction orders via the U.S. Postal Service (i.e., regular mail).
HOW
THE FUNDS VALUE THEIR SHARES
Each
Fund’s NAV is calculated on any day the Exchange is open at the close of regular
trading (ordinarily, 4:00 p.m., Eastern time, but sometimes earlier, as in
the case of scheduled half-day trading or unscheduled suspensions of trading).
To calculate NAV, a Fund’s assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding. If a Fund invests in securities that are primarily traded on
foreign exchanges that trade on weekends or other days when the Fund does not
price its shares, the NAV of the Fund’s shares may change on days when
shareholders will not be able to purchase or redeem their shares in the
Fund.
The
Funds value their securities at market value determined on the basis of market
quotations or, if market quotations are not readily available or are unreliable,
at “fair value” as determined in accordance with procedures approved by each
Fund’s Board. Pursuant to these procedures, the Adviser, as each Fund’s
“valuation designee” pursuant to Rule 2a-5 under the 1940 Act, is responsible
for making all fair value determinations relating to a Fund’s portfolio
investments, subject to oversight by the Fund’s Board.
When
making a fair value determination, the Adviser may take into account any factors
it deems appropriate. The Adviser may determine fair value based upon
developments related to a specific security, current valuations of foreign stock
indices (as reflected in U.S. futures markets) and/or U.S. sector or broader
stock market indices. The prices of securities used to calculate NAV may differ
from quoted or published prices for the same securities. Making a fair value
determination involves subjective judgments, and it is possible that the fair
value determined for a security is materially different than the value that
could be realized upon the sale of that security.
The
Funds expect to use fair value pricing for securities primarily traded on U.S.
exchanges under certain circumstances, such as the early closing of the exchange
on which a security is traded or suspension of trading in the security, or for
securities for which market quotations are not readily available or deemed
unreliable (including restricted securities). The Funds use fair value pricing
routinely for securities primarily traded in non-U.S. markets because, among
other things, most foreign markets close well before a Fund ordinarily values
its securities at 4:00 p.m., Eastern time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim. Factors considered in fair value
pricing may include, but are not limited to, interest rates, foreign currency
exchange rates, levels of publicly available benchmarks, prices of futures
contracts or comparable securities, or information obtained by analysis of the
issuers’ financial statements. Because most fixed-income securities are not
traded on exchanges, they are primarily valued using fair value prices provided
by independent pricing services when the valuation designee reasonably believes
that such prices reflect the fair value of the instruments.
The
Adviser has established a valuation committee of senior officers and employees
of the Adviser (“Valuation Committee”) to fulfill the Adviser’s responsibilities
as each Fund’s valuation designee, which operates under the policies and
procedures approved by the Board, to value a Fund’s assets on behalf of the
Fund. The Valuation Committee values Fund assets as described above. More
information about the valuation of the Funds’ assets is available in the Funds’
SAI.
45
MANAGEMENT
OF THE FUNDS
INVESTMENT
ADVISER
Each
Fund’s Adviser is AllianceBernstein L.P., 501 Commerce Street, Nashville, TN
37203. The Adviser, which is a controlled indirect subsidiary of Equitable
Holdings, Inc., is a leading global investment adviser supervising client
accounts with assets as of September 30, 2023 totaling approximately
$669 billion (of which approximately $131 billion represented assets
of registered investment companies sponsored by the Adviser). As of
September 30, 2023, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 17 of the nation’s
FORTUNE 100 companies), for public employee retirement funds in 32 of
the 50 states, for investment companies, and for foundations, endowments, banks
and insurance companies worldwide. The 28 registered investment companies
managed by the Adviser, comprising approximately 94 separate investment
portfolios, had as of September 30, 2023 approximately 2.7 million
shareholder accounts.
The
Adviser provides investment advisory services and order placement facilities for
each of the Funds. For these advisory services, each Fund paid the Adviser
during the most recent fiscal year a management fee as a percentage of average
daily net assets as follows:
|
|
|
|
|
|
|
|
|
| |
Fund |
|
Fee as a Percentage of Average
Daily Net Assets* |
|
Fiscal Year Ended |
Bond
Inflation Strategy |
|
|
|
.50 |
% |
|
|
|
10/31/23 |
|
Municipal
Bond Inflation Strategy |
|
|
|
.50 |
% |
|
|
|
10/31/23 |
|
All
Market Real Return Portfolio |
|
|
|
.73 |
% |
|
|
|
10/31/23 |
|
* |
Fee
stated net of any waivers and/or reimbursements. See “Fees and Expenses of
the Fund” in the Summary Information at the beginning of this Prospectus
for more information about the
waivers/reimbursements. |
A
discussion regarding the basis for the Board’s approval of each Fund’s
investment advisory agreement is available in the Fund’s annual report to
shareholders for the fiscal year ended October 31, 2023.
The
Adviser acts as an investment adviser to other persons, firms or corporations,
including investment companies, hedge funds, pension funds and other
institutional investors. The Adviser may receive management fees, including
performance fees, that may be higher or lower than the advisory fees it receives
from the Funds. Certain other clients of the Adviser have investment objectives
and policies similar to those of a Fund. The Adviser may, from time to time,
make recommendations that result in the purchase or sale of a particular
security by its other clients simultaneously with a Fund. If transactions on
behalf of more than one client during the same period increase the demand for
securities being purchased or the supply of securities being sold, there may be
an adverse effect on price or quantity. It is the policy of the Adviser to
allocate advisory recommendations and the placing of orders in a manner that is
deemed equitable by the Adviser to the accounts involved, including the Funds.
When two or more of the clients of the Adviser (including a Fund) are purchasing
or selling the same security on a given day from the same broker or dealer, such
transactions are averaged as to price. The securities are then allocated to
participating accounts using automated algorithms designed to achieve a fair,
equitable and objective distribution of the securities over time.
PORTFOLIO
MANAGERS
The
management of, and investment decisions for, the Funds’ portfolios are made by
certain Investment Policy Teams. Each Investment Policy Team relies heavily on
the fundamental analysis and research of the Adviser’s large internal research
staff. No one person is principally responsible for coordinating each Fund’s
investments.
The
day-to-day management of, and investment decisions for, Bond Inflation Strategy are made by the
Adviser’s U.S. Multi-Sector Fixed-Income Team. The U.S. Multi-Sector
Fixed-Income Team relies heavily on the fundamental analysis and research of the
Adviser’s large internal research staff. No one person is principally
responsible for coordinating the Fund’s investments.
The
following table lists the senior members of the U.S. Multi-Sector Fixed-Income
Team with the responsibility for day‑to‑day management of the Fund’s portfolio,
the year that each person assumed joint and primary responsibility for the Fund,
and each person’s principal occupation during the past five years:
|
| |
Employee; Length of Service; Title |
|
Principal
Occupation(s) During
the
Past Five (5) Years |
Michael Canter; since 2016; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. He is also the Director and Chief Investment
Officer—Securitized Assets. |
| |
Michael Rosborough; since February 2023;
Senior Vice President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
2020. Prior to 2020, he was an investment director, portfolio manager and
member of the tactical asset allocation committee at California Public
Employees’ Retirement System (CalPERS) since prior to 2019. |
| |
Serena Zhou; since January 2024; Senior
Vice President of the Adviser |
|
Senior Vice President of the Adviser, with
which she has been associated in a substantially similar capacity to her
current position since prior to 2019. |
The
day-to-day management of, and investment decisions for, Municipal Bond Inflation Strategy are made by
the Adviser’s Municipal Bond Investment Team. The following table lists the
senior members of the Municipal Bond Investment Team with the responsibility for
day-to-day management of the Fund’s portfolio, the year that each person assumed
joint
46
and
primary responsibility for the Fund, and each person’s principal occupation
during the past five years:
|
| |
Employee; Length of
Service; Title |
|
Principal Occupation(s) During
the Past Five (5) Years |
Daryl Clements; since 2022; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. |
| |
Matthew J. Norton; since 2016; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. He is also Chief Investment Officer—Municipal Bonds. |
| |
Andrew D. Potter; since 2017; Vice
President of the Adviser |
|
Vice President of the Adviser, with which
he has been associated in a substantially similar capacity since prior to
2019. |
The
day-to-day management of, and investment decisions for, All Market Real Return Portfolio are made by
the Adviser’s All Market Real Return Portfolio Team. The All Market Real Return
Portfolio Team relies heavily on the fundamental analysis and research of the
Adviser’s large internal research staff. No one person is principally
responsible for coordinating the Fund’s investments.
The
following table lists the senior members of the All Market Real Return Portfolio
Team with responsibility for day-to-day management of the Fund’s portfolio, the
year that each person assumed joint and primary responsibility for the Fund, and
each person’s principal occupation during the past five years.
|
| |
Employee; Length of Service; Title |
|
Principal Occupation(s) During
the Past Five (5) Years |
Vinod Chathlani; since 2015; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. |
| |
Daniel J. Loewy; since 2015; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. He is also Chief Investment Officer and Head of Multi-Asset
Solutions and Chief Investment Officer for Dynamic Asset Allocation. |
| |
Leon Zhu; since 2018; Senior Vice
President of the Adviser |
|
Senior Vice President of the Adviser, with
which he has been associated in a substantially similar capacity since
prior to 2019. |
The
Funds’ SAI provides additional information about the portfolio managers’
compensation, other accounts managed by the portfolio managers, and the
portfolio managers’ ownership of securities in the Funds.
TRANSFER
AGENCY AND RETIREMENT PLAN SERVICES
ABIS
acts as the transfer agent for the Funds. ABIS, an indirect wholly-owned
subsidiary of the Adviser, registers the transfer, issuance and redemption of
Fund shares and disburses dividends and other distributions to Fund
shareholders.
Many
Fund shares are owned by financial intermediaries for the benefit of their
customers. Retirement plans may also hold Fund shares in the name of the plan,
rather than the participant. In those cases, the Funds often do not maintain an
account for you. Thus, some or all of the transfer agency functions for these
and certain other accounts are performed by the financial intermediaries and
plan recordkeepers. Financial intermediaries and recordkeepers, which may have
affiliated financial intermediaries that sell shares of the AB Mutual Funds, may
be paid by a Fund, the Adviser, ABI and ABIS (i) account fees in amounts up
to $19 per account per annum, (ii) asset-based fees of up to
0.25% (except in respect of a limited number of intermediaries) per annum
of the average daily assets held through the intermediary, or (iii) a
combination of both. These amounts include fees for shareholder servicing,
sub-transfer agency, sub-accounting and recordkeeping services. These
amounts do not include fees for shareholder servicing that may be paid
separately by the Fund pursuant to its Rule 12b-1 plan. Amounts paid
by a Fund for these services are included in “Other Expenses” under “Fees and
Expenses of the Fund” in the Summary Information section of this Prospectus. In
addition, financial intermediaries may be affiliates of entities that receive
compensation from the Adviser or ABI for maintaining retirement plan “platforms”
that facilitate trading by affiliated and non-affiliated financial
intermediaries and recordkeeping for retirement plans.
Because
financial intermediaries and plan recordkeepers may be paid varying amounts per
class for sub-transfer agency and related recordkeeping services, the service
requirements of which may also vary by class, this may create an additional
incentive for financial intermediaries and their financial advisors to favor one
fund complex over another or one class of shares over another.
47
DIVIDENDS,
DISTRIBUTIONS AND TAXES
DIVIDENDS
AND DISTRIBUTIONS INFORMATION
Each
Fund’s income dividends and capital gains distributions, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of that Fund.
If paid in additional shares, the shares will have an aggregate NAV as of the
close of business on the declaration date of the dividend or distribution equal
to the cash amount of the dividend or distribution.
Income
dividends are typically declared and paid monthly, except with respect to All Market Real Return Portfolio, which
typically declares and pays annually. During the fourth quarter of the
calendar year, typically in early November, an estimate of each Fund’s capital
gains distribution, if any, will be made available at www.alliancebernstein.com/investments/us/tax-center.htm.
You
may make an election to receive dividends and distributions in cash or in shares
at the time you purchase shares. Your election can be changed at any time prior
to a record date for a dividend. There is no sales or other charge in connection
with the reinvestment of dividends or capital gains distributions. Cash
dividends may be paid by check or, at your election, electronically via the ACH
network.
If
you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
the Adviser, with appropriate instructions, the check representing the dividend
or distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
There
is no fixed dividend rate and there can be no assurance that a Fund will pay any
dividends or realize any capital gains. The amount of any dividend distribution
paid in shares of a Fund must necessarily depend upon the realization of income
and capital gains from the Fund’s investments.
TAX
INFORMATION
Any
investment in a Fund typically involves several tax considerations. The
information below is intended as a general summary for U.S. citizens and
residents. Please see the SAI for additional information. Because each person’s
tax situation is different, you are encouraged to consult your tax adviser about
the tax implications of an investment in a Fund in your particular situation.
You also can visit the Internal Revenue Service (IRS) website at www.irs.gov for more information about
applicable tax rates and other information.
General
If
you purchase shares before a Fund deducts a distribution from its NAV, you will
pay the full price for the shares and then receive a portion of the price back
as a distribution, which may be taxable.
For
tax purposes, an exchange is treated as a sale of Fund shares. The sale or
exchange of Fund shares is a taxable transaction for federal income tax
purposes.
Each
year shortly after December 31, each Fund will send its shareholders tax
information stating the amount and type of all its distributions for the year.
You are encouraged to consult your tax adviser about the federal, state, and
local tax consequences in your particular circumstances, as well as about any
possible foreign tax consequences.
A
Fund may experience relatively large redemptions due to transactions in Fund
shares by significant investors. If large shareholder redemptions occur, a Fund
could be required to sell portfolio securities and this may result in the Fund’s
realization of net capital gains, which could be significant. Certain investment
advisers, including an affiliate of the Adviser, provide tax management services
to their clients that invest in the Funds. As part of these services, those
investment advisers conduct year-end tax trading on behalf of their clients to
offset capital gains taxes where possible, which may result in buying and
selling shares in one or more of the Funds. These transactions could result in a
Fund experiencing temporary asset inflows or outflows at year end. The Adviser’s
affiliate coordinates with the Adviser to try to ensure that the implementation
of its tax management strategies will not compromise the interests of any Fund
or its shareholders, and the Adviser considers that it has a fiduciary duty to
both the Funds and its affiliate’s clients. The implementation of tax management
strategies by such investment advisers may require a Fund to sell portfolio
securities to satisfy redemption requests or increase asset allocations to cash
or cash equivalents, which could result in the Fund’s realization of capital
gains. If a significant amount of a Fund’s assets is allocated to cash or cash
equivalents, it may be more difficult for the Fund to achieve its investment
objective. Implementation of tax management strategies may also require a Fund
to incur transaction costs, which will reduce its return.
Bond
Inflation Strategy and All Market Real Return Portfolio
You
will normally have to pay federal income tax, and any state or local income
taxes, on the distributions you receive from a Fund, whether you take the
distributions in cash or reinvest them in additional shares. Distributions of
net capital gains from the sale of investments that a Fund owned for more than
one year and that are properly designated as capital gains distributions are
taxable as long-term capital gains. Distributions of dividends to the Fund’s
non-corporate shareholders may be treated as “qualified dividend income”, which
is taxed at the same preferential rates applicable to long-term capital gains,
if such distributions are derived from, and designated by the Fund as,
“qualified dividend income” and provided that holding period and other
requirements are met by both the shareholder and the Fund. “Qualified dividend
income” generally is income derived from dividends from U.S. corporations and
“qualified foreign corporations”. Other distributions by a Fund are generally
taxable to you as ordinary income. Each Fund will notify you as to how much of
the Fund’s distributions, if any, qualify for these reduced tax rates.
48
Dividends
declared in October, November, or December and paid in January of the following
year are taxable as if they had been paid the previous December.
Periodic
adjustments for inflation to the principal amount of an inflation-indexed bond
may give rise to original issue discount, which will be includable in each
affected Fund’s gross income. Due to original issue discount, each affected Fund
may be required to make annual distributions to shareholders that exceed the
cash received, which may cause each affected Fund to liquidate certain
investments when it is not advantageous to do so. Also, if the principal value
of an inflation-indexed bond is adjusted downward due to deflation, amounts
previously distributed in the taxable year may be characterized in some
circumstances as a return of capital.
Investment
income received by a Fund from sources within foreign countries may be subject
to foreign income taxes withheld at the source. To the extent that any Fund is
liable for foreign income taxes withheld at the source, the Fund intends, if
possible, to operate so as to meet the requirements of the Code to “pass
through” to the Fund’s shareholders credits for foreign income taxes paid (or to
permit shareholders to claim a deduction for such foreign taxes), but there can
be no assurance that any Fund will be able to do so, and Funds that invest
primarily in U.S. securities will not do so. Furthermore, a shareholder’s
ability to claim a foreign tax credit or deduction for foreign taxes paid by the
Fund may be subject to certain limitations imposed by the Code, as a result of
which a shareholder may not be permitted to claim a credit or deduction for all
or a portion of the amount of such taxes.
Under
certain circumstances, if a Fund realizes losses (e.g., from fluctuations in currency exchange
rates) after paying a dividend, all or a portion of the dividend may
subsequently be characterized as a return of capital. Returns of capital are
generally nontaxable, but will reduce a shareholder’s basis in shares of the
Fund. If that basis is reduced to zero (which could happen if the shareholder
does not reinvest distributions and returns of capital are significant), any
further returns of capital will be taxable as a capital gain.
One
of the requirements for favorable tax treatment as a regulated investment
company under the Code is that a Fund derive at least 90% of its gross income
from certain qualifying sources of income. The IRS has issued a revenue ruling
which holds that income derived from commodity-linked derivatives is not
qualifying income under Subchapter M of the Code. As such, All Market Real Return Portfolio’s ability to
utilize commodity-linked derivatives as part of its investment strategy is
limited to a maximum of 10% of its gross income.
All Market Real Return Portfolio will seek to
gain exposure to the commodities markets primarily through investments in the
Subsidiary. Under recently finalized Treasury Regulations, income derived from
All Market Real Return Portfolio’s investment in its Subsidiary will
constitute qualifying income to the Fund, even if the Subsidiary itself owns
commodity-linked derivatives.
Municipal
Bond Inflation Strategy
Distributions
to shareholders out of tax-exempt interest income earned by the Fund are not
subject to federal income tax. Under current tax law, some individuals may be
subject to the AMT on distributions to shareholders out of income from the
AMT-subject bonds in which the Fund invests. Distributions out of taxable
interest, other investment income, and net realized short-term capital gains,
including any income derived from the Fund’s swap transactions, are taxable to
shareholders as ordinary income.
Any
distributions of long-term capital gains generally will be taxable to you as
long-term capital gains regardless of how long you have held your shares. Since
the Fund’s investment income is derived from interest rather than dividends, no
portion of its distributions will be eligible for the dividends-received
deduction available to corporations, and for non-corporate shareholders no
portion of such distributions will be treated as “qualified dividend income”
taxable at the same preferential rates applicable to long-term capital
gains.
Interest
on indebtedness incurred by shareholders to purchase or carry shares of the Fund
is not deductible for federal income tax purposes. Further, persons who are
“substantial users” (or related persons) of facilities financed by AMT-subject
bonds should consult their tax advisers before purchasing shares of the
Fund.
Shareholders
may be subject to state and local taxes on distributions from the Fund,
including distributions that are exempt from federal income tax. The Fund will
report annually to shareholders the percentage and source of interest earned by
the Fund that is exempt from federal income tax.
Non-U.S.
Shareholders
If
you are a nonresident alien individual or a foreign corporation for federal
income tax purposes, please see the Funds’ SAI for information on how you will
be taxed as a result of holding shares in the Funds.
49
GENERAL
INFORMATION
Under
unusual circumstances, the Funds may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that has remained below $1,000 for 90
days.
During
drastic economic or market developments, you might have difficulty in reaching
ABIS by telephone, in which event you should issue written instructions to ABIS.
ABIS is not responsible for the authenticity of telephone requests to purchase,
sell, or exchange shares. ABIS will employ reasonable procedures to verify that
telephone requests are genuine, and could be liable for losses resulting from
unauthorized transactions if it failed to do so. Dealers and agents may charge a
commission for handling telephone requests. The telephone service may be
suspended or terminated at any time without notice.
Shareholder Services. ABIS offers a
variety of shareholder services. For more information about these services or
your account, call ABIS’s toll-free number, (800) 221-5672. Some services
are described in the Mutual Fund Application.
Householding. Many shareholders of the
AB Mutual Funds have family members living in the same home who also own shares
of the same Funds. In order to reduce the amount of duplicative mail that is
sent to homes with more than one Fund account and to reduce expenses of the
Funds, all AB Mutual Funds will, until notified otherwise, send only one copy of
each prospectus, shareholder report and proxy statement to each household
address. This process, known as “householding”, does not apply to account
statements, confirmations, or personal tax information. If you do not wish to
participate in householding, or wish to discontinue householding at any time,
call ABIS at (800) 221-5672 or, in the case of private clients of
Bernstein, contact Bernstein or your Bernstein Advisor. We will resume separate
mailings for your account within 30 days of your request.
50
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand each Fund’s
financial performance for the past five years. Certain information reflects
financial results for a single share of a class of each Fund. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). Each Fund’s financial statements have been audited by
Ernst & Young LLP, the independent registered public accounting firm
for each Fund, whose report, along with each Fund’s financial statements, are
included in each Fund’s annual report, which is available upon request.
AB
Bond Inflation Strategy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
|
|
CLASS A |
|
|
|
Year Ended October 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Net
asset value, beginning of period |
|
$ |
10.29 |
| |
$ |
11.97 |
| |
$ |
11.56 |
| |
$ |
10.95 |
| |
$ |
10.47 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
investment income(a)(b) |
|
|
.43 |
| |
|
.64 |
| |
|
.51 |
| |
|
.25 |
| |
|
.21 |
|
Net
realized and unrealized gain (loss) on investment and foreign currency
transactions |
|
|
(.26 |
) |
|
|
(1.66 |
) |
|
|
.35 |
| |
|
.59 |
| |
|
.52 |
|
Contributions
from Affiliates |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
.00 |
(c) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
.17 |
| |
|
(1.02 |
) |
|
|
.86 |
| |
|
.84 |
| |
|
.73 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends and Distributions |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Dividends
from net investment income |
|
|
(.44 |
) |
|
|
(.62 |
) |
|
|
(.45 |
) |
|
|
(.23 |
) |
|
|
(.24 |
) |
Distributions
from net realized gain on investment transactions |
|
|
– 0 – |
|
|
|
(.04 |
) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
Return
of capital |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
(.01 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dividends and distributions |
|
|
(.44 |
) |
|
|
(.66 |
) |
|
|
(.45 |
) |
|
|
(.23 |
) |
|
|
(.25 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
10.02 |
|
|
$ |
10.29 |
|
|
$ |
11.97 |
|
|
$ |
11.56 |
|
|
$ |
10.95 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Total
investment return based on net asset value(d) |
|
|
1.70 |
% |
|
|
(8.93 |
)% |
|
|
7.63 |
% |
|
|
7.64 |
% |
|
|
7.00 |
% |
|
|
|
|
| |
Ratios/Supplemental Data |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
assets, end of period (000’s omitted) |
|
$ |
46,881 |
| |
$ |
63,936 |
| |
$ |
54,687 |
| |
$ |
31,248 |
| |
$ |
38,422 |
|
Ratio
to average net assets of: |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Expenses,
net of waivers/reimbursements(e) |
|
|
.86 |
% |
|
|
.84 |
% |
|
|
.78 |
% |
|
|
.91 |
% |
|
|
1.25 |
% |
Expenses,
before waivers/reimbursements(e) |
|
|
1.09 |
% |
|
|
1.04 |
% |
|
|
1.00 |
% |
|
|
1.18 |
% |
|
|
1.51 |
% |
Net
investment income(b) |
|
|
4.16 |
% |
|
|
5.69 |
% |
|
|
4.29 |
% |
|
|
2.26 |
% |
|
|
1.93 |
% |
Portfolio
turnover rate |
|
|
125 |
% |
|
|
79 |
% |
|
|
62 |
% |
|
|
48 |
% |
|
|
40 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
CLASS C |
|
|
|
Year Ended October 31, |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Net
asset value, beginning of period |
|
$ |
9.96 |
| |
$ |
11.63 |
| |
$ |
11.25 |
| |
$ |
10.67 |
| |
$ |
10.24 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Net
investment income(a)(b) |
|
|
.33 |
| |
|
.54 |
| |
|
.44 |
| |
|
.18 |
| |
|
.13 |
|
Net
realized and unrealized gain (loss) on investment and foreign currency
transactions |
|
|
(.24 |
) |
|
|
(1.62 |
) |
|
|
.31 |
| |
|
.56 |
| |
|
.49 |
|
Contributions
from Affiliates |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
.00 |
(c) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
.09 |
| |
|
(1.08 |
) |
|
|
.75 |
| |
|
.74 |
| |
|
.62 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends and Distributions |
|
|
|
| |
|
|
| |
|
|
| |
|
|
| |
|
| |
Dividends
from net investment income |
|
|
(.37 |
) |
|
|
(.55 |
) |
|
|
(.37 |
) |
|
|
(.16 |
) |
|
|
(.19 |
) |
Distributions
from net realized gain on investment transactions |
|
|
– 0 – |
|
|
|
(.04 |
) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dividends and distributions |
|
|
(.37 |
) |
|
|
(.59 |
) |
|
|
(.37 |
) |
|
|
(.16 |
) |
|
|
(.19 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
9.68 |
|