AB Corporate Shares
PROSPECTUS | AUGUST 31, 2022
AB
Corporate Shares
Fund
(Exchange Ticker Symbol)
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AB Corporate Income Shares (ACISX) |
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AB Municipal Income Shares (MISHX) |
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AB Taxable Multi-Sector Income Shares
(CSHTX) |
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AB Impact Municipal Income Shares
(ABIMX) |
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AB Tax‑Aware Real Return Income Shares (TARRX) |
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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
|
Ø Are Not
FDIC Insured
Ø May
Lose Value
Ø Are Not Bank Guaranteed |
TABLE
OF CONTENTS
SUMMARY
INFORMATION
AB
Corporate Income Shares
INVESTMENT
OBJECTIVE:
The
investment objective of the Fund is to earn high current income.
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.
Shareholder Fees (fees paid directly from your
investment)
|
|
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|
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|
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
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|
None |
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Maximum
Deferred Sales Charge (Load)
(as
a percentage of original purchase price or redemption proceeds, whichever
is lower) |
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None |
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Exchange
Fee |
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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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|
|
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Management
Fees(a) |
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0.00% |
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Other
Expenses |
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0.00% |
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Total
Annual Fund Operating Expenses(b) |
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0.00% |
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(a) |
The Fund does not pay an advisory fee to
AllianceBernstein L.P. (the “Adviser”) under the advisory agreement
between AB Corporate Shares, on behalf of the Fund, and the Adviser (the
“Advisory Agreement”). Shares of the Fund are available only to
(i) investors with accounts established under a wrap fee program or
other similar fee‑based investment program sponsored and maintained by a
registered investment adviser or broker-dealer and for which the Adviser
is providing advisory and administrative and other similar services for
compensation and (ii) institutional advisory clients of the Adviser.
Such investors pay a wrap fee, advisory fee or other fee that covers
advisory and administrative and other similar services, which fee is paid
at the wrap fee program or fee‑based account level. Participants in a wrap
fee program or other similar fee‑based investment program should review
the program brochure or literature provided by the sponsor for a
discussion of fees and expenses
charged. |
(b) |
Under
the Advisory Agreement, the Adviser is contractually responsible for and
assumes the obligation for payment of the Fund’s expenses included as
“Other Expenses” of the Fund, except certain extraordinary expenses,
taxes, brokerage fees and commissions and the costs of borrowing money and
other leveraging methods, including interest expenses. This obligation
will continue in effect for so long as the Adviser serves as the
investment adviser to the Fund pursuant to the Advisory Agreement.
|
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
$10,000 in the Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Examples also assume that your
investment has a 5% return each year and that the Fund’s operating expenses stay
the same.* Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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After
1 Year |
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$ |
0 |
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After
3 Years |
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$ |
0 |
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After
5 Years |
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$ |
0 |
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After
10 Years |
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$ |
0 |
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* |
The
Examples do not include any fees paid at the wrap fee program or fee‑based
account level. |
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 49% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES:
The
Fund invests, under normal circumstances, at least 80% of its net assets in U.S.
corporate bonds. The Fund may also invest in U.S. Government securities (other
than U.S. Government securities that are mortgage-backed or asset-backed
securities),
4
repurchase
agreements and forward contracts relating to U.S. Government securities. The
Fund normally invests all of its assets in securities that are rated, at the
time of purchase, at least BBB‑ or the equivalent by any nationally recognized
statistical rating organization. The Fund will not invest in unrated corporate
debt securities. The Fund has the flexibility to invest in long- and short-term
fixed-income securities. In making decisions about whether to buy or sell
securities, the Adviser will consider, among other things, the strength of
certain sectors of the fixed-income market relative to others, interest rates
and other general market conditions and the credit quality of individual
issuers.
The
Fund also may:
• |
|
invest
in convertible debt
securities; |
• |
|
invest
up to 10% of its assets in inflation-indexed
securities; |
• |
|
invest
up to 5% of its net assets in preferred
stock; |
• |
|
purchase
and sell interest rate futures contracts and
options; |
• |
|
enter
into swap transactions; |
• |
|
invest
in zero‑coupon securities and “payment‑in‑kind”
debentures; |
• |
|
make
secured loans of portfolio securities;
and |
• |
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invest
in U.S. Dollar-denominated fixed-income securities issued by non‑U.S.
companies. |
PRINCIPAL
RISKS:
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the stock or bond market fluctuates. 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. |
• |
|
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 any 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 end of a recent period of
historically low rates and the effect of potential government fiscal
policy initiatives and resulting market reactions to those
initiatives. |
• |
|
Inflation Risk: This is the risk that the
value of assets or income from investments will be less in the future as
inflation decreases the value of money. As inflation increases, the value
of the Fund’s assets can decline as can the value of the Fund’s
distributions. This risk is significantly greater for fixed-income
securities with longer
maturities. |
• |
|
Foreign (Non‑U.S.) Risk: Investments in
securities of non‑U.S. issuers may involve more risk than those of U.S.
issuers. These securities may fluctuate more widely in price and may be
more difficult to trade due to adverse market, economic, political,
regulatory or other
factors. |
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. Derivatives, especially
over‑the‑counter derivatives, are also subject to counterparty risk, 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. |
• |
|
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.
5
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 year, five and ten years compare to those of a
broad-based securities market
index. |
The
performance information does not take into account charges associated with a
separate account or wrap fee program or other investment program. If such
charges were included, an investor’s return would be lower. The Fund’s past performance
before and after taxes, of course, does not necessarily indicate how it will
perform in the
future.
Bar
Chart
Through
June 30, 2022, the
year‑to‑date unannualized return
for the Fund’s shares was -14.74%.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was up
11.74%, 2nd quarter, 2020;
and Worst Quarter was down
‑6.18%, 1st quarter,
2020.
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2021)
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1 Year |
|
5 Years |
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10 Years |
|
Fund |
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-0.78% |
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5.83% |
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|
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5.15% |
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Return
After Taxes on Distributions |
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-2.19% |
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4.06% |
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|
|
3.46% |
|
Return
After Taxes on Distributions and Sales of Fund Shares |
|
-0.32% |
|
|
3.75% |
|
|
|
3.25% |
|
Bloomberg
U.S. Credit Bond Index
(reflects
no deduction for fees, expenses or taxes) |
|
-1.08% |
|
|
5.05% |
|
|
|
4.45% |
|
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:
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|
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Employee |
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Length of Service |
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Title |
Russell Wald |
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Since October 2021 |
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Vice President of the Adviser |
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Tiffanie Wong |
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Since 2019 |
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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 23 in this Prospectus.
6
AB
Municipal Income Shares
INVESTMENT
OBJECTIVE:
The
investment objective of the Fund is to earn the highest level of current income,
exempt from federal taxation, that is available consistent with what the Adviser
considers to be an appropriate level of
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.
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
|
None |
|
Maximum
Deferred Sales Charge (Load)
(as
a percentage of original purchase price or redemption proceeds, whichever
is lower) |
|
|
None |
|
Exchange
Fee |
|
|
None |
|
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fees(a) |
|
|
0.00% |
|
|
|
Other
Expenses: |
|
|
|
|
Interest
Expense |
|
|
0.07% |
|
|
|
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|
|
Total Other Expenses |
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|
0.07% |
|
|
|
|
|
|
Total Annual Fund Operating Expenses(b) |
|
|
0.07% |
|
|
|
|
|
|
|
|
(a) |
The
Fund does not pay an advisory fee to AllianceBernstein L.P. (the
“Adviser”) under the advisory agreement between AB Corporate Shares, on
behalf of the Fund, and the Adviser (the “Advisory Agreement”). Shares of
the Fund are available only to (i) investors with accounts
established under a wrap fee program or other similar fee‑based investment
program sponsored and maintained by a registered investment adviser or
broker-dealer and for which the Adviser is providing advisory and
administrative and other similar services for compensation and
(ii) institutional advisory clients of the Adviser. Such investors
pay a wrap fee, advisory fee or other fee that covers advisory and
administrative and other similar services, which fee is paid at the wrap
fee program or fee‑based account level. Participants in a wrap fee program
or other similar fee‑based investment program should review the program
brochure or literature provided by the sponsor for a discussion of fees
and expenses charged. |
(b) |
Under
the Advisory Agreement, the Adviser is contractually responsible for and
assumes the obligation for payment of the Fund’s expenses included as
“Other Expenses” of the Fund, except certain extraordinary expenses,
taxes, brokerage fees and commissions and the costs of borrowing money and
other leveraging methods, including interest expenses. This obligation
will continue in effect for so long as the Adviser serves as the
investment adviser to the Fund pursuant to the Advisory
Agreement. |
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 and that the Fund’s operating expenses stay
the same.* Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
After
1 Year |
|
$ |
7 |
|
|
|
After
3 Years |
|
$ |
23 |
|
|
|
After
5 Years |
|
$ |
40 |
|
|
|
After
10 Years |
|
$ |
90 |
|
* |
The
Examples do not include any fees paid at the wrap fee program or fee‑based
account level. |
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 6% of the average value of its
portfolio.
7
PRINCIPAL
STRATEGIES:
The
Fund pursues its objective by investing principally in high-yielding municipal
securities that may be non‑investment grade or investment grade. As a matter of
fundamental policy, the Fund invests, under normal circumstances, at least 80%
of its net assets in municipal securities that pay interest that is exempt from
federal income tax. These securities may pay interest that is subject to the
federal alternative minimum tax (“AMT”) for certain taxpayers.
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 without limit in lower-rated securities (“junk bonds”), which
may include securities having the lowest rating, and in unrated securities that,
in the Adviser’s judgment, would be lower-rated securities if rated. The Fund
may invest in fixed-income securities with any maturity or duration. The Fund
will seek to increase income for shareholders by investing in longer-maturity
bonds. Consistent with its objective of seeking a higher level of income, the
Fund may experience greater volatility and a higher risk of loss of principal
than other municipal funds.
The
Fund may also invest in:
• |
|
tender
option bond transactions
(“TOBs”); |
• |
|
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 make short sales of securities or maintain a short position, and may
use other investment techniques. The Fund may use leverage for investment
purposes to increase income through the use of TOBs and derivative instruments,
such as interest rate swaps.
PRINCIPAL
RISKS:
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the stock or bond market fluctuates. 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. |
• |
|
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 any 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 may be 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. For example, the novel coronavirus
(COVID‑19) pandemic has significantly stressed the financial resources of
many issuers of municipal securities, which could impair any such issuer’s
ability to meet its financial obligations when due and adversely impact
the value of its securities held by the Fund. As the full effects of the
COVID‑19 pandemic on state and local economies and on issuers of municipal
securities are still uncertain, the financial difficulties of issuers of
municipal securities may continue or worsen, adversely affecting the
performance of the Fund. 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. |
Congress
has previously considered making changes to the municipal securities provisions
of the Internal Revenue Code that could change the U.S. federal income tax
treatment of certain types of municipal
securities.
8
• |
|
Tax Risk: There is no guarantee that all
of the Fund’s income will remain exempt from federal or state income
taxes. From time to time, the U.S. Government and the U.S. Congress
consider changes in federal tax law that could limit or eliminate the
federal tax exemption for municipal bond income, which would in effect
reduce the income received by shareholders from the Fund by increasing
taxes on that income. In such event, the Fund’s net asset value, or NAV,
could also decline as yields on municipal bonds, which are typically lower
than those on taxable bonds, would be expected to increase to
approximately the yield of comparable taxable bonds. Actions or
anticipated actions affecting the tax exempt status of municipal bonds
could also result in significant shareholder redemptions of Fund shares as
investors anticipate adverse effects on the Fund or seek higher yields to
offset the potential loss of the tax deduction. As a result, the Fund
would be required to maintain higher levels of cash to meet the
redemptions, which would negatively affect the Fund’s yield. The federal
income tax treatment of payments in respect of certain derivative
contracts is unclear. |
• |
|
Below Investment Grade Securities Risk:
Investments in fixed-income securities with lower ratings (commonly known
as “junk bonds”) tend to have a higher probability that an issuer will
default or fail to meet its payment obligations. These securities may be
subject to greater price volatility due to such factors as specific
corporate developments, interest rate sensitivity and negative perceptions
of the junk bond market generally and may be more difficult to trade than
other types of
securities. |
• |
|
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 end of a recent period of
historically low rates and the effect of potential government fiscal
policy initiatives and resulting market reactions to those
initiatives. |
• |
|
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. |
• |
|
Leverage Risk: To the extent the Fund
uses leveraging techniques, its 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 particular investments, such as lower-rated
securities, are or become difficult to purchase or sell, possibly
preventing the Fund from selling such investments at an advantageous
price. The Fund is subject to illiquid investments risk because the market
for municipal securities is generally smaller than many other markets.
Derivatives and securities involving substantial market and credit risk
tend to involve greater illiquid investments risk than most other types of
investments. |
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. Derivatives, especially
over‑the‑counter derivatives, are also subject to counterparty risk, 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. |
• |
|
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 year, five and ten years compare to those of a
broad-based securities market
index. |
The
performance information does not take into account charges associated with a
separate account or wrap fee program or other investment program. If such
charges were included, an investor’s return would be lower. The Fund’s past performance
before and after taxes, of course, does not necessarily indicate how it will
perform in the future.
9
Bar
Chart
Through
June 30, 2022, the
year‑to‑date unannualized return
for the Fund’s shares was -12.60%.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was up
6.60%, 1st quarter, 2014;
and Worst Quarter was down
‑7.34%, 1st quarter,
2020.
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2021)
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
5 Years |
|
|
10 Years |
|
Fund |
|
7.42% |
|
|
7.01% |
|
|
|
6.92% |
|
Return
After Taxes on Distributions |
|
7.38% |
|
|
6.97% |
|
|
|
6.85% |
|
Return
After Taxes on Distributions and Sales of Fund Shares |
|
5.78% |
|
|
6.29% |
|
|
|
6.37% |
|
Bloomberg
Municipal Bond Index
(reflects
no deduction for fees, expenses or taxes) |
|
1.52% |
|
|
4.17% |
|
|
|
3.72% |
|
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 |
Terrance T. Hults |
|
Since 2010 |
|
Senior Vice President of the Adviser |
|
|
|
Matthew J. Norton |
|
Since 2016 |
|
Senior Vice President of the Adviser |
|
|
|
Andrew D. Potter |
|
Since 2020 |
|
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 23 in this Prospectus.
10
AB
Taxable Multi-Sector Income Shares
INVESTMENT
OBJECTIVE:
The
investment objective of the Fund is to generate income and price
appreciation.
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.
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
|
None |
|
Maximum
Deferred Sales Charge (Load)
(as
a percentage of original purchase price or redemption proceeds, whichever
is lower) |
|
|
None |
|
Exchange
Fee |
|
|
None |
|
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fees(a) |
|
|
0.00% |
|
Other
Expenses |
|
|
0.00% |
|
|
|
|
|
|
Total
Annual Fund Operating Expenses(b) |
|
|
0.00% |
|
|
|
|
|
|
|
|
(a) |
The
Fund does not pay an advisory fee to AllianceBernstein L.P. (the
“Adviser”) under the advisory agreement between AB Corporate Shares, on
behalf of the Fund, and the Adviser (the “Advisory Agreement”). Shares of
the Fund are available only to (i) investors with accounts
established under a wrap fee program or other similar fee‑based investment
program sponsored and maintained by a registered investment adviser or
broker-dealer and for which the Adviser is providing advisory and
administrative and other similar services for compensation and
(ii) institutional advisory clients of the Adviser. Such investors
pay a wrap fee, advisory fee or other fee that covers advisory and
administrative and other similar services, which fee is paid at the wrap
fee program or fee‑based account level. Participants in a wrap fee program
or other similar fee‑based investment program should review the program
brochure or literature provided by the sponsor for a discussion of fees
and expenses charged. |
(b) |
Under
the Advisory Agreement, the Adviser is contractually responsible for and
assumes the obligation for payment of the Fund’s expenses included as
“Other Expenses” of the Fund, except certain extraordinary expenses,
taxes, brokerage fees and commissions and the costs of borrowing money and
other leveraging methods, including interest expenses. This obligation
will continue in effect for so long as the Adviser serves as the
investment adviser to the Fund pursuant to the Advisory
Agreement. |
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 and that the Fund’s operating expenses stay
the same.* Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
After
1 Year |
|
$ |
0 |
|
|
|
After
3 Years |
|
$ |
0 |
|
|
|
After
5 Years |
|
$ |
0 |
|
|
|
After
10 Years |
|
$ |
0 |
|
* |
The
Examples do not include any fees paid at the wrap fee program or fee‑based
account level. |
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 45% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES:
The
Fund invests, under normal circumstances, at least 80% of its net assets in
fixed-income securities. The Fund may invest in a broad range of securities in
both developed and emerging markets. The Fund may invest across all fixed-income
sectors, including corporate and U.S. and non‑U.S. Government securities. The
Fund may invest up to 50% of its assets in below investment grade bonds (“junk
bonds”). The Fund expects to invest in readily marketable fixed-income
securities with a range of maturities from short- to long-term.
11
The
Fund may invest without limit in U.S. Dollar-denominated foreign
fixed-income securities and may invest up to 50% of its assets in
non‑U.S. Dollar‑denominated foreign fixed-income securities. These
investments may include, in each case, developed and emerging market debt
securities.
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 mortgage-related and other asset-backed securities, loan
participations, inflation-indexed securities, structured securities, variable,
floating, and inverse floating-rate instruments and preferred stock, and may use
other investment techniques. The Fund may use leverage for investment purposes.
The Fund intends, among other things, to enter into transactions such as reverse
repurchase agreements, forward contracts, and dollar rolls. The Fund may invest,
without limit, in derivatives, such as options, futures contracts, forwards, or
swap agreements.
Currencies
can have a dramatic effect on returns of non‑U.S. Dollar‑denominated
fixed-income securities, significantly adding to returns in some years and
greatly diminishing them in others. The Adviser evaluates currency and
fixed-income positions separately and may seek to hedge the currency exposure
resulting from the Fund’s fixed-income securities positions when it finds the
currency exposure unattractive. To hedge a portion of its currency risk, the
Fund may from time to time invest in currency-related derivatives, including
forward currency exchange contracts, futures contracts, options on futures
contracts, swaps and options. The Adviser may also seek investment opportunities
by taking long or short positions in currencies through the use of
currency-related derivatives.
PRINCIPAL
RISKS:
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the stock or bond market fluctuates. 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. |
• |
|
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 any 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. |
• |
|
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 end of a recent period of
historically low rates and the effect of potential government fiscal
policy initiatives and resulting market reactions to those
initiatives. |
• |
|
Below Investment Grade Securities Risk:
Investments in fixed-income securities with lower ratings (commonly known
as “junk bonds”) tend to have a higher probability that an issuer will
default or fail to meet its payment obligations. These securities may be
subject to greater price volatility due to such factors as specific
corporate developments, interest rate sensitivity, negative perceptions of
the junk bond market generally and may be more difficult to trade than
other types of
securities. |
• |
|
Inflation Risk: This is the risk that the
value of assets or income from investments will be less in the future as
inflation decreases the value of money. As inflation increases, the value
of the Fund’s assets can decline as can the value of the Fund’s
distributions. This risk is significantly greater for fixed-income
securities with longer
maturities. |
• |
|
Foreign (Non‑U.S.) Risk: Investments in
securities of non‑U.S. issuers may involve more risk than those of U.S.
issuers. These securities may fluctuate more widely in price and may be
more difficult to trade due to adverse market, economic, political,
regulatory or other
factors. |
• |
|
Emerging Market Risk: Investments in
emerging market countries may have more risk because the markets are less
developed and less liquid as well as being subject to increased economic,
political, regulatory or other
uncertainties. |
• |
|
Currency Risk: Fluctuations in currency
exchange rates may negatively affect the value of the Fund’s investments
or reduce its returns. |
• |
|
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 |
12
|
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 nongovernmental 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. |
• |
|
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 may be 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. For example, the novel coronavirus
(COVID‑19) pandemic has significantly stressed the financial resources of
many issuers of municipal securities, which could impair any such issuer’s
ability to meet its financial obligations when due and adversely impact
the value of its securities held by the Fund. As the full effects of the
COVID‑19 pandemic on state and local economies and on issuers of municipal
securities are still uncertain, the financial difficulties of issuers of
municipal securities may continue or worsen, adversely affecting the
performance of the Fund. 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. |
Congress
has previously considered making changes to the municipal securities provisions
of the Internal Revenue Code that could change the U.S. federal income tax
treatment of certain types of municipal
securities.
• |
|
Sector Risk: The Fund may have more risk
because it may invest to a significant extent in one or more particular
market sectors. To the extent it does so, market or economic factors
affecting the relevant sector(s) could have a major effect on the value of
the Fund’s investments. |
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. Derivatives, especially
over‑the‑counter derivatives, are also subject to counterparty risk, 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, 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. |
• |
|
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 year, five and ten years compare to those of a
broad-based securities market
index. |
The
performance information does not take into account charges associated with a
separate account or wrap fee program or other investment program. If such
charges were included, an investor’s return would be lower. The Fund’s past performance
before and after taxes, of course, does not necessarily indicate how it will
perform in the future.
13
Bar
Chart
Through
June 30, 2022, the
year‑to‑date unannualized return
for the Fund’s shares was -3.19%.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was up
3.35%, 2nd quarter, 2020;
and Worst Quarter was down
‑1.60%, 1st quarter,
2020.
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2021)
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
5 Years |
|
|
10 Years |
|
Fund |
|
0.36% |
|
|
2.38% |
|
|
|
2.11% |
|
Return
After Taxes on Distributions |
|
-0.21% |
|
|
1.49% |
|
|
|
1.26% |
|
Return
After Taxes on Distributions and Sales of Fund Shares |
|
0.28% |
|
|
1.44% |
|
|
|
1.28% |
|
Bloomberg
U.S. Aggregate ex Government Bond Index
(reflects
no deduction for fees, expenses or taxes) |
|
-1.08% |
|
|
3.83% |
|
|
|
3.37% |
|
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 |
Scott A. DiMaggio |
|
Since 2010 |
|
Senior Vice President of the Adviser |
|
|
|
Janaki Rao |
|
Since October 2021 |
|
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 23 in this Prospectus.
14
AB
Impact Municipal Income Shares
INVESTMENT
OBJECTIVE:
The
investment objective of the Fund is to earn the highest level of current income,
exempt from federal taxation, that is available consistent with what the Adviser
considers to be an appropriate level of
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.
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
None |
Maximum
Deferred Sales Charge (Load)
(as
a percentage of original purchase price or redemption proceeds, whichever
is lower) |
|
None |
Exchange
Fee |
|
None |
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
Management
Fees(a) |
|
|
0.00% |
|
|
|
Other
Expenses |
|
|
0.00% |
|
|
|
|
|
|
Total
Annual Fund Operating Expenses(b) |
|
|
0.00% |
|
|
|
|
|
|
|
|
(a) |
The
Fund does not pay an advisory fee to AllianceBernstein L.P. (the
“Adviser”) under the advisory agreement between AB Corporate Shares, on
behalf of the Fund, and the Adviser (the “Advisory Agreement”). Shares of
the Fund are available only to (i) investors with accounts
established under a wrap fee program or other similar fee‑based investment
program sponsored and maintained by a registered investment adviser or
broker-dealer and for which the Adviser is providing advisory and
administrative and other similar services for compensation and
(ii) institutional advisory clients of the Adviser. Such investors
pay a wrap fee, advisory fee or other fee that covers advisory and
administrative and other similar services, which fee is paid at the wrap
fee program or fee‑based account level. Participants in a wrap fee program
or other similar fee‑based investment program should review the program
brochure or literature provided by the sponsor for a discussion of fees
and expenses charged. |
(b) |
Under
the Advisory Agreement, the Adviser is contractually responsible for and
assumes the obligation for payment of the Fund’s expenses included as
“Other Expenses” of the Fund, except certain extraordinary expenses,
taxes, brokerage fees and commissions and the costs of borrowing money and
other leveraging methods, including interest expenses. This obligation
will continue in effect for so long as the Adviser serves as the
investment adviser to the Fund pursuant to the Advisory
Agreement. |
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 and that the Fund’s operating expenses stay
the same.* Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
After
1 Year |
|
$ |
0 |
|
|
|
After
3 Years |
|
$ |
0 |
|
|
|
After
5 Years |
|
$ |
0 |
|
|
|
After
10 Years |
|
$ |
0 |
|
* |
The
Examples do not include any fees paid at the wrap fee program or fee‑based
account level. |
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 13% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES:
The
Fund pursues its objective by investing principally in high-yielding municipal
securities of any credit quality that (i) score highly on the Adviser’s
environmental, social and governance (“ESG”) criteria and (ii) are deemed
by the Adviser to have an environmental or social impact in underserved or low
socio-economic communities. As a matter of fundamental policy, the Fund
15
invests,
under normal circumstances, at least 80% of its net assets in municipal
securities that pay interest that is exempt from federal income tax. These
securities may pay interest that is subject to the federal alternative minimum
tax (“AMT”) for certain taxpayers.
The
Adviser evaluates each security in which the Fund invests using both a
traditional municipal bond credit analysis and a consideration of the security’s
overall ESG score under the Adviser’s ESG evaluation criteria. Under this ESG
evaluation, to arrive at an overall ESG score, each security is scored on
environmental, social and governance factors, and the scores are weighted based
on the Adviser’s assessment of the relevance of each factor within a given
sector (e.g., education, health care,
renewable energy and mass transit). For example, social factors are weighted
more heavily in the overall ESG score for a security of an issuer in the
education sector than they are for a security of an issuer in the mass transit
sector, where environmental factors predominate. The Adviser regularly reviews
the overall ESG scores assigned to securities under consideration for purposes
of determining the securities in which to invest for the
Fund.
The
Adviser’s ESG evaluation is conducted on an industry sector basis and includes
the use of key performance indicators that vary in materiality by sector. The
Adviser’s environmental evaluation covers issues such as clean and renewable
energy, climate change and water conservation. The Adviser’s social evaluation
covers issues such as economic impact, high quality safety‑net healthcare and
overall community health needs, and the reduction of achievement gaps between
wealthy and poor school districts. The Adviser’s governance evaluation
covers issues such as stewardship of debt and capital, board governance and
transparency.
The
Adviser also assesses a security’s risk and return characteristics as well as a
security’s 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, maturity, sensitivity to interest rates and the expected
after‑tax returns of the security under consideration and of the Fund’s other
holdings.
The
Fund may invest without limit in lower-rated securities (“junk bonds”), which
may include securities having the lowest rating, and in unrated securities that,
in the Adviser’s judgment, would be lower-rated securities if rated. The Fund
may invest in fixed-income securities with any maturity or duration. The Fund
will seek to increase income for shareholders by investing in longer-maturity
bonds. Consistent with its objective of seeking a higher level of income, the
Fund may experience greater volatility and a higher risk of loss of principal
than other municipal funds.
The
Fund may also invest in:
• |
|
tender
option bond transactions
(“TOBs”); |
• |
|
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 make short sales of securities or maintain a short position, and may
use other investment techniques. The Fund may use leverage for investment
purposes to increase income through the use of TOBs and derivative instruments,
such as interest rate swaps.
PRINCIPAL
RISKS:
• |
|
Market Risk: The value of the Fund’s
assets will fluctuate as the stock or bond market fluctuates. 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. |
• |
|
ESG Risk: Applying ESG and sustainability
criteria to the investment process may exclude securities of certain
issuers for non‑investment reasons and, therefore, the Fund may forgo some
market opportunities available to funds that do not use ESG or
sustainability criteria. Securities selected based on ESG factors may
shift into and out of favor depending on market and economic conditions,
and the Fund’s performance may at times be better or worse than the
performance of funds that do not use ESG or sustainability criteria.
Furthermore, “sustainability” is not a uniformly defined characteristic,
and the Fund’s sustainability criteria may differ from those used by other
funds. In addition, in evaluating an investment, the investment adviser is
dependent upon information and data that may be incomplete, inaccurate or
unavailable, which could adversely affect the analysis of the ESG and
sustainability factors relevant to a particular
investment. |
• |
|
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 any 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. |
16
• |
|
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 may be 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. For example, the novel coronavirus
(COVID‑19) pandemic has significantly stressed the financial resources of
many issuers of municipal securities, which could impair any such issuer’s
ability to meet its financial obligations when due and adversely impact
the value of its securities held by the Fund. As the full effects of the
COVID‑19 pandemic on state and local economies and on issuers of municipal
securities are still uncertain, the financial difficulties of issuers of
municipal securities may continue or worsen, adversely affecting the
performance of the Fund. 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. |
Congress
has previously considered making changes to the municipal securities provisions
of the Internal Revenue Code that could change the U.S. federal income tax
treatment of certain types of municipal
securities.
• |
|
Tax Risk: There is no guarantee that all
of the Fund’s income will remain exempt from federal or state income
taxes. From time to time, the U.S. Government and the U.S. Congress
consider changes in federal tax law that could limit or eliminate the
federal tax exemption for municipal bond income, which would in effect
reduce the income received by shareholders from the Fund by increasing
taxes on that income. In such event, the Fund’s net asset value, or NAV,
could also decline as yields on municipal bonds, which are typically lower
than those on taxable bonds, would be expected to increase to
approximately the yield of comparable taxable bonds. Actions or
anticipated actions affecting the tax exempt status of municipal bonds
could also result in significant shareholder redemptions of Fund shares as
investors anticipate adverse effects on the Fund or seek higher yields to
offset the potential loss of the tax deduction. As a result, the Fund
would be required to maintain higher levels of cash to meet the
redemptions, which would negatively affect the Fund’s yield. The federal
income tax treatment of payments in respect of certain derivative
contracts is unclear. |
• |
|
Below Investment Grade Securities Risk:
Investments in fixed-income securities with lower ratings (commonly known
as “junk bonds”) tend to have a higher probability that an issuer will
default or fail to meet its payment obligations. These securities may be
subject to greater price volatility due to such factors as specific
corporate developments, interest rate sensitivity, negative perceptions of
the junk bond market generally and may be more difficult to trade than
other types of
securities. |
• |
|
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 end of a recent period of
historically low rates and the effect of potential government fiscal
policy initiatives and resulting market reactions to those
initiatives. |
• |
|
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. |
• |
|
Leverage Risk: To the extent the Fund
uses leveraging techniques, its 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 particular investments, such as lower-rated
securities, are or become difficult to purchase or sell, possibly
preventing the Fund from selling such investments at an advantageous
price. The Fund is subject to illiquid investments risk because the market
for municipal securities is generally smaller than many other markets.
Derivatives and securities involving substantial market and credit risk
tend to involve greater illiquid investments risk than most other types of
investments. |
• |
|
Derivatives Risk: Derivatives may be
difficult to price or unwind and leveraged so that small changes may
produce disproportionate losses for the Fund. Derivatives, especially
over‑the‑counter derivatives, are also subject to counterparty risk, 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. |
• |
|
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 |
17
|
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 the life of the Fund;
and |
• |
|
how the Fund’s average
annual returns for one year and since inception compare to those of a
broad-based securities market
index. |
The
performance information does not take into account charges associated with a
separate account or wrap fee program or other investment program. If such
charges were included, an investor’s return would be lower. The Fund’s past performance
before and after taxes, of course, does not necessarily indicate how it will
perform in the
future.
Bar
Chart
Through
June 30, 2022, the
year‑to‑date unannualized return
for the Fund’s shares was -12.17%.
During
the period shown in the bar chart, the Fund’s:
Best Quarter was up
3.94%, 1st quarter, 2019;
and Worst Quarter was down
‑1.92%, 1st quarter,
2020.
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2021)
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
|
Since
Inception* |
|
Fund |
|
|
4.28% |
|
|
|
5.34% |
|
Return
After Taxes on Distributions |
|
|
4.24% |
|
|
|
5.29% |
|
Return
After Taxes on Distributions and Sales of Fund Shares |
|
|
3.55% |
|
|
|
4.76% |
|
Bloomberg
Municipal Bond Index
(reflects
no deduction for fees, expenses or taxes) |
|
|
1.52% |
|
|
|
3.61% |
|
* |
Inception
date: 09/12/2017. |
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 |
Matthew J. Norton |
|
Since 2017 |
|
Senior Vice President of the Adviser |
|
|
|
Marc Uy |
|
Since October 2021 |
|
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 23 in this Prospectus.
18
AB
Tax‑Aware Real Return Income Shares
INVESTMENT
OBJECTIVE:
The
investment objective of the Fund is to maximize real after‑tax return for
investors subject to federal income
taxation.
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.
Shareholder Fees (fees paid directly from your
investment)
|
|
|
|
|
|
|
Maximum
Sales Charge (Load) Imposed on Purchases
(as
a percentage of offering price) |
|
|
None |
|
Maximum
Deferred Sales Charge (Load)
(as
a percentage of original purchase price or redemption proceeds, whichever
is lower) |
|
|
None |
|
Exchange
Fee |
|
|
None |
|
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your investment)
|
|
|
|
|
|
|
Management
Fees(a) |
|
|
0.00% |
|
|
|
Other
Expenses |
|
|
0.00% |
|
|
|
|
|
|
Total
Annual Fund Operating Expenses(b) |
|
|
0.00% |
|
|
|
|
|
|
|
|
(a) |
The
Fund does not pay an advisory fee to AllianceBernstein L.P. (the
“Adviser”) under the advisory agreement between AB Corporate Shares, on
behalf of the Fund, and the Adviser (the “Advisory Agreement”). Shares of
the Fund are available only to (i) investors with accounts
established under a wrap fee program or other similar fee‑based investment
program sponsored and maintained by a registered investment adviser or
broker-dealer and for which the Adviser is providing advisory and
administrative and other similar services for compensation and
(ii) institutional advisory clients of the Adviser. Such investors
pay a wrap fee, advisory fee or other fee that covers advisory and
administrative and other similar services, which fee is paid at the wrap
fee program or fee‑based account level. Participants in a wrap fee program
or other similar fee‑based investment program should review the program
brochure or literature provided by the sponsor for a discussion of fees
and expenses charged. |
(b) |
Under
the Advisory Agreement, the Adviser is contractually responsible for and
assumes the obligation for payment of the Fund’s expenses included as
“Other Expenses” of the Fund, except certain extraordinary expenses,
taxes, brokerage fees and commissions and the costs of borrowing money and
other leveraging methods, including interest expenses. This obligation
will continue in effect for so long as the Adviser serves as the
investment adviser to the Fund pursuant to the Advisory
Agreement. |
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 and that the Fund’s operating expenses stay
the same.* Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
After
1 Year |
|
$ |
0 |
|
|
|
After
3 Years |
|
$ |
0 |
|
|
|
After
5 Years |
|
$ |
0 |
|
|
|
After
10 Years |
|
$ |
0 |
|
|
|
* |
The
Examples do not include any fees paid at the wrap fee program or fee‑based
account level. |
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 13% of the average value of its
portfolio.
PRINCIPAL
STRATEGIES:
The
Fund seeks real after‑tax return for investors who are subject to federal income
taxes. Real return is the rate of return after adjusting for inflation. The Fund
pursues its objective by investing primarily in municipal securities that pay
interest exempt from federal taxation and by using inflation protection
derivatives instruments. Municipal securities may pay interest that is subject
to the federal alternative minimum tax (“AMT”) for certain taxpayers.
19
The
Fund may invest in fixed-income securities with any maturity or duration. The
Fund may also invest without limit in fixed-income securities that are rated
below investment grade (commonly known as “junk
bonds”).
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 make significant use of derivatives, including swaps, futures, options
and forwards. To provide inflation protection, the Fund will enter into various
kinds of inflation swap agreements. The Fund may use other inflation-protected
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 taxation. The Fund may at times seek a substantial amount of inflation
protection and, consequently, may generate substantial taxable income. It is
expected that the Fund’s primary use of derivatives will be for the purposes of
inflation protection.
The
Fund may also invest in:
• |
|
zero‑coupon
municipal securities and variable, floating and inverse floating rate
municipal securities;
and |
• |
|
certain
types of mortgage-related
securities. |
The
Fund may utilize leverage for investment purposes through the use of tender
option bond transactions (“TOBs”). The Adviser will consider the impact of TOBs,
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 stock or bond market fluctuates. 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. |
• |
|
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 any 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 end of a recent period of
historically low rates and the effect of potential government fiscal
policy initiatives and resulting market reactions to those
initiatives. |
• |
|
Below Investment Grade Securities Risk:
Investments in fixed-income securities with lower ratings (commonly known
as “junk bonds”) are subject to a higher probability that an issuer will
default or fail to meet its payment obligations. These securities may be
subject to greater price volatility due to such factors as specific
corporate developments and negative perceptions of the junk bond market
generally and may be more difficult to trade than other types of
securities. |
• |
|
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. |
• |
|
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 may be 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. For example, the novel coronavirus
(COVID‑19) pandemic has significantly stressed the financial resources of
many issuers of municipal securities, which could impair any such
issuer’s |
20
|
ability
to meet its financial obligations when due and adversely impact the value
of its securities held by the Fund. As the full effects of the COVID‑19
pandemic on state and local economies and on issuers of municipal
securities are still uncertain, the financial difficulties of issuers of
municipal securities may continue or worsen, adversely affecting the
performance of the Fund. 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. |
Congress
has previously considered making changes to the municipal securities provisions
of the Internal Revenue Code that could change the U.S. federal income tax
treatment of certain types of municipal
securities.
• |
|
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. 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, or 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 particular investments, such as lower-rated
securities, are or become difficult to purchase or sell, possibly
preventing the Fund from selling such investments at an advantageous
price. The Fund is subject to illiquid investments risk because the market
for municipal securities is generally smaller than many other markets.
Derivatives and securities involving substantial market and credit risk
tend to involve greater illiquid investments risk than most other types of
investments. |
• |
|
Management Risk: The Fund is subject to
management risk because it is an actively-managed investment fund. The
Adviser will apply its investment techniques and risk analyses in making
investment decisions, but there is no guarantee that its techniques will
produce the intended results. Some of these techniques may incorporate, or
rely upon, quantitative models, but there is no guarantee that these
models will generate accurate forecasts, reduce risk or otherwise perform
as
expected. |
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 the life of the Fund;
and |
|
• |
|
how the Fund’s average
annual returns for one year, the Fund’s period of current investment
operations (since November 13, 2019) and the Fund’s period of
previous investment operations (from May 2, 2011 to March 20,
2014) compare to those of a broad-based securities market
index. |
The
performance information does not take into account charges associated with a
separate account or wrap fee program or other investment program. If such
charges were included, an investor’s return would be lower. The Fund’s past performance
before and after taxes, of course, does not necessarily indicate how it will
perform in the
future.
The
Fund commenced investment operations on May 2, 2011 and continued
operations through March 20, 2014, the date on which all shares of the Fund
were redeemed. Between March 20, 2014 and November 12, 2019, the Fund
did not conduct investment operations. The Fund resumed investment operations on
November 13, 2019. The performance information in the bar chart shown below
is for only those calendar years during which the Fund conducted investment
operations for a full calendar year.
21
Bar
Chart
Through
June 30, 2022, the
year‑to‑date unannualized return
for the Fund’s shares was -5.23%.
* |
The Fund did not conduct investment
operations for a full calendar year; therefore, no performance information
has been provided. |
During
the period shown in the bar chart, the Fund’s:
Best Quarter was up
8.86%, 2nd quarter, 2020;
and Worst Quarter was down
‑13.31%, 1st quarter,
2020.
Performance
Table
Average
Annual Total Returns
(For
the periods ended December 31, 2021)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year |
|
Since Inception (Current Investment Operations) on 11/13/19 |
|
Previous Investment Operations
5/2/11
to 3/20/14 |
Fund |
|
|
|
19.57 |
% |
|
|
|
13.14 |
% |
|
|
|
0.72 |
% |
Return
After Taxes on Distributions |
|
|
|
16.99 |
% |
|
|
|
11.91 |
% |
|
|
|
0.64 |
% |
Return
After Taxes on Distributions and Sales of Fund Shares |
|
|
|
13.35 |
% |
|
|
|
10.15 |
% |
|
|
|
1.03 |
% |
Bloomberg
Capital TIPS 1‑10 Year Index
(reflects
no deduction for fees, expenses or taxes) |
|
|
|
5.69 |
% |
|
|
|
7.02 |
% |
|
|
|
1.41 |
% |
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 |
Terrance T. Hults |
|
Since 2011 |
|
Senior Vice President of the Adviser |
|
|
|
Matthew J. Norton |
|
Since 2019 |
|
Senior Vice President of the Adviser |
|
|
|
Andrew D. Potter |
|
Since 2019 |
|
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 23 in this Prospectus.
22
ADDITIONAL
INFORMATION ABOUT PURCHASE AND SALE OF FUND SHARES, TAXES AND FINANCIAL
INTERMEDIARIES
|
• |
|
PURCHASE
AND SALE OF FUND SHARES |
You
may purchase shares of the Funds at the relevant NAV without a sales charge or
other fee.
Shares
of the Funds are available only to (i) investors with accounts established
under a wrap fee program or other similar fee‑based investment program sponsored
and maintained by a registered investment adviser or broker-dealer and for which
the Adviser is providing advisory and administrative and other similar services
for compensation and (ii) institutional advisory clients of the
Adviser.
There
are no maximum or minimum investment requirements.
You
may sell (redeem) your shares through your registered investment adviser or
broker-dealer on any day the New York Stock Exchange (the “Exchange”) is
open.
AB Corporate Income Shares and AB Taxable Multi-Sector Income Shares may each
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. The Funds may pay income dividends, which may be subject
to federal income taxes and state and local taxes.
AB Municipal Income Shares and AB Impact Municipal Income Shares may each make
capital gains distributions, which may be taxable as ordinary income or capital
gains, and income dividends. The Fund anticipates that substantially all of its
income dividends will be exempt from regular federal income tax. A portion of
the Fund’s distributions may be subject to the federal AMT.
AB Tax‑Aware Real Return Income Shares may pay
income dividends or 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. These dividends may be exempt from
regular income tax but may be subject to the federal AMT.
|
• |
|
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL
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.
23
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 Corporate Income
Shares (“Corporate Income Shares”), AB
Municipal Income Shares (“Municipal Income Shares”), AB Taxable Multi-Sector Income Shares (“Taxable
Multi-Sector Income Shares”), AB Impact
Municipal Income Shares (“Impact Municipal Income Shares”) and AB Tax‑Aware
Real Return Income Shares (“Tax‑Aware Real Return Income Shares” and
together with Corporate Income Shares, Municipal Income Shares, Taxable
Multi-Sector Income Shares and Impact Municipal Income Shares, 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 the Funds’ risks and investments can be found in
the Funds’ Statement of Additional Information, or SAI.
ESG
Integration
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.
For
additional information with respect to the ESG integration for Impact Municipal Income Shares, please refer to
the Fund’s Principal Strategies section in this Prospectus.
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 the 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.
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 a portfolio,
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, which are 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 the 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).
The
Funds’ investments in derivatives may include, but are not limited to, the
following:
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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 is either
settled by physical delivery of the |
24
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commodity
or tangible asset to an agreed-upon location at a future date, 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: |
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Forward
Currency Exchange Contracts. A Fund 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”. The 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). |
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Futures Contracts and Options on Futures
Contracts—A futures contract is an 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. Futures contracts that Municipal Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may
each buy and sell may include futures contracts on municipal securities,
U.S. Government securities and contracts based on any index of municipal
securities, U.S. Government securities, or financial indices or reference
rates. 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. Taxable
Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may
each 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”. |
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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. 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. 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. The Funds’ investments in options
may include the following: |
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Options
on Municipal and U.S. Government Securities. In an effort to increase
current income and to reduce fluctuations in NAV, Municipal Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may each 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. In purchasing an option on securities, a Fund would be in a
position to realize a gain if, during the option period, the price of the
underlying securities increased (in the case of a call) or decreased (in
the case of a put) by an amount in excess of the premium paid; otherwise
the Fund would experience a loss not greater than the premium paid for the
option. Thus, a Fund would realize a loss if the price of the underlying
security declined or remained the same (in the case of a call) or
increased or remained the same (in the case of a put) or otherwise did not
increase (in the case of a put) or decrease (in the case of a call) by
more than the amount of the premium. 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. |
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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. |
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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. |
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Options
on Foreign Currencies. Taxable
Multi-Sector Income Shares 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 Fund and against increases in the U.S. Dollar cost of securities
to be acquired. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange rates,
although if rates move adversely, the Fund may forfeit the entire amount
of the premium plus related transaction costs. The 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”. |
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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, 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 the 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 (“SEC”) 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. Payments
received by Municipal Income Shares
and Impact Municipal Income Shares
from swap agreements will result in taxable income, either as
ordinary income or capital gains, rather than tax exempt income, which
will increase the amount of taxable distributions received by
shareholders. The Funds’ investments in swap transactions include the
following: |
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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 agreement, 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 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 the Fund
anticipates purchasing at a later date. Interest rate swaps may also be used to
leverage a Fund’s investments by creating positions that are functionally
similar to purchasing a municipal or other fixed-income security but may only
require payments to a swap counterparty under certain circumstances and allow
the Fund to efficiently increase (or decrease) its duration and income.
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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. |
26
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Credit
Default Swap Agreements. 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 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 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.
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Currency
Swaps. Taxable Multi-Sector Income
Shares and Tax‑Aware Real Return
Income Shares may each 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. |
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Total
Return Swaps. Taxable Multi-Sector Income
Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may
each enter into total return swaps in order to take a “long” or “short”
position with respect to an underlying asset. A total return swap involves
commitments to pay interest in exchange for a market-linked return based
on a notional amount of the underlying asset. Therefore, when a Fund
enters into a total return swap, it is subject to the market price
volatility of the underlying asset. To the extent that the total return of
the security, group of securities or index underlying the swap exceeds or
falls short of the offsetting interest obligation, the Fund will receive
or make a payment to the counterparty. 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 a Fund. There is no
guarantee that a Fund’s investment via a total return swap will deliver
returns in excess of the embedded borrowing costs and, accordingly, a
Fund’s performance may be less than would be achieved by a direct
investment in the underlying reference
asset. |
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Other Derivatives and
Strategies |
|
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Eurodollar
Instruments. Taxable Multi-Sector Income
Shares may invest in Eurodollar instruments. Eurodollar instruments
are essentially U.S. Dollar-denominated futures contracts or options that
are linked to the London Interbank Offered Rate (LIBOR) or another
reference rate. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. In 2017, the United Kingdom Financial Conduct Authority
(“FCA”), which regulates LIBOR, announced a desire to phase out the use of
LIBOR by the end of 2021. See “LIBOR Transition and Associated Risk” below
for additional information. |
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Currency
Transactions. Taxable Multi-Sector Income
Shares may invest in non‑U.S. Dollar-denominated securities on a
currency hedged or un‑hedged basis. The Adviser may actively manage the
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 the Fund and
do not present attractive investment opportunities. Such transactions may
also be used when the Adviser believes that it may be more efficient than
a direct investment in a foreign currency-denominated security. The Fund
may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate
prevailing in the currency exchange market for buying or selling
currencies). |
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Convertible
Securities
A
Fund may invest in convertible securities. Prior to conversion, convertible
securities have the same general characteristics as non‑convertible debt
securities, which generally provide a stable stream of income with generally
higher yields than those of equity securities of the same or similar issuers.
The price of a convertible security will normally vary with changes in the price
of the underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non‑convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market prices of the underlying
common stock.
Event-Linked
Securities
Tax‑Aware Real Return Income Shares may invest
in event-linked securities. Event-linked securities are variable 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 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 the trigger events do not occur, the Fund
will recover its principal and interest. If a trigger event occurs, the Fund may
lose a portion of 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).
Municipal Income Shares, Taxable Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may each
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
The
Funds limit their investments in illiquid securities to 15% of their net assets.
Under Rule 22e‑4 under the Investment Company Act of 1940 (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 or certain commercial paper
(“Rule 144A Securities”)) may be more difficult to trade than other types
of securities.
Commercial
Paper
Commercial
paper consists of short-term (usually from 1 to 270 days) unsecured promissory
notes issued by entities in order to finance their current operations. The value
of commercial paper may be affected by changes in the credit rating or financial
condition of the issuing entity and tends to fall when interest rates rise and
increase when interest rates fall. Maturing commercial paper issuances are
usually repaid by the issuer from the proceeds of new commercial paper
issuances. Consequently, investments in commercial paper are subject to the risk
the issuer cannot issue enough new commercial paper to satisfy its outstanding
commercial paper, which is also known as rollover risk.
Indexed
commercial paper may have its principal linked to changes in foreign currency
exchange rates whereby its principal amount is adjusted upwards or downwards
(but not below zero) at maturity to reflect changes in the referenced exchange
rate. Tax‑Aware Real Return Income Shares
will receive interest and principal payments on such commercial paper in the
currency in which such commercial paper is denominated, but the amount of
principal payable by the issuer at maturity will change in proportion to the
change (if any) in the exchange rate between the two specified currencies
between the date the instrument is issued and the date the instrument matures.
While such commercial paper entails the risk of loss of principal, the potential
for realizing gains as a result of changes in foreign currency exchange rates
enables the Fund to hedge
28
(or
cross-hedge) against a decline in the U.S. Dollar value of investments
denominated in foreign currencies while providing an attractive money market
rate of return. The Fund will purchase such commercial paper for hedging
purposes only, not for speculation.
Certificates
of Deposit, Bankers’ Acceptances and Bank Time Deposits
Certificates
of deposit are receipts issued by a bank in exchange for the deposit of funds.
The issuer agrees to pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The certificate usually can be
traded in the secondary market prior to maturity.
Bankers’
acceptances typically arise from short-term credit arrangements designed to
enable businesses to obtain funds to finance commercial transactions. Generally,
an acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then “accepted” by another bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date. The acceptance may
then be held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most maturities are six
months or less.
Bank
time deposits are funds kept on deposit with a bank for a stated period of time
in an interest-bearing account.
Inflation-Indexed
Securities
A
Fund may invest in inflation-indexed securities. Inflation-indexed securities
are fixed-income securities whose principal 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 these securities can fall when real interest
rates rise, and can rise when real interest rates fall. 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, or TIPS, which are issued by the U.S. Treasury,
use the Consumer Price Index for Urban Consumers, or 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 Income Shares, Impact Municipal Income
Shares and Tax‑Aware Real Return Income
Shares may each 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 evaluates the risk and return of municipal securities
through its own research.
Investment
in Exchange-Traded Funds and Other Investment Companies
A
Fund may invest in shares of exchange-traded funds, or 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. 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 their NAV.
Accordingly, there may be times when an ETF’s shares trade at a discount or
premium to its NAV.
A
Fund may also invest in investment companies other than ETFs, 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, subjects the Fund indirectly to the underlying risks
of those investment companies.
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 the Fund and a borrower
may affect the ability of the Fund to receive principal and interest
payments.
The
success of the Fund’s investments in these instruments may depend on the skill
with which an agent bank administers the terms of the corporate loan agreements,
monitors borrower
29
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.
LIBOR
Transition and Associated Risk
A
Fund may be exposed to debt securities, derivatives or other financial
instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a
“benchmark” or “reference rate” for various interest rate calculations. In 2017,
the FCA announced a desire to phase out the use of LIBOR by the end of 2021. The
FCA and LIBOR’s administrator, ICE Benchmark Administration, have since
announced that most LIBOR settings (which reflect LIBOR rates quoted in
different currencies over various time periods) will no longer be published
after the end of 2021 but that the most widely used U.S. Dollar LIBOR
settings will continue to be published until June 30, 2023. However, banks
were strongly encouraged to cease entering into agreements with counterparties
referencing LIBOR by the end of 2021. It is possible that a subset of LIBOR
settings will be published after these dates on a “synthetic” basis, but any
such publications would be considered non‑representative of the underlying
market. Since 2018 the Federal Reserve Bank of New York has published the
secured overnight funding rate (referred to as SOFR), which is intended to
replace U.S. Dollar LIBOR. SOFR is a broad measure of the cost of borrowing
cash overnight collateralized by U.S. Treasury securities in the repurchase
agreement (repo) market and has been used increasingly on a voluntary basis in
new instruments and transactions. In addition, on March 15, 2022, the
Adjustable Interest Rate Act was signed into law. This law provides a statutory
fallback mechanism to replace LIBOR with a benchmark rate that is selected by
the Federal Reserve Board and based on SOFR for certain contracts that reference
LIBOR without adequate fallback provisions. The Federal Reserve Board has
proposed a regulation implementing the law, and it is anticipated that such
regulation will be adopted by the end of September 2022.
The
elimination of LIBOR or changes to other reference rates or any other changes or
reforms to the determination or supervision of reference rates could have an
adverse impact on the market for, or value of, any securities or payments linked
to those reference rates, which may adversely affect a Fund’s performance and/or
net asset value. Uncertainty and risk also remain regarding the willingness and
ability of issuers and lenders to include revised provisions in new and existing
contracts or instruments. Consequently, the transition from LIBOR to other
reference rates may lead to increased volatility and illiquidity in markets that
are tied to LIBOR, fluctuations in values of LIBOR-related investments or
investments in issuers that utilize LIBOR, increased difficulty in borrowing or
refinancing and diminished effectiveness of hedging strategies, potentially
adversely affecting a Fund’s performance. Furthermore, the risks associated with
the expected discontinuation of LIBOR and transition may be exacerbated if the
work necessary to effect an orderly transition to an alternative reference rate
is not completed in a timely manner. Neither the effect of the LIBOR transition
process nor its ultimate success can yet be known.
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 the 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 in connection with the loan) If a 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
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 AB Corporate Shares’ Board of
Trustees (the “Board”) and expected to be managed by the Adviser. Any such
investment will be at the Fund’s risk. The 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 termi-
30
nation
of the loan and that the value of the collateral will not be sufficient to
replace the loaned securities.
Mortgage-Related
Securities, Other Asset-Backed Securities and Structured Securities
Municipal Income Shares, Taxable Multi-Sector Income Shares, Impact Municipal
Income Shares and Tax‑Aware Real Return
Income Shares may each 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 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). The yield to maturity on an IO class
is extremely sensitive to the rate of principal payments (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. The Funds may invest in other asset-backed
securities that have been offered to investors.
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.
Taxable Multi-Sector Income Shares 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.
Taxable Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may each
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. The Funds’ 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 the Funds may invest may consist of entities organized and
operated for the purpose of holding a basket of other securities. Baskets
involving debt obligations
31
may
be designed to represent the characteristics of some portion of the debt
securities market or the entire debt market.
Municipal
Securities
Municipal Income Shares, Impact Municipal Income Shares, Taxable Multi-Sector
Income Shares and Tax‑Aware Real Return
Income Shares each invest in
municipal securities issued by the governments of states, their political
subdivisions (such as cities, towns, counties, agencies and authorities) and the
District of Columbia, U.S. territories, commonwealths, and possessions or by
their agencies, instrumentalities and authorities. 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. A Fund 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).
A
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.
In
recent periods an increasing number of municipal issuers have defaulted on
obligations, commenced insolvency proceedings, or suffered downgrades of their
credit ratings. For example, the novel coronavirus (COVID‑19) pandemic has
significantly stressed the financial resources of many issuers of municipal
securities, which could impair any such issuer’s ability to meet its financial
obligations when due and adversely impact the value of its securities held by a
Fund. As the full effects of the COVID‑19 pandemic on state and local economies
and on issuers of municipal securities are still uncertain, the financial
difficulties of issuers of municipal securities may continue or worsen,
adversely affecting the performance of a Fund.
Preferred
Stock
Corporate Income Shares and Taxable Multi-Sector Income Shares may each
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 may begin, a certain number of common shares per preferred
shares, 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.
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.
32
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
Taxable Multi-Sector Income Shares, Impact Municipal
Income Shares and Tax‑Aware Real Return
Income Shares may each enter into reverse repurchase agreements and Taxable Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may each
enter into dollar rolls, subject to each
Fund’s limitations on borrowings. A reverse repurchase agreement or dollar roll
involves the sale of a security by the 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 the Fund. In addition,
reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities the 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, the Fund forgoes principal and interest paid on the securities. The 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.
In
the event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the 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
Taxable Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may each
invest in 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.
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.
Standby
Commitment Agreements
A
Fund may invest in 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. 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.
Structured
Products
Taxable Multi-Sector Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may each
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
33
purchase
of a structured product also exposes a Fund to the credit risk 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 indices 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 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.
Taxable Multi-Sector Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may each
also invest in certain hybrid derivatives-type investments that combine features
of a traditional bond with 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 derivative 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 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 Transactions
Municipal Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may each
enter into and have, from time to time, entered into TOBs in which a 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. Municipal Income
Shares, Impact Municipal Income
Shares and Tax‑Aware Real Return Income
Shares each receive cash proceeds from the Trust’s sale of the floaters
as consideration for the transferred municipal securities and use 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 “Borrowing and Leverage”
below.
U.S.
Government Securities
U.S.
Government securities are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or by certain government-sponsored
entities (entities chartered by or sponsored by Act of Congress). These
securities include securities backed by the full faith and credit of the United
States, those supported by the right of the issuer to borrow from the U.S.
Treasury, and those backed only by the credit of the issuing agency or entity
itself. The first category includes U.S. Treasury securities (which are U.S.
Treasury bills, notes and bonds).
Corporate Income Shares will not invest in
mortgage-backed or asset-backed securities, including mortgage-backed or
asset-backed securities that are U.S. Government securities, although the Fund
may invest in other securities issued by U.S. Government-sponsored entities. For
example, the Fund will not invest in mortgage-backed securities issued by FNMA,
although it may invest in other securities issued by FNMA that are not
mortgage-backed or asset-backed securities.
Variable,
Floating and Inverse Floating-Rate Instruments
A
Fund may invest in variable, floating and inverse floating-rate instruments.
Variable and floating-rate securities pay
34
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.
A
Fund 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 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
RISK 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.
Borrowing
and Leverage
A
Fund may use borrowings for investment purposes subject to its investment
policies and procedures and to applicable statutory or regulatory requirements.
Borrowings by a Fund result in leverage of the Fund’s shares. Likewise, a Fund’s
use of certain derivatives may effectively leverage the Fund’s portfolio. Municipal Income Shares, Taxable Multi-Sector Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may each
also use leverage for investment purposes by entering into such transactions as
interest rate swaps or, for Municipal Income
Shares, Impact Municipal Income
Shares and Tax‑Aware Real Return Income
Shares, TOBs. Taxable Multi-Sector Income
Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares may also
use reverse repurchase agreements and forward contracts, and, with respect to
Taxable Multi-Sector Income Shares and
Tax‑Aware Real Return Income Shares,
dollar rolls, for leverage. The Funds may use leverage to seek to enhance the
yield and NAV attributable to their shares. This means that a Fund uses cash
made available during the term of these transactions to make other investments
or to make investments through interest rate swaps that are functionally
equivalent to the purchase of a fixed-income security.
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 a Fund’s
shares and the relatively greater effect of changes in the value of the Fund’s
portfolio on the NAV of the shares. In the case of borrowings for investment
purposes, so long as a Fund is able to realize a net return on the portion of
its investment portfolio resulting from leverage that is higher than the
interest expense paid on borrowings, the effect of such leverage will be to
cause the Fund’s shareholders to realize a higher net return than if the Fund
were not leveraged. With respect to a Fund’s use of certain derivatives that
result in leverage of the Fund’s shares, if the Fund is able to realize a net
return on its investments that is higher than the costs of the leverage, the
effect of such leverage will be to cause the Fund 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 a 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, the Fund’s
use of leverage would 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 the Fund’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
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 causing a Fund to liquidate the longer-term
securities at unfavorable prices to meet the TOB Trust’s outstanding
obligations.
The
SEC has adopted Rule 18f‑4 under the 1940 Act, which imposes limits on the
amount of derivatives and certain other forms of leverage into which a fund can
enter. 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 foreign securities 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
35
foreign
securities 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 imposed by the U.S. or
a foreign country may restrict a Fund’s ability to purchase or sell foreign
securities or may require the Fund to divest its holdings in foreign securities,
which could adversely affect the value or liquidity of such holdings. The
imposition of sanctions could also adversely affect global sectors and economies
and thereby negatively affect the value of the 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 Corporate Income Shares and Taxable Multi-Sector Income Shares. 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 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 foreign securities 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 (the “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 net asset
value. 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.
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.
36
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, or 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
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 SEC
finalized rules to implement the Holding Foreign Companies Accountable Act,
which requires the SEC 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 SEC (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
Taxable Multi-Sector Income Shares may invest a
substantial portion of its 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, the Fund may engage in certain currency hedging transactions, as
described above, which involve certain special risks.
The
Fund may also invest directly in foreign currencies for non‑hedging purposes,
directly on a spot basis (i.e., cash) or
through derivative 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
the Fund’s NAV to fluctuate.
Investment
in Below Investment Grade Fixed-Income Securities
Municipal Income Shares, Taxable Multi-Sector Income Shares, Impact Municipal
Income Shares and Tax‑Aware Real Return
Income Shares may each invest in below investment grade fixed-income
securities. Investments in securities rated below investment grade
(commonly
37
known
as “junk bonds”) may be subject to greater risk of loss of principal and
interest than higher-rated securities. These securities are also generally
considered to be 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.
Unrated
Securities
Municipal Income Shares, Taxable Multi-Sector Income Shares, Impact Municipal
Income Shares and Tax‑Aware Real Return
Income Shares may each 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 a Fund to a degree comparable to that of rated securities that are consistent
with the Fund’s objective and policies.
Sovereign
Debt Obligations
Taxable Multi-Sector Income Shares may invest
in 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 the 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 the 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 necessarily represent firm
bids of those dealers or prices for actual sales.
By
investing in sovereign debt obligations, the 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
Fund is permitted to invest in sovereign debt obligations 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 Fund’s investment objectives. The Fund may
have limited legal recourse in the event of a default with respect to certain
sovereign debt obligations it holds. 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.
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
the 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 are different from or exceed
those involved in the practices described above.
Changes
in Investment Objectives and Policies
The
Board may change a Fund’s investment objective without shareholder approval. The
Fund will provide shareholders with 60 days’ prior written notice of any change
to the Fund’s investment objective. Corporate
Income Shares has a policy to invest at least 80% of its net assets in
U.S. corporate bonds and will not change this policy without 60 days’ prior
written notice to shareholders. Municipal Income
Shares and Impact Municipal Income
Shares each have a fundamental
policy to invest at least 80% of its net assets in municipal securities that pay
interest that is exempt from federal income tax and will not change this policy
without shareholder approval. Unless otherwise noted, all other investment
policies of a Fund 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, Corporate Income Shares, Taxable Multi-Sector Income Shares and Tax‑Aware Real Return Income Shares may each
invest in certain types of short-term, liquid,
38
investment-grade
or high-quality debt securities. For temporary defensive purposes, Municipal Income Shares and Impact Municipal Income Shares may each also invest without limit in high-quality
municipal notes or variable-rate demand obligations, or in taxable cash
equivalents. 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 the 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 the Funds, the Adviser, and/or the Funds’ 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 the Funds and their
shareholders, and substantial costs may be incurred in seeking to prevent or
minimize future cyber security incidents.
39
INVESTING
IN THE FUNDS
HOW
THE FUNDS VALUE THEIR SHARES
Each
Fund’s NAV is calculated at 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). 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.
The
Funds value their securities at their current market value determined on the
basis of market quotations or, if market quotations are not readily available or
are unreliable (including restricted securities), at “fair value” as determined
in accordance with procedures established by and under the general supervision
of the Board. When a Fund uses fair value pricing, it may take into account any
factors it deems appropriate, including but not limited to, information obtained
by contacting the issuer or analysts, or by analysis of the issuer’s financial
statements. A Fund may determine fair value based upon developments related to a
specific security and/or U.S. sector or broader stock market indices. A Fund may
also value these securities using fair value prices based on independent pricing
services or third-party vendor tools to the extent available. The prices of
securities used by the Fund to calculate its NAV may differ from quoted or
published prices for the same securities. Fair value pricing 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 only under very limited 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 prices are not readily available or
deemed unreliable (including restricted securities). A Fund may use fair value
pricing more frequently for securities primarily traded in non‑U.S. markets
because, among other things, most foreign markets close well before the Fund
values its securities at the Fund Closing 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. For example, the Funds
believe that foreign security values may be affected by events that occur after
the close of foreign securities markets. To account for this, the Funds may
value many of their foreign equity securities using fair value prices based on
third-party vendor modeling tools to the extent available.
Subject
to its oversight, the Board has delegated responsibility for valuing each Fund’s
assets to the Adviser. The Adviser has established a Valuation Committee, 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.
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
You
may purchase shares of a Fund at NAV without a sales charge or other fee. Your
order for purchase, sale, or exchange of shares is priced at the next-determined
NAV calculated after your order is received in proper form by the
Fund.
Shares
of the Funds are available only to (i) investors with accounts established
under a wrap fee program or other similar fee‑based investment program sponsored
and maintained by a registered investment adviser or broker-dealer and for which
the Adviser is providing advisory, administrative and other similar services for
compensation and (ii) institutional advisory clients of the Adviser.
Initial
and Additional Investments
There
are no maximum or minimum investment requirements. Purchase orders are made
based on instructions from your registered investment adviser to the
broker-dealer who executes trades for your program or advised account. To make a
purchase, your broker-dealer must submit a purchase order to the Funds’ transfer
agent, AllianceBernstein Investor Services, Inc. (“ABIS”), P.O. Box 786003,
San Antonio, Texas 78278‑6003, ((800) 221‑5672), either directly or through an
appropriate clearing agency (e.g., the
National Securities Clearing Corporation—Fund/SERV).
Other
Purchase Information
A
Fund may issue shares upon purchase in full and fractional shares. Certificates
for shares will not be issued. The payment for shares to be purchased shall be
wired to ABIS. Wiring instructions may be obtained by calling (800)
221‑5672.
A
Fund may, at its sole option, accept securities as payment for shares if the
Adviser believes that the securities are appropriate investments for the Fund.
The securities are valued by the
40
method
described under “How the Funds Value Their Shares” above as of the date the Fund
receives the securities and corresponding documentation necessary to transfer
the securities to the Fund. This is a taxable transaction to the
shareholder.
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 your account. Required information includes name, date of birth,
physical address and social security/taxpayer identification number. A Fund may
also ask to see other identifying documents. If you do not provide the
information, the 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 as it deems appropriate, 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 shareholders who have not provided the
Fund with his or her current taxpayer identification number. To avoid this, you
must provide your correct taxpayer identification number on your account
application.
Each
Fund may refuse any order to purchase shares. Each Fund reserves the right to
suspend the sale of its shares in response to conditions in the securities
markets or for other reasons.
HOW
TO SELL SHARES
You
may “redeem” your shares (i.e., sell
your shares to a Fund) through your broker-dealer on any day the Exchange is
open. Redemption requests for Fund shares are effected at the NAV per share
next-determined after receipt of a redemption request by ABIS. A redemption
request received by ABIS prior to the Fund Closing Time is effected on that day.
A redemption request received after the Fund Closing Time is effected on the
next business day.
A
Fund expects that it will typically take one to three business days following
the receipt of your redemption request in proper form 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 by the
Fund by the Fund Closing Time. Redemption proceeds will ordinarily be wired. A
Fund may suspend the right of redemption or postpone the payment date at times
when the Exchange is closed, or during certain other periods as permitted under
the federal securities laws.
Shares
of a Fund may be held only by investors who meet the purchase eligibility
criteria described above under “How to Buy Shares.” Each Fund intends to redeem
shares of any investor at the then-current value of such shares (which will be
paid promptly to the investor) when the investor ceases to meet the purchase
eligibility criteria, which may be based on information provided to the Fund
from the investor’s intermediary of record. With respect to investors with
shares subject to mandatory redemption, the Fund intends to provide advance
notice of any such mandatory redemption to the investor’s intermediary of
record.
A
Fund expects, under normal circumstances, to use cash or cash equivalents held
by the Fund to satisfy redemption requests. A Fund may also determine to sell
portfolio assets to meet such requests. Under certain circumstances, including
stressed market conditions, a 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. A Fund normally pays proceeds of
a sale of Fund shares in cash. However, the Funds have 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.
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 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
41
expenses
due to excessive or short-term trading, including increased brokerage costs and
realization of taxable capital gains.
Investments
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 calculates its NAV 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 the Fund calculates its own
share price (referred to as “time zone arbitrage”).
A
shareholder engaging in a short-term trading strategy may also target a Fund
that does not invest primarily 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.
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, AllianceBernstein Investments, Inc. 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. |
• |
|
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 action that may include issuing a warning,
revoking certain account-related privileges (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 contingent
deferred sales charge 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 and variable insurance products. The Funds apply their
surveillance procedures to these omnibus account arrangements. As required
by SEC 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 Fund 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). |
42
MANAGEMENT
OF THE FUNDS
INVESTMENT
ADVISER
The
Funds’ 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 June 30, 2022, totaling approximately
$647 billion (of which approximately $126 billion are the assets of
investment companies). As of June 30, 2022, the Adviser managed retirement
assets for many of the largest public and private employee benefit plans
(including 15 of the nation’s FORTUNE 100 companies), for public employee
retirement funds in 30 of the 50 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. Currently, the
27 registered investment companies managed by the Adviser, comprising
approximately 90 separate investment portfolios, had as of June 30, 2022
approximately 2.9 million retail accounts.
The
Adviser provides investment advisory services and order placement facilities for
each of the Funds. The Funds pay no advisory or other fees for these services.
A
discussion regarding the basis for the Board’s approval of the Funds’ investment
advisory agreement is available in each Fund’s annual report to shareholders for
the fiscal year ended April 30, 2022.
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 than the advisory fees it receives for
managing 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 which 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-dealer, such transactions may be averaged as to price.
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 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, Corporate Income Shares are made by the
Corporate Income Shares Investment Team.
The
following table lists the senior persons within the Corporate Income Shares
Investment Team primarily responsible for day‑to‑day management of the Fund’s
portfolio, the length of time that each person has been jointly and primarily
responsible 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 |
Russell Wald; since October 2021; Vice
President of the Adviser |
|
Vice President of the Adviser,
with which he has been associated in a substantially similar capacity
since prior to 2017. |
|
|
Tiffanie Wong; since 2019;
Senior Vice President of the Adviser |
|
Senior Vice President of the Adviser,
with which she has been associated in a substantially similar
capacity since prior to 2017. |
The
day‑to‑day management of, and investment decisions for, Municipal Income Shares are made by the
Municipal Bond Investment Team.
The
following table lists the persons with the most significant responsibility for
the day‑to‑day management of the Fund’s portfolio, the length of time that each
person has been jointly and primarily responsible 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 |
Terrance T. Hults; since 2010;
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 2017. |
|
|
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 2017. |
|
|
Andrew D. Potter; since 2020; Vice
President of the Adviser |
|
Vice President of the Adviser, with which
he has been associated in a substantially similar capacity since prior to
2017. |
The
day‑to‑day management of, and investment decisions for, Taxable Multi-Sector Income Shares are made by
the Core Fixed-Income Team.
The
following table lists the persons with the most significant responsibility for
the day‑to‑day management of the Fund’s portfolio, the length of time that each
person has been jointly
43
and
primarily responsible 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 |
Scott A. DiMaggio; since 2010;
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 2017. |
|
|
Janaki Rao; since October 2021; 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 2017. |
The
day‑to‑day management of, and investment decisions for, Impact Municipal Income Shares are made by the
Municipal Impact Investment Team.
The
following table lists the persons with the most significant responsibility for
the day‑to‑day management of the Fund’s portfolio, the length of time that each
person has been jointly and primarily responsible 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 |
Matthew J. Norton; since 2017; Senior Vice
President of the Adviser |
|
See above. |
|
|
Marc Uy; since October 2021; Vice
President of the Adviser |
|
Vice President of the Adviser, with which
he has been associated in a substantially similar capacity since prior to
2017. |
The
day‑to‑day management of, and investment decisions for, Tax‑Aware Real Return Income Shares are made by
the Municipal Bond Investment Team.
The
following table lists the persons with the most significant responsibility for
the day‑to‑day management of the Fund’s portfolio, the length of time that each
person has been jointly and primarily responsible 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 |
Terrance T. Hults; since 2011; Senior Vice
President of the Adviser |
|
See above. |
|
|
Matthew J. Norton; since 2019; Senior Vice
President of the Adviser |
|
See above. |
|
|
Andrew D. Potter; since 2019; Vice
President of the Adviser |
|
See above. |
The
Funds’ SAI provides additional information about each portfolio manager’s
compensation, other accounts managed by the portfolio manager, and the portfolio
manager’s ownership of securities in the Funds.
TRANSFER
AGENCY 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. In these cases, the Fund often does not maintain an account for Fund
shareholders. Thus, some or all of the transfer agency functions for these and
certain other accounts are performed by the financial intermediaries.
44
DIVIDENDS,
DISTRIBUTIONS AND TAXES
DIVIDENDS
AND DISTRIBUTIONS INFORMATION
The
income dividends and capital gains distributions, if any, declared by each Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the Fund, depending on the terms of the
shareholder’s investment program. 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. As permitted by the terms of your investment program, you may make
an election to receive dividends and distributions in cash or in shares at the
time you purchase shares. If permitted by the program, 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.
Income
dividends generally are declared daily and paid monthly; capital gains
distributions for the Funds generally occur annually in December. 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 on the
Fund’s website at www.alliancebernstein.com/investments/us/tax‑center.htm.
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. Tax
efficiency is not a stated investment objective of any Fund, except Municipal Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income Shares.
Investments
made through a 401(k) plan, 457 plan, employer sponsored 403(b) plan, profit
sharing and money purchase plan, defined benefit plan or a nonqualified deferred
compensation plan are subject to special United States federal income tax rules.
Therefore, the federal income tax consequences described below apply only to
investments made other than by such plans.
Corporate
Income Shares and Taxable Multi-Sector Income Shares
For
federal income tax purposes, distributions of investment income are generally
taxable as ordinary income. Taxes on distributions that are properly designated
as capital gains are determined by how long a Fund owned the investments that
generated them, rather than on how long you have owned your 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 by the Fund as
capital gain distributions generally are taxable to you as long-term capital
gains regardless of how long you have held your shares. Distributions of gains
from the sale of investments that the Fund owned for one year or less will be
taxable as ordinary income. Distributions of investment income designated by a
Fund as derived from “qualified dividend income”—as further defined in the
Funds’ SAI—will be taxed in the hands of individuals, trusts and estates at the
same preferential tax rates applicable to long-term capital gains provided that
holding period and other requirements are met at both the shareholder and the
Fund level. The Funds do not expect a significant portion of Fund distributions
to be derived from qualified dividend income.
While
it is the intention of a Fund to distribute to its shareholders substantially
all of each fiscal year’s net income and net realized capital gains, if any, the
amount and timing of any dividend or distribution will depend on the realization
by the Fund of income and capital gains from investments. There is no fixed
dividend rate and there can be no assurance that the Fund will pay any dividends
or realize any capital gains.
A
Fund’s investments in certain debt obligations may cause the Fund to recognize
taxable income in excess of the cash generated by such obligations. Thus, the
Fund may be required to liquidate other investments, including at times when it
is not advantageous to do so, in order to satisfy its distribution requirements
and to eliminate tax at the Fund level.
Municipal
Income Shares, Impact Municipal Income Shares and Tax‑Aware Real Return Income
Shares
Distributions
to shareholders out of tax‑exempt interest income earned by the Funds 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 Funds invest. Distributions out of taxable
interest, other investment income, and net realized short-term capital gains 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 Funds’ investment
income is derived from interest rather than dividends, no portion of their
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 tax rates applicable to long-term capital gains.
Interest
on indebtedness incurred by shareholders to purchase or carry shares of the
Funds 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 Funds.
45
The
Funds anticipate that a substantial portion of their dividends will be exempt
from regular federal income taxes. Shareholders may be subject to state and
local taxes on distributions from the Funds, including distributions that are
exempt from federal income taxes.
General
If
you purchase shares just 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 taxable distribution.
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 you tax information
stating the amount and type of all distributions for the year, including, for
the Funds that invest in municipal securities, the percentage and source of
interest earned by the Fund that is exempt from federal income tax. Each
investor should consult his or her own tax adviser to determine the tax status,
with regard to his or her tax situation, of distributions from the Funds.
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 resulting 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
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 the 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.
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.
46
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 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 Fund. 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 Fund, 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. We will resume separate mailings for your account within 30 days
of your request.
47
GLOSSARY
AMT is the federal alternative minimum tax.
AMT‑Subject bonds are municipal securities with
interest that is an item of “tax preference” and thus subject to the AMT when
received by a person in a tax year during which the person is subject to the
AMT. These securities are primarily private activity bonds, including revenue
bonds.
Bloomberg Capital TIPS
1‑10 Year Index is an unmanaged market index comprised of U.S. Treasury
inflation-indexed securities with maturities between one and ten years.
Bloomberg Municipal Bond
Index is an unmanaged index comprising a broad range of investment-grade
municipal bonds having remaining maturities of greater than one year.
Bloomberg U.S. Aggregate
Bond Index is a broad-based index that measures the investment grade,
U.S. Dollar‑denominated, fixed-rate taxable bond market, including U.S.
Government and corporate securities, mortgage pass-through securities and
asset-backed securities. The Bloomberg
U.S. Aggregate ex Government Bond Index excludes U.S. Government securities.
Bloomberg U.S. Credit
Bond Index is an unmanaged index that includes publicly issued U.S.
corporate and specified foreign debentures and secured notes that meet the
specified maturity, liquidity, and quality requirements.
Bonds are interest-bearing or discounted
government or corporate securities that obligate the issuer to pay the holder a
specified sum of money, usually at specified intervals, and to repay the
principal amount of the loan at maturity.
Fixed-income securities are investments, such
as bonds, that pay a fixed-rate of return.
Nationally Recognized Statistical Rating
Organizations, or NRSROs, are credit rating agencies registered with the
SEC. NRSROs assess the creditworthiness of an obligor as an entity or with
respect to specific securities or money market instruments. As of December 2021,
there were nine credit rating agencies registered as NRSROs.
48
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand each Fund’s
financial performance for the past five years (or, if shorter, the period of the
Fund’s operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in each Fund (assuming
reinvestment of all dividends and distributions). Each Fund’s financial
statements have been audited by Ernst & Young LLP, independent
registered public accounting firm. The report of the independent registered
public accounting firm, along with each Fund’s financial statements, are
included in each Fund’s annual report, which is available upon request.
AB
Corporate Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
Net
asset value, beginning of period |
|
$ |
11.82 |
|
|
$ |
11.56 |
|
|
$ |
11.11 |
|
|
$ |
10.81 |
|
|
$ |
11.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(a) |
|
|
.33 |
|
|
|
.37 |
|
|
|
.44 |
|
|
|
.44 |
|
|
|
.39 |
|
Net
realized and unrealized gain (loss) on investment transactions |
|
|
(1.47 |
) |
|
|
.55 |
|
|
|
.51 |
|
|
|
.30 |
|
|
|
(.33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
(1.14 |
) |
|
|
.92 |
|
|
|
.95 |
|
|
|
.74 |
|
|
|
.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends and Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
from net investment income |
|
|
(.34 |
) |
|
|
(.38 |
) |
|
|
(.45 |
) |
|
|
(.44 |
) |
|
|
(.39 |
) |
Distributions
from net realized gain on investment transactions |
|
|
(.12 |
) |
|
|
(.28 |
) |
|
|
(.05 |
) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
dividends and distributions |
|
|
(.46 |
) |
|
|
(.66 |
) |
|
|
(.50 |
) |
|
|
(.44 |
) |
|
|
(.39 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
10.22 |
|
|
$ |
11.82 |
|
|
$ |
11.56 |
|
|
$ |
11.11 |
|
|
$ |
10.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return based on net asset value(b) |
|
|
(10.08 |
)% |
|
|
7.90 |
% |
|
|
8.65 |
% |
|
|
7.03 |
% |
|
|
.50 |
% |
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000’s omitted) |
|
$ |
222,550 |
|
|
$ |
208,745 |
|
|
$ |
114,455 |
|
|
$ |
98,680 |
|
|
$ |
84,740 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
2.84 |
% |
|
|
3.02 |
% |
|
|
3.83 |
% |
|
|
4.06 |
% |
|
|
3.47 |
% |
Portfolio
turnover rate |
|
|
49 |
% |
|
|
43 |
% |
|
|
87 |
% |
|
|
140 |
% |
|
|
73 |
% |
(a) |
Based
on average shares outstanding. |
(b) |
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized.
|
49
AB
Municipal Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
Net
asset value, beginning of period |
|
$ |
12.70 |
|
|
$ |
10.80 |
|
|
$ |
11.70 |
|
|
$ |
11.32 |
|
|
$ |
11.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(a) |
|
|
.43 |
|
|
|
.44 |
|
|
|
.44 |
|
|
|
.45 |
|
|
|
.44 |
|
Net
realized and unrealized gain (loss) on investment transactions |
|
|
(1.35 |
) |
|
|
1.91 |
|
|
|
(.90 |
) |
|
|
.38 |
|
|
|
.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
(.92 |
) |
|
|
2.35 |
|
|
|
(.46 |
) |
|
|
.83 |
|
|
|
.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
from net investment income |
|
|
(.42 |
) |
|
|
(.45 |
) |
|
|
(.44 |
) |
|
|
(.45 |
) |
|
|
(.44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
11.36 |
|
|
$ |
12.70 |
|
|
$ |
10.80 |
|
|
$ |
11.70 |
|
|
$ |
11.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return based on net asset value(b) |
|
|
(7.52 |
)% |
|
|
22.01 |
% |
|
|
(4.23 |
)% |
|
|
7.53 |
% |
|
|
4.55 |
% |
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000’s omitted) |
|
$ |
7,305,688 |
|
|
$ |
6,349,716 |
|
|
$ |
4,685,911 |
|
|
$ |
3,509,575 |
|
|
$ |
2,760,892 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses(c) |
|
|
.07 |
% |
|
|
.07 |
% |
|
|
.01 |
% |
|
|
.01 |
% |
|
|
.01 |
% |
Net
investment income |
|
|
3.38 |
% |
|
|
3.62 |
% |
|
|
3.67 |
% |
|
|
3.91 |
% |
|
|
3.82 |
% |
Portfolio
turnover rate |
|
|
6 |
% |
|
|
10 |
% |
|
|
12 |
% |
|
|
14 |
% |
|
|
19 |
% |
(a) |
Based
on average shares outstanding. |
(b) |
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized. |
(c) |
The
expense ratios, excluding interest expense are .00%, .00%, .00%, .00% and
.00%, respectively. |
50
AB
Taxable Multi-Sector Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
Net
asset value, beginning of period |
|
$ |
10.04 |
|
|
$ |
9.89 |
|
|
$ |
9.82 |
|
|
$ |
9.70 |
|
|
$ |
9.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(a) |
|
|
.10 |
|
|
|
.14 |
|
|
|
.24 |
|
|
|
.25 |
|
|
|
.20 |
|
Net
realized and unrealized gain (loss) on investment transactions |
|
|
(.39 |
) |
|
|
.16 |
|
|
|
.09 |
|
|
|
.13 |
|
|
|
(.14 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
(.29 |
) |
|
|
.30 |
|
|
|
.33 |
|
|
|
.38 |
|
|
|
.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
from net investment income |
|
|
(.12 |
) |
|
|
(.15 |
) |
|
|
(.26 |
) |
|
|
(.26 |
) |
|
|
(.20 |
) |
Distributions
from net realized gain on investment transactions |
|
|
(.04 |
) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
9.59 |
|
|
$ |
10.04 |
|
|
$ |
9.89 |
|
|
$ |
9.82 |
|
|
$ |
9.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return based on net asset value(b) |
|
|
(2.98 |
)% |
|
|
3.02 |
% |
|
|
3.43 |
% |
|
|
4.00 |
% |
|
|
.65 |
% |
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000’s omitted) |
|
$ |
297,166 |
|
|
$ |
305,872 |
|
|
$ |
178,508 |
|
|
$ |
154,300 |
|
|
$ |
129,628 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
.00 |
% |
|
|
.00 |
% |
|
|
.01 |
%(c) |
|
|
.00 |
% |
|
|
.00 |
% |
Net
investment income |
|
|
1.03 |
% |
|
|
1.36 |
% |
|
|
2.47 |
% |
|
|
2.62 |
% |
|
|
2.05 |
% |
Portfolio
turnover rate |
|
|
45 |
% |
|
|
74 |
% |
|
|
124 |
% |
|
|
45 |
% |
|
|
81 |
% |
(a) |
Based
on average shares outstanding. |
(b) |
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized. |
(c) |
The
expense ratio, excluding bank overdraft expense, is .00%.
|
51
AB
Impact Municipal Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30, |
|
|
September 12, 2017(a) to April 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018 |
|
Net
asset value, beginning of period |
|
$ |
10.91 |
|
|
$ |
9.91 |
|
|
$ |
10.19 |
|
|
$ |
9.79 |
|
|
$ |
10.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(b) |
|
|
.28 |
|
|
|
.31 |
|
|
|
.33 |
|
|
|
.33 |
|
|
|
.18 |
|
Net
realized and unrealized gain (loss) on investment transactions |
|
|
(1.16 |
) |
|
|
1.00 |
|
|
|
(.27 |
) |
|
|
.40 |
|
|
|
(.22 |
) |
Contributions
from Affiliates |
|
|
– 0 – |
|
|
|
.00 |
(c) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
(.88 |
) |
|
|
1.31 |
|
|
|
.06 |
|
|
|
.73 |
|
|
|
(.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
from net investment income |
|
|
(.27 |
) |
|
|
(.31 |
) |
|
|
(.34 |
) |
|
|
(.33 |
) |
|
|
(.17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
9.76 |
|
|
$ |
10.91 |
|
|
$ |
9.91 |
|
|
$ |
10.19 |
|
|
$ |
9.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return based on net asset value(d) |
|
|
(8.23 |
)% |
|
|
13.32 |
% |
|
|
.40 |
% |
|
|
7.56 |
% |
|
|
(.44 |
)% |
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000’s omitted) |
|
$ |
516,931 |
|
|
$ |
458,181 |
|
|
$ |
245,297 |
|
|
$ |
132,964 |
|
|
$ |
37,341 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
2.59 |
% |
|
|
2.88 |
% |
|
|
3.18 |
% |
|
|
3.35 |
% |
|
|
2.89 |
%^ |
Portfolio
turnover rate |
|
|
13 |
% |
|
|
14 |
% |
|
|
2 |
% |
|
|
23 |
% |
|
|
8 |
% |
(a) |
Commencement
of operations. |
(b) |
Based
on average shares outstanding. |
(c) |
Amount
is less than $.005. |
(d) |
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized. |
52
AB
Tax‑Aware Real Return Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30, |
|
|
November 12, 2019(a) to April 30,
|
|
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Net
asset value, beginning of period |
|
$ |
11.57 |
|
|
$ |
8.95 |
|
|
$ |
10.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
From Investment Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(b) |
|
|
.17 |
|
|
|
.16 |
|
|
|
.07 |
|
Net
realized and unrealized gain (loss) on investment transactions |
|
|
1.36 |
|
|
|
2.55 |
|
|
|
(1.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in net asset value from operations |
|
|
1.53 |
|
|
|
2.71 |
|
|
|
(1.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Dividends and Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
from net investment income |
|
|
(.02 |
) |
|
|
(.09 |
) |
|
|
(.01 |
) |
Distributions
from net realized gain on investment transactions |
|
|
(1.14 |
) |
|
|
– 0 – |
|
|
|
– 0 – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
11.94 |
|
|
$ |
11.57 |
|
|
$ |
8.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return |
|
|
|
|
|
|
|
|
|
|
|
|
Total
investment return based on net asset value(c) |
|
|
13.65 |
% |
|
|
30.32 |
% |
|
|
(10.43 |
)% |
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets, end of period (000’s omitted) |
|
$ |
9,900 |
|
|
$ |
20,633 |
|
|
$ |
18,760 |
|
Ratio
to average net assets of: |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
.00 |
% |
|
|
.00 |
% |
|
|
.01 |
%(d)^ |
Net
investment income |
|
|
1.40 |
% |
|
|
1.53 |
% |
|
|
1.55 |
%^ |
Portfolio
turnover rate |
|
|
13 |
% |
|
|
5 |
% |
|
|
10 |
% |
(a) |
Commencement
of operations. |
(b) |
Based
on average shares outstanding. |
(c) |
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect
the deduction of taxes that a shareholder would pay on fund distributions
or the redemption of fund shares. Total investment return calculated for a
period of less than one year is not annualized. |
(d) |
The
expense ratio, excluding bank overdraft expense, is .00%.
|
53
APPENDIX
A
BOND
RATINGS
The
following is a summary of published ratings by certain NRSROs. The Adviser
generally uses ratings issued by such NRSROs but may rely on ratings from other
NRSROs, depending on the security in question. The rating of an issuer is
heavily weighted by past developments and does not necessarily reflect probable
future conditions. While NRSROs may from time to time revise such ratings, they
undertake no obligation to do so. NRSROs may also fail to change credit ratings
to reflect subsequent events on a timely basis.
Moody’s
Investors Service, Inc. (“Moody’s”)
Aaa—Bonds
which are rated Aaa are judged to be of the highest quality and are subject to
the lowest level of credit risk.
Aa—Bonds
which are rated Aa are judged to be of high quality and are subject to very low
credit risk.
A—Bonds
which are rated A are judged to be upper-medium-grade and are subject to low
credit risk.
Baa—Bonds
which are rated Baa are judged to be medium-grade and subject to moderate credit
risk and as such may possess certain speculative characteristics.
Ba—Bonds
which are rated Ba are judged to be speculative and are subject to substantial
credit risk.
B—Bonds
which are rated B are considered speculative and are subject to high credit
risk.
Caa—Bonds
which are rated Caa are judged to be speculative of poor standing and are
subject to very high credit risk.
Ca—Bonds
which are rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.
C—Bonds
which are rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.
Note—Moody’s
applies numerical modifiers, 1, 2 and 3 in each generic rating classification
from Aa through Caa. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid‑range
ranking; and the modifier 3 indicates a ranking in the lower end of its generic
rating category. Additionally, a “(hyb)” indicator is appended to all ratings of
hybrid securities issued by banks, insurers, finance companies, and securities
firms.
By
their terms, hybrid securities allow for the omission of scheduled dividends,
interest or principal payments, which can potentially result in impairment if
such an omission occurs. Hybrid securities may also be subject to contractually
allowable write-downs of principal that could result in impairment. Together
with the hybrid indicator, the long-term obligation rating assigned to a hybrid
security is an expression of the relative credit risk associated with that
security.
S&P
Global Ratings (“S&P”)
AAA—Debt
rated AAA has the highest rating assigned by S&P. The obligor’s capacity to
meet its financial commitments on the obligation is extremely strong.
AA—Debt
rated AA differs from the highest rated obligations only to a small degree. The
obligor’s capacity to meet its financial commitments on the obligation is very
strong.
A—Debt
rated A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor’s capacity to meet its financial commitments on
the obligation is still strong.
BBB—Debt
rated BBB exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to weaken the obligor’s
capacity to meet its financial commitments on the obligation.
BB,
B, CCC, CC, C—Debt rated BB, B, CCC, CC or C are regarded as having significant
speculative characteristics. BB indicates the lowest degree of speculation and C
the highest. While such debt will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposure to adverse conditions.
BB—Debt
rated BB is less vulnerable to nonpayment than other speculative debt. However,
it faces major ongoing uncertainties or exposures to adverse business, financial
or economic conditions which could lead to the obligor’s inadequate capacity to
meet its financial commitments on the obligation.
B—Debt
rated B is more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitments on the
obligation. Adverse business, financial or economic conditions will likely
impair the obligor’s capacity or willingness to meet its financial commitments
on the obligation.
CCC—Debt
rated CCC is currently vulnerable to nonpayment and is dependent upon favorable
business, financial and economic conditions for the obligor to meet its
financial commitments on the obligation. In the event of adverse business,
financial or economic conditions, the obligor is not likely to have the capacity
to meet its financial commitments on the obligation.
CC—Debt
rated CC is currently highly vulnerable to nonpayment. The CC rating is used
when a default has not yet occurred but S&P expects default to be a virtual
certainty, regardless of the anticipated time to default.
C—Debt
rated C is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery compared
with obligations that are rated higher.
D—Debt
rated D is in default or in breach of an imputed promise. For non‑hybrid capital
instruments, the D rating
A-1
category
is used when payments on an obligation are not made on the date due, unless
S&P believes that such payments will be made within five business days in
the absence of a stated grace period or within the earlier of the stated grace
period or 30 calendar days. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of similar action and where default on an
obligation is a virtual certainty, for example due to automatic stay provisions.
An obligation’s rating is lowered to D if it is subject to a distressed debt
restructuring.
Plus
(+) or Minus (-)—Ratings from AA to CCC may be modified by the addition of
a plus or minus sign to show relative standing within the rating categories.
NR—NR
indicates that a rating has not been assigned or is no longer assigned.
Fitch
Ratings
AAA—Bonds
considered to be investment grade and of the highest credit quality. The AAA
ratings denote the lowest expectation of credit risk and are assigned only in
cases of exceptionally strong capacity for payment of financial
commitments. This capacity is highly unlikely to be adversely affected by
foreseeable events.
AA—Bonds
considered to be investment grade and of very high credit quality. The AA
ratings denote expectations of very low credit risk and indicate very strong
capacity for payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A—Bonds
considered to be investment grade and of high credit quality. The A ratings
denote expectations of low credit risk. The capacity for payment of financial
commitments is considered strong. This capacity may, nevertheless, be more
vulnerable to adverse business or economic conditions than bonds with higher
ratings.
BBB—Bonds
considered to be investment grade and of good credit quality. The BBB ratings
indicate that expectations of credit risk are currently low. The capacity for
payment of financial commitments is considered adequate, but adverse business or
economic conditions are more likely to impair this capacity.
BB—Bonds
are considered speculative and are indicative of an elevated vulnerability to
credit risk, particularly in the event of adverse changes in business or
economic conditions over time; however, business or financial alternatives may
be available to allow financial commitments to be met.
B—Bonds
are considered highly speculative. The B ratings indicate that material credit
risk is present.
CCC—Bonds
are considered to have substantial credit risk.
CC—Bonds
are considered to have very high levels of credit risk.
C—Bonds
are considered to have exceptionally high levels of credit risk.
Defaulted
obligations are typically rated in the CCC to C rating categories, depending
upon their recovery prospects and other relevant characteristics. This approach
better aligns obligations that have comparable overall expected loss but varying
vulnerability to default and loss.
Plus
(+) Minus (-)—Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category or in categories below
CCC.
DBRS
Morningstar
AAA—Long-term
debt rated AAA is of the highest credit quality. The capacity for the payment of
financial obligations is exceptionally high and unlikely to be adversely
affected by future events.
AA—Long-term
debt rated AA is of superior credit quality. The capacity for the payment of
financial obligations is considered high. Credit quality differs from AAA only
to a small degree. Unlikely to be significantly vulnerable to future events.
A—Long-term
debt rated A is of good credit quality. The capacity for the payment of
financial obligations is substantial, but of lesser credit quality than AA. May
be vulnerable to future events, but qualifying negative factors are considered
manageable.
BBB—Long-term
debt rated BBB is of adequate credit quality. The capacity for the payment of
financial obligations is considered acceptable. May be vulnerable to future
events.
BB—Long-term
debt rated BB is of speculative, non-investment grade credit quality. The
capacity for the payment of financial obligations is uncertain. Vulnerable to
future events.
B—Long-term
debt rated B is of highly speculative credit quality. There is a high level of
uncertainty as to the capacity to meet financial obligations.
CCC,
CC and C—Long-term debt rated in any of these categories is of very highly
speculative credit quality. In danger of defaulting on financial obligations.
There is little difference between these three categories, although CC and C
ratings are normally applied to obligations that are seen as highly likely to
default, or subordinated to obligations rated in the CCC to B range. Obligations
in respect of which default has not technically taken place but is considered
inevitable may be rated in the C category.
D—When
the issuer has filed under any applicable bankruptcy, insolvency or winding up
statute or there is a failure to satisfy an obligation after the exhaustion of
grace periods, a downgrade to D may occur. DBRS Morningstar may also use SD
(Selective Default) in cases where only some securities are impacted, such as
the case of a “distressed exchange.”
All
rating categories other than AAA and D also contain subcategories “(high)” and
“(low).” The absence of either a “(high)” or “(low)” designation indicates the
rating is in the middle of the category.
A-2
Kroll
Bond Rating Agency (“KBRA”)
AAA—Determined
to have almost no risk of loss due to credit-related events. Assigned only to
the very highest quality obligors and obligations able to survive extremely
challenging economic events.
AA—Determined
to have minimal risk of loss due to credit-related events. Such obligors and
obligations are deemed very high quality.
A—Determined
to be of high quality with a small risk of loss due to credit-related events.
Issuers and obligations in this category are expected to weather difficult times
with low credit losses.
BBB—Determined
to be of medium quality with some risk of loss due to credit-related events.
Such issuers and obligations may experience credit losses during stressed
environments.
BB—Determined
to be of low quality with moderate risk of loss due to credit-related events.
Such issuers and obligations have fundamental weaknesses that create moderate
credit risk.
B—Determined
to be of very low quality with high risk of loss due to credit-related events.
These issuers and obligations contain many fundamental shortcomings that create
significant credit risk.
CCC—Determined
to be at substantial risk of loss due to credit-related events, near default or
in default with high recovery expectations.
CC—Determined
to be near default or in default with average recovery expectations.
C—Determined
to be near default or in default with low recovery expectations.
D—KBRA
defines default as occurring if: (1) there is a missed interest payment,
principal payment, or preferred dividend payment, as applicable, on a rated
obligation which is unlikely to be recovered; (2) the rated entity files
for protection from creditors, is placed into receivership, or is closed by
regulators such that a missed payment is likely to result; (3) the rated
entity seeks and completes a distressed exchange, where existing rated
obligations are replaced by new obligations with a diminished economic value.
KBRA
may append - or + modifiers to ratings in categories AA through CCC to
indicate, respectively, upper and lower risk levels within the broader category.
A-3
APPENDIX
B
Hypothetical
Investment and Expense Information
The
Funds are available only to certain separately managed account (“SMA”) clients
of the Adviser or participants in certain “wrap fee” programs or other similar
fee‑based investment programs. You should be aware that these clients typically
pay a unitary fee for management of their investments, which includes all costs
and expenses, including fees paid for investment advice and portfolio execution.
You should read carefully the program brochure or other literature provided in
connection with these accounts, which includes information about the total fees
paid by you and information about the fee paid to AllianceBernstein L.P.
A
mutual fund’s expense ratio is the percentage of fund assets used by the fund to
pay an investment advisory fee to AllianceBernstein L.P. and to pay the fund’s
direct operating expenses (such as accounting, transfer agency and custody
fees). The following supplemental chart provides information about the effect of
a hypothetical annual expense ratio of 0.35% on each Fund’s returns over a
10‑year period. The annual expense ratio is hypothetical because
AllianceBernstein L.P. has agreed irrevocably to waive all fees and pay or
reimburse all expenses, except extraordinary expenses, incurred by the Funds.
The
chart assumes a return of 5% each year on a hypothetical investment of $10,000
in shares of each Fund. The chart also assumes that the current hypothetical
annual expense ratio of 0.35% stays the same throughout the 10‑year period.
The chart does not reflect the fees paid by you
in connection with an SMA or wrap fee program (or other similar fee‑based
program) or the fees paid by you to AllianceBernstein L.P. in connection with
its management of your SMA.
AB
Corporate Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Hypothetical Investment |
|
Hypothetical
Performance
Earnings |
|
Investment
After
Returns |
|
Hypothetical
Expenses |
|
Hypothetical
Ending
Investment |
1 |
|
|
$ |
10,000.00 |
|
|
|
$ |
500.00 |
|
|
|
$ |
10,500.00 |
|
|
|
$ |
36.75 |
|
|
|
$ |
10,463.25 |
|
2 |
|
|
|
10,463.25 |
|
|
|
|
523.16 |
|
|
|
|
10,986.41 |
|
|
|
|
38.45 |
|
|
|
|
10,947.96 |
|
3 |
|
|
|
10,947.96 |
|
|
|
|
547.40 |
|
|
|
|
11,495.36 |
|
|
|
|
40.23 |
|
|
|
|
11,455.13 |
|
4 |
|
|
|
11,455.13 |
|
|
|
|
572.76 |
|
|
|
|
12,027.89 |
|
|
|
|
42.10 |
|
|
|
|
11,985.79 |
|
5 |
|
|
|
11,985.79 |
|
|
|
|
599.29 |
|
|
|
|
12,585.08 |
|
|
|
|
44.05 |
|
|
|
|
12,541.03 |
|
6 |
|
|
|
12,541.03 |
|
|
|
|
627.05 |
|
|
|
|
13,168.08 |
|
|
|
|
46.09 |
|
|
|
|
13,121.99 |
|
7 |
|
|
|
13,121.99 |
|
|
|
|
656.10 |
|
|
|
|
13,778.09 |
|
|
|
|
48.22 |
|
|
|
|
13,729.87 |
|
8 |
|
|
|
13,729.87 |
|
|
|
|
686.49 |
|
|
|
|
14,416.36 |
|
|
|
|
50.46 |
|
|
|
|
14,365.90 |
|
9 |
|
|
|
14,365.90 |
|
|
|
|
718.30 |
|
|
|
|
15,084.20 |
|
|
|
|
52.79 |
|
|
|
|
15,031.41 |
|
10 |
|
|
|
15,031.41 |
|
|
|
|
751.57 |
|
|
|
|
15,782.98 |
|
|
|
|
55.24 |
|
|
|
|
15,727.74 |
|
Cumulative |
|
|
|
|
|
|
|
$ |
6,182.12 |
|
|
|
|
|
|
|
|
$ |
454.38 |
|
|
|
|
|
|
AB
Municipal Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Hypothetical Investment |
|
Hypothetical
Performance
Earnings |
|
Investment
After
Returns |
|
Hypothetical
Expenses |
|
Hypothetical
Ending
Investment |
1 |
|
|
$ |
10,000.00 |
|
|
|
$ |
500.00 |
|
|
|
$ |
10,500.00 |
|
|
|
$ |
44.10 |
|
|
|
$ |
10,455.90 |
|
2 |
|
|
|
10,455.90 |
|
|
|
|
522.80 |
|
|
|
|
10,978.70 |
|
|
|
|
46.11 |
|
|
|
|
10,932.59 |
|
3 |
|
|
|
10,932.59 |
|
|
|
|
546.63 |
|
|
|
|
11,479.22 |
|
|
|
|
48.21 |
|
|
|
|
11,431.01 |
|
4 |
|
|
|
11,431.01 |
|
|
|
|
571.55 |
|
|
|
|
12,002.56 |
|
|
|
|
50.41 |
|
|
|
|
11,952.15 |
|
5 |
|
|
|
11,952.15 |
|
|
|
|
597.61 |
|
|
|
|
12,549.76 |
|
|
|
|
52.71 |
|
|
|
|
12,497.05 |
|
6 |
|
|
|
12,497.05 |
|
|
|
|
624.85 |
|
|
|
|
13,121.90 |
|
|
|
|
55.11 |
|
|
|
|
13,066.79 |
|
7 |
|
|
|
13,066.79 |
|
|
|
|
653.34 |
|
|
|
|
13,720.13 |
|
|
|
|
57.62 |
|
|
|
|
13,662.51 |
|
8 |
|
|
|
13,662.51 |
|
|
|
|
683.13 |
|
|
|
|
14,345.64 |
|
|
|
|
60.25 |
|
|
|
|
14,285.39 |
|
9 |
|
|
|
14,285.39 |
|
|
|
|
714.27 |
|
|
|
|
14,999.66 |
|
|
|
|
63.00 |
|
|
|
|
14,936.66 |
|
10 |
|
|
|
14,936.66 |
|
|
|
|
746.83 |
|
|
|
|
15,683.49 |
|
|
|
|
65.87 |
|
|
|
|
15,617.62 |
|
Cumulative |
|
|
|
|
|
|
|
$ |
6,161.01 |
|
|
|
|
|
|
|
|
$ |
543.39 |
|
|
|
|
|
|
B-1
AB
Taxable Multi-Sector Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Hypothetical Investment |
|
Hypothetical
Performance
Earnings |
|
Investment
After
Returns |
|
Hypothetical
Expenses |
|
Hypothetical
Ending
Investment |
1 |
|
|
$ |
10,000.00 |
|
|
|
$ |
500.00 |
|
|
|
$ |
10,500.00 |
|
|
|
$ |
36.75 |
|
|
|
$ |
10,463.25 |
|
2 |
|
|
|
10,463.25 |
|
|
|
|
523.16 |
|
|
|
|
10,986.41 |
|
|
|
|
38.45 |
|
|
|
|
10,947.96 |
|
3 |
|
|
|
10,947.96 |
|
|
|
|
547.40 |
|
|
|
|
11,495.36 |
|
|
|
|
40.23 |
|
|
|
|
11,455.13 |
|
4 |
|
|
|
11,455.13 |
|
|
|
|
572.76 |
|
|
|
|
12,027.89 |
|
|
|
|
42.10 |
|
|
|
|
11,985.79 |
|
5 |
|
|
|
11,985.79 |
|
|
|
|
599.29 |
|
|
|
|
12,585.08 |
|
|
|
|
44.05 |
|
|
|
|
12,541.03 |
|
6 |
|
|
|
12,541.03 |
|
|
|
|
627.05 |
|
|
|
|
13,168.08 |
|
|
|
|
46.09 |
|
|
|
|
13,121.99 |
|
7 |
|
|
|
13,121.99 |
|
|
|
|
656.10 |
|
|
|
|
13,778.09 |
|
|
|
|
48.22 |
|
|
|
|
13,729.87 |
|
8 |
|
|
|
13,729.87 |
|
|
|
|
686.49 |
|
|
|
|
14,416.36 |
|
|
|
|
50.46 |
|
|
|
|
14,365.90 |
|
9 |
|
|
|
14,365.90 |
|
|
|
|
718.30 |
|
|
|
|
15,084.20 |
|
|
|
|
52.79 |
|
|
|
|
15,031.41 |
|
10 |
|
|
|
15,031.41 |
|
|
|
|
751.57 |
|
|
|
|
15,782.98 |
|
|
|
|
55.24 |
|
|
|
|
15,727.74 |
|
Cumulative |
|
|
|
|
|
|
|
$ |
6,182.12 |
|
|
|
|
|
|
|
|
$ |
454.38 |
|
|
|
|
|
|
AB
Impact Municipal Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Hypothetical Investment |
|
Hypothetical Performance Earnings |
|
Investment After Returns |
|
Hypothetical Expenses |
|
Hypothetical Ending Investment |
1 |
|
|
$ |
10,000.00 |
|
|
|
$ |
500.00 |
|
|
|
$ |
10,500.00 |
|
|
|
$ |
36.75 |
|
|
|
$ |
10,463.25 |
|
2 |
|
|
|
10,463.25 |
|
|
|
|
523.16 |
|
|
|
|
10,986.41 |
|
|
|
|
38.45 |
|
|
|
|
10,947.96 |
|
3 |
|
|
|
10,947.96 |
|
|
|
|
547.40 |
|
|
|
|
11,495.36 |
|
|
|
|
40.23 |
|
|
|
|
11,455.13 |
|
4 |
|
|
|
11,455.13 |
|
|
|
|
572.76 |
|
|
|
|
12,027.89 |
|
|
|
|
42.10 |
|
|
|
|
11,985.79 |
|
5 |
|
|
|
11,985.79 |
|
|
|
|
599.29 |
|
|
|
|
12,585.08 |
|
|
|
|
44.05 |
|
|
|
|
12,541.03 |
|
6 |
|
|
|
12,541.03 |
|
|
|
|
627.05 |
|
|
|
|
13,168.08 |
|
|
|
|
46.09 |
|
|
|
|
13,121.99 |
|
7 |
|
|
|
13,121.99 |
|
|
|
|
656.10 |
|
|
|
|
13,778.09 |
|
|
|
|
48.22 |
|
|
|
|
13,729.87 |
|
8 |
|
|
|
13,729.87 |
|
|
|
|
686.49 |
|
|
|
|
14,416.36 |
|
|
|
|
50.46 |
|
|
|
|
14,365.90 |
|
9 |
|
|
|
14,365.90 |
|
|
|
|
718.30 |
|
|
|
|
15,084.20 |
|
|
|
|
52.79 |
|
|
|
|
15,031.41 |
|
10 |
|
|
|
15,031.41 |
|
|
|
|
751.57 |
|
|
|
|
15,782.98 |
|
|
|
|
55.24 |
|
|
|
|
15,727.74 |
|
Cumulative |
|
|
|
|
|
|
|
$ |
6,182.12 |
|
|
|
|
|
|
|
|
$ |
454.38 |
|
|
|
|
|
|
AB
Tax‑Aware Real Return Income Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
Hypothetical Investment |
|
Hypothetical
Performance
Earnings |
|
Investment
After
Returns |
|
Hypothetical
Expenses |
|
Hypothetical
Ending
Investment |
1 |
|
|
$ |
10,000.00 |
|
|
|
$ |
500.00 |
|
|
|
$ |
10,500.00 |
|
|
|
$ |
36.75 |
|
|
|
$ |
10,463.25 |
|
2 |
|
|
|
10,463.25 |
|
|
|
|
523.16 |
|
|
|
|
10,986.41 |
|
|
|
|
38.45 |
|
|
|
|
10,947.96 |
|
3 |
|
|
|
10,947.96 |
|
|
|
|
547.40 |
|
|
|
|
11,495.36 |
|
|
|
|
40.23 |
|
|
|
|
11,455.13 |
|
4 |
|
|
|
11,455.13 |
|
|
|
|
572.76 |
|
|
|
|
12,027.89 |
|
|
|
|
42.10 |
|
|
|
|
11,985.79 |
|
5 |
|
|
|
11,985.79 |
|
|
|
|
599.29 |
|
|
|
|
12,585.08 |
|
|
|
|
44.05 |
|
|
|
|
12,541.03 |
|
6 |
|
|
|
12,541.03 |
|
|
|
|
627.05 |
|
|
|
|
13,168.08 |
|
|
|
|
46.09 |
|
|
|
|
13,121.99 |
|
7 |
|
|
|
13,121.99 |
|
|
|
|
656.10 |
|
|
|
|
13,778.09 |
|
|
|
|
48.22 |
|
|
|
|
13,729.87 |
|
8 |
|
|
|
13,729.87 |
|
|
|
|
686.49 |
|
|
|
|
14,416.36 |
|
|
|
|
50.46 |
|
|
|
|
14,365.90 |
|
9 |
|
|
|
14,365.90 |
|
|
|
|
718.30 |
|
|
|
|
15,084.20 |
|
|
|
|
52.79 |
|
|
|
|
15,031.41 |
|
10 |
|
|
|
15,031.41 |
|
|
|
|
751.57 |
|
|
|
|
15,782.98 |
|
|
|
|
55.24 |
|
|
|
|
15,727.74 |
|
Cumulative |
|
|
|
|
|
|
|
$ |
6,182.12 |
|
|
|
|
|
|
|
|
$ |
454.38 |
|
|
|
|
|
|
B-2
For
more information about the Funds, the following documents are available upon
request:
• |
|
ANNUAL
AND SEMI-ANNUAL REPORT TO SHAREHOLDERS |
The
Funds’ annual and semi-annual reports to shareholders contain additional
information on the Funds’ investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund’s performance during its last fiscal year.
• |
|
STATEMENT
OF ADDITIONAL INFORMATION (SAI) |
The
Funds have an SAI, which contains more detailed information about the Funds,
including their operations and investment policies. The Funds’ SAI, the
independent registered public accounting firm’s report and financial statements
in each Fund’s most recent annual report to shareholders are
incorporated
by reference into (and are legally part of) this Prospectus.
You
may request a free copy of the current annual/semi-annual report or the SAI, or
make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting the Adviser:
|
|
|
By Mail: |
|
c/o
AllianceBernstein Investor Services, Inc.
P.O.
Box 786003 San Antonio, TX 78278-6003 |
|
|
By Phone: |
|
For Information: (800) 221‑5672 For
Literature: (800) 227‑4618 |
|
|
On the Internet: |
|
www.abfunds.com |
You
may also view reports and other information about the Funds, including the SAI,
by visiting the EDGAR database on the Securities and Exchange Commission’s
website (http://www.sec.gov). Copies of this information can be obtained, for a
duplicating fee, by electronic request at the following e‑mail address:
[email protected].
You
also may find more information about the Adviser and other AB Mutual Funds on
the Internet at: www.abfunds.com.
The
[A/B] Logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark
used by permission of the owner, AllianceBernstein L.P.
SEC
File Number 811‑21497
PRO-0111-0822
AB
CORPORATE SHARES
-AB
Corporate Income Shares
(ACISX)
-AB
Impact Municipal Income Shares
(ABIMX)
-AB
Municipal Income Shares
(MISHX)
-AB
Taxable Multi-Sector Income Shares
(CSHTX)
-AB
Tax-Aware Real Return Income Shares
(TARRX)
c/o
AllianceBernstein Investor Services, Inc. P.O. Box 786003, San Antonio,
Texas 78278-6003 Toll Free: (800) 221-5672 For Literature: Toll Free
(800) 227-4618
|
|