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Ab Cap Fund

Filed: 25 Feb 22, 11:24am

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-01716

 

 

AB CAP FUND, INC.

(Exact name of registrant as specified in charter)

 

 

1345 Avenue of the Americas, New York, New York 10105

(Address of principal executive offices) (Zip code)

 

 

Joseph J. Mantineo

AllianceBernstein L.P.

1345 Avenue of the Americas

New York, New York 10105

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (800) 221-5672

Date of fiscal year end: June 30, 2022

Date of reporting period: December 31, 2021

 

 

 


ITEM 1. REPORTS TO STOCKHOLDERS.


DEC    12.31.21

LOGO

SEMI-ANNUAL REPORT

AB CONCENTRATED GROWTH FUND

 

LOGO

 

As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.

You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.


 

 

 
Investment Products Offered 

  Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.


 

FROM THE PRESIDENT  LOGO

Dear Shareholder,

We’re pleased to provide this report for the AB Concentrated Growth Fund (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.

At AB, we’re striving to help our clients achieve better outcomes by:

 

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Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets

 

+  

Applying differentiated investment insights through a connected global research network

 

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Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions

Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.

For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.

Thank you for your investment in AB mutual funds—and for placing your trust in our firm.

Sincerely,

 

LOGO

Onur Erzan

President and Chief Executive Officer, AB Mutual Funds

 

abfunds.com 

AB CONCENTRATED GROWTH FUND    |    1


 

SEMI-ANNUAL REPORT

 

February 9, 2022

This report provides management’s discussion of fund performance for the AB Concentrated Growth Fund for the semi-annual reporting period ended December 31, 2021.

The Fund’s investment objective is long-term growth of capital.

NAV RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

   6 Months   12 Months 
AB CONCENTRATED GROWTH FUND    
Class A Shares   12.26%    31.15% 
Class C Shares   11.83%    30.17% 
Advisor Class Shares1   12.39%    31.47% 
Class R Shares1   12.02%    30.62% 
Class K Shares1   12.26%    31.11% 
Class I Shares1   12.37%    31.38% 
Class Z Shares1   12.42%    31.51% 
S&P 500 Index   11.67%    28.71% 

 

1

Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions.

INVESTMENT RESULTS

The table above shows the Fund’s performance compared to its benchmark, the Standard & Poor’s (“S&P”) 500 Index, for the six- and 12-month periods ended December 31, 2021.

All share classes of the Fund outperformed the benchmark for both periods, before sales charges. For the six-month period, positive sector positioning drove outperformance, relative to the benchmark, while security selection modestly detracted. Underweights to communication services and financials contributed. Security selection within the consumer-discretionary and technology sectors detracted. For the 12-month period, positive security selection, particularly in health care and financials, drove outperformance. Sector positioning was also positive, benefiting from a lack of exposure to utilities and communication services, which lagged the market.

 

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For the six-month period, the top absolute contributors included Microsoft, Abbott Laboratories and Zoetis, while detractors included Stericycle, Amazon and Meta Platforms. For the 12-month period, the top contributors included Microsoft, IQVIA and Charles Schwab, while the top detractors included Stericycle, Amazon and Ulta Beauty.

The Fund did not utilize derivatives during the six- or 12-month periods.

MARKET REVIEW AND INVESTMENT STRATEGY

US equities recorded positive returns during the six-month period ended December 31, 2021, supported by accommodative monetary policy and strong company earnings growth. Increased market volatility periodically sent risk assets lower, but investors continued to buy the dip. Toward the end of the period, US markets pulled back as the rapid spread of the coronavirus omicron variant triggered concern that new restrictions could derail the economic recovery. Encouraging developments in COVID-19 treatments and vaccines and a reluctance to reinstate shutdowns helped investors look past the potential impact of the omicron variant. Stock markets gave back gains, however, after the US Federal Reserve (the “Fed”) took a hawkish pivot and confirmed that it would accelerate the wind-down of its bond purchases and raise rates multiple times in 2022. After digesting the Fed’s comments, equity markets rose as investors appeared to adjust to the shift and remained focused on still generally supportive monetary policy. Growth outperformed value, in terms of style, and large-cap stocks outperformed their small-cap peers.

The Fund’s Senior Investment Management Team remains focused on sustainably growing the underlying earnings power of the Fund and believes the Fund is well positioned for the current environment.

INVESTMENT POLICIES

The Adviser seeks to achieve the Fund’s investment objective of long-term growth of capital by investing primarily in common stocks of listed US companies. The Adviser employs an appraisal method that attempts to measure each prospective company’s quality and growth rate by numerous factors. Such factors include: a company’s record and projections of profit and earnings growth, accuracy and availability of information with respect to the company, success and experience of management, accessibility of management to the Fund’s Adviser, product lines and competitive position both in the United States and abroad, lack of cyclicality, large market capitalization and liquidity of the company’s securities. The Adviser compares these results to the general stock markets to determine the relative attractiveness of each company at a given time. The Adviser weighs economic, political and market factors in making investment decisions; this appraisal technique

 

(continued on next page)

 

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AB CONCENTRATED GROWTH FUND    |    3


attempts to measure each investment candidate not only against other stocks of the same industry group, but also against a broad spectrum of investments. While the Fund primarily invests in companies that have market capitalizations of $5 billion or more, it may invest in companies that have market capitalizations of $3 billion to $5 billion.

The Fund invests in a relatively small number of individual stocks. The Fund is considered to be “non-diversified”, which means that the securities laws do not limit the percentage of its assets that it may invest in any one company (subject to certain limitations under the US Internal Revenue Code of 1986, as amended).

 

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DISCLOSURES AND RISKS

 

Benchmark Disclosure

The S&P 500® Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Index includes 500 US stocks and is a common representation of the performance of the overall US stock market. An investor cannot invest directly in an index or average, and its results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Market Risk: The value of the Fund’s assets will fluctuate as the equity markets fluctuate. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.

Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value (“NAV”).

Sector Risk: The Fund may have more risk because it may invest to a significant extent in one or more particular market sectors, such as the information-technology or consumer-discretionary sector. 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.

Capitalization Risk: Investments in mid-capitalization companies may be more volatile and less liquid than investments in large-capitalization companies.

Non-Diversification Risk: The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s NAV.

Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results. 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.

 

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AB CONCENTRATED GROWTH FUND    |    5


 

DISCLOSURES AND RISKS (continued)

 

These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.

An Important Note About Historical Performance

The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.

Effective as of the close of business on February 28, 2014, the W.P. Stewart Growth Fund, Inc. (the “Predecessor Fund”) was converted into the Fund and the Predecessor Fund’s shares were converted into Advisor Class shares of the Fund. The inception date for Class A, C, R, K, I and Z shares is February 28, 2014. The inception date of the Predecessor Fund is February 28, 1994.

All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.

Please note: References to specific securities are presented to illustrate the Fund’s investment philosophy and are not to be considered advice or recommendations. This information reflects prevailing market conditions and the Adviser’s judgments as of the date indicated, which are subject to change. In preparing this report, the Adviser has relied upon and assumed without independent verification, the accuracy and completeness of all information available from third-party sources. It should not be assumed that any investments made in the future will be profitable or will equal the performance of the selected investments referenced herein.

 

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HISTORICAL PERFORMANCE

 

AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

  NAV Returns  

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES  
1 Year  31.15%   25.57% 
5 Years  22.38%   21.32% 
Since Inception1  16.65%   16.01% 
CLASS C SHARES  
1 Year  30.17%   29.17% 
5 Years  21.46%   21.46% 
Since Inception1  15.78%   15.78% 
ADVISOR CLASS SHARES2  
1 Year  31.47%   31.47% 
5 Years  22.68%   22.68% 
10 Years  18.16%   18.16% 
CLASS R SHARES2  
1 Year  30.62%   30.62% 
5 Years  22.01%   22.01% 
Since Inception1  16.32%   16.32% 
CLASS K SHARES2  
1 Year  31.11%   31.11% 
5 Years  22.34%   22.34% 
Since Inception1  16.64%   16.64% 
CLASS I SHARES2  
1 Year  31.38%   31.38% 
5 Years  22.67%   22.67% 
Since Inception1  16.94%   16.94% 
CLASS Z SHARES2  
1 Year  31.51%   31.51% 
5 Years  22.71%   22.71% 
Since Inception1  16.96%   16.96% 

The Fund’s prospectus fee table shows the Fund’s total annual operating expense ratios as 1.01%, 1.76%, 0.76%, 1.38%, 1.07%, 0.83% and 0.78% for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively, gross of any fee waivers or expense reimbursements. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.

 

1

Inception date: 2/28/2014.

 

2

These share classes are offered at NAV to eligible investors and their SEC returns are the same as their NAV returns. Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

abfunds.com 

AB CONCENTRATED GROWTH FUND    |    7


 

HISTORICAL PERFORMANCE (continued)

 

SEC AVERAGE ANNUAL RETURNS

AS OF THE MOST RECENT CALENDAR QUARTER-END

DECEMBER 31, 2021 (unaudited)

 

   

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES  
1 Year   25.57% 
5 Years   21.32% 
Since Inception1   16.01% 
CLASS C SHARES  
1 Year   29.17% 
5 Years   21.46% 
Since Inception1   15.78% 
ADVISOR CLASS SHARES2  
1 Year   31.47% 
5 Years   22.68% 
10 Years   18.16% 
CLASS R SHARES2  
1 Year   30.62% 
5 Years   22.01% 
Since Inception1   16.32% 
CLASS K SHARES2  
1 Year   31.11% 
5 Years   22.34% 
Since Inception1   16.64% 
CLASS I SHARES2  
1 Year   31.38% 
5 Years   22.67% 
Since Inception1   16.94% 
CLASS Z SHARES2  
1 Year   31.51% 
5 Years   22.71% 
Since Inception1   16.96% 

 

1

Inception date: 2/28/2014.

 

2

Please note that these share classes are for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

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EXPENSE EXAMPLE

(unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

  Beginning
Account Value
July 1, 2021
  Ending
Account Value
December 31, 2021
  Expenses Paid
During Period*
  Annualized
Expense Ratio*
 
Class A    

Actual

 $1,000  $1,122.60  $5.30   0.99

Hypothetical**

 $    1,000  $    1,020.21  $    5.04   0.99

 

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AB CONCENTRATED GROWTH FUND    |    9


 

EXPENSE EXAMPLE (continued)

 

  Beginning
Account Value
July 1, 2021
  Ending
Account Value
December 31, 2021
  Expenses Paid
During Period*
  Annualized
Expense Ratio*
 
Class C    

Actual

 $1,000  $1,118.30  $9.29   1.74

Hypothetical**

 $1,000  $1,016.43  $8.84   1.74
Advisor Class    

Actual

 $1,000  $1,123.90  $3.96   0.74

Hypothetical**

 $1,000  $1,021.48  $3.77   0.74
Class R    

Actual

 $1,000  $1,120.20  $7.48   1.40

Hypothetical**

 $1,000  $1,018.15  $7.12   1.40
Class K    

Actual

 $1,000  $1,122.60  $5.35   1.00

Hypothetical**

 $1,000  $1,020.16  $5.09   1.00
Class I    

Actual

 $1,000  $1,123.70  $4.34   0.81

Hypothetical**

 $1,000  $1,021.12  $4.13   0.81
Class Z    

Actual

 $1,000  $1,124.20  $3.80   0.71

Hypothetical**

 $    1,000  $    1,021.63  $    3.62   0.71

 

*

Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

**

Assumes 5% annual return before expenses.

 

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PORTFOLIO SUMMARY

December 31, 2021 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $1,548.8

 

 

 

LOGO

TEN LARGEST HOLDINGS2

 

Company  U.S. $ Value   Percent of
Net Assets
 
Microsoft Corp.  $147,865,778    9.5
Mastercard, Inc. – Class A   135,704,384    8.8 
Amazon.com, Inc.   117,685,530    7.6 
Abbott Laboratories   114,309,591    7.4 
NIKE, Inc. – Class B   98,610,306    6.4 
Meta Platforms, Inc. – Class A   87,252,890    5.6 
CDW Corp./DE   75,998,363    4.9 
Zoetis, Inc.   75,667,114    4.9 
TJX Cos., Inc. (The)   74,629,284    4.8 
Amphenol Corp. – Class A   74,292,460    4.8 
  $  1,002,015,700    64.7

 

1

All data are as of December 31, 2021. The Fund’s sector breakdown is expressed as a percentage of total investments and may vary over time.

 

2

Long-term investments.

Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.

 

abfunds.com 

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PORTFOLIO OF INVESTMENTS

December 31, 2021 (unaudited)

 

Company  Shares  U.S. $ Value 

 

 

COMMON STOCKS – 99.0%

 

Information Technology – 32.6%

 

Electronic Equipment, Instruments & Components – 9.7%

   

Amphenol Corp. – Class A

   849,445  $74,292,460 

CDW Corp./DE

   371,122   75,998,363 
   

 

 

 
    150,290,823 
   

 

 

 

IT Services – 13.4%

 

Automatic Data Processing, Inc.

   289,149   71,298,361 

Mastercard, Inc. – Class A

   377,670   135,704,384 
   

 

 

 
    207,002,745 
   

 

 

 

Software – 9.5%

 

Microsoft Corp.

   439,658   147,865,778 
   

 

 

 
    505,159,346 
   

 

 

 

Consumer Discretionary – 23.6%

 

Auto Components – 4.8%

 

Aptiv PLC(a)

   449,316   74,114,674 
   

 

 

 

Internet & Direct Marketing Retail – 7.6%

 

Amazon.com, Inc.(a)

   35,295   117,685,530 
   

 

 

 

Specialty Retail – 4.8%

 

TJX Cos., Inc. (The)

   982,999   74,629,284 
   

 

 

 

Textiles, Apparel & Luxury Goods – 6.4%

 

NIKE, Inc. – Class B

   591,650   98,610,306 
   

 

 

 
    365,039,794 
   

 

 

 

Health Care – 16.8%

 

Health Care Equipment & Supplies – 7.4%

 

Abbott Laboratories

   812,204   114,309,591 
   

 

 

 

Life Sciences Tools & Services – 4.5%

 

IQVIA Holdings, Inc.(a)

   249,926   70,514,122 
   

 

 

 

Pharmaceuticals – 4.9%

 

Zoetis, Inc.

   310,073   75,667,114 
   

 

 

 
    260,490,827 
   

 

 

 

Communication Services – 5.6%

 

Interactive Media & Services – 5.6%

 

Meta Platforms, Inc. – Class A(a)

   259,411   87,252,890 
   

 

 

 

Industrials – 5.5%

 

Commercial Services & Supplies – 2.8%

 

Stericycle, Inc.(a)

   728,908   43,472,073 
   

 

 

 

Professional Services – 2.7%

 

Verisk Analytics, Inc. – Class A

   183,125   41,886,181 
   

 

 

 
    85,358,254 
   

 

 

 

 

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PORTFOLIO OF INVESTMENTS (continued)

 

Company  Shares  U.S. $ Value 

 

 

Financials – 4.7%

 

Capital Markets – 4.7%

 

Charles Schwab Corp. (The)

   867,670  $72,971,047 
   

 

 

 

Real Estate – 4.5%

 

Equity Real Estate Investment Trusts (REITs) – 4.5%

   

American Tower Corp.

   238,212   69,677,010 
   

 

 

 

Consumer Staples – 3.5%

 

Beverages – 3.5%

 

Constellation Brands, Inc. – Class A

   213,172   53,499,777 
   

 

 

 

Materials – 2.2%

 

Chemicals – 2.2%

 

International Flavors & Fragrances, Inc.

   231,615   34,892,800 
   

 

 

 

Total Common Stocks
(cost $1,030,225,958)

    1,534,341,745 
   

 

 

 
   

SHORT-TERM INVESTMENTS – 0.9%

 

Investment Companies – 0.9%

 

AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB,
0.01%(b)(c)(d)
(cost $13,543,227)

   13,543,227   13,543,227 
   

 

 

 

Total Investments – 99.9%
(cost $1,043,769,185)

    1,547,884,972 

Other assets less liabilities – 0.1%

    932,286 
   

 

 

 

Net Assets – 100.0%

   $    1,548,817,258 
   

 

 

 

 

(a)

Non-income producing security.

 

(b)

Affiliated investments.

 

(c)

The rate shown represents the 7-day yield as of period end.

 

(d)

To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618.

Glossary:

REIT – Real Estate Investment Trust

See notes to financial statements.

 

abfunds.com 

AB CONCENTRATED GROWTH FUND    |    13


 

STATEMENT OF ASSETS & LIABILITIES

December 31, 2021 (unaudited)

 

Assets

 

Investments in securities, at value

  

Unaffiliated issuers (cost $1,030,225,958)

  $1,534,341,745 

Affiliated issuers (cost $13,543,227)

   13,543,227 

Receivable for capital stock sold

   2,636,587 

Unaffiliated dividends receivable

   972,422 

Affiliated dividends receivable

   105 
  

 

 

 

Total assets

   1,551,494,086 
  

 

 

 
Liabilities

 

Payable for capital stock redeemed

   1,508,080 

Advisory fee payable

   828,450 

Custody and accounting fees payable

   140,526 

Distribution fee payable

   42,412 

Transfer Agent fee payable

   36,891 

Administrative fee payable

   22,439 

Accrued expenses and other liabilities

   98,030 
  

 

 

 

Total liabilities

   2,676,828 
  

 

 

 

Net Assets

  $1,548,817,258 
  

 

 

 
Composition of Net Assets

 

Capital stock, at par

  $2,578 

Additional paid-in capital

   993,466,825 

Distributable earnings

   555,347,855 
  

 

 

 

Net Assets

  $    1,548,817,258 
  

 

 

 

Net Asset Value Per Share—33 billion shares of capital stock authorized, $.0001 par value

 

Class Net Assets     Shares
Outstanding
     Net Asset
Value
 

 

 
A $77,130,119      1,309,377     $  58.91

 

 
C $31,811,522      581,784     $54.68 

 

 
Advisor $  1,331,077,104      22,084,030     $60.27 

 

 
R $68,927      1,203.05     $57.29 

 

 
K $1,925,869      32,731     $58.84 

 

 
I $52,397      867.68     $60.39 

 

 
Z $106,751,320      1,767,737     $60.39 

 

 

 

*

The maximum offering price per share for Class A shares was $61.52 which reflects a sales charge of 4.25%.

See notes to financial statements.

 

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STATEMENT OF OPERATIONS

Six Months Ended December 31, 2021 (unaudited)

 

Investment Income   

Dividends

   

Unaffiliated issuers

  $    5,466,985  

Affiliated issuers

   811  $5,467,796 
  

 

 

  
Expenses   

Advisory fee (see Note B)

   4,751,485  

Distribution fee—Class A

   87,415  

Distribution fee—Class C

   162,131  

Distribution fee—Class R

   173  

Distribution fee—Class K

   2,295  

Transfer agency—Class A

   19,050  

Transfer agency—Class C

   8,787  

Transfer agency—Advisor Class

   338,845  

Transfer agency—Class R

   79  

Transfer agency—Class K

   735  

Transfer agency—Class I

   43  

Transfer agency—Class Z

   11,834  

Custody and accounting

   78,404  

Registration fees

   62,443  

Administrative

   47,218  

Printing

   27,325  

Legal

   21,102  

Audit and tax

   18,397  

Directors’ fees

   17,844  

Miscellaneous

   11,714  
  

 

 

  

Total expenses

   5,667,319  

Less: expenses waived and reimbursed by the Adviser (see Note B)

   (4,495 

Less: expenses waived and reimbursed by the Distributor (see Note C)

   (161 
  

 

 

  

Net expenses

    5,662,663 
   

 

 

 

Net investment loss

    (194,867
   

 

 

 
Realized and Unrealized Gain on Investment Transactions   

Net realized gain on investment transactions

    96,413,016 

Net change in unrealized appreciation/depreciation of investments

    74,264,134 
   

 

 

 

Net gain on investment transactions

    170,677,150 
   

 

 

 

Net Increase in Net Assets from Operations

   $    170,482,283 
   

 

 

 

See notes to financial statements.

 

abfunds.com 

AB CONCENTRATED GROWTH FUND    |    15


 

STATEMENT OF CHANGES IN NET ASSETS

 

   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
 
Increase (Decrease) in Net Assets from Operations   

Net investment income (loss)

  $(194,867 $561,330 

Net realized gain on investment transactions

   96,413,016   109,552,725 

Net change in unrealized appreciation/depreciation of investments

   74,264,134   258,183,101 
  

 

 

  

 

 

 

Net increase in net assets from operations

   170,482,283   368,297,156 

Distributions to Shareholders

 

Class A

   (7,354,268  (1,666,714

Class C

   (3,366,773  (1,148,075

Advisor Class

   (127,714,704  (30,486,932

Class R

   (6,676  (1,771

Class K

   (185,132  (43,851

Class I

   (5,225  (761

Class Z

   (10,903,438  (113,756
Capital Stock Transactions

 

Net increase

   170,588,615   253,578,895 
  

 

 

  

 

 

 

Total increase

   191,534,682   588,414,191 
Net Assets

 

Beginning of period

   1,357,282,576   768,868,385 
  

 

 

  

 

 

 

End of period

  $    1,548,817,258  $    1,357,282,576 
  

 

 

  

 

 

 

See notes to financial statements.

 

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NOTES TO FINANCIAL STATEMENTS

December 31, 2021 (unaudited)

 

NOTE A

Significant Accounting Policies

AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 12 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Concentrated Growth Fund (the “Fund”), a non-diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Class B, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Effective May 31, 2021, Class C shares automatically converted to Class A shares eight years after the end of the calendar month of purchase. Prior to May 31, 2021, Class C shares automatically converted to Class A shares ten years after the end of the calendar month of purchase. Class R and Class K shares are sold without an initial or contingent deferred sales charge. Advisor Class, Class I and Class Z shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All 11 classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.

1. Security Valuation

Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).

 

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AB CONCENTRATED GROWTH FUND    |    17


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, the Adviser will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

  

Level 1—quoted prices in active markets for identical investments

  

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

  

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of December 31, 2021:

 

Investments in

Securities:

  Level 1  Level 2  Level 3  Total 

Assets:

     

Common Stocks(a)

  $1,534,341,745  $– 0 –  $– 0 –  $1,534,341,745 

Short-Term Investments

   13,543,227   – 0 –   – 0 –   13,543,227 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Investments in Securities

   1,547,884,972   – 0 –   – 0 –   1,547,884,972 

Other Financial Instruments(b)

   – 0 –   – 0 –   – 0 –   – 0– 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $  1,547,884,972  $  – 0 –  $  – 0 –  $  1,547,884,972 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

See Portfolio of Investments for sector classifications.

 

(b)

Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value.

3. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

4. Taxes

It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.

In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.

5. Investment Income and Investment Transactions

Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily and includes amortization of premiums and accretions of discounts as adjustments to interest income. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.

6. Class Allocations

All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.

7. Dividends and Distributions

Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.

 

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AB CONCENTRATED GROWTH FUND    |    21


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .65% of the Fund’s average daily net assets. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding expenses associated with acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to 1.24%, 1.99%, .99%, 1.49%, 1.24%, .99% and .99% of daily average net assets for Class A, Class C, Advisor Class, Class R, Class K, Class I and Class Z shares, respectively. For the six months ended December 31, 2021, there was no such waiver/reimbursement. The Expense Caps may not be terminated by the Adviser prior to October 31, 2022.

Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended December 31, 2021, the reimbursement for such services amounted to $47,218.

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $111,373 for the six months ended December 31, 2021.

AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $6,556 from the sale of Class A shares and received $91 and $1,115 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the six months ended December 31, 2021.

The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended December 31, 2021, such waiver amounted to $4,495.

A summary of the Fund’s transactions in AB mutual funds for the six months ended December 31, 2021 is as follows:

 

Fund

 Market Value
6/30/21
(000)
  Purchases
at Cost
(000)
  Sales
Proceeds
(000)
  Market Value
12/31/21
(000)
  Dividend
Income
(000)
 

Government Money Market Portfolio

 $    19,954  $    115,558  $    121,969  $    13,543  $    1 

NOTE C

Distribution Services Agreement

The Fund has adopted a Distribution Services Agreement (“the Agreement���) pursuant to Rule 12b-1 under the Investment Company Act of 1940 for Class A, Class C, Class R and Class K. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares, 1% of the Fund’s average daily net assets attributable to Class C shares, .50% of the Fund’s average daily net assets attributable to Class R shares, and .25% of the Fund’s average daily net assets attributable to Class K shares. There are no distribution and servicing fees on the Advisor Class, Class I and Class Z shares. As of November 1, 2021, with respect to Class R and Class K shares, payments to the Distributor are voluntarily being limited to .45% and .20% of the average daily net assets attributable to Class R and Class K shares. For the year ended December 31, 2021, such waivers amounted to $5 and $156, respectively. The fees are accrued daily and paid monthly. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amounts of $187,076, $0 and $0 for Class C, Class R and Class K shares, respectively. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.

 

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AB CONCENTRATED GROWTH FUND    |    23


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

NOTE D

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended December 31, 2021 were as follows:

 

   Purchases  Sales 

Investment securities (excluding U.S. government securities)

  $    218,925,110  $    192,259,075 

U.S. government securities

   – 0 –   – 0 – 

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows:

 

Gross unrealized appreciation

  $505,414,139 

Gross unrealized depreciation

   (1,298,352
  

 

 

 

Net unrealized appreciation

  $    504,115,787 
  

 

 

 

1. Derivative Financial Instruments

The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.

The Fund did not engage in derivatives transactions for the six months ended December 31, 2021.

2. Currency Transactions

The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

NOTE E

Capital Stock

Each class consists of 3,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:

 

       
   Shares     Amount    
   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
     Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
    
  

 

 

  
Class A

 

 

Shares sold

   164,905   347,029   $9,950,611  $17,627,097  

 

  

Shares issued in reinvestment of distributions

   109,688   29,495    6,320,224   1,431,708  

 

  

Shares converted from Class C

   70,053   119,203    4,241,402   5,918,108  

 

  

Shares redeemed

   (117,210  (315,873   (7,102,305  (15,528,997 

 

  

Net increase

   227,436   179,854   $13,409,932  $9,447,916  

 

  
       
Class C

 

 

Shares sold

   50,651   73,473   $2,854,117  $3,484,121  

 

  

Shares issued in reinvestment of distributions

   52,516   20,575    2,810,124   941,520  

 

  

Shares converted to Class A

   (74,827  (126,358   (4,241,402  (5,918,108 

 

  

Shares redeemed

   (27,821  (100,111   (1,566,087  (4,624,254 

 

  

Net increase (decrease)

   519   (132,421  $(143,248 $(6,116,721 

 

  
       
Advisor Class

 

 

Shares sold

   2,638,771   8,260,043   $161,823,721  $431,680,249  

 

  

Shares issued in reinvestment of dividends and distributions

   1,626,566   469,941    95,886,075   23,247,997  

 

  

Shares redeemed

   (1,584,183  (5,816,794   (97,316,598  (307,620,382 

 

  

Net increase

   2,681,154   2,913,190   $160,393,198  $147,307,864  

 

  
       
Class R

 

 

Shares sold

   124   387   $7,211  $19,535  

 

  

Shares issued in reinvestment of distributions

   100   22    5,578   1,043  

 

  

Shares redeemed

   (254  (15   (14,607  (788 

 

  

Net increase (decrease)

   (30  394   $(1,818 $19,790  

 

  

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

       
   Shares     Amount    
   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
     Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
    
  

 

 

  
Class K

 

 

Shares sold

   1,159   16,367   $70,308  $808,665  

 

  

Shares issued in reinvestment of distributions

   3,217   889    185,132   43,123  

 

  

Shares redeemed

   (1,792  (22,614   (107,943  (1,095,247 

 

  

Net increase (decrease)

   2,584   (5,358  $147,497  $(243,459 

 

  
       
Class I

 

 

Shares sold

   1   1,074   $80  $57,215  

 

  

Shares issued in reinvestment of dividends and distributions

   39   1    2,304   25  

 

  

Shares redeemed

   (665  (1   (39,999  (50 

 

  

Net increase (decrease)

   (625  1,074   $(37,615 $57,190  

 

  
       
Class Z

 

 

Shares sold

   102,806   1,781,814   $6,286,766  $103,979,270  

 

  

Shares issues in reinvestment of dividends and distributions

   49,006   1,954    2,894,321   96,828  

 

  

Shares redeemed

   (197,964  (17,124   (12,360,418  (969,783 

 

  

Net increase (decrease)

   (46,152  1,766,644   $(3,179,331 $103,106,315  

 

  

NOTE F

Risks Involved in Investing in the Fund

Market Risk—The value of the Fund’s assets will fluctuate as the equity markets fluctuate. The value of the Fund’s investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.

Focused Portfolio Risk—Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Sector Risk—The Fund may have more risk because it may invest to a significant extent in one or more particular market sectors, such as the information technology or consumer discretionary sector. 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.

Capitalization Risk—Investments in mid-capitalization companies may be more volatile and less liquid than investments in large-capitalization companies.

Non-Diversification Risk—The Fund may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s NAV.

LIBOR Transition and Associated Risk—A Fund may be exposed to debt securities, derivatives or other financial instruments that are tied to the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. 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. 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. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), has begun publishing a Secured Overnight Funding Rate (referred to as SOFR), which is intended to replace U.S. dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication. Markets are slowly developing in response to these new rates.

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

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. The potential effects of a phase out of LIBOR on LIBOR-based investments are currently unknown.

Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.

Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.

NOTE G

Joint Credit Facility

A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing related to redemptions and other short term liquidity requirements, subject to certain restrictions. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended December 31, 2021.

NOTE H

Distributions to Shareholders

The tax character of distributions to be paid for the year ending June 30, 2022 will be determined at the end of the current fiscal year. The tax

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

character of distributions paid during the fiscal years ended June 30, 2021 and June 30, 2020 were as follows:

 

   2021  2020 

Distributions paid from:

   

Ordinary income

  $– 0 –  $656,724 

Net long-term capital gains

   33,461,860   21,561,729 
  

 

 

  

 

 

 

Total taxable distributions paid

  $    33,461,860  $    22,218,453 
  

 

 

  

 

 

 

As of June 30, 2021, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income

  $5,207,886 

Undistributed capital gains

   101,387,269 

Unrealized appreciation/(depreciation)

       427,806,633(a) 
  

 

 

 

Total accumulated earnings/(deficit)

  $534,401,788 
  

 

 

 

 

(a)

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales.

For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of June 30, 2021, the Fund did not have any capital loss carryforwards.

NOTE I

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.

NOTE J

Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.

 

abfunds.com 

AB CONCENTRATED GROWTH FUND    |    29


 

FINANCIAL HIGHLIGHTS

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class A 
  

Six Months
Ended
December 31,
2021

(unaudited)

  Year Ended June 30, 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  58.21   $  41.70   $  40.35   $  35.44   $  32.65   $  26.04 
 

 

 

 

Income From Investment Operations

      

Net investment loss(a)(b)

  (.07  (.08  (.10  (.12  (.15  (.08

Net realized and unrealized gain on investment transactions

  7.07   18.40   2.87   7.62   4.13   6.82 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  7.00   18.32   2.77   7.50   3.98   6.74 
 

 

 

 

Less: Distributions

      

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  58.91   $  58.21   $  41.70   $  40.35   $  35.44   $  32.65 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.26 %   44.80 %   6.84 %   22.67 %   12.39 %   25.93 % 

Ratios/Supplemental
Data

      

Net assets, end of period (000’s omitted)

  $77,130   $62,979   $37,615   $28,661   $26,920   $26,579 

Ratio to average net
assets of:

      

Expenses, net of
waivers/reimbursements(e)

  .99 %^   1.01 %   1.12 %   1.19 %   1.21 %   1.22 % 

Expenses, before
waivers/reimbursements(e)

  .99 %^   1.01 %   1.15 %   1.19 %   1.21 %   1.22 % 

Net investment loss(b)

  (.24)%^   (.15)%   (.24)%   (.32)%   (.45)%   (.27)% 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class C 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  54.65   $  39.53   $  38.61   $  34.27   $  31.84   $  25.58 
 

 

 

 

Income From Investment Operations

      

Net investment loss(a)(b)

  (.28  (.43  (.38  (.38  (.40  (.29

Net realized and unrealized gain on investment transactions

  6.61   17.36   2.72   7.31   4.02   6.68 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  6.33   16.93   2.34   6.93   3.62   6.39 
 

 

 

 

Less: Distributions

      

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  54.68   $  54.65   $  39.53   $  38.61   $  34.27   $  31.84 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  11.83 %   43.71 %   6.01 %   21.75 %   11.56 %   25.03 % 

Ratios/Supplemental
Data

      

Net assets, end of period (000’s omitted)

  $31,812   $31,765   $28,210   $22,320   $18,168   $18,727 

Ratio to average net
assets of:

      

Expenses, net of
waivers/reimbursements(e)

  1.74 %^   1.75 %   1.87 %   1.94 %   1.96 %   1.97 % 

Expenses, before
waivers/reimbursements(e)

  1.74 %^   1.76 %   1.90 %   1.94 %   1.96 %   1.97 % 

Net investment loss(b)

  (1.00)%^   (.91)%   (.99)%   (1.07)%   (1.20)%   (1.02)% 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Advisor Class 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  59.41   $  42.42   $  40.93   $  35.83   $  32.91   $  26.18 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  – 0 –   .05   .01   (.03  (.07  (.01

Net realized and unrealized gain on investment transactions

  7.22   18.75   2.90   7.72   4.18   6.87 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  7.22   18.80   2.91   7.69   4.11   6.86 
 

 

 

 

Less: Distributions

      

Dividends from net investment income

  (.06  – 0 –   – 0 –   – 0 –   – 0 –   – 0 – 

Distributions from net realized gain on investment transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Total dividends and distributions

  (6.36  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  60.27   $  59.41   $  42.42   $  40.93   $  35.83   $  32.91 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.39 %   45.17 %   7.09 %   22.97 %   12.69 %   26.26 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $1,331,077   $1,152,671   $699,504   $537,484   $369,006   $298,099 

Ratio to average net assets of:

      

Expenses, net of waivers/reimbursements(e)

  .74 %^   .76 %   .87 %   .94 %   .96 %   .96 % 

Expenses, before waivers/reimbursements(e)

  .74 %^   .76 %   .90 %   .94 %   .96 %   .97 % 

Net investment income (loss)(b)

  .01 %^   .10 %   .02 %   (.07)%   (.21)%   (.03)% 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class R 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  56.89   $  40.93   $  39.76   $  35.04   $  32.37   $  25.88 
 

 

 

 

Income From Investment Operations

      

Net investment loss(a)(b)

  (.19  (.26  (.21  (.21  (.24  (.15

Net realized and unrealized gain on investment transactions

  6.89   18.03   2.80   7.52   4.10   6.77 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  6.70   17.77   2.59   7.31   3.86   6.62 
 

 

 

 

Less: Distributions

      

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  57.29   $  56.89   $  40.93   $  39.76   $  35.04   $  32.37 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.02 %   44.28 %   6.48 %   22.38 %   12.12 %   25.63 % 

Ratios/Supplemental
Data

      

Net assets, end of period (000’s omitted)

  $69   $70   $34   $16   $14   $13 

Ratio to average net
assets of:

      

Expenses, net of
waivers/reimbursements(e)

  1.40 %^   1.38 %   1.42 %   1.44 %   1.45 %   1.46 % 

Expenses, before
waivers/reimbursements(e)

  1.41 %^   1.38 %   1.45 %   1.44 %   1.45 %   1.47 % 

Net investment loss(b)

  (.65)%^   (.52)%   (.54)%   (.57)%   (.70)%   (.53)% 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class K 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  58.15   $  41.69   $  40.36   $  35.45   $  32.66   $  26.04 
 

 

 

 

Income From Investment Operations

      

Net investment loss(a)(b)

  (.08  (.11  (.11  (.12  (.16  (.09

Net realized and unrealized gain on investment transactions

  7.07   18.38   2.86   7.62   4.14   6.84 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  6.99   18.27   2.75   7.50   3.98   6.75 
 

 

 

 

Less: Distributions

      

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  58.84   $  58.15   $  41.69   $  40.36   $  35.45   $  32.66 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.26 %   44.69 %   6.78 %   22.67 %   12.38 %   25.97 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $1,926   $1,753   $1,480   $741   $558   $398 

Ratio to average net assets of:

      

Expenses, net of
waivers/reimbursements(e)

  1.00 %^   1.07 %   1.15 %   1.19 %   1.21 %   1.21 % 

Expenses, before
waivers/reimbursements(e)

  1.02 %^   1.07 %   1.18 %   1.20 %   1.22 %   1.22 % 

Net investment loss(b)

  (.25)%^   (.22)%   (.27)%   (.32)%   (.46)%   (.31)% 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class I 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  59.48   $  42.50   $  41.00   $  35.88   $  32.95   $  26.21 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  (.02  .02   .01   (.03  (.07  .00(c) 

Net realized and unrealized gain on investment transactions

  7.23   18.77   2.91   7.74   4.19   6.87 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  7.21   18.79   2.92   7.71   4.12   6.87 
 

 

 

 

Less: Dividends and Distributions

      

Dividends from net investment income

  (.00)(c)   – 0 –   – 0 –   – 0 –   – 0 –   – 0 – 

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Total dividends and distributions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  60.39   $  59.48   $  42.50   $  41.00   $  35.88   $  32.95 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.37 %   45.06 %   7.10 %   22.99 %   12.71 %   26.26 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $52   $89   $18   $17   $21   $13 

Ratio to average net assets of:

      

Expenses, net of
waivers/reimbursements(e)

  .81 %^   .83 %   .86 %   .91 %   .95 %   .95 % 

Expenses, before
waivers/reimbursements(e)

  .81 %^   .83 %   .88 %   .92 %   .96 %   .96 % 

Net investment income (loss)(b)

  (.07)%^   .03 %   .03 %   (.09)%   (.21)%   .01 % 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class Z 
  

Six Months
Ended
December 31,
2021

(unaudited)

      
    
Year Ended June 30,
 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  59.52   $  42.49   $  40.98   $  35.86   $  32.93   $  26.19 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  .01   .10   .02   (.01  (.05  .00(c) 

Net realized and unrealized gain on investment transactions

  7.24   18.74   2.91   7.72   4.17   6.87 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase in net asset value from operations

  7.25   18.84   2.93   7.71   4.12   6.87 
 

 

 

 

Less: Distributions

      

Dividends from net investment income

  (.08  – 0 –   – 0 –   – 0 –   – 0 –   – 0 – 

Distributions from net realized gain on investment
transactions

  (6.30  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Total dividends and distributions

  (6.38  (1.81  (1.42  (2.59  (1.19  (.13
 

 

 

 

Net asset value, end of period

  $  60.39   $  59.52   $  42.49   $  40.98   $  35.86   $  32.93 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)

  12.42 %   45.19 %   7.13 %   23.01 %   12.72 %   26.29 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $106,751   $107,956   $2,007   $990   $812   $64,060 

Ratio to average net assets of:

      

Expenses, net of
waivers/reimbursements(e)

  .71 %^   .78 %   .84 %   .91 %   .91 %   .93 % 

Expenses, before
waivers/reimbursements(e)

  .71 %^   .78 %   .87 %   .92 %   .92 %   .94 % 

Net investment income (loss)(b)

  .03 %^   .18 %   .04 %   (.03)%   (.13)%   0 % 

Portfolio turnover rate

  13 %   26 %   23 %   30 %   27 %   29 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .00 %   .00 %   .01 %   .01 % 

See footnote summary on page 37.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

(a)

Based on average shares outstanding.

 

(b)

Net of expenses waived/reimbursed by the Adviser.

 

(c)

Amount is less than $.005.

 

(d)

Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized.

 

(e)

In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the years ended June 30, 2018 and June 30, 2017, such waiver amounted to .01% and .01%, respectively.

 

^

Annualized.

See notes to financial statements.

 

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BOARD OF DIRECTORS

 

Marshall C. Turner, Jr(1),

Chairman

Jorge A. Bermudez(1)

Michael J. Downey(1)

Onur Erzan, President and Chief Executive Officer

  

Nancy P. Jacklin(1)

Jeanette W. Loeb(1)

Carol C. McMullen(1)

Garry L. Moody(1)

OFFICERS

James T. Tierney(2), Vice President

Emilie D. Wrapp, Secretary

Michael B. Reyes, Senior Vice President and Senior Analyst

  

Joseph J. Mantineo, Treasurer and Chief Financial Officer

Phyllis J. Clarke, Controller

Vincent S. Noto, Chief Compliance Officer

 

Custodian and Accounting Agent

State Street Bank and Trust Company

State Street Corporation CCB/5

1 Iron Street

Boston, MA 02210

 

Principal Underwriter

AllianceBernstein Investments, Inc.

501 Commerce Street

Nashville, TN 37203

 

Transfer Agent

AllianceBernstein Investor Services,

Inc.

P.O. Box 786003

San Antonio, TX 78278

Toll-Free (800) 221-5672

  

Independent Registered Public Accounting Firm

Ernst & Young LLP

One Manhattan West

New York, NY 10001

 

Legal Counsel

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

 

1

Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee.

 

2

The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by Mr. James T. Tierney. Mr. Tierney has the most significant responsibility for the day-to-day management of the Fund’s portfolio.

 

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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:

In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.

One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).

Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2021, which covered the period January 1, 2020 through December 31, 2020 (the “Program Reporting Period”).

The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner.

Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.

During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP.

The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.

The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended,

 

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and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP. During the Program Reporting Period, beginning in March 2020, all financial markets experienced extreme levels of price volatility and relative illiquidity resulting from the COVID-19 impacts on the global economy. This extreme relative illiquidity resulted in significantly wider bid-ask spreads to transact in securities, including many of those securities held by the Fund, and in a diminished depth of liquidity in most markets, to varying degrees. Nonetheless, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.

 

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Information Regarding the Review and Approval of the Fund’s Advisory Agreement

The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser (the “Advisory Agreement”) in respect of AB Concentrated Growth Fund (the “Fund”) at a meeting held by video conference on May 3-5, 2021 (the “Meeting”).

Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.

The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund, and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.

The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business

 

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judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:

Nature, Extent and Quality of Services Provided

The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant at the request of the directors. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.

Costs of Services Provided and Profitability

The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2019 and 2020 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Fund before taxes and distribution

 

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expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.

Fall-Out Benefits

The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.

Investment Results

In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.

At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended February 28, 2021 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.

Advisory Fees and Other Expenses

The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s contractual advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.

 

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The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s proposed fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements.

The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.

The directors noted that the Fund may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued, and rules adopted, by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.

In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund

 

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in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s most recent semi-annual period (and reflected the Fund’s advisory fee rate reduction effective March 2, 2020 for the entire fiscal year). The Adviser had agreed to cap the Fund’s expenses, but the directors noted that the Fund’s expense ratio was currently below the level of the Adviser’s cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.

Economies of Scale

The directors noted that the advisory fee schedule for the Fund does not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. The directors informed the Adviser that they would monitor the Fund’s asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.

 

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This page is not part of the Shareholder Report or the Financial Statements.

 

 

AB FAMILY OF FUNDS

 

US EQUITY

CORE

Core Opportunities Fund

Select US Equity Portfolio

Sustainable US Thematic Portfolio1

GROWTH

Concentrated Growth Fund

Discovery Growth Fund

Growth Fund

Large Cap Growth Fund

Small Cap Growth Portfolio

VALUE

Discovery Value Fund

Equity Income Fund

Relative Value Fund

Small Cap Value Portfolio

Value Fund

INTERNATIONAL/ GLOBAL EQUITY

CORE

Global Core Equity Portfolio

International Strategic Core Portfolio

Sustainable Global Thematic Fund

Tax-Managed Wealth Appreciation Strategy

Wealth Appreciation Strategy

GROWTH

Concentrated International Growth Portfolio

Sustainable International Thematic Fund

VALUE

All China Equity Portfolio

International Value Fund

FIXED INCOME

MUNICIPAL

High Income Municipal Portfolio

Intermediate California Municipal Portfolio

Intermediate Diversified Municipal Portfolio

Intermediate New York Municipal Portfolio

Municipal Bond Inflation Strategy

Tax-Aware Fixed Income Opportunities Portfolio

National Portfolio

Arizona Portfolio

California Portfolio

Massachusetts Portfolio

Minnesota Portfolio

New Jersey Portfolio

New York Portfolio

Ohio Portfolio

Pennsylvania Portfolio

Virginia Portfolio

TAXABLE

Bond Inflation Strategy

Global Bond Fund

High Income Fund

High Yield Portfolio1

Income Fund

Intermediate Duration Portfolio

Limited Duration High Income Portfolio

Short Duration Income Portfolio

Short Duration Portfolio

Sustainable Thematic Credit Portfolio

Total Return Bond Portfolio

ALTERNATIVES

All Market Real Return Portfolio

Global Real Estate Investment Fund

Select US Long/Short Portfolio

MULTI-ASSET

All Market Income Portfolio

All Market Total Return Portfolio

Emerging Markets Multi-Asset Portfolio

Global Risk Allocation Fund

Sustainable Thematic Balanced Portfolio1

Tax-Managed All Market Income Portfolio

CLOSED-END FUNDS

AllianceBernstein Global High Income Fund

AllianceBernstein National Municipal Income Fund

 

We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

 

1

Prior to August 23, 2021, Sustainable US Thematic Portfolio was named FlexFee US Thematic Portfolio. Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio. Prior to December 1, 2021, Sustainable Thematic Balanced Portfolio was named Conservative Wealth Strategy.

 

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NOTES

 

 

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AB CONCENTRATED GROWTH FUND    |    47


 

NOTES

 

 

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LOGO

AB CONCENTRATED GROWTH FUND

1345 Avenue of the Americas

New York, NY 10105

800 221 5672

 

CG-0152-1221                LOGO


DEC    12.31.21

LOGO

SEMI-ANNUAL REPORT

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

 

LOGO

 

As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.

You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.


 

 

 
Investment Products Offered 

  Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.


 

FROM THE PRESIDENT  LOGO

Dear Shareholder,

We’re pleased to provide this report for the AB Concentrated International Growth Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.

At AB, we’re striving to help our clients achieve better outcomes by:

 

+  

Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets

 

+  

Applying differentiated investment insights through a connected global research network

 

+  

Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions

Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.

For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.

Thank you for your investment in AB mutual funds—and for placing your trust in our firm.

Sincerely,

 

LOGO

Onur Erzan

President and Chief Executive Officer, AB Mutual Funds

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    1


 

SEMI-ANNUAL REPORT

 

February 9, 2022

This report provides management’s discussion of fund performance for the AB Concentrated International Growth Portfolio for the semi-annual reporting period ended December 31, 2021.

The Fund’s investment objective is to seek long-term growth of capital.

 

NAV RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

   6 Months   12 Months 
AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    
Class A Shares   -3.93%    3.13% 
Class C Shares   -4.35%    2.37% 
Advisor Class Shares1   -3.83%    3.39% 
MSCI EAFE Index (net)   2.24%    11.26% 

 

1

Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

INVESTMENT RESULTS

The table above shows the Fund’s performance compared to its benchmark, the Morgan Stanley Capital International Europe, Australasia and the Far East (“MSCI EAFE”) Index (net), for the six- and 12-month periods ended December 31, 2021.

All share classes underperformed the benchmark for both periods, before sales charges. In both periods, security selection accounted for the majority of underperformance, relative to the benchmark, predominantly by exposure to China. Security selection within the consumer-discretionary and technology sectors detracted most, while selection in materials and communication services contributed. Sector positioning was positive, aided most by an overweight to technology and lack of exposure to real estate.

For the six-month period, the top absolute detractors from performance were Alibaba Group, Worldline and TeamViewer, while top contributors included Capgemini, Sika Group and ASML. For the 12-month period, top detractors included TeamViewer, Alibaba and Alstom, while top contributors included ASML, Capgemini and Ashtead.

During both periods, the Fund utilized derivatives in the form of currency forwards for hedging purposes (to reduce volatility), which detracted from absolute returns.

 

2    |    AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

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MARKET REVIEW AND INVESTMENT STRATEGY

International equities recorded positive returns while emerging markets declined during the six-month period ended December 31, 2021. International markets were supported by accommodative monetary policy and strong company earnings growth, while economic turbulence in China, geopolitical risks and inflation pressured emerging markets. Increased market volatility periodically sent risk assets lower, but investors continued to buy the dip. Toward the end of the period, global markets fell as the rapid spread of the coronavirus omicron variant triggered concern that new restrictions could derail the economic recovery. Encouraging developments in COVID-19 treatments and vaccines and a reluctance to reinstate shutdowns helped investors look past the potential impact of the omicron variant. Stock markets gave back gains, however, after the US Federal Reserve (the “Fed”) took a hawkish pivot and confirmed that it would accelerate the wind-down of its bond purchases and raise rates multiple times in 2022. After digesting the Fed’s comments, equity markets rose as investors appeared to adjust to the shift and remained focused on still generally supportive monetary policy. Growth outperformed value, in terms of style, and large-cap stocks outperformed their small-cap peers.

The Fund’s Senior Investment Management Team (“the Team”) continues to focus the Fund primarily on companies with very stable earnings profiles. The Team wishes to not get caught up by moving the Fund too far in one direction or another, believing that it can generate a solid return from a positive and less volatile earnings mix.

INVESTMENT POLICIES

The Adviser seeks to achieve the Fund’s investment objective by investing, under normal circumstances, primarily in common stocks of non-US companies, and in companies in at least three countries other than the United States.

The Fund invests in companies that are determined by the Adviser to offer favorable long-term growth potential and that are trading at attractive valuations. The Adviser employs an appraisal method which attempts to measure each prospective company’s quality and growth rate by numerous factors. Such factors include: a company’s record and projections of profit and earnings growth, accuracy and availability of information with respect to the company, success and experience of management, accessibility of management to the Adviser, product lines and competitive position both in the United States and abroad, lack of cyclicality, large market capitalization and liquidity of the company’s securities. The Adviser compares these results to the characteristics of the general stock markets to determine the relative

 

(continued on next page)

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    3


attractiveness of each company at a given time. The Adviser weighs economic, political and market factors in making investment decisions; this appraisal technique attempts to measure each investment candidate not only against other stocks of the same industry and region, but also against a broad spectrum of investments.

The Fund invests in a relatively small number of individual stocks, generally 25 to 35 companies. The Fund primarily invests in mid- and large-capitalization companies, which are currently defined for the Fund as companies that have market capitalizations of $2.0 billion or more. The Fund’s holdings of non-US companies may include some companies located in emerging markets, and at times emerging-market companies may make up a significant portion of the Fund.

Fluctuations in currency exchange rates can have a dramatic impact on the returns of equity securities. While the Adviser may hedge the foreign currency exposure resulting from the Fund’s security positions through the use of currency-related derivatives, it is not required to do so.

 

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DISCLOSURES AND RISKS

 

Benchmark Disclosure

The MSCI EAFE Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI EAFE Index (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets, excluding the US and Canada. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. Net returns include the reinvestment of dividends after deduction of non-US withholding tax. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Market Risk: The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Fund’s growth approach, may underperform the market generally.

Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value (“NAV”).

Sector Risk: The Fund may have more risk because it may invest to a significant extent in one or more particular market sectors, such as the information-technology sector. 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.

Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.

Emerging-Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory or other uncertainties.

Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    5


 

DISCLOSURES AND RISKS (continued)

 

Capitalization Risk: Investments in mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.

Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.

These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.

An Important Note About Historical Performance

The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.

All fees and expenses related to the operation of the Fund have been deducted. NAV returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.

Please note: References to specific securities are presented to illustrate the Fund’s investment philosophy and are not to be considered advice or recommendations. This information reflects prevailing market conditions and the Adviser’s judgments as of the date indicated, which are subject to change. In preparing this report, the Adviser has relied upon and assumed without independent verification, the accuracy and completeness of all information available from third-party sources. It should not be assumed that any investments made in the future will be profitable or will equal the performance of the selected investments referenced herein.

 

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HISTORICAL PERFORMANCE

 

AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

  NAV Returns  

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES  
1 Year  3.13%   -1.22% 
5 Years  14.24%   13.26% 
Since Inception1  8.09%   7.40% 
CLASS C SHARES  
1 Year  2.37%   1.37% 
5 Years  13.40%   13.40% 
Since Inception1  7.29%   7.29% 
ADVISOR CLASS SHARES2  
1 Year  3.39%   3.39% 
5 Years  14.52%   14.52% 
Since Inception1  8.35%   8.35% 

The Fund’s prospectus fee table shows the Fund’s total annual operating expense ratios as 1.17%, 1.93% and 0.93% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Fund’s annual operating expense ratios to 1.15%, 1.90% and 0.90% for Class A, Class C and Advisor Class shares, respectively. These waivers/reimbursements may not be terminated before October 31, 2022, and may be extended by the Adviser for one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.

 

1

Inception date: 4/15/2015.

 

2

This share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    7


 

HISTORICAL PERFORMANCE (continued)

 

SEC AVERAGE ANNUAL RETURNS

AS OF THE MOST RECENT CALENDAR QUARTER-END

DECEMBER 31, 2021 (unaudited)

 

   

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES  
1 Year   -1.22% 
5 Years   13.26% 
Since Inception1   7.40% 
CLASS C SHARES  
1 Year   1.37% 
5 Years   13.40% 
Since Inception1   7.29% 
ADVISOR CLASS SHARES2  
1 Year   3.39% 
5 Years   14.52% 
Since Inception1   8.35% 

 

1

Inception date: 4/15/2015.

 

2

Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

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EXPENSE EXAMPLE

(unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    9


 

EXPENSE EXAMPLE (continued)

 

  Beginning
Account Value
July 1, 2021
  Ending
Account Value
December 31, 2021
  Expenses Paid
During Period*
  Annualized
Expense Ratio*
 
Class A    

Actual

 $1,000  $960.70  $5.49   1.11

Hypothetical**

 $    1,000  $    1,019.61  $    5.65   1.11
Class C    

Actual

 $1,000  $956.50  $9.17   1.86

Hypothetical**

 $1,000  $1,015.83  $9.45   1.86
Advisor Class    

Actual

 $1,000  $961.70  $4.25   0.86

Hypothetical**

 $1,000  $1,020.87  $4.38   0.86

 

*

Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

**

Assumes 5% annual return before expenses.

 

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PORTFOLIO SUMMARY

December 31, 2021 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $526.7

 

 

 

LOGO

 

 

 

LOGO

 

1

All data are as of December 31, 2021. The Fund’s sector and country breakdowns are expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Fund also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details).

Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    11


 

PORTFOLIO SUMMARY (continued)

December 31, 2021 (unaudited)

 

TEN LARGEST HOLDINGS1

 

Company  U.S. $ Value   Percent of
Net Assets
 
Capgemini SE  $25,133,247    4.8
Sika AG   23,217,623    4.4 
ASML Holding NV   22,100,137    4.2 
Ashtead Group PLC   21,753,993    4.2 
Nidec Corp.   20,772,479    4.0 
SAP SE   19,477,362    3.7 
St. James’s Place PLC   19,098,796    3.6 
Cellnex Telecom SA   18,907,336    3.6 
Lonza Group AG   18,308,609    3.5 
Partners Group Holding AG   17,959,156    3.2 
  $  206,728,738    39.2

 

1

Long-term investments.

 

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PORTFOLIO OF INVESTMENTS

December 31, 2021 (unaudited)

 

Company Shares  U.S. $ Value 

 

 

COMMON STOCKS – 97.0%

 

Industrials – 23.3%

 

Electrical Equipment – 4.0%

 

Nidec Corp.

  175,600  $20,772,479 
  

 

 

 

Machinery – 9.6%

 

Alstom SA

  304,273   10,804,868 

FANUC Corp.

  65,400   13,901,548 

KION Group AG

  143,229   15,644,284 

Techtronic Industries Co., Ltd.

  517,500   10,316,309 
  

 

 

 
   50,667,009 
  

 

 

 

Professional Services – 5.6%

 

Recruit Holdings Co., Ltd.

  294,500   17,922,000 

Teleperformance

  26,220   11,722,332 
  

 

 

 
   29,644,332 
  

 

 

 

Trading Companies & Distributors – 4.1%

 

Ashtead Group PLC

  269,852   21,753,993 
  

 

 

 
   122,837,813 
  

 

 

 

Information Technology – 21.4%

 

Electronic Equipment, Instruments & Components – 6.2%

  

Keyence Corp.

  23,500   14,775,815 

Murata Manufacturing Co., Ltd.

  224,600   17,914,649 
  

 

 

 
   32,690,464 
  

 

 

 

IT Services – 7.3%

 

Capgemini SE

  102,551   25,133,247 

Worldline SA/France(a)(b)

  235,850   13,127,448 
  

 

 

 
   38,260,695 
  

 

 

 

Semiconductors & Semiconductor Equipment – 4.2%

  

ASML Holding NV

  27,590   22,100,137 
  

 

 

 

Software – 3.7%

 

SAP SE

  138,393   19,477,362 
  

 

 

 
   112,528,658 
  

 

 

 

Financials – 14.1%

 

Banks – 2.1%

 

HDFC Bank Ltd. (ADR)

  172,948   11,253,726 
  

 

 

 

Capital Markets – 9.7%

 

London Stock Exchange Group PLC

  146,290   13,761,519 

Partners Group Holding AG

  10,879   17,959,156 

St. James’s Place PLC

  835,752   19,098,796 
  

 

 

 
   50,819,471 
  

 

 

 

Insurance – 2.3%

 

AIA Group Ltd.

  1,225,000   12,363,730 
  

 

 

 
   74,436,927 
  

 

 

 

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    13


 

PORTFOLIO OF INVESTMENTS (continued)

 

Company Shares  U.S. $ Value 

 

 

Consumer Discretionary – 12.8%

 

Hotels, Restaurants & Leisure – 4.1%

 

Compass Group PLC(b)

  497,720  $11,205,511 

Yum China Holdings, Inc.

  208,011   10,367,268 
  

 

 

 
   21,572,779 
  

 

 

 

Internet & Direct Marketing Retail – 3.4%

 

Alibaba Group Holding Ltd. (ADR)(b)

  69,509   8,256,974 

Prosus NV(b)(c)

  119,143   9,868,019 
  

 

 

 
   18,124,993 
  

 

 

 

Textiles, Apparel & Luxury Goods – 5.3%

 

adidas AG

  44,915   12,933,061 

LVMH Moet Hennessy Louis Vuitton SE

  17,772   14,687,378 
  

 

 

 
   27,620,439 
  

 

 

 
   67,318,211 
  

 

 

 

Consumer Staples – 9.2%

 

Beverages – 2.1%

 

Pernod Ricard SA

  46,170   11,107,469 
  

 

 

 

Food Products – 5.7%

 

Kerry Group PLC – Class A

  101,034   13,034,969 

Nestle SA

  121,522   16,966,572 
  

 

 

 
   30,001,541 
  

 

 

 

Personal Products – 1.4%

 

Kose Corp.

  65,300   7,407,761 
  

 

 

 
   48,516,771 
  

 

 

 

Health Care – 8.2%

 

Biotechnology – 2.8%

 

Genmab A/S(b)

  37,891   15,124,306 
  

 

 

 

Health Care Equipment & Supplies – 1.9%

  

Koninklijke Philips NV

  266,480   9,862,852 
  

 

 

 

Life Sciences Tools & Services – 3.5%

 

Lonza Group AG

  21,990   18,308,609 
  

 

 

 
   43,295,767 
  

 

 

 

Materials – 4.4%

 

Chemicals – 4.4%

 

Sika AG

  55,863   23,217,623 
  

 

 

 

Communication Services – 3.6%

 

Diversified Telecommunication Services – 3.6%

  

Cellnex Telecom SA(a)(b)(c)

  326,396   18,907,336 
  

 

 

 

Total Common Stocks
(cost $442,847,306)

   511,059,106 
  

 

 

 
  

 

14    |    AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

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PORTFOLIO OF INVESTMENTS (continued)

 

Company Shares  U.S. $ Value 

 

 

SHORT-TERM INVESTMENTS – 3.2%

 

Investment Companies – 3.2%

 

AB Fixed Income Shares, Inc. – Government
Money Market Portfolio – Class AB,
0.01%(d)(e)(f)
(cost $16,976,474)

  16,976,474  $16,976,474 
  

 

 

 

Total Investments Before Security Lending
Collateral for Securities Loaned – 100.2%

(cost $459,823,780)

   528,035,580 
  

 

 

 
  

INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 2.9%

  

Investment Companies – 2.9%

  

AB Fixed Income Shares, Inc. – Government
Money Market Portfolio – Class AB, 0.01%(d)(e)(f)
(cost $15,042,556)

  15,042,556   15,042,556 
  

 

 

 

Total Investments – 103.1%
(cost $474,866,336)

   543,078,136 

Other assets less liabilities – (3.1)%

   (16,361,057
  

 

 

 

Net Assets – 100.0%

  $526,717,079 
  

 

 

 

FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)

 

Counterparty  Contracts to
Deliver
(000)
   In Exchange
For
(000)
   Settlement
Date
   Unrealized
Appreciation/
(Depreciation)
 

Bank of America, NA

  USD2,200   CHF2,026    01/13/2022   $23,954 

Bank of America, NA

  GBP3,726   USD5,044    01/14/2022    784 

Bank of America, NA

  GBP8,534   USD11,388    01/14/2022    (162,624

Bank of America, NA

  USD1,692   GBP1,271    01/14/2022    27,879 

Bank of America, NA

  JPY  232,275   USD2,060    02/09/2022    40,422 

Bank of America, NA

  USD5,303   JPY598,096    02/09/2022    (101,927

Bank of America, NA

  USD1,363   HKD10,628    02/10/2022    577 

Barclays Bank PLC

  USD4,675   JPY536,619    02/09/2022    (8,618

BNP Paribas SA

  CHF11,935   USD13,011    01/13/2022    (90,152

BNP Paribas SA

  HKD149,400   USD19,186    02/10/2022    24,832 

Citibank, NA

  USD21,557   JPY  2,453,877    02/09/2022    (218,926

Citibank, NA

  EUR8,884   USD10,123    02/10/2022    1,261 

Citibank, NA

  USD1,887   EUR1,673    02/10/2022    18,893 

Goldman Sachs Bank USA

  INR389,537   USD5,227    01/07/2022    (6,650

Goldman Sachs Bank USA

  CHF4,338   USD4,711    01/13/2022    (50,346

Goldman Sachs Bank USA

  GBP1,208   USD1,611    01/14/2022    (23,747

Goldman Sachs Bank USA

  EUR7,597   USD8,777    02/10/2022    121,395 

Goldman Sachs Bank USA

  USD1,408   EUR1,246    02/10/2022    11,151 

HSBC Bank USA

  USD38,813   AUD52,528    02/08/2022        (592,120

HSBC Bank USA

  EUR2,275   USD2,580    02/10/2022    (11,593

HSBC Bank USA

  USD1,768   EUR1,568    02/10/2022    18,520 

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    15


 

PORTFOLIO OF INVESTMENTS (continued)

 

Counterparty  Contracts to
Deliver
(000)
   In Exchange
For
(000)
   Settlement
Date
   Unrealized
Appreciation/
(Depreciation)
 

Natwest Markets PLC

  USD10,436   SEK89,616    01/20/2022   $(517,508

State Street Bank & Trust Co.

  CHF1,935   USD2,113    01/13/2022    (10,912

State Street Bank & Trust Co.

  USD1,654   CHF1,519    01/13/2022    13,719 

State Street Bank & Trust Co.

  USD1,446   SEK13,089    01/20/2022    3,024 

State Street Bank & Trust Co.

  USD2,052   AUD2,827    02/08/2022    5,024 

State Street Bank & Trust Co.

  JPY245,281   USD2,136    02/09/2022    3,495 

State Street Bank & Trust Co.

  EUR16,141   USD18,662    02/10/2022    271,379 

State Street Bank & Trust Co.

  HKD32,229   USD4,138    02/10/2022    4,674 

State Street Bank & Trust Co.

  USD3,882   EUR3,342    02/10/2022    (74,051

UBS AG

  USD1,677   GBP1,248    01/14/2022    11,749 

UBS AG

  USD18,782   GBP13,844    01/14/2022    (44,275

UBS AG

  USD  10,097   SEK88,101    01/20/2022    (345,832

UBS AG

  USD6,610   EUR5,749    02/10/2022    (59,487

UBS AG

  CNH 151,095   USD  23,563    02/17/2022    (120,533
        

 

 

 
  $    (1,836,569
        

 

 

 

 

(a)

Security is exempt from registration under Rule 144A or Regulation S of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration. At December 31, 2021, the aggregate market value of these securities amounted to $32,034,784 or 6.1% of net assets.

 

(b)

Non-income producing security.

 

(c)

Represents entire or partial securities out on loan. See Note E for securities lending information.

 

(d)

Affiliated investments.

 

(e)

The rate shown represents the 7-day yield as of period end.

 

(f)

To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618.

Currency Abbreviations:

AUD – Australian Dollar

CHF – Swiss Franc

CNH – Chinese Yuan Renminbi (Offshore)

EUR – Euro

GBP – Great British Pound

HKD – Hong Kong Dollar

INR – Indian Rupee

JPY – Japanese Yen

SEK – Swedish Krona

USD – United States Dollar

Glossary:

ADR – American Depositary Receipt

See notes to financial statements.

 

16    |    AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

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STATEMENT OF ASSETS & LIABILITIES

December 31, 2021 (unaudited)

 

Assets  

Investments in securities, at value

  

Unaffiliated issuers (cost $442,847,306)

  $511,059,106 

Affiliated issuers (cost $32,019,030—including investment of cash collateral for securities loaned of $15,042,556)

   32,019,030 

Foreign currencies, at value (cost $110,157)

   110,968 

Receivable for capital stock sold

   1,381,529 

Unrealized appreciation on forward currency exchange contracts

   602,732 

Unaffiliated dividends receivable

   388,866 

Affiliated dividends receivable

   136 
  

 

 

 

Total assets

   545,562,367 
  

 

 

 
Liabilities  

Payable for collateral received on securities loaned

   15,042,556 

Unrealized depreciation on forward currency exchange contracts

   2,439,301 

Payable for capital stock redeemed

   822,687 

Advisory fee payable

   324,936 

Administrative fee payable

   22,686 

Transfer Agent fee payable

   4,215 

Distribution fee payable

   3,730 

Accrued expenses

   185,177 
  

 

 

 

Total liabilities

   18,845,288 
  

 

 

 

Net Assets

  $526,717,079 
  

 

 

 
Composition of Net Assets  

Capital stock, at par

  $3,609 

Additional paid-in capital

   459,833,870 

Distributable earnings

   66,879,600 
  

 

 

 

Net Assets

  $    526,717,079 
  

 

 

 

Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value

 

Class Net Assets     Shares
Outstanding
     Net Asset
Value
 

 

 
A $10,663,201      737,523     $14.46

 

 
C $1,731,549      124,921     $13.86 

 

 
Advisor $  514,322,329      35,225,561     $  14.60 

 

 

 

(a)

Includes securities on loan with a value of $14,374,317 (see Note E).

 

*

The maximum offering price per share for Class A shares was $15.10 which reflects a sales charge of 4.25%.

See notes to financial statements.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    17


 

STATEMENT OF OPERATIONS

Six Months Ended December 31, 2021 (unaudited)

 

Investment Income   

Dividends

   

Unaffiliated issuers (net of foreign taxes withheld of $108,317)

  $1,275,234  

Affiliated issuers

   1,041  

Securities lending income

   23,708  $1,299,983 
  

 

 

  
Expenses   

Advisory fee (see Note B)

   1,947,656  

Distribution fee—Class A

   13,231  

Distribution fee—Class C

   9,283  

Transfer agency—Class A

   1,396  

Transfer agency—Class C

   290  

Transfer agency—Advisor Class

   66,961  

Custody and accounting

   67,282  

Administrative

   49,045  

Registration fees

   32,602  

Audit and tax

   19,155  

Legal

   18,155  

Printing

   14,145  

Directors’ fees

   12,298  

Miscellaneous

   9,737  
  

 

 

  

Total expenses

       2,261,236  

Less: expenses waived and reimbursed by the Adviser (see Notes B & E)

   (5,784 
  

 

 

  

Net expenses

    2,255,452 
   

 

 

 

Net investment loss

    (955,469
   

 

 

 
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions   

Net realized gain (loss) on:

   

Investment transactions

    2,004,232 

Forward currency exchange contracts

    (2,540,669

Foreign currency transactions

    (228,064

Net change in unrealized appreciation/depreciation of:

   

Investments

    (18,492,390

Forward currency exchange contracts

    (606,406

Foreign currency denominated assets and liabilities

    2,566 
   

 

 

 

Net loss on investment and foreign currency transactions

    (19,860,731
   

 

 

 

Net Decrease in Net Assets from Operations

   $    (20,816,200
   

 

 

 

See notes to financial statements.

 

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STATEMENT OF CHANGES IN NET ASSETS

 

   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
 
Increase (Decrease) in Net Assets from Operations   

Net investment income (loss)

  $(955,469 $1,012,061 

Net realized gain (loss) on investment transactions and foreign currency

   (764,501  13,145,766 

Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities

   (19,096,230  66,274,646 
  

 

 

  

 

 

 

Net increase (decrease) in net assets from operations

   (20,816,200  80,432,473 
Distributions to Shareholders   

Class A

   (193,993  (89,972

Class C

   (33,729  (23,763

Advisor Class

   (9,062,326  (4,224,338
Capital Stock Transactions   

Net increase

   64,212,118   254,097,150 
  

 

 

  

 

 

 

Total increase

   34,105,870   330,191,550 
Net Assets   

Beginning of period

   492,611,209   162,419,659 
  

 

 

  

 

 

 

End of period

  $    526,717,079  $    492,611,209 
  

 

 

  

 

 

 

See notes to financial statements.

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    19


 

NOTES TO FINANCIAL STATEMENTS

December 31, 2021 (unaudited)

 

NOTE A

Significant Accounting Policies

AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 12 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Concentrated International Growth Portfolio (the “Fund”), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares. Class B, Class R, Class K, Class I, Class Z, Class T, Class 1 and Class 2 shares have not been issued. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Effective May 31, 2021, Class C shares automatically converted to Class A shares eight years after the end of the calendar month of purchase. Prior to May 31, 2021, Class C shares automatically converted to Class A shares ten years after the end of the calendar month of purchase. Advisor Class shares are sold without any initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All 11 classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.

1. Security Valuation

Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    21


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

  

Level 1—quoted prices in active markets for identical investments

  

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

  

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates,

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3.

Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of December 31, 2021:

 

Investments in
Securities:

  Level 1  Level 2  Level 3  Total 

Assets:

 

Common Stocks:

     

Industrials

  $– 0 –  $122,837,813  $    – 0 –  $122,837,813 

Information Technology

   – 0 –   112,528,658   – 0 –   112,528,658 

Financials

   11,253,726   63,183,201   – 0 –   74,436,927 

Consumer Discretionary

   18,624,242   48,693,969   – 0 –   67,318,211 

Consumer Staples

   – 0 –   48,516,771   – 0 –   48,516,771 

Health Care

   – 0 –   43,295,767   – 0 –   43,295,767 

Materials

   – 0 –   23,217,623   – 0 –   23,217,623 

Communication Services

   – 0 –   18,907,336   – 0 –   18,907,336 

Short-Term Investments

   16,976,474   – 0 –   – 0 –   16,976,474 

Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund

   15,042,556   – 0 –   – 0 –   15,042,556 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total Investments in Securities

   61,896,998   481,181,138(a)    – 0 –   543,078,136 

 

abfunds.com 

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    23


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

Investments in
Securities:

  Level 1  Level 2  Level 3  Total 

Other Financial Instruments(b):

     

Assets:

 

Forward Currency Exchange Contracts

  $– 0 –  $602,732  $– 0 –  $602,732 

Liabilities:

 

Forward Currency Exchange Contracts

   – 0 –   (2,439,301  – 0 –   (2,439,301
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $    61,896,998  $    479,344,569  $– 0 –  $    541,241,567 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

(a)

A significant portion of the Fund’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1.

 

(b)

Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value.

3. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

4. Taxes

It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.

In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.

5. Investment Income and Investment Transactions

Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.

6. Class Allocations

All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.

7. Dividends and Distributions

Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .75% of the Fund’s average

 

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AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO    |    25


 

NOTES TO FINANCIAL STATEMENTS (continued)

 

daily net assets. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to 1.15%, 1.90% and 0.90% of the daily average net assets for Class A, Class C and Advisor Class shares, respectively. The Expense Caps may not be terminated by the Adviser before October 31, 2022. For the six months ended December 31, 2021, there were no expenses waived by the Adviser.

Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended December 31, 2021, the reimbursement for such services amounted to $49,045.

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. Such compensation retained by ABIS amounted to $29,218 for the six months ended December 31, 2021.

AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, serves as the distributor of the Fund’s shares. The Distributor has advised the Fund that it has retained front-end sales charges of $81 from the sale of Class A shares and received $12 and $910 in contingent deferred sales charges imposed upon redemptions by shareholders of Class A and Class C shares, respectively, for the six months ended December 31, 2021.

The Fund may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive ..10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2022. In connection with the investment by the Fund in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Fund in an amount equal to the Fund’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. For the six months ended December 31, 2021, such waiver amounted to $5,782.

 

26    |    AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

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NOTES TO FINANCIAL STATEMENTS (continued)

 

A summary of the Fund’s transactions in AB mutual funds for the six months ended December 31, 2021 is as follows:

 

Fund

 Market Value
6/30/21
(000)
  Purchases
at Cost
(000)
  Sales
Proceeds
(000)
  Market Value
12/31/21
(000)
  Dividend
Income
(000)
 

Government Money Market Portfolio

 $  12,685  $  87,472  $  83,181  $  16,976  $  1 

Government Money Market Portfolio*

  – 0 –  46,176   31,133   15,043   1 
    

 

 

  

 

 

 

Total

    $32,019  $2 
    

 

 

  

 

 

 

 

*

Investments of cash collateral for securities lending transactions (see Note E).

NOTE C

Distribution Services Agreement

The Fund has adopted a Distribution Services Agreement (the “Agreement”) pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Fund pays distribution and servicing fees to the Distributor at an annual rate of up to .25% of the Fund’s average daily net assets attributable to Class A shares and 1% of the Fund’s average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. Since the commencement of the Fund’s operations, the Distributor has incurred expenses in excess of the distribution costs reimbursed by the Fund in the amount of $0 for Class C shares. While such costs may be recovered from the Fund in future periods so long as the Agreement is in effect, the rate of the distribution and servicing fees payable under the Agreement may not be increased without a shareholder vote. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs incurred by the Distributor beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of the Fund’s shares.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

NOTE D

Investment Transactions

Purchases and sales of investment securities (excluding short-term investments) for the six months ended December 31, 2021 were as follows:

 

   Purchases  Sales 

Investment securities (excluding U.S. government securities)

  $    96,181,132  $    48,626,831 

U.S. government securities

   – 0 –   – 0 – 

The cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes. Accordingly, gross unrealized appreciation and unrealized depreciation are as follows:

 

Gross unrealized appreciation

  $    107,558,554 

Gross unrealized depreciation

   (41,183,323
  

 

 

 

Net unrealized appreciation

  $66,375,231 
  

 

 

 

1. Derivative Financial Instruments

The Fund may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.

The principal type of derivative utilized by the Fund, as well as the methods in which they may be used are:

 

  

Forward Currency Exchange Contracts

The Fund may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.

A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on forward currency exchange contracts. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Fund. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

During the six months ended December 31, 2021, the Fund held forward currency exchange contracts for hedging purposes.

The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the OTC counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination. In the event of a default by an OTC counterparty, the return of collateral with market value in excess of the Fund’s net liability, held by the defaulting party, may be delayed or denied.

The Fund’s ISDA Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Fund decline below specific levels (“net asset contingent features”). If these levels are triggered, the Fund’s OTC counterparty has the right to terminate such transaction and require the Fund to pay or receive a settlement amount in connection with the terminated transaction. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.

During the six months ended December 31, 2021, the Fund had entered into the following derivatives:

 

   Asset Derivatives   Liability Derivatives 

Derivative Type

  Statement of
Assets and
Liabilities
Location
  Fair Value   Statement of
Assets and
Liabilities
Location
   Fair Value 

Foreign currency contracts

  
Unrealized
appreciation
on forward
currency
exchange
contracts
   
$

602,732

 
   






Unrealized
depreciation
on forward
currency
exchange
contracts

 
 
 
 
 
 
   
$

2,439,301

 
    

 

 

     

 

 

 

Total

    $  602,732     $  2,439,301 
    

 

 

     

 

 

 

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Derivative Type

 

Location of Gain
or (Loss) on
Derivatives Within
Statement of
Operations

  Realized Gain
or (Loss) on
Derivatives
  Change in
Unrealized
Appreciation or
(Depreciation)
 

Foreign currency contracts

 

Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts

  

$

  (2,540,669

 

$

  (606,406

   

 

 

  

 

 

 

Total

   $(2,540,669 $(606,406
   

 

 

  

 

 

 

The following table represents the average monthly volume of the Fund’s derivative transactions during the six months ended December 31, 2021:

 

Forward Currency Exchange Contracts:

  

Average principal amount of buy contracts

  $127,415,859 

Average principal amount of sale contracts

  $  117,178,689 

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.

All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Fund’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Fund as of December 31, 2021. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.

 

Counterparty

 Derivative
Assets
Subject
to a MA
  Derivatives
Available
for Offset
  Cash
Collateral
Received*
  Security
Collateral
Received*
  Net Amount
of Derivative
Assets
 

Bank of America, NA

 $93,616  $(93,616 $– 0 –  $– 0 –  $– 0 – 

BNP Paribas SA

  24,832   (24,832  – 0 –   – 0 –   – 0 – 

Citibank, NA

  20,154   (20,154  – 0 –   – 0 –   – 0 – 

Goldman Sachs Bank USA

  132,546   (80,743  – 0 –   – 0 –   51,803 

HSBC Bank USA

  18,520   (18,520  – 0 –   – 0 –   – 0 – 

State Street Bank & Trust Co.

  301,315   (84,963  – 0 –   – 0 –   216,352 

UBS AG

  11,749   (11,749  – 0 –   – 0 –   – 0 – 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $    602,732  $    (334,577 $    – 0 –  $    – 0 –  $    268,155^ 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Counterparty

 Derivative
Liabilities
Subject
to a MA
  Derivatives
Available
for Offset
  Cash
Collateral
Pledged*
  Security
Collateral
Pledged*
  Net Amount
of Derivative
Liabilities
 

Bank of America, NA

 $264,551  $(93,616 $– 0 –  $– 0 –  $170,935 

Barclays Bank PLC

  8,618   – 0 –   – 0 –   – 0 –   8,618 

BNP Paribas SA

  90,152   (24,832  – 0 –   – 0 –   65,320 

Citibank, NA

  218,926   (20,154  – 0 –   – 0 –   198,772 

Goldman Sachs Bank USA

  80,743   (80,743  – 0 –   – 0 –   – 0 – 

HSBC Bank USA

  603,713   (18,520  – 0 –   – 0 –   585,193 

Natwest Markets PLC

  517,508   – 0 –   – 0 –   – 0 –   517,508 

State Street Bank & Trust Co.

  84,963   (84,963  – 0 –   – 0 –   – 0 – 

UBS AG

  570,127   (11,749  – 0 –   – 0 –   558,378 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $    2,439,301  $    (334,577 $    – 0 –  $    – 0 –  $    2,104,724^ 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

*

The actual collateral received/pledged may be more than the amount reported due to over-collateralization.

 

^

Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty.

2. Currency Transactions

The Fund may invest in non-U.S. Dollar-denominated securities on a currency hedged or unhedged basis. The Fund may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Fund may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Fund and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Fund may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).

NOTE E

Securities Lending

The Fund may enter into securities lending transactions. Under the Fund’s securities lending program, all loans of securities will be collateralized continually by cash collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Fund cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized by cash, the Fund will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Fund in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. If the Fund receives non-cash collateral, the Fund will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. The Fund will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Fund amounts equal to any dividend income or other distributions from the securities; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Fund will not be able to exercise voting rights with respect to any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Fund, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Fund earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Fund in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Fund’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Fund as an acquired fund fee and expense. When the Fund lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Fund in the case of default of any securities borrower.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

A summary of the Fund’s transactions surrounding securities lending for the six months ended December 31, 2021 is as follows:

 

Market Value
of Securities

on Loan*

  Cash
Collateral*
  Market Value
of Non-Cash
Collateral*
  Income from
Borrowers
  Government Money
Market Portfolio
 
 Income
Earned
  Advisory
Fee
Waived
 
$  14,374,317  $  15,042,556  $  – 0 –  $  23,199  $  509  $  2 

 

*

As of December 31, 2021.

NOTE F

Capital Stock

Each class consists of 1,000,000,000 authorized shares. Transactions in capital shares for each class were as follows:

 

        
   Shares     Amount    
   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,
2021
     Six Months Ended
December 31, 2021
(unaudited)
  

Year Ended
June 30,

2021

    
  

 

 

  
Class A

 

     

Shares sold

   108,136   559,442   $1,619,349  $7,757,064  

 

  

Shares issued in reinvestment of distributions

   11,893   6,363    170,552   87,175  

 

  

Shares converted from Class C

   130   232    1,981   3,546  

 

  

Shares redeemed

   (53,360  (43,592   (807,847  (620,014 

 

  

Net increase

   66,799   522,445   $984,035  $7,227,771  

 

  
       
Class C

 

     

Shares sold

   8,752   113,773   $128,078  $1,521,812  

 

  

Shares issued in reinvestment of distributions

   2,194   1,665    30,175   22,060  

 

  

Shares converted to Class A

   (136  (241   (1,981  (3,546 

 

  

Shares redeemed

   (15,189  (23,519   (225,206  (331,635 

 

  

Net increase (decrease)

   (4,379  91,678   $(68,934 $1,208,691  

 

  
       
Advisor Class

 

     

Shares sold

   6,456,369   20,884,203   $97,865,793  $295,820,942  

 

  

Shares issued in reinvestment of distributions

   503,631   229,056    7,292,563   3,160,973  

 

  

Shares redeemed

   (2,805,477  (3,710,652   (41,861,339  (53,321,227 

 

  

Net increase

   4,154,523   17,402,607   $63,297,017  $245,660,688  

 

  

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

NOTE G

Risks Involved in Investing in the Fund

Market Risk—The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Fund’s growth approach, may underperform the market generally.

Focused Portfolio Risk—Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund’s net asset value, or NAV.

Sector Risk—The Fund may have more risk because it may invest to a significant extent in one or more particular market sectors, such as the information technology sector. 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.

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, and because these investments may be subject to increased economic, political, regulatory or other uncertainties.

Currency Risk—Fluctuations in currency exchange rates may negatively affect the value of the Fund’s investments or reduce its returns.

Capitalization Risk—Investments in mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.

LIBOR Transition and Associated Risk—A Fund may be exposed to debt securities, derivatives or other financial instruments that are tied to the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In 2017, the United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, announced a desire to

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

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. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), has begun publishing a Secured Overnight Funding Rate (referred to as SOFR), which is intended to replace U.S. dollar LIBOR. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication. Markets are slowly developing in response to these new rates.

The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Fund’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Fund’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. The potential effects of a phase out of LIBOR on LIBOR-based investments are currently unknown.

Indemnification Risk—In the ordinary course of business, the Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Fund has not accrued any liability in connection with these indemnification provisions.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

Management Risk—The Fund is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.

NOTE H

Joint Credit Facility

A number of open-end mutual funds managed by the Adviser, including the Fund, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing related to redemptions and other short term liquidity requirements, subject to certain restrictions. Commitment fees related to the Facility are paid by the participating funds and are included in miscellaneous expenses in the statement of operations. The Fund did not utilize the Facility during the six months ended December 31, 2021.

NOTE I

Distributions to Shareholders

The tax character of distributions to be paid for the year ending June 30, 2022 will be determined at the end of the current fiscal year. The tax character of distributions paid during the fiscal years ended June 30, 2021 and June 30, 2020 were as follows:

 

   2021   2020 

Distributions paid from:

    

Ordinary income

  $    174,089   $120,160 

Net long-term capital gains

   4,163,984    816,179 
  

 

 

   

 

 

 

Total taxable distributions paid

  $    4,338,073   $    936,339 
  

 

 

   

 

 

 

As of June 30, 2021, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income

  $4,000,960 

Undistributed capital gains

   6,600,275 

Other losses

   (297,062)(a) 

Unrealized appreciation/(depreciation)

       86,681,675(b) 
  

 

 

 

Total accumulated earnings/(deficit)

  $    96,985,848 
  

 

 

 

 

(a)

As of June 30, 2021, the Fund had a qualified late-year ordinary loss deferral of $297,062.

 

(b)

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments and the tax deferral of losses on wash sales.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of June 30, 2021, the Fund did not have any capital loss carryforwards.

NOTE J

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board issued an Accounting Standards Update, ASU 2020-04, “Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance to ease the potential accounting burden due to the discontinuation of the LIBOR and other interbank-offered based reference rates. ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact, if any, of applying ASU 2020-04.

NOTE K

Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Fund’s financial statements through this date.

 

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FINANCIAL HIGHLIGHTS

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class A 
  

Six Months
Ended
December 31,
2021

(unaudited)

  Year Ended June 30, 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  15.33   $  11.66   $  11.02   $  11.54   $  10.50   $  8.46 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  (.05  .02   .01   .02   .08   .05 

Net realized and unrealized gain (loss) on investment transactions and foreign currency

  (.55  3.86   .74   .15   1.32   2.04 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase (decrease) in net asset value from operations

  (.60  3.88   .75   .17   1.40   2.09 
 

 

 

 

Less: Dividends and Distributions

      

Dividends from net investment income

  – 0 –   – 0 –   – 0 –   (.00)(c)   (.08  (.05

Distributions from net realized gain on investment transactions

  (.27  (.21  (.11  (.69  (.28  – 0 – 
 

 

 

 

Total dividends and distributions

  (.27  (.21  (.11  (.69  (.36  (.05
 

 

 

 

Net asset value, end of period

  $  14.46   $  15.33   $  11.66   $  11.02   $  11.54   $  10.50 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)(e)

  (3.93)%   33.53 %   6.75 %   2.72 %   13.43 %   24.83 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $10,663   $10,284   $1,729   $498   $286   $11 

Ratio to average net assets of:

      

Expenses, net of waivers/reimbursements(f)

  1.11 %^   1.15 %   1.22 %   1.29 %   1.29 %   1.29 % 

Expenses, before waivers/reimbursements(f)

  1.11 %^   1.17 %   1.47 %   1.85 %   2.08 %   8.96 % 

Net investment income (loss)(b)

  (.61)%^   .14 %   .12 %   .23 %   .67 %   .54 % 

Portfolio turnover rate

  10 %   25 %   30 %   34 %   34 %   66 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .01 %   .01 %   .01 %   .01 % 

See footnote summary on page 41.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Class C 
  

Six Months
Ended
December 31,
2021

(unaudited)

  Year Ended June 30, 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  14.77   $  11.32   $  10.78   $  11.38   $  10.39   $  8.39 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  (.10  (.09  (.08  (.02  .00(c)   (.02

Net realized and unrealized gain (loss) on investment transactions and foreign currency

  (.54  3.75   .73   .11   1.30   2.02 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase (decrease) in net asset value from operations

  (.64  3.66   .65   .09   1.30   2.00 
 

 

 

 

Less: Dividends and Distributions

      

Dividends from net investment income

  – 0 –   – 0 –   – 0 –   – 0 –   (.03  – 0 – 

Distributions from net realized gain on investment transactions

  (.27  (.21  (.11  (.69  (.28  – 0 – 
 

 

 

 

Total dividends and distributions

  (.27  (.21  (.11  (.69  (.31  – 0 – 
 

 

 

 

Net asset value, end of period

  $  13.86   $  14.77   $  11.32   $  10.78   $  11.38   $  10.39 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)(e)

  (4.35)%   32.59 %   5.97 %   2.00 %   12.57 %   23.84 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $1,732   $1,909   $426   $291   $172   $28 

Ratio to average net assets of:

      

Expenses, net of waivers/reimbursements(f)

  1.86 %^   1.90 %   1.99 %   2.04 %   2.04 %   2.04 % 

Expenses, before waivers/reimbursements(f)

  1.87 %^   1.93 %   2.27 %   2.59 %   2.89 %   9.39 % 

Net investment income (loss)(b)

  (1.36)%^   (.66)%   (.79)%   (.17)%   .02 %   (.20)% 

Portfolio turnover rate

  10 %   25 %   30 %   34 %   34 %   66 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .01 %   .01 %   .01 %   .01 % 

See footnote summary on page 41.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

  Advisor Class 
  

Six Months
Ended
December 31,
2021

(unaudited)

  Year Ended June 30, 
  2021  2020  2019  2018  2017 
 

 

 

 

Net asset value, beginning of period

  $  15.46   $  11.73   $  11.06   $  11.57   $  10.51   $  8.47 
 

 

 

 

Income From Investment Operations

      

Net investment income (loss)(a)(b)

  (.03  .05   .04   .06   .06   .20 

Net realized and unrealized gain (loss) on investment transactions and foreign currency

  (.56  3.89   .75   .13   1.37   1.91 

Contributions from Affiliates

  – 0 –   – 0 –   .00(c)   – 0 –   – 0 –   – 0 – 
 

 

 

 

Net increase (decrease) in net asset value from operations

  (.59  3.94   .79   .19   1.43   2.11 
 

 

 

 

Less: Dividends and Distributions

      

Dividends from net investment income

  – 0 –   – 0 –   (.01  (.01  (.09  (.07

Distributions from net realized gain on investment transactions

  (.27  (.21  (.11  (.69  (.28  – 0 – 
 

 

 

 

Total dividends and distributions

  (.27  (.21  (.12  (.70  (.37  (.07
 

 

 

 

Net asset value, end of period

  $  14.60   $  15.46   $  11.73   $  11.06   $  11.57   $  10.51 
 

 

 

 

Total Return

      

Total investment return based on net asset value(d)(e)

  (3.83)%   33.84 %   7.11 %   3.01 %   13.61 %   25.12 % 

Ratios/Supplemental Data

      

Net assets, end of period (000’s omitted)

  $514,322   $480,418   $160,265   $67,054   $45,424   $32,602 

Ratio to average net assets of:

      

Expenses, net of waivers/reimbursements(f)

  .86 %^   .90 %   .98 %   1.04 %   1.04 %   1.04 % 

Expenses, before waivers/reimbursements(f)

  .86 %^   .93 %   1.23 %   1.59 %   1.80 %   3.75 % 

Net investment income (loss)(b)

  (.36)%^   .32 %   .37 %   .54 %   .53 %   2.04 % 

Portfolio turnover rate

  10 %   25 %   30 %   34 %   34 %   66 % 
      
 

  Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying

   

portfolios

  .00 %^   .00 %   .01 %   .01 %   .01 %   .01 % 

See footnote summary on page 41.

 

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FINANCIAL HIGHLIGHTS (continued)

Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period

 

(a)

Based on average shares outstanding.

 

(b)

Net of expenses waived/reimbursed by the Adviser.

 

(c)

Amount is less than $.005.

 

(d)

Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total return does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Total investment return calculated for a period of less than one year is not annualized.

 

(e)

Includes the impact of reimbursements from the Adviser which enhanced the Fund’s performance for the year ended June 30, 2020 by .01%.

 

(f)

In connection with the Fund’s investments in affiliated underlying portfolios, the Fund incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Fund in an amount equal to the Fund’s pro rata share of certain acquired fund fees and expenses, and for the years ended June 30, 2020, June 30, 2019, June 30, 2018 and June 30, 2017 such waiver amounted to .01%, .01%, .01% and .01% respectively.

 

^

Annualized.

See notes to financial statements.

 

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BOARD OF DIRECTORS

 

Marshall C. Turner, Jr(1),

Chairman

Jorge A. Bermudez(1)

Michael J. Downey(1)

Onur Erzan, President and Chief Executive Officer

  

Nancy P. Jacklin(1)

Jeanette W. Loeb(1)

Carol C. McMullen(1)

Garry L. Moody(1)

OFFICERS

Debasashi (Dev) Chakrabarti(2), Vice President

Mark Phelps(2)*, Vice President

Emilie D. Wrapp, Secretary

Michael B. Reyes, Senior Vice President and Senior Analyst

  

Joseph J. Mantineo, Treasurer and Chief Financial Officer

Phyllis J. Clarke, Controller

Vincent S. Noto, Chief Compliance Officer

 

Custodian and Accounting Agent

State Street Bank and Trust Company

State Street Corporation CCB/5

1 Iron Street

Boston, MA 02210

 

Principal Underwriter

AllianceBernstein Investments, Inc.

501 Commerce Street

Nashville, TN 37203

 

Transfer Agent

AllianceBernstein Investor Services Inc.

P.O. Box 786003

San Antonio, TX 78278

Toll-Free (800) 221-5672

  

Independent Registered Public Accounting Firm

Ernst & Young LLP

One Manhattan West

New York, NY 10001

 

Legal Counsel

Seward & Kissel LLP

One Battery Park Plaza

New York, NY 10004

 

1

Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee.

 

2

The day-to-day management of, and investment decisions for, the Fund’s portfolio are made by the Concentrated International Growth Investment Team. Messrs. Phelps and Chakrabarti are the persons with the most significant responsibility for day-to-day management of the Fund’s portfolio.

 

*

Mr. Phelps is expected to retire from the Adviser effective December 31, 2022.

 

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Operation and Effectiveness of the Fund’s Liquidity Risk Management Program:

In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.

One of the requirements of the Liquidity Rule is for the Fund to designate an Administrator of the Fund’s Liquidity Risk Management Program. The Administrator of the Fund’s LRMP is AllianceBernstein L.P., the Fund’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”).

Another requirement of the Liquidity Rule is for the Fund’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Fund’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2021, which covered the period January 1, 2020 through December 31, 2020 (the “Program Reporting Period”).

The LRMP’s principal objectives include supporting the Fund’s compliance with limits on investments in illiquid assets and mitigating the risk that the Fund will be unable to meet its redemption obligations in a timely manner.

Pursuant to the LRMP, the Fund classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.

During the Program Reporting Period, the Committee reviewed whether the Fund’s strategy is appropriate for an open-end structure, incorporating any holdings of less liquid and illiquid assets. If the Fund participated in derivative transactions, the exposure from such transactions were considered in the LRMP.

The Committee also performed an analysis to determine whether the Fund is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Fund’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Fund’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.

The Adviser informed the Fund Board that the Committee believes the Fund’s LRMP is adequately designed, has been implemented as intended,

 

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and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP. During the Program Reporting Period, beginning in March 2020, all financial markets experienced extreme levels of price volatility and relative illiquidity resulting from the COVID-19 impacts on the global economy. This extreme relative illiquidity resulted in significantly wider bid-ask spreads to transact in securities, including many of those securities held by the Fund, and in a diminished depth of liquidity in most markets, to varying degrees. Nonetheless, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions during the Program Reporting Period.

 

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Information Regarding the Review and Approval of the Fund’s Advisory Agreement

The disinterested directors (the “directors”) of AB Cap Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser (the “Advisory Agreement”) in respect of AB Concentrated International Growth Portfolio (the “Fund”) at a meeting held by video conference on May 3-5, 2021 (the “Meeting”).

Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.

The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.

The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. The directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Fund and the overall arrangements between the Fund and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters

 

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as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:

Nature, Extent and Quality of Services Provided

The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Fund to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant at the request of the directors. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.

Costs of Services Provided and Profitability

The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2019 and 2020 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the

 

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Adviser’s relationship with the Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.

Fall-Out Benefits

The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of certain classes of the Fund’s shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s profitability to the Adviser would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.

Investment Results

In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.

At the Meeting, the directors reviewed performance information prepared by an independent service provide (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1- and 3-year periods ended February 28, 2021 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.

Advisory Fees and Other Expenses

The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund’s contractual advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.

 

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The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s proposed fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements.

The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.

The directors noted that the Fund may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued, and rules adopted, by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.

 

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In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s most recent semi-annual period (and reflected the Fund’s advisory fee rate reduction effective March 2, 2020 for the entire period). The directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.

Economies of Scale

The directors noted that the advisory fee schedule for the Fund does not contain breakpoints and that they had discussed their strong preference for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the Meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. The directors informed the Adviser that they would monitor the Fund’s asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.

 

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This page is not part of the Shareholder Report or the Financial Statements.

 

 

AB FAMILY OF FUNDS

 

US EQUITY

CORE

Core Opportunities Fund

Select US Equity Portfolio

Sustainable US Thematic Portfolio1

GROWTH

Concentrated Growth Fund

Discovery Growth Fund

Growth Fund

Large Cap Growth Fund

Small Cap Growth Portfolio

VALUE

Discovery Value Fund

Equity Income Fund

Relative Value Fund

Small Cap Value Portfolio

Value Fund

INTERNATIONAL/ GLOBAL EQUITY

CORE

Global Core Equity Portfolio

International Strategic Core Portfolio

Sustainable Global Thematic Fund

Tax-Managed Wealth Appreciation Strategy

Wealth Appreciation Strategy

GROWTH

Concentrated International Growth Portfolio

Sustainable International Thematic Fund

VALUE

All China Equity Portfolio

International Value Fund

FIXED INCOME

MUNICIPAL

High Income Municipal Portfolio

Intermediate California Municipal Portfolio

Intermediate Diversified Municipal Portfolio

Intermediate New York Municipal Portfolio

Municipal Bond Inflation Strategy

Tax-Aware Fixed Income Opportunities Portfolio

National Portfolio

Arizona Portfolio

California Portfolio

Massachusetts Portfolio

Minnesota Portfolio

New Jersey Portfolio

New York Portfolio

Ohio Portfolio

Pennsylvania Portfolio

Virginia Portfolio

TAXABLE

Bond Inflation Strategy

Global Bond Fund

High Income Fund

High Yield Portfolio1

Income Fund

Intermediate Duration Portfolio

Limited Duration High Income Portfolio

Short Duration Income Portfolio

Short Duration Portfolio

Sustainable Thematic Credit Portfolio

Total Return Bond Portfolio

ALTERNATIVES

All Market Real Return Portfolio

Global Real Estate Investment Fund

Select US Long/Short Portfolio

MULTI-ASSET

All Market Income Portfolio

All Market Total Return Portfolio

Emerging Markets Multi-Asset Portfolio

Global Risk Allocation Fund

Sustainable Thematic Balanced Portfolio1

Tax-Managed All Market Income Portfolio

CLOSED-END FUNDS

AllianceBernstein Global High Income Fund

AllianceBernstein National Municipal Income Fund

 

We also offer Government Money Market Portfolio, which serves as the money market fund exchange vehicle for the AB mutual funds. You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

 

1

Prior to August 23, 2021, Sustainable US Thematic Portfolio was named FlexFee US Thematic Portfolio. Prior to April 30, 2021, High Yield Portfolio was named FlexFee High Yield Portfolio. Prior to December 1, 2021, Sustainable Thematic Balanced Portfolio was named Conservative Wealth Strategy.

 

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NOTES

 

 

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NOTES

 

 

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LOGO

AB CONCENTRATED INTERNATIONAL GROWTH PORTFOLIO

1345 Avenue of the Americas

New York, NY 10105

800 221 5672

 

CIG-0152-1221                LOGO


DEC    12.31.21

LOGO

SEMI-ANNUAL REPORT

AB GLOBAL CORE EQUITY PORTFOLIO

 

LOGO

 

As of January 1, 2021, as permitted by new regulations adopted by the Securities and Exchange Commission, the Fund’s annual and semi-annual shareholder reports are no longer sent by mail, unless you specifically requested paper copies of the reports. Instead, the reports are made available on a website, and you will be notified by mail each time a report is posted and provided with a website address to access the report.

You may elect to receive all future reports in paper form free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports; if you invest directly with the Fund, you can call the Fund at (800) 221 5672. Your election to receive reports in paper form will apply to all funds held in your account with your financial intermediary or, if you invest directly, to all AB Mutual Funds you hold.


 

 

 
Investment Products Offered 

  Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed

Investors should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.

This shareholder report must be preceded or accompanied by the Fund’s prospectus for individuals who are not current shareholders of the Fund.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abfunds.com, or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227 4618.

The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC 0330. AB publishes full portfolio holdings for the Fund monthly at www.abfunds.com.

AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.

The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.


 

FROM THE PRESIDENT  LOGO

Dear Shareholder,

We’re pleased to provide this report for the AB Global Core Equity Portfolio (the “Fund”). Please review the discussion of Fund performance, the market conditions during the reporting period and the Fund’s investment strategy.

At AB, we’re striving to help our clients achieve better outcomes by:

 

+  

Fostering diverse perspectives that give us a distinctive approach to navigating global capital markets

 

+  

Applying differentiated investment insights through a connected global research network

 

+  

Embracing innovation to design better ways to invest and leading-edge mutual-fund solutions

Whether you’re an individual investor or a multibillion-dollar institution, we’re putting our knowledge and experience to work for you every day.

For more information about AB’s comprehensive range of products and shareholder resources, please log on to www.abfunds.com.

Thank you for your investment in AB mutual funds—and for placing your trust in our firm.

Sincerely,

 

LOGO

Onur Erzan

President and Chief Executive Officer, AB Mutual Funds

 

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SEMI-ANNUAL REPORT

 

February 7, 2022

This report provides management’s discussion of fund performance for the AB Global Core Equity Portfolio for the semi-annual reporting period ended December 31, 2021.

The Fund’s investment objective is to seek long-term growth of capital.

NAV RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

   6 Months   12 Months 
AB GLOBAL CORE EQUITY PORTFOLIO    
Class A Shares   2.40%    17.84% 
Class C Shares   2.01%    16.96% 
Advisor Class Shares1   2.52%    18.14% 
MSCI ACWI (net)   5.55%    18.54% 

 

1

Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions.

INVESTMENT RESULTS

The table above shows the Fund’s performance compared with its benchmark, the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) (net), for the six- and 12-month periods ended December 31, 2021.

All share classes of the Fund underperformed the benchmark for both periods, before sales charges. During the six-month period, overall stock selection detracted from performance, relative to the benchmark. Selection within the consumer-discretionary and technology sectors detracted most, while selection in communication services and real estate contributed. Sector selection was also negative. Overweights to communication services and consumer discretionary detracted, while an overweight to financials and an underweight to materials contributed. Country positioning (a result of bottom-up security analysis combined with fundamental research) detracted from performance; an overweight to South Korea detracted most, while an overweight to the Netherlands contributed.

 

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For the 12-month period, overall sector selection detracted, as an overweight to communication services and an underweight to energy offset gains from an overweight to financials and an underweight to consumer staples. Stock selection contributed, particularly selection within communication services and financials, while selection in consumer discretionary and technology detracted. Overall country positioning was positive; an overweight to the Netherlands contributed, while an overweight to Macau detracted.

The Fund did not utilize derivatives during the six- or 12-month periods.

MARKET REVIEW AND INVESTMENT STRATEGY

Global equities recorded positive returns while emerging markets declined during the six-month period ended December 31, 2021. Global markets were supported by accommodative monetary policy and strong company earnings growth, while economic turbulence in China, geopolitical risks and inflation pressured emerging markets. Increased market volatility periodically sent risk assets lower, but investors continued to buy the dip. Toward the end of the period, global markets fell as the rapid spread of the coronavirus omicron variant triggered concern that new restrictions could derail the economic recovery. Encouraging developments in COVID-19 treatments and vaccines and a reluctance to reinstate shutdowns helped investors look past the potential impact of the omicron variant. Stock markets gave back gains, however, after the US Federal Reserve (the “Fed”) took a hawkish pivot and confirmed that it would accelerate the wind-down of its bond purchases and raise rates multiple times in 2022. After digesting the Fed’s comments, equity markets rose as investors appeared to adjust to the shift and remained focused on still generally supportive monetary policy. Growth outperformed value, in terms of style, and large-cap stocks outperformed their small-cap peers.

The Fund’s Senior Investment Management Team continues to invest in firms that are attractively valued in a core portfolio setup, and to minimize unintended factor risks.

INVESTMENT POLICIES

The Fund invests primarily in a portfolio of equity securities of issuers from markets around the world. Under normal circumstances, the Fund invests at least 80% of its net assets in equity securities, at least 40% of its net assets in securities of non-US companies, and invests in companies in at least three countries (including the United States).

The Fund is principally comprised of companies considered by the Adviser to offer good prospects for attractive returns relative to the general stock market. The Adviser seeks companies that are attrac-

 

(continued on next page)

 

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AB GLOBAL CORE EQUITY PORTFOLIO    |    3


tively valued and have the ability to generate high and sustainable returns on invested capital. In addition to returns on invested capital, other criteria that the Adviser considers include strong business fundamentals, capable management, prudent corporate governance, a strong balance sheet, strong earnings power, high earnings quality, low downside risk and substantial upside potential. In managing the Fund, the Adviser does not seek to have a bias towards any investment style, economic sector, country or company size. The Fund’s holdings of non-US companies frequently include companies located in emerging markets, and at times emerging-market companies will make up a significant portion of the Fund.

Fluctuations in currency exchange rates can have a dramatic impact on the returns of equity securities. While the Adviser may hedge the foreign currency exposure resulting from the Fund’s security positions through the use of currency-related derivatives, it is not required to do so.

 

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DISCLOSURES AND RISKS

 

Benchmark Disclosure

The MSCI ACWI is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI ACWI (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. Net returns include the reinvestment of dividends after deduction of non-US withholding tax. An investor cannot invest directly in an index or average, and their results are not indicative of the performance for any specific investment, including the Fund.

A Word About Risk

Market Risk: The value of the Fund’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing may underperform the market generally.

Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.

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.

Sector Risk: The Fund may have more risk because it may invest to a significant extent in one or more particular market sectors, such as the information-technology or financial-services sector. 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.

Management Risk: The Fund is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Fund,

 

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DISCLOSURES AND RISKS (continued)

 

but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.

These risks are fully discussed in the Fund’s prospectus. As with all investments, you may lose money by investing in the Fund.

An Important Note About Historical Performance

The investment return and principal value of an investment in the Fund will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by visiting www.abfunds.com.

All fees and expenses related to the operation of the Fund have been deducted. Net asset value (“NAV”) returns do not reflect sales charges; if sales charges were reflected, the Fund’s quoted performance would be lower. SEC returns reflect the applicable sales charges for each share class: a 4.25% maximum front-end sales charge for Class A shares and a 1% 1-year contingent deferred sales charge for Class C shares. Returns for the different share classes will vary due to different expenses associated with each class. Performance assumes reinvestment of distributions and does not account for taxes.

 

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HISTORICAL PERFORMANCE

 

AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2021 (unaudited)

 

   NAV Returns   

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES    
1 Year   17.84%    12.83% 
5 Years   14.39%    13.39% 
Since Inception1   10.60%    9.94% 
CLASS C SHARES    
1 Year   16.96%    15.96% 
5 Years   13.53%    13.53% 
Since Inception1   9.76%    9.76% 
ADVISOR CLASS SHARES2    
1 Year   18.14%    18.14% 
5 Years   14.68%    14.68% 
Since Inception1   10.86%    10.86% 

The Fund’s current prospectus fee table shows the Fund’s total annual operating expense ratios as 1.06%, 1.81% and 0.81% for Class A, Class C and Advisor Class shares, respectively, gross of any fee waivers or expense reimbursements. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.

 

1

Inception date: 11/12/2014.

 

2

Please note that this share class is offered at NAV to eligible investors and the SEC returns are the same as the NAV returns. Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

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HISTORICAL PERFORMANCE (continued)

 

SEC AVERAGE ANNUAL RETURNS

AS OF THE MOST RECENT CALENDAR QUARTER-END

DECEMBER 31, 2021 (unaudited)

 

   

SEC Returns

(reflects applicable
sales charges)

 
CLASS A SHARES  
1 Year   12.83% 
5 Years   13.39% 
Since Inception1   9.94% 
CLASS C SHARES  
1 Year   15.96% 
5 Years   13.53% 
Since Inception1   9.76% 
ADVISOR CLASS SHARES2   
1 Year   18.14% 
5 Years   14.68% 
Since Inception1   10.86% 

 

1

Inception date: 11/12/2014.

 

2

Please note that this share class is for investors purchasing shares through accounts established under certain fee-based programs sponsored and maintained by certain broker-dealers and financial intermediaries, institutional pension plans and/or investment advisory clients of, and certain other persons associated with, the Adviser and its affiliates or the Fund.

 

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EXPENSE EXAMPLE

(unaudited)

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The table below also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the hypothetical example is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

  Beginning
Account Value
7/1/2021
  Ending
Account Value
12/31/2021
  Expenses Paid
During Period*
  Annualized
Expense Ratio*
 
Class A    

Actual

 $    1,000  $    1,024.00  $    5.25   1.03

Hypothetical**

 $1,000  $1,020.01  $5.24   1.03

 

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EXPENSE EXAMPLE (continued)

 

  Beginning
Account Value
7/1/2021
  Ending
Account Value
12/31/2021
  Expenses Paid
During Period*
  Annualized
Expense Ratio*
 
Class C    

Actual

 $    1,000  $    1,020.10  $    9.06   1.78

Hypothetical**

 $1,000  $1,016.23  $9.05   1.78
Advisor Class    

Actual

 $1,000  $1,025.20  $3.98   0.78

Hypothetical**

 $1,000  $1,021.27  $3.97   0.78

 

*

Expenses are equal to the classes’ annualized expense ratios multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

**

Assumes 5% annual return before expenses.

 

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PORTFOLIO SUMMARY

December 31, 2021 (unaudited)

 

PORTFOLIO STATISTICS

Net Assets ($mil): $2,863.0

 

 

 

LOGO

 

 

 

LOGO

 

1

All data are as of December 31, 2021. The Fund’s sector and country breakdowns are expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. “Other” country weightings represent 0.7% or less in the following: Belgium, Denmark and Finland.

Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Fund’s prospectus.

 

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PORTFOLIO SUMMARY (continued)

December 31, 2021 (unaudited)

 

TEN LARGEST HOLDINGS1

 

Company  U.S. $ Value   Percent of
Net Assets
 
Microsoft Corp.  $162,198,728    5.7
Anthem, Inc.   125,125,670    4.4 
Meta Platforms, Inc. – Class A   115,889,056    4.0 
Otis Worldwide Corp.   102,727,102    3.6 
Coca-Cola Co., (The)   101,284,389    3.5 
Alphabet, Inc. – Class C   100,254,213    3.5 
Samsung Electronics Co., Ltd.   96,594,024    3.4 
Cognizant Technology Solutions Corp. – Class A   90,388,735    3.1 
Visa, Inc. – Class A   76,265,233    2.7 
Prosus NV   74,282,486    2.6 
  $  1,045,009,636    36.5

 

1

Long-term investments.

 

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PORTFOLIO OF INVESTMENTS

December 31, 2021 (unaudited)

 

Company        
    
Shares
   U.S. $ Value 

 

 

COMMON STOCKS – 99.4%

    

Information Technology – 23.8%

    

Electronic Equipment, Instruments & Components – 0.6%

    

IPG Photonics Corp.(a)

   96,970   $16,692,416 
    

 

 

 

IT Services – 7.7%

    

Akamai Technologies, Inc.(a)

   323,504    37,862,908 

Cognizant Technology Solutions Corp. – Class A

   1,018,809    90,388,735 

PayPal Holdings, Inc.(a)

   88,140    16,621,441 

Visa, Inc. – Class A

   351,923    76,265,233 
    

 

 

 
     221,138,317 
    

 

 

 

Semiconductors & Semiconductor Equipment – 2.4%

    

Applied Materials, Inc.

   438,409    68,988,040 
    

 

 

 

Software – 9.7%

    

Microsoft Corp.

   482,275    162,198,728 

SAP SE

   493,267    69,422,175 

VMware, Inc. – Class A

   408,557    47,343,585 
    

 

 

 
     278,964,488 
    

 

 

 

Technology Hardware, Storage & Peripherals – 3.4%

    

Samsung Electronics Co., Ltd.

   1,470,789    96,594,024 
    

 

 

 
     682,377,285 
    

 

 

 

Health Care – 15.8%

    

Health Care Equipment & Supplies – 3.4%

    

Koninklijke Philips NV

   1,231,310    45,572,786 

Medtronic PLC

   505,077    52,250,216 
    

 

 

 
     97,823,002 
    

 

 

 

Health Care Providers & Services – 4.9%

    

Anthem, Inc.

   269,935    125,125,670 

Henry Schein, Inc.(a)

   192,315    14,910,182 
    

 

 

 
     140,035,852 
    

 

 

 

Life Sciences Tools & Services – 1.6%

    

Thermo Fisher Scientific, Inc.

   69,082    46,094,274 
    

 

 

 

Pharmaceuticals – 5.9%

    

AstraZeneca PLC (Sponsored ADR)

   494,794    28,821,750 

Roche Holding AG

   160,028    66,389,417 

Sanofi

   722,157    72,464,142 
    

 

 

 
     167,675,309 
    

 

 

 
     451,628,437 
    

 

 

 

 

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PORTFOLIO OF INVESTMENTS (continued)

 

Company        
    
Shares
   U.S. $ Value 

 

 

Communication Services – 13.5%

    

Diversified Telecommunication Services – 1.9%

    

Comcast Corp. – Class A

   1,098,397   $55,282,321 
    

 

 

 

Entertainment – 3.1%

    

Activision Blizzard, Inc.

   739,246    49,182,036 

Electronic Arts, Inc.

   293,647    38,732,039 
    

 

 

 
     87,914,075 
    

 

 

 

Interactive Media & Services – 7.5%

    

Alphabet, Inc. – Class C(a)

   34,647    100,254,213 

Meta Platforms, Inc. – Class A(a)

   344,549    115,889,056 
    

 

 

 
     216,143,269 
    

 

 

 

Wireless Telecommunication Services – 1.0%

    

SoftBank Group Corp.

   579,500    27,781,327 
    

 

 

 
     387,120,992 
    

 

 

 

Financials – 13.0%

    

Banks – 1.3%

    

ABN AMRO Bank NV (GDR)

   1,393,940    20,490,515 

Jyske Bank A/S(a)

   306,017    15,741,214 
    

 

 

 
     36,231,729 
    

 

 

 

Capital Markets – 9.6%

    

BlackRock, Inc. – Class A

   47,765    43,731,723 

CME Group, Inc. – Class A

   78,618    17,961,068 

Credit Suisse Group AG (REG)

   5,151,692    49,948,848 

Goldman Sachs Group, Inc. (The)

   122,774    46,967,194 

Julius Baer Group Ltd.

   717,584    47,986,501 

London Stock Exchange Group PLC

   288,296    27,120,058 

Moody’s Corp.

   106,247    41,497,953 
    

 

 

 
     275,213,345 
    

 

 

 

Consumer Finance – 1.4%

    

American Express Co.

   239,470    39,177,292 
    

 

 

 

Diversified Financial Services – 0.7%

    

Groupe Bruxelles Lambert SA

   177,979    19,877,921 
    

 

 

 
     370,500,287 
    

 

 

 

Consumer Discretionary – 10.5%

    

Diversified Consumer Services – 1.4%

    

Service Corp. International/US

   563,527    40,004,782 
    

 

 

 

Hotels, Restaurants & Leisure – 2.4%

    

Compass Group PLC(a)

   1,435,897    32,327,340 

Galaxy Entertainment Group Ltd.(a)

   7,080,000    36,728,221 
    

 

 

 
     69,055,561 
    

 

 

 

 

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PORTFOLIO OF INVESTMENTS (continued)

 

Company        
    
Shares
   U.S. $ Value 

 

 

Internet & Direct Marketing Retail – 6.1%

    

Alibaba Group Holding Ltd. (ADR)(a)

   265,047   $31,484,933 

Amazon.com, Inc.(a)

   20,361    67,890,497 

Prosus NV(a)

   896,860    74,282,486 
    

 

 

 
     173,657,916 
    

 

 

 

Textiles, Apparel & Luxury Goods – 0.6%

    

Kering SA

   23,584    18,922,678 
    

 

 

 
     301,640,937 
    

 

 

 

Industrials – 10.2%

    

Building Products – 3.6%

    

Otis Worldwide Corp.

   1,179,822    102,727,102 
    

 

 

 

Electrical Equipment – 0.6%

    

Vertiv Holdings Co.

   723,386    18,062,948 
    

 

 

 

Industrial Conglomerates – 1.1%

    

3M Co.

   178,539    31,713,883 
    

 

 

 

Machinery – 4.7%

    

Dover Corp.

   285,488    51,844,621 

Parker-Hannifin Corp.

   158,350    50,374,302 

Volvo AB – Class B

   1,368,525    31,649,203 
    

 

 

 
     133,868,126 
    

 

 

 

Professional Services – 0.2%

    

RELX PLC

   151,661    4,924,402 
    

 

 

 
     291,296,461 
    

 

 

 

Consumer Staples – 5.4%

    

Beverages – 5.4%

    

Asahi Group Holdings Ltd.(b)

   1,352,535    52,652,557 

Coca-Cola Co., (The)

   1,710,596    101,284,389 
    

 

 

 
     153,936,946 
    

 

 

 

Energy – 2.8%

    

Oil, Gas & Consumable Fuels – 2.8%

    

LUKOIL PJSC (Sponsored ADR)

   286,130    25,659,404 

Neste Oyj

   303,434    14,933,745 

Royal Dutch Shell PLC – Class B

   1,829,025    40,159,138 
    

 

 

 
     80,752,287 
    

 

 

 

Real Estate – 1.8%

    

Real Estate Management & Development – 1.8%

    

CBRE Group, Inc. – Class A(a)

   470,021    51,001,979 
    

 

 

 

Materials – 1.7%

    

Chemicals – 1.7%

    

Linde PLC

   138,278    47,903,647 
    

 

 

 

 

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PORTFOLIO OF INVESTMENTS (continued)

 

Company        
    
Shares
   U.S. $ Value 

 

 

Utilities – 0.9%

    

Electric Utilities – 0.9%

    

Iberdrola SA(b)

   2,273,825   $26,922,052 
    

 

 

 

Total Common Stocks
(cost $2,276,966,226)

     2,845,081,310 
    

 

 

 
    

SHORT-TERM INVESTMENTS – 0.1%

    

Investment Companies – 0.0%

    

AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB, 0.01%(c)(d)(e)
(cost $1,207,791)

   1,207,791    1,207,791 
    

 

 

 
     Principal
Amount
(000)
     

Time Deposits – 0.1%

    

BBH, Grand Cayman
(10.58)%, 01/03/2022

  SEK   2,489    275,501 

(1.61)%, 01/03/2022

  CHF   260    284,927 

0.00%, 01/03/2022

  HKD   2,102    269,534 

0.01%, 01/03/2022

  DKK   2,073    317,364 

Citibank, London
(0.97)%, 01/03/2022

  EUR   475    540,219 

0.01%, 01/04/2022

  GBP   211    285,079 

Sumitomo, Tokyo
(0.34)%, 01/04/2022

  JPY   32,910    286,096 
    

 

 

 

Total Time Deposits
(cost $2,258,720)

     2,258,720 
    

 

 

 

Total Short-Term Investments
(cost $3,466,511)

     3,466,511 
    

 

 

 

Total Investments Before Security Lending Collateral for Securities
Loaned – 99.5%

(cost $2,280,432,737)

     2,848,547,821 
    

 

 

 

 

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PORTFOLIO OF INVESTMENTS (continued)

 

Company        
    
Shares
   U.S. $ Value 

 

 

INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED – 0.0%

    

Investment Companies – 0.0%

    

AB Fixed Income Shares, Inc. – Government Money Market Portfolio – Class AB,
0.01%(c)(d)(e)
(cost $779,233)

   779,233   $779,233 
    

 

 

 

Total Investments – 99.5%
(cost $2,281,211,970)

     2,849,327,054 

Other assets less liabilities – 0.5%

     13,719,816 
    

 

 

 

Net Assets – 100.0%

    $2,863,046,870 
    

 

 

 

 

(a)

Non-income producing security.

 

(b)

Represents entire or partial securities out on loan. See Note E for securities lending information.

 

(c)

The rate shown represents the 7-day yield as of period end.

 

(d)

To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618.

 

(e)

Affiliated investments.

Currency Abbreviations:

CHF – Swiss Franc

DKK – Danish Krone

EUR – Euro

GBP – Great British Pound

HKD – Hong Kong Dollar

JPY – Japanese Yen

SEK – Swedish Krona

Glossary:

ADR – American Depositary Receipt

GDR – Global Depositary Receipt

PJSC – Public Joint Stock Company

REG – Registered Shares

See notes to financial statements.

 

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STATEMENT OF ASSETS & LIABILITIES

December 31, 2021 (unaudited)

 

Assets  

Investments in securities, at value
Unaffiliated issuers (cost $2,279,224,946)

  $2,847,340,030(a) 

Affiliated issuers (cost $1,987,024—including investment of cash collateral for securities loaned of $779,233)

   1,987,024 

Receivable for capital stock sold

   32,098,929 

Receivable for investment securities sold

   10,296,539 

Unaffiliated dividends receivable

   4,647,778 

Affiliated dividends receivable

   34 
  

 

 

 

Total assets

   2,896,370,334 
  

 

 

 
Liabilities  

Due to Custodian (includes foreign currency overdraft of $6,781 with a cost of $7,110)

   6,872 

Payable for investment securities purchased and foreign currency transactions

   29,888,823 

Advisory fee payable

   1,725,666 

Payable for collateral received on securities loaned

   779,233 

Payable for capital stock redeemed

   658,870 

Administrative fee payable

   43,958 

Transfer Agent fee payable

   10,251 

Distribution fee payable

   6,104 

Accrued expenses

   203,687 
  

 

 

 

Total liabilities

   33,323,464 
  

 

 

 

Net Assets

  $2,863,046,870 
  

 

 

 
Composition of Net Assets  

Capital stock, at par

  $16,558 

Additional paid-in capital

   2,276,069,707 

Distributable earnings

   586,960,605 
  

 

 

 
  $    2,863,046,870 
  

 

 

 

Net Asset Value Per Share—11 billion shares of capital stock authorized, $.0001 par value

 

Class Net Assets     Shares
Outstanding
     Net Asset
Value
 

 

 
A $25,257,988      1,464,586     $17.25

 

 
C $1,053,946      62,101     $16.97 

 

 
Advisor $  2,836,734,936      164,049,175     $  17.29 

 

 

 

(a)

Includes securities on loan with a value of $743,693 (see Note E).

 

*

The maximum offering price per share for Class A shares was $18.02 which reflects a sales charge of 4.25%.

See notes to financial statements.

 

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STATEMENT OF OPERATIONS

Six Months Ended December 31, 2021 (unaudited)

 

Investment Income   

Dividends

   

Unaffiliated issuers (net of foreign taxes withheld of $833,699)

  $    21,687,045  

Affiliated issuers

   258  

Securities lending income

   491,623  $22,178,926 
  

 

 

  
Expenses   

Advisory fee (see Note B)

   9,964,125  

Transfer agency—Class A

   1,248  

Transfer agency—Class C

   68  

Transfer agency—Advisor Class

   136,733  

Distribution fee—Class A

   30,278  

Distribution fee—Class C

   5,333  

Custody and accounting

   148,806  

Administrative

   45,863  

Registration fees

   36,616  

Audit and tax

   29,338  

Directors’ fees

   24,815  

Legal

   24,017  

Printing

   21,047  

Miscellaneous

   40,082  
  

 

 

  

Total expenses

   10,508,369  

Less: expenses waived and reimbursed by the Adviser (see Note B and Note E)

   (1,434 
  

 

 

  

Net expenses

    10,506,935 
   

 

 

 

Net investment income

    11,671,991 
   

 

 

 
Realized and Unrealized Gain (Loss) on Investment and Foreign Currency Transactions   

Net realized gain (loss) on:

   

Investment transactions

    82,362,221 

Foreign currency transactions

    (293,571

Net change in unrealized appreciation/depreciation on:

   

Investments

    (25,797,127

Foreign currency denominated assets and liabilities

    (25,141
   

 

 

 

Net gain on investment and foreign currency transactions

    56,246,382 
   

 

 

 

Net Increase in Net Assets from Operations

   $    67,918,373 
   

 

 

 

See notes to financial statements.

 

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STATEMENT OF CHANGES IN NET ASSETS

 

   Six Months Ended
December 31, 2021
(unaudited)
  Year Ended
June 30,

2021
 
Increase (Decrease) in Net Assets from Operations   

Net investment income

  $11,671,991  $20,060,433 

Net realized gain on investment and foreign currency transactions

   82,068,650   98,711,975 

Net change in unrealized appreciation/depreciation on investments and foreign currency denominated assets and liabilities

   (25,822,268  473,282,024 
  

 

 

  

 

 

 

Net increase in net assets from operations

   67,918,373   592,054,432 
Distributions to Shareholders   

Class A

   (1,102,469  (115,326

Class C

   (39,486  – 0 – 

Advisor Class

   (126,697,451  (13,822,505
Capital Stock Transactions   

Net increase

   420,356,815   691,248,738 
  

 

 

  

 

 

 

Total increase

   360,435,782   1,269,365,339 
Net Assets   

Beginning of period

   2,502,611,088   1,233,245,749 
  

 

 

  

 

 

 

End of period

  $    2,863,046,870  $    2,502,611,088 
  

 

 

  

 

 

 

See notes to financial statements.

 

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NOTES TO FINANCIAL STATEMENTS

December 31, 2021 (unaudited)

 

NOTE A

Significant Accounting Policies

AB Cap Fund, Inc. (the “Company”) is registered under the Investment Company Act of 1940 as an open-end management investment company. The Company, which is a Maryland corporation, operates as a series company comprised of 12 portfolios currently in operation. Each portfolio is considered to be a separate entity for financial reporting and tax purposes. This report relates only to the AB Global Core Equity Portfolio (the “Fund”), a diversified portfolio. The Fund has authorized the issuance of Class A, Class B, Class C, Advisor Class, Class R, Class K, Class I, Class Z, Class T, Class 1, and Class 2 shares. Class B, Class R, Class K, Class I, Class Z, Class T, Class 1, and Class 2 shares are not currently being offered. Class A shares are sold with a front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase may be subject to a contingent deferred sales charge of 1%. Class C shares are subject to a contingent deferred sales charge of 1% on redemptions made within the first year after purchase, and 0% after the first year of purchase. Effective May 31, 2021, Class C shares automatically converted to Class A shares eight years after the end of the calendar month of purchase. Prior to May 31, 2021, Class C shares automatically converted to Class A shares ten years after the end of the calendar month of purchase. Advisor Class shares are sold without an initial or contingent deferred sales charge and are not subject to ongoing distribution expenses. All 11 classes of shares have identical voting, dividend, liquidation and other rights, except that the classes bear different distribution and transfer agency expenses. Each class has exclusive voting rights with respect to its distribution plan. The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The Fund is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. The following is a summary of significant accounting policies followed by the Fund.

1. Security Valuation

Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Company’s Board of Directors (the “Board”).

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g., last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology is commonly used for short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.

Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but are not limited to, information obtained by

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Fund may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Fund values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Fund generally values many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.

2. Fair Value Measurements

In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Fund’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.

 

  

Level 1—quoted prices in active markets for identical investments

  

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

  

Level 3—significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

unobservable and significant to the fair value, these investments will be classified as Level 3.

Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of December 31, 2021:

 

Investments in

Securities

 Level 1  Level 2  Level 3  Total 

Assets:

    

Common Stocks:

    

Information Technology

 $516,361,086  $166,016,199  $– 0 –  $682,377,285 

Health Care

  267,202,092   184,426,345   – 0 –   451,628,437 

Communication Services

  359,339,665   27,781,327   – 0 –   387,120,992 

Financials

  189,335,230   181,165,057   – 0 –   370,500,287 

Consumer Discretionary

  139,380,212   162,260,725   – 0 –   301,640,937 

Industrials

  254,722,856   36,573,605   – 0 –   291,296,461 

Consumer Staples

  101,284,389   52,652,557   – 0 –   153,936,946 

Energy

  25,659,404   55,092,883   – 0 –   80,752,287 

Real Estate

  51,001,979   – 0 –   – 0 –   51,001,979 

Materials

  47,903,647   – 0 –   – 0 –   47,903,647 

Utilities

  – 0 –   26,922,052   – 0 –   26,922,052 

Short-Term Investments:

    

Investment Companies

  1,207,791   – 0 –   – 0 –   1,207,791 

Time Deposits

  – 0 –   2,258,720   – 0 –   2,258,720 

Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund

  779,233   – 0 –   – 0 –   779,233 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total Investments in Securities

 $1,954,177,584  $  895,149,470  $– 0 –  $2,849,327,054 

Other Financial Instruments*

  – 0 –   – 0 –   – 0 –   – 0 – 
 

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $  1,954,177,584  $ 895,149,470  $  – 0 –  $  2,849,327,054 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

A significant portion of the Fund’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1.

 

*

Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

3. Currency Translation

Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at the rates of exchange prevailing when accrued.

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

4. Taxes

It is the Fund’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.

In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Fund’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Fund’s financial statements.

5. Investment Income and Investment Transactions

Dividend income is recorded on the ex-dividend date or as soon as the Fund is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Fund amortizes premiums and accretes

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

discounts as adjustments to interest income. The Fund accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.

6. Class Allocations

All income earned and expenses incurred by the Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Company are charged proportionately to each portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.

7. Dividends and Distributions

Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. Income dividends and capital gains distributions are determined in accordance with federal tax regulations and may differ from those determined in accordance with U.S. GAAP. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on their federal tax basis treatment; temporary differences do not require such reclassification.

NOTE B

Advisory Fee and Other Transactions with Affiliates

Under the terms of the investment advisory agreement, the Fund pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion of the Fund’s average daily net assets, .65% of the excess over $2.5 billion up to $5 billion, and .60% of the excess of $5 billion. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses (excluding acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Fund may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to 1.15%, 1.90% and .90% of the daily average net assets for Class A, Class C and Advisor Class shares, respectively. For the six months ended December 31, 2021, there was no such reimbursement. The expense caps may not be terminated by the Adviser before October 31, 2022.

Pursuant to the investment advisory agreement, the Fund may reimburse the Adviser for certain legal and accounting services provided to the Fund by the Adviser. For the six months ended December 31, 2021, the reimbursement for such services amounted to $45,863.

 

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NOTES TO FINANCIAL STATEMENTS (continued)

 

The Fund compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Fund. ABIS may make payments t