File Nos. 2-11023
811-00126
|_| immediately upon filing pursuant to paragraph (b)
|X| on March 1, 2013 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485.
_____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
ADDITIONAL INFORMATION ABOUT THE FUNDS' RISKS AND INVESTMENTS
This section of the Prospectus provides additional information about the Funds'
investment practices and related risks. Most of these investment practices are
discretionary, which means that the Adviser may or may not decide to use them.
This Prospectus does not describe all of a Fund's investment practices and
additional information about each Fund's risks and investments can be found in
the Funds' SAI.
DERIVATIVES
Each Fund may, but is not required to, use derivatives for hedging or other
risk management purposes or as part of its investment strategies. Derivatives
are financial contracts whose value depends on, or is derived from, the value
of an underlying asset, reference rate or index. A Fund may use derivatives to
earn income and enhance returns, to hedge or adjust the risk profile of its
investments, to replace more traditional direct investments and to obtain
exposure to otherwise inaccessible markets.
There are four principal types of derivatives--options, futures, forwards and
swaps--each of which is described below. Derivatives may be (i) standardized,
exchange-traded contracts or (ii) customized, privately-negotiated contracts.
Exchange-traded derivatives tend to be more liquid and subject to less credit
risk than those that are privately negotiated.
A Fund's use of derivatives may involve risks that are different from, or
possibly greater than, the risks associated with investing directly in
securities or other more traditional instruments. These risks include the risk
that the value of a derivative instrument may not correlate perfectly, or at
all, with the value of the assets, reference rates, or indices that they are
designed to track. Other risks include: the possible absence of a liquid
secondary market for a particular instrument and possible exchange-imposed
price fluctuation limits, either of which may make it difficult or impossible
to close out a position when desired; and the risk that the counterparty will
not perform its obligations. Certain derivatives may have a leverage component
and involve leverage risk. Adverse changes in the value or level of the
underlying asset, note or index can result in a loss substantially greater than
the Fund's investment (in some cases, the potential loss is unlimited).
The Funds' investments in derivatives may include, but are not limited to, the
following:
. FORWARD CONTRACTS. A forward contract is an agreement that obligates one
party to buy, and the other party to sell, a specific quantity of an
underlying commodity or other tangible asset for an agreed-upon price at a
future date. A forward contract generally is settled by physical delivery of
the commodity or tangible asset to an agreed-upon location (rather than
settled by cash), or is rolled forward into a new forward contract or, in
the case of a non-deliverable forward, by a cash payment at maturity. The
Funds' investments in forward contracts may include the following:
- Forward Currency Exchange Contracts. A Fund may purchase or sell forward
currency exchange contracts for hedging purposes to minimize the risk from
adverse changes in the relationship between the U.S. Dollar and other
currencies or for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Other
Derivatives and Strategies--Currency Transactions". A Fund, for example, may
enter into a forward contract as a transaction hedge (to "lock in" the
U.S. Dollar price of a non-U.S. Dollar security), as a position hedge (to
protect the value of securities the Fund owns that are denominated in a
foreign currency against substantial changes in the value of the foreign
currency) or as a cross-hedge (to protect the value of securities the Fund
owns that are denominated in a foreign currency against substantial changes
in the value of that foreign currency by entering into a forward contract
for a different foreign currency that is expected to change in the same
direction as the currency in which the securities are denominated).
. FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A futures contract is a
standardized, exchange-traded agreement that obligates the buyer to buy and
the seller to sell a specified quantity of an underlying asset (or settle
for cash the value of a contract based on an underlying asset, rate or
index) at a specific price on the contract maturity date. Options on futures
contracts are options that call for the delivery of futures contracts upon
exercise. A Fund may purchase or sell futures contracts and options thereon
to hedge against changes in interest rates, securities (through index
futures or options) or currencies. A Fund may also purchase or sell futures
contracts for foreign currencies or options thereon for non-hedging purposes
as a means of making direct investments in foreign currencies, as described
below under "Other Derivatives and Strategies--Currency Transactions".
. OPTIONS. An option is an agreement that, for a premium payment or fee, gives
the option holder (the buyer) the right but not the obligation to buy (a
"call option") or sell (a "put option") the underlying asset (or settle for
cash an amount based on an underlying asset, rate or index) at a specified
price (the exercise price) during a period of time or on a specified date.
Investments in options are considered speculative. A Fund may lose the
premium paid for them if the price of the underlying security or other asset
decreased or remained the same (in the case of a call option) or increased
or remained the same (in the case of a put option). If a put or call option
purchased by a Fund were permitted to expire without being sold or
exercised, its premium would represent a loss to the Fund. The Funds'
investments in options may include the following:
- Options on Foreign Currencies. A Fund may invest in options on foreign
currencies that are privately negotiated or traded on U.S. or foreign
exchanges for hedging purposes to protect against declines in the
U.S. Dollar value of foreign currency-denominated securities held by a Fund
and
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against increases in the U.S. Dollar cost of securities to be acquired. The
purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates, although if rates move
adversely, a Fund may forfeit the entire amount of the premium plus related
transaction costs. A Fund may also invest in options on foreign currencies
for non-hedging purposes as a means of making direct investments in foreign
currencies, as described below under "Other Derivatives and
Strategies--Currency Transactions".
- Options on Securities. A Fund may purchase or write a put or call option on
securities. A Fund may write covered options, which means writing an option
for securities the Fund owns, and uncovered options.
- Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than taking or making delivery
of a security at a specified price, an option on a securities index gives
the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the
option.
- Other Option Strategies. In an effort to earn extra income, to adjust
exposure to individual securities or markets, or to protect all or a portion
of its portfolio from a decline in value, sometimes within certain ranges, a
Fund may use option strategies such as the concurrent purchase of a call or
put option, including on individual securities and stock indexes, futures
contracts (including on individual securities and stock indexes) or shares
of ETFs at one strike price and the writing of a call or put option on the
same individual security, stock index, futures contract or ETF at a higher
strike price in the case of a call option or at a lower strike price in the
case of a put option. The maximum profit from this strategy would result for
the call options from an increase in the value of the individual security,
stock index, futures contract or ETF above the higher strike price or for
the put options the decline in the value of the individual security, stock
index, futures contract or ETF below the lower strike price. If the price of
the individual security, stock index, futures contract or ETF declines in
the case of the call option or increases in the case of the put option, the
Fund has the risk of losing the entire amount paid for the call or put
options.
. SWAP TRANSACTIONS. A swap is an agreement that obligates two parties to
exchange a series of cash flows at specified intervals (payment dates) based
upon or calculated by reference to changes in specified prices or rates
(e.g., interest rates in the case of interest rate swaps, currency exchange
rates in the case of currency swaps) for a specified amount of an underlying
asset (the "notional" principal amount). Except for currency swaps, as
described below, the notional principal amount is used solely to calculate
the payment stream, but is not exchanged. Rather, most swaps are entered
into on a net basis (i.e., the two payment streams are netted out, with a
Fund receiving or paying, as the case may be, only the net amount of the two
payments). The Funds' investments in swap transactions include the following:
- Currency Swaps. A Fund may invest in currency swaps for hedging purposes to
protect against adverse changes in exchange rates between the U.S. Dollar
and other currencies or for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions". Currency swaps involve the individually negotiated exchange
by the Fund with another party of a series of payments in specified
currencies. Actual principal amounts of currencies may be exchanged by the
counterparties at the initiation, and again upon the termination of the
transaction. Therefore, the entire principal value of a currency swap is
subject to the risk that the swap counterparty will default on its
contractual delivery obligations. If there is a default by the counterparty
to the transaction, the Fund will have contractual remedies under the
transaction agreements.
- Credit Default Swap Agreements. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of payments over
the term of the contract in return for a contingent payment upon the
occurrence of a credit event with respect to an underlying reference
obligation. Generally, a credit event means bankruptcy, failure to pay,
obligation acceleration or restructuring. A Fund may be either the buyer or
seller in the transaction. If a Fund is a seller, the Fund receives a fixed
rate of income throughout the term of the contract, which typically is
between one month and ten years, provided that no credit event occurs. If a
credit event occurs, a Fund typically must pay the contingent payment to the
buyer, which will be either (i) the "par value" (face amount) of the
reference obligation, in which case the Fund will receive the reference
obligation in return or (ii) an amount equal to the difference between the
par value and the current market value of the reference obligation. The
periodic payments previously received by the Fund, coupled with the value of
any reference obligation received, may be less than the full amount it pays
to the buyer, resulting in a loss to the Fund. If a Fund is a buyer and no
credit event occurs, the Fund will lose its periodic stream of payments over
the term of the contract. However, if a credit event occurs, the buyer
typically receives full notional value for a reference obligation that may
have little or no value.
Credit default swaps may involve greater risks than if a Fund had invested
in the reference obligation directly. Credit default swaps are subject to
general market risk, liquidity risk and credit risk.
- Total Return Swaps. A Fund may enter into total return swaps in order to
take a "long" or "short" position with respect to an underlying asset. A
total return swap involves commitments to pay interest in exchange for a
market-linked return based on a notional amount of the underlying asset.
Therefore, when a Fund enters into a total return
47
swap, it is subject to the market price volatility of the underlying asset.
To the extent that the total return of the security, group of securities or
index underlying the swap exceeds or falls short of the offsetting interest
obligation, a Fund will receive or make a payment to the counterparty.
. OTHER DERIVATIVES AND STRATEGIES
- Currency Transactions. A Fund may invest in non-U.S. Dollar-denominated
securities on a currency hedged or un-hedged basis. The Adviser may actively
manage the Funds' currency exposures and may seek investment opportunities
by taking long or short positions in currencies through the use of
currency-related derivatives, including forward currency exchange contracts,
futures and options on futures, swaps and options. The Adviser may enter
into transactions for investment opportunities when it anticipates that a
foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by a Fund and do not present
attractive investment opportunities. Such transactions may also be used when
the Adviser believes that it may be more efficient than a direct investment
in a foreign currency-denominated security. The Funds 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).
- Synthetic Foreign Equity Securities. A Fund may invest in different types of
derivatives generally referred to as synthetic foreign equity securities.
These securities may include international warrants or local access
products. International warrants are financial instruments issued by banks
or other financial institutions, which may or may not be traded on a foreign
exchange. International warrants are a form of derivative security that may
give holders the right to buy or sell an underlying security or a basket of
securities representing an index from or to the issuer of the warrant for a
particular price or may entitle holders to receive a cash payment relating
to the value of the underlying security or index, in each case upon exercise
by the Fund. Local access products are similar to options in that they are
exercisable by the holder for an underlying security or a cash payment based
upon the value of that security, but are generally exercisable over a longer
term than typical options. These types of instruments may be American style,
which means that they can be exercised at any time on or before the
expiration date of the international warrant, or European style, which means
that they may be exercised only on the expiration date.
Other types of synthetic foreign equity securities in which a Fund may
invest include covered warrants and low exercise price warrants. Covered
warrants entitle the holder to purchase from the issuer, typically a
financial institution, upon exercise, common stock of an international
company or receive a cash payment (generally in U.S. Dollars). The issuer of
the covered warrants usually owns the underlying security or has a
mechanism, such as owning equity warrants on the underlying securities,
through which it can obtain the securities. The cash payment is calculated
according to a predetermined formula, which is generally based on the
difference between the value of the underlying security on the date of
exercise and the strike price. Low exercise price warrants are warrants with
an exercise price that is very low relative to the market price of the
underlying instrument at the time of issue (e.g., one cent or less). The
buyer of a low exercise price warrant effectively pays the full value of the
underlying common stock at the outset. In the case of any exercise of
warrants, there may be a time delay between the time a holder of warrants
gives instructions to exercise and the time the price of the common stock
relating to exercise or the settlement date is determined, during which time
the price of the underlying security could change significantly. In
addition, the exercise or settlement date of the warrants may be affected by
certain market disruption events, such as difficulties relating to the
exchange of a local currency into U.S. Dollars, the imposition of capital
controls by a local jurisdiction or changes in the laws relating to foreign
investments. These events could lead to a change in the exercise date or
settlement currency of the warrants, or postponement of the settlement date.
In some cases, if the market disruption events continue for a certain period
of time, the warrants may become worthless, resulting in a total loss of the
purchase price of the warrants.
The Funds will acquire synthetic foreign equity securities issued by
entities deemed to be creditworthy by the Adviser, which will monitor the
creditworthiness of the issuers on an ongoing basis. Investments in these
instruments involve the risk that the issuer of the instrument may default
on its obligation to deliver the underlying security or cash in lieu
thereof. These instruments may also be subject to liquidity risk because
there may be a limited secondary market for trading the warrants. They are
also subject, like other investments in foreign securities, to foreign
(non-U.S.) risk and currency risk.
CONVERTIBLE SECURITIES
Prior to conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which generally provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying equity security,
although the higher yield tends to make the convertible security less volatile
than the underlying equity security. As with debt securities, the market value
of convertible securities tends to decrease as interest rates rise and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market prices of the underlying common stock. Convertible debt securities that
are rated Baa3 or lower by Moody's or BBB- or lower by S&P or Fitch and
comparable unrated securities may share some or all of the risks of debt
securities with those ratings.
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DEPOSITARY RECEIPTS AND SECURITIES OF SUPRANATIONAL ENTITIES
A Fund may invest in depositary receipts. American Depositary Receipts, or
ADRs, are depositary receipts typically issued by a U.S. bank or trust company
that evidence ownership of underlying securities issued by a foreign
corporation. Global Depositary Receipts, or GDRs, European Depositary Receipts,
or EDRs, and other types of depositary receipts are typically issued by
non-U.S. banks or trust companies and evidence ownership of underlying
securities issued by either a U.S. or a non-U.S. company. Depositary receipts
may not necessarily be denominated in the same currency as the underlying
securities into which they may be converted. In addition, the issuers of the
stock underlying unsponsored depositary receipts are not obligated to disclose
material information in the United States. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in securities markets
outside of the United States. For purposes of determining the country of
issuance, investments in depositary receipts of either type are deemed to be
investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include the World Bank
(International Bank for Reconstruction and Development) and the European
Investment Bank. "Semi-governmental securities" are securities issued by
entities owned by either a national, state or equivalent government or are
obligations of one of such government jurisdictions that are not backed by its
full faith and credit and general taxing powers.
FORWARD COMMITMENTS
Forward commitments for the purchase or sale of securities may include
purchases on a when-issued basis or purchases or sales on a delayed delivery
basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a
merger, corporate reorganization or debt restructuring or approval of a
proposed financing by appropriate authorities (i.e., a "when, as and if issued"
trade).
A Fund may invest in TBA--mortgaged-backed securities. A TBA, or "To Be
Announced", trade represents a contract for the purchase or sale of
mortgage-backed securities to be delivered at a future agreed-upon date;
however, the specific mortgage pool numbers or the number of pools that will be
delivered to fulfill the trade obligation or terms of the contract are unknown
at the time of the trade. Mortgage pools (including fixed rate or variable rate
mortgages) guaranteed by the Government National Mortgage Association, or GNMA,
the Federal National Mortgage Association, or FNMA, or the Federal Home Loan
Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA
transactions.
When forward commitments with respect to fixed-income securities are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but payment for and delivery of the securities
take place at a later date. Securities purchased or sold under a forward
commitment are subject to market fluctuation and no interest or dividends
accrue to the purchaser prior to the settlement date. There is the risk of loss
if the value of either a purchased security declines before the settlement date
or the security sold increases before the settlement date. The use of forward
commitments helps a Fund to protect against anticipated changes in interest
rates and prices.
EQUITY-LINKED DEBT SECURITIES
Equity-linked debt securities are securities on which the issuer is obligated
to pay interest and/or principal that is linked to the performance of a
specified index of equity securities. The interest or principal payments may be
significantly greater or less than payment obligations for other types of debt
securities. Adverse changes in equity securities indices and other adverse
changes in the securities markets may reduce payments made under, and/or the
principal of, equity-linked debt securities held by a Fund. As with any debt
securities, the values of equity-linked debt securities will generally vary
inversely with changes in interest rates. A Fund's ability to dispose of
equity-linked debt securities will depend on the availability of liquid markets
for such securities. Investment in equity-linked debt securities may be
considered to be speculative.
ILLIQUID SECURITIES
Under current Securities and Exchange Commission ("SEC") guidelines, each Fund
limits its investments in illiquid securities to 15% of its net assets. The
term "illiquid securities" for this purpose means securities that cannot be
disposed of within seven days in the ordinary course of business at
approximately the amount a Fund has valued the securities. A Fund that invests
in illiquid securities may not be able to sell such securities and may not be
able to realize their full value upon sale. Restricted securities (securities
subject to legal or contractual restrictions on resale) may be illiquid. Some
restricted securities (such as securities issued pursuant to Rule 144A under
the Securities Act of 1933, or certain commercial paper) may be treated as
liquid, although they may be less liquid than registered securities traded on
established secondary markets.
INFLATION-PROTECTED SECURITIES OR IPS
Inflation-protected securities, or IPS, are fixed-income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced.
The value of IPS tends to react to change in response to changes in real
interest rates. In general, the price of an IPS can fall when real interest
rates rise, and can rise when real interest rates fall. In addition, the value
of IPS can fluctuate based on fluctuations in expectations of inflation.
Interest payments on IPS can be unpredictable and will vary as the principal
and/or interest is adjusted for inflation.
Treasury Inflation Protected Securities, or TIPS, which are issued by the U.S.
Treasury, use the Consumer Price Index for Urban Consumers, or the CPI, as the
inflation measure. The
49
principal of a TIPS increases with inflation and decreases with deflation, as
measured by the CPI. When a TIPS matures, the holder is paid the adjusted
principal or original principal, whichever is greater. TIPS pay interest twice
a year, at a fixed rate, which is determined by auction at the time the TIPS
are issued. The rate is applied to the adjusted principal; so, like the
principal, interest payments rise with inflation and fall with deflation. TIPS
are issued in terms of 5, 10, and 30 years.
INVESTMENT IN EXCHANGE-TRADED FUNDS AND OTHER INVESTMENT COMPANIES
A Fund may invest, sometimes significantly, in shares of ETFs, subject to the
restrictions and limitations of the Investment Company Act of 1940 (the "1940
Act"), or any applicable rules, exemptive orders or regulatory guidance
thereunder. ETFs are pooled investment vehicles, which may be managed or
unmanaged, that generally seek to track the performance of a specific index.
ETFs will not track their underlying indices precisely since the ETFs have
expenses and may need to hold a portion of their assets in cash, unlike the
underlying indices, and the ETFs may not invest in all of the securities in the
underlying indices in the same proportion as the indices for varying reasons. A
Fund will incur transaction costs when buying and selling ETF shares, and
indirectly bear the expenses of the ETFs. In addition, the market value of an
ETF's shares, which is based on supply and demand in the market for the ETF's
shares, may differ from their NAV. Accordingly, there may be times when an
ETF's shares trade at a discount or premium to its NAV.
A Fund may also invest in investment companies other than ETFs, as permitted by
the 1940 Act or the rules and regulations thereunder. As with ETF investments,
if the Fund acquires shares in other investment companies, shareholders would
bear, indirectly, the expenses of such investment companies (which may include
management and advisory fees), which are in addition to the Fund's expenses.
The Funds intend to invest uninvested cash balances in an affiliated money
market fund as permitted by Rule 12d1-1 under the 1940 Act.
LOANS OF PORTFOLIO SECURITIES
For the purposes of achieving income, a Fund may make secured loans of
portfolio securities to brokers, dealers and financial institutions
("borrowers") to the extent permitted under the 1940 Act or the rules and
regulations thereunder (as such statute, rules or regulations may be amended
from time to time) or by guidance regarding, interpretations of or exemptive
orders under the 1940 Act. Under a Fund's securities lending program, all
securities loans will be secured continually by cash collateral. The loans will
be made only to borrowers deemed by the Adviser to be creditworthy, and when,
in the judgment of the Adviser, the consideration that can be earned currently
from securities loans justifies the attendant risk. The Fund will be
compensated for the loan from a portion of the net return from the interest
earned on cash collateral after a rebate paid to the borrower (in some cases
this rebate may be a "negative rebate", or fee paid by the borrower to the Fund
in connection with the loan) and payments for fees of the securities lending
agent and for certain other administrative expenses.
A Fund will have the right to call a loan and obtain the securities loaned at
any time on notice to the borrower within the normal and customary settlement
time for the securities. While the securities are on loan, the borrower is
obligated to pay the Fund amounts equal to any income or other distributions
from the securities. The Fund will not have the right to vote any securities
during the existence of a loan, but will have the right to regain ownership of
loaned securities in order to exercise voting or other ownership rights. When
the Fund lends securities, its investment performance will continue to reflect
changes in the value of the securities loaned.
A Fund will invest cash collateral in a money market fund approved by the
Fund's Board of Directors or Trustees (the "Board") and expected to be managed
by the Adviser, such as AllianceBernstein Exchange Reserves. Any such
investment will be at the Fund's risk. A Fund may pay reasonable finders',
administrative, and custodial fees in connection with a loan.
A principal risk of lending portfolio securities is that the borrower will fail
to return the loaned securities upon termination of the loan and that the
collateral will not be sufficient to replace the loaned securities.
MORTGAGE-BACKED SECURITIES AND ASSOCIATED RISKS
Mortgage-backed securities may be issued by the U.S. Government or one of its
sponsored entities, or may be issued by private organizations. Interest and
principal payments (including prepayments) on the mortgages underlying
mortgage-backed securities are passed through to the holders of the securities.
As a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed securities are often subject to more rapid
prepayment of principal than their stated maturity would indicate.
Prepayments occur when the mortgagor on a mortgage prepays the remaining
principal before the mortgage's scheduled maturity date. Because the prepayment
characteristics of the underlying mortgages vary, it is impossible to predict
accurately the realized yield or average life of a particular issue of
pass-through certificates. Prepayments are important because of their effect on
the yield and price of the mortgage-backed securities. During periods of
declining interest rates, prepayments can be expected to accelerate and a Fund
that invests in these securities would be required to reinvest the proceeds at
the lower interest rates then available. Conversely, during periods of rising
interest rates, a reduction in prepayments may increase the effective maturity
of the securities, subjecting them to a greater risk of decline in market value
in response to rising interest rates. In addition, prepayments of mortgages
underlying securities purchased at a premium could result in capital losses.
Mortgage-backed securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as real estate mortgage investment
conduit certificates, or REMICs, pass-through certificates, collateralized
mortgage obligations, or CMOs, and stripped mortgage-backed securities, or
SMBS, and other types of mortgage-backed securities that may be available in
the future.
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Guaranteed Mortgage Pass-Through Securities. ALLIANCEBERNSTEIN GLOBAL REAL
ESTATE INVESTMENT FUND may invest in guaranteed mortgage pass-through
securities, which represent participation interests in pools of residential
mortgage loans and are issued by U.S. governmental or private lenders and
guaranteed by the U.S. Government or one of its agencies or instrumentalities,
including but not limited to GNMA, FNMA and FHLMC.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-backed securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMICs are
issued in multiple classes and the principal of and interest on the mortgage
assets may be allocated among the several classes of CMOs or REMICs in various
ways. Each class of CMOs or REMICs, often referred to as a "tranche", is issued
at a specific adjustable or fixed interest rate and must be fully retired no
later than its final distribution date. Generally, interest is paid or accrued
on all classes of CMOs or REMICs on a monthly basis. ALLIANCEBERNSTEIN GLOBAL
REAL ESTATE INVESTMENT FUND will not invest in the lowest tranche of CMOs and
REMICs.
Typically, CMOs are collateralized by GNMA or FHLMC certificates but also may
be collateralized by other mortgage assets such as whole loans or private
mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgage assets and any
reinvestment income.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code of 1986, as amended, or the Code, and invests in certain mortgages
primarily secured by interests in real property and other permitted
investments. Investors may purchase "regular" and "residual" interest shares of
beneficial interest in REMIC trusts, although ALLIANCEBERNSTEIN GLOBAL REAL
ESTATE INVESTMENT FUND does not intend to invest in residual interests.
PREFERRED STOCK
A Fund may invest in preferred stock. Preferred stock is subordinated to any
debt the issuer has outstanding. Accordingly, preferred stock dividends are not
paid until all debt obligations are first met. Preferred stock may be subject
to more fluctuations in market value, due to changes in market participants'
perceptions of the issuer's ability to continue to pay dividends, than debt of
the same issuer. These investments include convertible preferred stock, which
includes an option for the holder to convert the preferred stock into the
issuer's common stock under certain conditions, among which may be the
specification of a future date when the conversion must begin, a certain number
of common shares per preferred shares, or a certain price per share for the
common stock. Convertible preferred stock tends to be more volatile than
non-convertible preferred stock, because its value is related to the price of
the issuer's common stock as well as the dividends payable on the preferred
stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are pooled investment vehicles that invest primarily in income-producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments and principal. Similar to investment companies such as the Funds,
REITs are not taxed on income distributed to shareholders provided they comply
with several requirements of the Code. A Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the Fund invests in
addition to the expenses incurred directly by the Fund.
REPURCHASE AGREEMENTS AND BUY/SELL BACK TRANSACTIONS
Each Fund may enter into repurchase agreements in which a Fund purchases a
security from a bank or broker-dealer, which agrees to repurchase the security
from the Fund at an agreed-upon future date, normally a day or a few days
later. The purchase and repurchase transactions are transacted under one
agreement. The resale price is greater than the purchase price, reflecting an
agreed-upon interest rate for the period the buyer's money is invested in the
security. Such agreements permit a Fund to keep all of its assets at work while
retaining "overnight" flexibility in pursuit of investments of a longer-term
nature. If the bank or broker-dealer defaults on its repurchase obligation, a
Fund would suffer a loss to the extent that the proceeds from the sale of the
security were less than the repurchase price.
Each Fund may enter into buy/sell back transactions, which are similar to
repurchase agreements. In this type of transaction, a Fund enters a trade to
buy securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
back transaction is considered two separate transactions.
REVERSE REPURCHASE AGREEMENTS
A reverse repurchase agreement involves the sale of a security by a Fund and
its agreement to repurchase the instrument at a specified time and price, and
may be considered a form of borrowing for some purposes. Reverse repurchase
agreements are subject to a Fund's limitations on borrowings and create
leverage risk for the Fund. In addition, reverse repurchase agreements involve
the risk that the market value of the securities a Fund is obligated to
repurchase may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, a Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
51
RIGHTS AND WARRANTS
Rights and warrants are option securities permitting their holders to subscribe
for other securities. Rights are similar to warrants except that they have a
substantially shorter duration. Rights and warrants do not carry with them
dividend or voting rights with respect to the underlying securities, or any
rights in the assets of the issuer. As a result, an investment in rights and
warrants may be considered more speculative than certain other types of
investments. In addition, the value of a right or a warrant does not
necessarily change with the value of the underlying securities, and a right or
a warrant ceases to have value if it is not exercised prior to its expiration
date.
SHORT SALES
A Fund may make short sales as a part of overall portfolio management or to
offset a potential decline in the value of a security. A short sale involves
the sale of a security that a Fund does not own, or if the Fund owns the
security, is not to be delivered upon consummation of the sale. When the Fund
makes a short sale of a security that it does not own, it must borrow from a
broker-dealer the security sold short and deliver the security to the
broker-dealer upon conclusion of the short sale.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a short-term
capital gain. Although a Fund's gain is limited to the price at which it sold
the security short, its potential loss is theoretically unlimited.
STANDBY COMMITMENT AGREEMENTS
Standby commitment agreements are similar to put options that commit a Fund,
for a stated period of time, to purchase a stated amount of a security that may
be issued and sold to the Fund at the option of the issuer. The price and
coupon of the security are fixed at the time of the commitment. At the time of
entering into the agreement, the Fund is paid a commitment fee, regardless of
whether the security ultimately is issued. A Fund will enter into such
agreements only for the purpose of investing in the security underlying the
commitment at a yield and price considered advantageous to the Fund and
unavailable on a firm commitment basis.
There is no guarantee that a security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in
the event the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
STRUCTURED PRODUCTS
A Fund may invest in certain hybrid derivatives-type investments that combine a
traditional stock or bond with, for example, a futures contract or an option.
These investments include structured notes and indexed securities,
commodity-linked notes and commodity index-linked notes and credit-linked
securities. The performance of the structured product, which is generally a
fixed-income security, is tied (positively or negatively) to the price or
prices of an unrelated reference indicator such as a security or basket of
securities, currencies, commodities, a securities or commodities index or a
credit default swap or other kinds of swaps. The structured product may not pay
interest or protect the principal invested. The structured product or its
interest rate may be a multiple of the reference indicator and, as a result,
may be leveraged and move (up or down) more rapidly than the reference
indicator. Investments in structured products may provide a more efficient and
less expensive means of investing in underlying securities, commodities or
other derivatives, but may potentially be more volatile, less liquid and carry
greater market risk than investments in traditional securities. The purchase of
a structured product also exposes a Fund to the credit risk of the structured
product.
Structured notes are derivative debt instruments. The interest rate or
principal of these notes are determined by reference to an unrelated indicator
(for example, a currency, security, or indices thereof) unlike a typical note
where the borrower agrees to make fixed or floating interest payments and to
pay a fixed sum at maturity. Indexed securities may include structured notes as
well as securities other than debt securities, the interest or principal of
which is determined by an unrelated indicator.
Commodity-linked notes and commodity index-linked notes provide exposure to the
commodities markets. These are derivative securities with one or more
commodity-linked components that have payment features similar to commodity
futures contracts, commodity options, commodity indices or similar instruments.
Commodity-linked products may be either equity or debt securities, leveraged or
unleveraged, and have both security and commodity-like characteristics. A
portion of the value of these instruments may be derived from the value of a
commodity, futures contract, index or other economic variable.
A Fund may also invest in certain hybrid derivatives-type investments that
combine a traditional bond with certain derivatives such as a credit default
swap, an interest rate swap or other securities. These investments include
credit-linked securities. The issuers of these securities frequently are
limited purpose trusts or other special purpose vehicles that invest in a
derivative instrument or basket of derivative instruments in order to provide
exposure to certain fixed-income markets. For instance, a Fund may invest in
credit-linked securities as a cash management tool to gain exposure to a
certain market or to remain fully invested when more traditional
income-producing securities are not available. The performance of the
structured product, which is generally a fixed-income security, is linked to
the receipt of payments from the counterparties to the derivatives instruments
or other securities. A Fund's investments in credit-linked securities are
indirectly subject to the risks associated with derivative instruments,
including, among others, credit risk, default risk, counterparty risk, interest
rate risk and leverage risk. These securities are generally structured as Rule
144A securities so that they may be freely
52
traded among institutional buyers. However, changes in the market for
credit-linked securities or the availability of willing buyers may result in
the securities becoming illiquid.
ADDITIONAL RISKS AND OTHER CONSIDERATIONS
Investments in the Funds involve the special risk considerations described
below.
LEVERAGE
A Fund's investments in certain derivatives may effectively leverage the Fund's
portfolio. In addition, a Fund may use leverage for investment purposes by
entering into transactions such as reverse repurchase agreements. This means
that a Fund uses cash made available during the term of these transactions to
make investments in other securities.
Utilization of leverage, which is usually considered speculative, involves
certain risks to a Fund's shareholders. These include a higher volatility of
the NAV of a Fund's shares and the relatively greater effect on the NAV of the
shares. So long as a Fund is able to realize a return on its investments made
with leveraged cash that is higher than the carrying costs of leveraged
transactions, the effect of leverage will be to cause the Fund's shareholders
to realize a higher current net investment income than if the Fund were not
leveraged. If the carrying costs of leveraged transactions approach the return
on a Fund's investments made through leverage, the benefit of leverage to the
Fund's shareholders will be reduced. If the carrying costs of leveraged
transactions were to exceed the return to shareholders, a Fund's use of
leverage would result in a lower rate of return. Similarly, the effect of
leverage in a declining market would result in a greater decrease in NAV. In an
extreme case, if a Fund's current investment income were not sufficient to meet
the carrying costs of leveraged transactions, it could be necessary for the
Fund to liquidate certain of its investments in adverse circumstances,
potentially significantly reducing its NAV.
FOREIGN (NON-U.S.) SECURITIES
Investing in foreign securities involves special risks and considerations not
typically associated with investing in U.S. securities. The securities markets
of many foreign countries are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited number of companies
representing a small number of industries. A Fund that invests in foreign
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States.
Securities registration, custody, and settlement may in some instances be
subject to delays and legal and administrative uncertainties. Foreign
investment in the securities markets of certain foreign countries is restricted
or controlled to varying degrees. These restrictions or controls may at times
limit or preclude investment in certain securities and may increase the costs
and expenses of a Fund. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from certain of the countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in
a country's balance of payments, the country could impose temporary
restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. Investing in local
markets may require a Fund to adopt special procedures or seek local
governmental approvals or other actions, any of which may involve additional
costs to a Fund. These factors may affect the liquidity of a Fund's investments
in any country and the Adviser will monitor the effect of any such factor or
factors on a Fund's investments. Transaction costs, including brokerage
commissions for transactions both on and off the securities exchanges, in many
foreign countries are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about most U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, revolutions, wars or
diplomatic developments could affect adversely the economy of a foreign
country. In the event of nationalization, expropriation, or other confiscation,
a Fund could lose its entire investment in securities in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Funds than that provided by U.S. laws.
Investments in securities of companies in emerging markets involve special
risks. There are approximately 100 countries identified by the World Bank as
Low Income, Lower Middle Income and Upper Middle Income countries that are
generally regarded as Emerging Markets. Emerging market countries that the
Adviser currently considers for investment are listed below. Countries may be
added to or removed from this list at any time.
53
Argentina Hungary Peru
Belarus India Philippines
Belize Indonesia Poland
Brazil Iraq Russia
Bulgaria Ivory Coast Senegal
Chile Jamaica Serbia
China Jordan South Africa
Colombia Kazakhstan South Korea
Croatia Lebanon Sri Lanka
Dominican Republic Lithuania Taiwan
Ecuador Malaysia Thailand
Egypt Mexico Turkey
El Salvador Mongolia Ukraine
Gabon Nigeria Uruguay
Georgia Pakistan Venezuela
Ghana Panama Vietnam
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For purposes of the ALLIANCEBERNSTEIN EMERGING MARKETS EQUITY PORTFOLIO,
"emerging market issuer" is an issuer that is domiciled in, maintains its
principal listing in, is principally traded in or has its principal operations
in (as defined in the SAI) an emerging market country. An emerging market
issuer will also include any issuer included in the MSCI Emerging Markets Index
or the MSCI Emerging Markets Frontier Index. "Emerging market country" is
defined as any country with securities included in the MSCI Emerging Markets
Index or the MSCI Emerging Markets Frontier Index, any country whose per capita
gross national income is not classified as "High Income" by the World Bank, or
any country that is not a member of the Organisation for Economic Co-Operation
and Development. The Fund may define "emerging market issuer" and "emerging
market country" differently in the future.
Investing in emerging market securities imposes risks different from, or
greater than, risks of investing in domestic securities or in foreign,
developed countries. These risks include: smaller market capitalization of
securities markets, which may suffer periods of relative illiquidity;
significant price volatility; restrictions on foreign investment; and possible
repatriation of investment income and capital. In addition, foreign investors
may be required to register the proceeds of sales and future economic or
political crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization, or creation of government
monopolies. The currencies of emerging market countries may experience
significant declines against the U.S. Dollar, and devaluation may occur
subsequent to investments in these currencies by a Fund. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. In addition, emerging securities
markets may have different clearance and settlement procedures, which may be
unable to keep pace with the volume of securities transactions or otherwise
make it difficult to engage in such transactions. Settlement problems may cause
a Fund to miss attractive investment opportunities, hold a portion of its
assets in cash pending investment, or be delayed in disposing of a portfolio
security. Such a delay could result in possible liability to a purchaser of the
security.
FOREIGN (NON-U.S.) CURRENCIES
A Fund that invests some portion of its assets in securities denominated in,
and receives revenues in, foreign currencies will be adversely affected by
reductions in the value of those currencies relative to the U.S. Dollar.
Foreign currency exchange rates may fluctuate significantly. They are
determined by supply and demand in the foreign exchange markets, the relative
merits of investments in different countries, actual or perceived changes in
interest rates, and other complex factors. Currency exchange rates also can be
affected unpredictably by intervention (or the failure to intervene) by U.S. or
foreign governments or central banks or by currency controls or political
developments. In light of these risks, a Fund may engage in certain currency
hedging transactions, as described above, which involve certain special risks.
A Fund may also invest directly in foreign currencies for non-hedging purposes
on a spot basis (i.e., cash) or through derivative transactions, such as
forward currency exchange contracts, futures and options thereon, swaps and
options as described above. These investments will be subject to the same
risks. In addition, currency exchange rates may fluctuate significantly over
short periods of time, causing a Fund's NAV to fluctuate.
REAL ESTATE INVESTMENTS
Although the Funds do not invest directly in real estate, they may invest in
securities of real estate companies including, in particular, ALLIANCEBERNSTEIN
GLOBAL REAL ESTATE INVESTMENT FUND. An investment in the Fund is subject to
certain risks associated with the direct ownership of real estate and with the
real estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions, including increases in the rate of inflation; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and changes in
interest rates. To the extent that assets underlying a Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
These risks may be greater for investments in non-U.S. real estate companies.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the
54
value of the underlying property owned by the REITs, while mortgage REITs may
be affected by the quality of any credit extended. REITs are dependent upon
management skills, are not diversified, and are subject to heavy cash flow
dependency, default by borrowers and self-liquidation.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have had more price volatility than
larger capitalization stocks.
CREDIT RATINGS
Credit ratings of fixed-income securities measure an issuer's expected ability
to pay principal and interest over time. Credit ratings are determined by
ratings organizations, such as S&P, Moody's or Fitch. A lower rating means
there is a greater chance that an issuer will fail to meet its payment
obligation or default. The following terms are generally used to describe the
credit quality of debt securities depending on the security's credit rating or,
if unrated, credit quality as determined by the Funds' Adviser:
. investment grade or
. below investment grade ("high-yield securities" or "junk bonds").
The credit rating organizations may modify their ratings of securities to show
relative standing within a rating category, with the addition of numerical
modifiers (1, 2 or 3) in the case of Moody's, with the addition of a plus
(+) or minus (-) sign in the case of S&P and Fitch, and with the addition of
"high" or "low" in the case of Dominion Bond Rating Services Limited. A Fund
may purchase a security, regardless of any rating modification, provided the
security is rated at or above the Fund's minimum rating category. For example,
a Fund may purchase a security rated B1 by Moody's, or B- by S&P, provided the
Fund may purchase securities rated B. Any reference to ratings by S&P or
Moody's includes equivalent ratings by other rating agencies.
INVESTMENT IN BELOW INVESTMENT-GRADE FIXED-INCOME SECURITIES
Investments in securities rated below investment grade (commonly known as "junk
bonds") may be subject to greater risk of loss of principal and interest than
higher-rated securities. These securities are also generally considered to be
subject to greater market risk than higher-rated securities. The capacity of
issuers of these securities to pay interest and repay principal is more likely
to weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition, below
investment-grade securities may be more susceptible to real or perceived
adverse economic conditions than investment-grade securities.
The market for these securities may be thinner and less active than that for
higher-rated securities, which can adversely affect the prices at which these
securities can be sold. To the extent that there is no established secondary
market for these securities, a Fund may experience difficulty in valuing such
securities and, in turn, the Fund's assets.
FUTURE DEVELOPMENTS
A Fund may take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be
developed, to the extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 2013
This Statement of Additional Information ("SAI") is not a prospectus
but supplements and should be read in conjunction with the current prospectus
dated March 1, 2013 (the "Prospectus") for AllianceBernstein(R) Value Fund
("Value Fund"), AllianceBernstein Discovery Value Fund (formerly,
AllianceBernstein Small/Mid Cap Value Fund) ("Discovery Value"),
AllianceBernstein International Value Fund ("International Value") and
AllianceBernstein Global Value Fund ("Global Value") of the AllianceBernstein
Trust (the "ABT Funds"), the AllianceBernstein Growth and Income Fund ("Growth
and Income"), the AllianceBernstein Core Opportunities Fund ("Core
Opportunities"), the AllianceBernstein Global Risk Allocation Fund (formerly,
AllianceBernstein Balanced Shares) ("Global Risk Allocation"), the
AllianceBernstein Equity Income Fund ("Equity Income"), the AllianceBernstein
Global Real Estate Investment Fund ("Global Real Estate") (the "AB Funds"), and
AllianceBernstein Emerging Markets Equity Portfolio ("Emerging Markets Equity")
of AllianceBernstein Cap Fund, Inc. (Emerging Markets Equity, together with the
ABT Funds and AB Funds, the "Funds") that offers Class A, Class B, Class C,
Adviser Class, Class R, Class K and Class I for each of the Funds except
Emerging Markets Equity, and Class A, Class C and Advisor Class for Emerging
Markets Equity. Financial statements for Growth and Income for the year ended
October 31, 2012 and financial statements for Value Fund, Discovery Value,
International Value, Global Value, Core Opportunities, Global Risk Allocation,
Equity Income, Global Real Estate and Emerging Markets Equity for the year ended
November 30, 2012, are included in the respective annual reports to shareholders
and are incorporated into this SAI by reference. Copies of the Prospectus and
each Fund's annual report may be obtained by contacting AllianceBernstein
Investor Services, Inc. ("ABIS") at the address or the "For Literature"
telephone number shown above or on the Internet at www.AllianceBernstein.com.
TABLE OF CONTENTS
Page
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INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS..............................2
INVESTMENT RESTRICTIONS.......................................................44
MANAGEMENT OF THE FUNDS.......................................................46
EXPENSES OF THE FUNDS.........................................................86
PURCHASE OF SHARES............................................................97
REDEMPTION AND REPURCHASE OF SHARES..........................................123
SHAREHOLDER SERVICES.........................................................126
NET ASSET VALUE..............................................................129
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................133
PORTFOLIO TRANSACTIONS.......................................................140
GENERAL INFORMATION..........................................................147
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.................................................186
APPENDIX A: STATEMENT OF POLICIES AND PROCEDURES
FOR PROXY VOTING.............................................................A-1
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AllianceBernstein(R) and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS
Introduction to the Funds
The AB Funds are open-end investment companies registered under the
Investment Company Act of 1940, as amended (the "1940 Act").
AllianceBernstein Trust (the "Trust") and AllianceBernstein Cap
Fund, Inc. (the "Company") are open-end investment companies whose shares are
offered in separate series referred to as portfolios. The ABT Funds and Emerging
Markets Equity are portfolios of the Trust and the Company, respectively, which
are described in this SAI. Each portfolio is a separate pool of assets
constituting, in effect, a separate open-end management investment company with
its own investment objective and policies. A shareholder in a portfolio will be
entitled to his or her pro-rata share of all dividends and distributions arising
from that portfolio's assets and, upon redeeming shares of that portfolio the
shareholder will receive the then current net asset value ("NAV") of the
applicable class of shares of that portfolio.
Except as noted, the Funds' investment objective and policies
described below are not "fundamental policies" within the meaning of the 1940
Act, and may, therefore, be changed by the Board of Directors of each AB Fund
(the "AB Funds' Boards"), the Board of Trustees of the Trust (the "Trust
Board"), or the Board of Directors of the Company (the "Company Board" and,
together with the AB Funds' Boards and the Trust Board, the "Boards") without
shareholder approval. However, no Fund will change its investment objective
without at least 60 days' prior written notice to shareholders. There is no
guarantee that a Fund will achieve its investment objective. Whenever any
investment policy or restriction states a percentage of a Fund's assets which
may be invested in any security or other asset, it is intended that such
percentage limitation be determined immediately after and as a result of a
Fund's acquisition of such securities or other assets. Accordingly, any later
increases or decreases in percentage beyond the specified limitation resulting
from a change in values or net assets will not be considered a violation of this
percentage limitation.
Additional Investment Policies and Practices
The following information about the Funds' investment policies and
practices supplements the information set forth in the Prospectus.
Convertible Securities
Convertible securities include bonds, debentures, corporate notes
and preferred stocks that are convertible at a stated exchange rate into shares
of the underlying common stock. Prior to their conversion, convertible
securities have the same general characteristics as non-convertible debt
securities, which provide a stable stream of income with generally higher yields
than those of equity securities of the same or similar issuers. As with all debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
While convertible securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality, they do enable the
investor to benefit from increases in the market price of the underlying common
stock.
When the market price of the common stock underlying a convertible
security increases, the price of the convertible security increasingly reflects
the value of the underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They are consequently of higher
quality and entail less risk than the issuer's common stock, although the extent
to which such risk is reduced depends in large measure upon the degree to which
the convertible security sells above its value as a fixed-income security.
Depositary Receipts
A Fund may invest in depositary receipts. American Depositary
Receipts ("ADRs") are depositary receipts typically issued by a U.S. bank or
trust company that evidence ownership of underlying securities issued by a
foreign corporation. European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") or other types of depositary receipts are typically issued by
non-U.S. banks or trust companies and evidence ownership of underlying
securities issued by either a U.S. or non-U.S. company. Transactions in these
securities may not necessarily be settled in the same currency as transactions
in the securities into which they represent. In addition, the issuers of the
securities of unsponsored depositary receipts are not obligated to disclose
material information in the United States. Generally, ADRs, in registered form,
are designed for use in the U.S. securities markets, EDRs, in bearer form, are
designed for use in European securities markets and GDRs, in bearer form, are
designed for use in two or more securities markets, such as those of Europe and
Asia.
Derivatives
A Fund may, but is not required to, use derivatives for hedging or
other risk management purposes or as part of its investment strategies.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities, interest rates,
currency exchange rates, bond indices and stock indices.
There are four principal types of derivatives -- options, futures,
forwards and swaps. These principal types of derivative instruments, as well as
the methods in which they may be used by a Fund are described below. Derivatives
may be (i) standardized, exchange-traded contracts or (ii) customized,
privately-negotiated contracts. Exchange-traded derivatives tend to be more
liquid and subject to less credit risk than those that are privately negotiated.
The Funds may use derivatives to earn income and enhance returns, to hedge or
adjust the risk profile of a portfolio and either to replace more traditional
direct investments or to obtain exposure to otherwise inaccessible markets.
Forward Contracts. A forward contract, which may be standardized and
exchange-traded or customized and privately negotiated, is an agreement for one
party to buy, and the other party to sell, a specific quantity of an underlying
commodity or other tangible asset for an agreed-upon price at a future date. A
forward contract generally is settled by physical delivery of the commodity or
other tangible asset underlying the forward contract to an agreed-upon location
at a future date (rather than settled by cash) or will be rolled forward into a
new forward contract. Non-deliverable forwards ("NDFs") specify a cash payment
upon maturity.
Futures Contracts and Options on Futures Contracts. A futures
contract is an agreement that obligates the buyer to buy and the seller to sell
a specified quantity of an underlying asset (or settle for cash the value of a
contract based on an underlying asset, rate or index) at a specific price on the
contract maturity date. Options on futures contracts are options that call for
the delivery of futures contracts upon exercise. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or canceled through the acquisition of equal but
opposite positions, which is the primary method in which futures contracts are
liquidated. A cash-settled futures contract does not require physical delivery
of the underlying asset but instead is settled for cash equal to the difference
between the values of the contract on the date it is entered into and its
maturity date.
Options. An option, which may be standardized and exchange-traded or
customized and privately negotiated, is an agreement that, for a premium payment
or fee, gives the option holder (the buyer) the right but not the obligation to
buy (a "call") or sell (a "put") the underlying asset (or settle for cash an
amount based on an underlying asset, rate or index) at a specified price (the
exercise price) during a period of time or on a specified date. Likewise, when
an option is exercised the writer of the option is obligated to sell (in the
case of a call option) or to purchase (in the case of a put option) the
underlying asset (or settle for cash an amount based on an underlying asset,
rate or index).
Swaps. A swap, which may be standardized and exchange-traded or
customized and privately negotiated, is an agreement that obligates two parties
to exchange a series of cash flows at specified intervals (payment dates) based
upon or calculated by reference to changes in specified prices or rates
(interest rates in the case of interest rate swaps, currency exchange rates in
the case of currency swaps) for a specified amount of an underlying asset (the
"notional" principal amount). Most swaps are entered into on a net basis (i.e.,
the two payment streams are netted out, with a Fund receiving or paying, as the
case may be, only the net amount of the two payments). Except for currency
swaps, the notional principal amount is used solely to calculate the payment
streams but is not exchanged. With respect to currency swaps, actual principal
amounts of currencies may be exchanged by the counterparties at the initiation,
and again upon the termination, of the transaction.
Risks of Derivatives and Other Regulatory Issues. Investment
techniques employing such derivatives involve risks different from, and, in
certain cases, greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk factors and
issues concerning the use of derivatives.
-- Market Risk. This is the general risk attendant to all
investments that the value of a particular investment will change in
a way detrimental to a Fund's interest.
-- Management Risk. Derivative products are highly specialized
instruments that require investment techniques and risk analyses
different from those associated with stocks and bonds. The use of a
derivative requires an understanding not only of the underlying
instrument but also of the derivative itself, without the benefit of
observing the performance of the derivative under all possible
market conditions. In particular, the use and complexity of
derivatives require the maintenance of adequate controls to monitor
the transactions entered into, the ability to assess the risk that a
derivative adds to a Fund's investment portfolio, and the ability to
forecast price, interest rate or currency exchange rate movements
correctly.
-- Credit Risk. This is the risk that a loss may be sustained by a
Fund as a result of the failure of another party to a derivative
(usually referred to as a "counterparty") to comply with the terms
of the derivative contract. The credit risk for exchange-traded
derivatives is generally less than for privately negotiated
derivatives, since the clearinghouse, which is the issuer or
counterparty to each exchange-traded derivative, provides a
guarantee of performance. This guarantee is supported by a daily
payment system (i.e., margin requirements) operated by the
clearinghouse in order to reduce overall credit risk. For privately
negotiated derivatives, there is no similar clearing agency
guarantee. Therefore, a Fund considers the creditworthiness of each
counterparty to a privately negotiated derivative in evaluating
potential credit risk.
-- Liquidity Risk. Liquidity risk exists when a particular
instrument is difficult to purchase or sell. If a derivative
transaction is particularly large or if the relevant market is
illiquid (as is the case with many privately negotiated
derivatives), it may not be possible to initiate a transaction or
liquidate a position at an advantageous price.
-- Leverage Risk. Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate
or index can result in a loss substantially greater than the amount
invested in the derivative itself. In the case of swaps, the risk of
loss generally is related to a notional principal amount, even if
the parties have not made any initial investment. Certain
derivatives have the potential for unlimited loss, regardless of the
size of the initial investment.
-- Risk of Governmental Regulation of Derivatives. Recent
legislation and regulatory developments will eventually require the
clearing and exchange trading of most over-the-counter derivatives
investments. It is possible that new government regulation of
various types of derivative instruments, including futures and
swaps, may affect a Fund's ability to use such instruments as a part
of its investment strategy.
-- Other Risks. Other risks in using derivatives include the risk of
mispricing or improper valuation of derivatives and the inability of
derivatives to correlate perfectly with underlying assets, rates and
indices. Many derivatives, in particular privately negotiated
derivatives, are complex and often valued subjectively. Improper
valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. Derivatives do not
always perfectly or even highly correlate or track the value of the
assets, rates or indices they are designed to closely track.
Consequently, a Fund's use of derivatives may not always be an
effective means of, and sometimes could be counterproductive to,
furthering the Fund's investment objective.
A Fund may purchase and sell derivative instruments only to the
extent that such activities are consistent with the requirements of the
Commodity Exchange Act ("CEA") and the rules adopted by the Commodity Futures
Trading Commission ("CFTC") thereunder. Under CFTC rules, a registered
investment company that conducts more than a minimal amount of trading in
futures, commodity options, swaps and other commodity interests is a commodity
pool and its adviser must register as a commodity pool operator, or CPO. Under
such rules, registered investment companies are subject to additional disclosure
and reporting requirements. The Adviser and the Funds, except Global Risk
Allocation, have claimed an exclusion from the definition of CPO under CFTC Rule
4.5 and are not currently subject to these registration, disclosure and
reporting requirements. This exclusion is not available to Global Risk
Allocation, and the Adviser has registered as a CPO with respect to this Fund.
As a result, Global Risk Allocation will be subject to additional disclosure and
reporting requirements. The CFTC has not yet adopted final rules for these
additional requirements and, therefore, the scope of these requirements is
currently unclear but could potentially affect the Fund's expenses.
Use of Options, Futures, Forwards and Swaps by a Fund
--Forward Currency Exchange Contracts. A forward currency exchange
contract is an obligation by one party to buy, and the other party to sell, a
specific amount of a currency for an agreed-upon price at a future date. A
forward currency exchange contract may result in the delivery of the underlying
asset upon maturity of the contract in return for the agreed-upon payment. NDFs
specify a cash payment upon maturity. NDFs are normally used when the market for
physical settlement of the currency is underdeveloped, heavily regulated or
highly taxed.
A Fund may, for example, enter into forward currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. Dollar and other currencies. A Fund may
purchase or sell forward currency exchange contracts for hedging purposes
similar to those described below in connection with its transactions in foreign
currency futures contracts. A Fund may also purchase or sell forward currency
exchange contracts for non-hedging purposes as a means of making direct
investments in foreign currencies, as described below under "Currency
Transactions".
If a hedging transaction in forward currency exchange contracts is
successful, the decline in the value of portfolio securities or the increase in
the cost of securities to be acquired may be offset, at least in part, by
profits on the forward currency exchange contract. Nevertheless, by entering
into such forward currency exchange contracts, a Fund may be required to forgo
all or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates.
A Fund may also use forward currency exchange contracts to seek to
increase total return when AllianceBernstein L.P., the Funds' Adviser (the
"Adviser"), 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. For example, a Fund may
enter into a foreign currency exchange contract to purchase a currency if the
Adviser expects the currency to increase in value. The Fund would recognize a
gain if the market value of the currency is more than the contract value of the
currency at the time of settlement of the contract. Similarly, a Fund may enter
into a foreign currency exchange contract to sell a currency if the Adviser
expects the currency to decrease in value. The Fund would recognize a gain if
the market value of the currency is less than the contract value of the currency
at the time of settlement of the contract.
The cost of engaging in forward currency exchange contracts varies
with such factors as the currencies involved, the length of the contract period
and the market conditions then prevailing. Since transactions in foreign
currencies are usually conducted on a principal basis, no fees or commissions
are involved.
--Options on Securities. A Fund may write and purchase call and put
options on securities. In purchasing an option on securities, a Fund would be in
a position to realize a gain if, during the option period, the price of the
underlying securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid; otherwise the Fund
would experience a loss not greater than the premium paid for the option. Thus,
a Fund would realize a loss if the price of the underlying security declined or
remained the same (in the case of a call) or increased or remained the same (in
the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
A Fund may write a put or call option in return for a premium, which
is retained by a Fund whether or not the option is exercised. A Fund may write
covered options or uncovered options. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than the call option it has written. A put
option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than the put
option it has written. Uncovered options or "naked options" are riskier than
covered options. For example, if a Fund wrote a naked call option and the price
of the underlying security increased, the Fund would have to purchase the
underlying security for delivery to the call buyer and sustain a loss equal to
the difference between the option price and the market price of the security.
A Fund may also purchase call options to hedge against an increase
in the price of securities that the Fund anticipates purchasing in the future.
If such increase occurs, the call option will permit the Fund to purchase the
securities at the exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund and the Fund will suffer a loss on the transaction to the
extent of the premium paid.
A Fund may purchase put options to hedge against a decline in the
value of portfolio securities. If such decline occurs, the put options will
permit the Fund to sell the securities at the exercise price or to close out the
options at a profit. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized on the underlying security by the amount
of the premium paid for the put option and by transaction costs.
A Fund also may, as an example, write combinations of put and call
options on the same security, known as "straddles", with the same exercise and
expiration date. By writing a straddle, the Fund undertakes a simultaneous
obligation to sell and purchase the same security in the event that one of the
options is exercised. If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund will be required
to sell the underlying security at or below market price. This loss may be
offset, however, in whole or part, by the premiums received on the writing of
the two options. Conversely, if the price of the security declines by a
sufficient amount, the put will likely be exercised. The writing of straddles
will likely be effective, therefore, only where the price of the security
remains relatively stable and neither the call nor the put is exercised. In
those instances where one of the options is exercised, the loss on the purchase
or sale of the underlying security may exceed the amount of the premiums
received.
A Fund may purchase or write options on securities of the types in
which it is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions. By writing a call option, a Fund limits its opportunity to profit
from any increase in the market value of the underlying security above the
exercise price of the option. By writing a put option, a Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price above its then current market value, resulting in a capital loss unless
the security subsequently appreciates in value. Where options are written for
hedging purposes, such transactions constitute only a partial hedge against
declines in the value of portfolio securities or against increases in the value
of securities to be acquired, up to the amount of the premium.
A Fund will effect such transactions only with investment dealers
and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Adviser, and the Adviser has adopted
procedures for monitoring the creditworthiness of such entities. Options
purchased or written in negotiated transactions may be illiquid and it may not
be possible for the Fund to effect a closing transaction at a time when the
Adviser believes it would be advantageous to do so.
--Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or making
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case of a
call) or less than (in the case of a put) the exercise price of the option.
A Fund may write (sell) call and put options and purchase call and
put options on securities indices. If a Fund purchases put options on securities
indices to hedge its investments against a decline in the value of portfolio
securities, it will seek to offset a decline in the value of securities it owns
through appreciation of the put option. If the value of the Fund's investments
does not decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for the option.
The success of this strategy will largely depend on the accuracy of the
correlation between the changes in value of the index and the changes in value
of the Fund's security holdings.
A Fund may also write put or call options on securities indices to,
among other things, earn income. If the value of the chosen index declines below
the exercise price of the put option, the Fund has the risk of loss of the
amount of the difference between the exercise price and the closing level of the
chosen index, which it would be required to pay to the buyer of the put option
and which may not be offset by the premium it received upon sale of the put
option. Similarly, if the value of the index is higher than the exercise price
of the call option, the Fund has the risk of loss of the amount of the
difference between the exercise price and the closing level of the chosen index,
which may not be off set by the premium it received upon sale of the call
option. If the decline or increase in the value securities index is
significantly below or above the exercise price of the written option, the Fund
could experience a substantial loss.
The purchase of call options on securities indices may be used by a
Fund to attempt to reduce the risk of missing a broad market advance, or an
advance in an industry or market segment, at a time when the Fund holds
uninvested cash or short-term debt securities awaiting investment. When
purchasing call options for this purpose, the Fund will also bear the risk of
losing all or a portion of the premium paid if the value of the index does not
rise. The purchase of call options on stock indices when a Fund is substantially
fully invested is a form of leverage, up to the amount of the premium and
related transaction costs, and involves risks of loss and of increased
volatility similar to those involved in purchasing call options on securities
the Fund owns.
-- Other Option Strategies. In an effort to earn extra income, to
adjust exposure to individual securities or markets, or to protect all or a
portion of its portfolio from a decline in value, sometimes within certain
ranges, a Fund may use option strategies such as the concurrent purchase of a
call or put option, including on individual securities and stock indices,
futures contracts (including on individual securities and stock indices) or
shares of exchange-traded funds ("ETFs") at one strike price and the writing of
a call or put option on the same individual security, stock index, futures
contract or ETF at a higher strike price in the case of a call option or at a
lower strike price in the case of a put option. The maximum profit from this
strategy would result for the call options from an increase in the value of the
individual security, stock index, futures contract or ETF above the higher
strike price or for the put options the decline in the value of the individual
security, stock index, futures contract or ETF below the lower strike price. If
the price of the individual security, stock index, futures contract or ETF
declines in the case of the call option or increases in the case of the put
option, the Fund has the risk of losing the entire amount paid for the call or
put options.
--Options on Foreign Currencies. A Fund may purchase and write
options on foreign currencies for hedging and non-hedging purposes. For example,
a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order to protect
against such diminutions in the value of portfolio securities, the Fund may
purchase put options on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell such currency for a fixed amount
in dollars and could thereby offset, in whole or in part, the adverse effect on
its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may purchase call options thereon. The purchase
of such options could offset, at least partially, the effects of the adverse
movements in exchange rates. As in the case of other types of options, however,
the benefit to the Fund from purchases of foreign currency options will be
reduced by the amount of the premium and related transaction costs. In addition,
where currency exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in foreign currency
options which would require it to forgo a portion or all of the benefits of
advantageous changes in such rates.
A Fund may write options on foreign currencies for hedging purposes
or to increase return. For example, where a Fund anticipates a decline in the
dollar value of non-U.S. Dollar-denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities could be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Fund
could write a put option on the relevant currency, which, if rates move in the
manner projected, will expire unexercised and allow the Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Fund will be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Fund also may be required to forgo all or a
portion of the benefits that might otherwise have been obtained from favorable
movements in exchange rates.
In addition to using options for the hedging purposes described
above, a Fund may also invest in options on foreign currencies for non-hedging
purposes as a means of making direct investments in foreign currencies. A Fund
may use options on currency to seek to increase total return when the Adviser
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. For example, the Fund may purchase
call options in anticipation of an increase in the market value of a currency. A
Fund would ordinarily realize a gain if, during the option period, the value of
such currency exceeded the sum of the exercise price, the premium paid and
transaction costs. Otherwise, the Fund would realize no gain or a loss on the
purchase of the call option. Put options may be purchased by a Fund for the
purpose of benefiting from a decline in the value of a currency that the Fund
does not own. A Fund would normally realize a gain if, during the option period,
the value of the underlying currency decreased below the exercise price
sufficiently to more than cover the premium and transaction costs. Otherwise,
the Fund would realize no gain or loss on the purchase of the put option. For
additional information on the use of options on foreign currencies for
non-hedging purposes, see "Currency Transactions" below.
Special Risks Associated with Options on Currencies. An
exchange-traded options position may be closed out only on an options exchange
that provides a secondary market for an option of the same series. Although a
Fund will generally purchase or sell options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time. For
some options, no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that the Fund would have to exercise its options in order to realize
any profit and would incur transaction costs on the purchase or sale of the
underlying currency.
--Futures Contracts and Options on Futures Contracts. Futures
contracts that a Fund may buy and sell may include futures contracts on
fixed-income or other securities, and contracts based on interest rates, foreign
currencies or financial indices, including any index of U.S. Government
securities. A Fund may, for example, purchase or sell futures contracts and
options thereon to hedge against changes in interest rates, securities (through
index futures or options) or currencies.
Interest rate futures contracts are purchased or sold for hedging
purposes to attempt to protect against the effects of interest rate changes on a
Fund's current or intended investments in fixed-income securities. For example,
if a Fund owned long-term bonds and interest rates were expected to increase,
that Fund might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in that Fund's
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique allows
a Fund to hedge its interest rate risk without having to sell its portfolio
securities. If interest rates were to increase, the value of the debt securities
in the portfolio would decline, but the value of that Fund's interest rate
futures contracts would be expected to increase at approximately the same rate,
thereby keeping the NAV of that Fund from declining as much as it otherwise
would have. On the other hand, if interest rates were expected to decline,
interest rate futures contracts could be purchased to hedge in anticipation of
subsequent purchases of long-term bonds at higher prices. Because the
fluctuations in the value of the interest rate futures contracts should be
similar to those of long-term bonds, a Fund could protect itself against the
effects of the anticipated rise in the value of long-term bonds without actually
buying them until the necessary cash becomes available or the market has
stabilized. At that time, the interest rate futures contracts could be
liquidated and that Fund's cash reserves could then be used to buy long-term
bonds on the cash market.
A Fund may purchase and sell foreign currency futures contracts for
hedging or risk management purposes in order to protect against fluctuations in
currency exchange rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or increase the cost of
non-U.S. Dollar-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant. A
Fund may sell futures contracts on a foreign currency, for example, when it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. If such a decline were to
occur, the resulting adverse effect on the value of non-U.S. Dollar-denominated
securities may be offset, in whole or in part, by gains on the futures
contracts. However, if the value of the foreign currency increases relative to
the dollar, a Fund's loss on the foreign currency futures contract may or may
not be offset by an increase in the value of the securities because a decline in
the price of the security stated in terms of the foreign currency may be greater
than the increase in value as a result of the change in exchange rates.
Conversely, a Fund could protect against a rise in the dollar cost
of non-U.S. Dollar-denominated securities to be acquired by purchasing futures
contracts on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. When a Fund purchases futures contracts under such
circumstances, however, and the price in dollars of securities to be acquired
instead declines as a result of appreciation of the dollar, the Fund will
sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
A Fund may also engage in currency "cross hedging" when, in the
opinion of the Adviser, the historical relationship among foreign currencies
suggests that a Fund may achieve protection against fluctuations in currency
exchange rates similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S. Dollar or the
currency in which the foreign security is denominated. Such "cross hedging" is
subject to the same risks as those described above with respect to an
unanticipated increase or decline in the value of the subject currency relative
to the U.S. Dollar.
A Fund may also use foreign currency futures contracts and options
on such contracts for non-hedging purposes. Similar to options on currencies
described above, a Fund may use foreign currency futures contracts and options
on such contracts to seek to increase total return when the Adviser 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. The risks associated with foreign currency
futures contracts and options on futures are similar to those associated with
options on foreign currencies, as described above. For additional information on
the use of options on foreign currencies for non-hedging purposes, see "Currency
Transactions" below.
Purchases or sales of stock or bond index futures contracts may be
used for hedging purposes to attempt to protect a Fund's current or intended
investments from broad fluctuations in stock or bond prices. For example, a Fund
may sell stock or bond index futures contracts in anticipation of or during a
market decline to attempt to offset the decrease in market value of the Fund's
portfolio securities that might otherwise result. If such decline occurs, the
loss in value of portfolio securities may be offset, in whole or part, by gains
on the futures position. When a Fund is not fully invested in the securities
market and anticipates a significant market advance, it may purchase stock or
bond index futures contracts in order to gain rapid market exposure that may, in
whole or in part, offset increases in the cost of securities that the Portfolio
intends to purchase. As such purchases are made, the corresponding positions in
stock or bond index futures contracts will be closed out.
Options on futures contracts are options that call for the delivery
of futures contracts upon exercise. Options on futures contracts written or
purchased by a Fund will be traded on U.S. exchanges.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the securities in a Fund's portfolio.
If the futures price at expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium, which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the securities or other instruments
required to be delivered under the terms of the futures contract. If the futures
price at expiration of the put option is higher than the exercise price, a Fund
will retain the full amount of the option premium, which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its options on futures
positions, a Fund's losses from exercised options on futures may to some extent
be reduced or increased by changes in the value of portfolio securities.
A Fund may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated as
a result of a projected market-wide decline or changes in interest or exchange
rates, a Fund could, in lieu of selling futures contracts, purchase put options
thereon. In the event that such decrease were to occur, it may be offset, in
whole or part, by a profit on the option. If the anticipated market decline were
not to occur, the Fund will suffer a loss equal to the price of the put. Where
it is projected that the value of securities to be acquired by a Fund will
increase prior to acquisition due to a market advance or changes in interest or
exchange rates, a Fund could purchase call options on futures contracts, rather
than purchasing the underlying futures contracts. If the market advances, the
increased cost of securities to be purchased may be offset by a profit on the
call. However, if the market declines, the Fund will suffer a loss equal to the
price of the call, but the securities that the Fund intends to purchase may be
less expensive.
--Total Return Swaps. A Fund may enter into total return swaps in
order to take a "long" or "short" position with respect to an underlying
referenced asset. The Fund is subject to market price volatility of the
underlying referenced asset. A total return swap involves commitments to pay
interest in exchange for a market linked return based on a notional amount. To
the extent that the total return of the security group of securities or index
underlying the transaction exceeds or falls short of the offsetting interest
obligation, the Fund will receive a payment from or make a payment to the
counterparty.
--Special Risks Associated with Swaps. Risks may arise as a result
of the failure of the counterparty to the swap contract to comply with the terms
of the swap contract. The loss incurred by the failure of a counterparty is
generally limited to the net interim payment to be received by a Fund, and/or
the termination value at the end of the contract. Therefore, the Fund considers
the creditworthiness of each counterparty to a swap contract in evaluating
potential counterparty risk. The risk is mitigated by having a netting
arrangement between the Fund and the counterparty and by the posting of
collateral by the counterparty to the Fund to cover the Fund's exposure to the
counterparty. Additionally, risks may arise from unanticipated movements in
interest rates or in the value of the underlying securities. The Fund accrues
for the interim payments on swap contracts on a daily basis, with the net amount
recorded within unrealized appreciation/depreciation of swap contracts on the
statement of assets and liabilities. Once the interim payments are settled in
cash, the net amount is recorded as realized gain/(loss) on swaps on the
statement of operations, in addition to any realized gain/(loss) recorded upon
the termination of swap contracts. Fluctuations in the value of swap contracts
are recorded as a component of net change in unrealized appreciation/
depreciation of swap contracts on the statement of operations.
--Credit Default Swap Agreements. The "buyer" in a credit default
swap contract is obligated to pay the "seller" a periodic stream of payments
over the term of the contract in return for a contingent payment upon the
occurrence of a credit event with respect to an underlying reference obligation.
Generally, a credit event means bankruptcy, failure to pay, obligation
acceleration or restructuring. A Fund may be either the buyer or seller in the
transaction. As a seller, the Fund receives a fixed rate of income throughout
the term of the contract, which typically is between one month and ten years,
provided that no credit event occurs. If a credit event occurs, the Fund
typically must pay the contingent payment to the buyer. The contingent payment
will be either (i) the "par value" (full amount) of the reference obligation in
which case the Fund will receive the reference obligation in return, or (ii) an
amount equal to the difference between the par value and the current market
value of the obligation. The value of the reference obligation received by the
Fund as a seller if a credit event occurs, coupled with the periodic payments
previously received, may be less than the full notional value it pays to the
buyer, resulting in a loss of value to the Fund. If the Fund is a buyer and no
credit event occurs, the Fund will lose its periodic stream of payments over the
term of the contract. However, if a credit event occurs, the buyer typically
receives full notional value for a reference obligation that may have little or
no value.
Credit default swaps may involve greater risks than if a Fund had
invested in the reference obligation directly. Credit default swaps are subject
to general market risk, liquidity risk and credit risk.
--Currency Swaps. A Fund may enter into currency swaps for hedging
purposes in an attempt to protect against adverse changes in exchange rates
between the U.S. Dollar and other currencies or for non-hedging purposes as a
means of making direct investments in foreign currencies, as described below
under "Currency Transactions". Currency swaps involve the exchange by the Fund
with another party of a series of payments in specified currencies. Actual
principal amounts of currencies may be exchanged by the counterparties at the
initiation, and again upon termination of the transaction. Since currency swaps
are typically individually negotiated, the Fund expects to achieve an acceptable
degree of correlation between its portfolio investments and its currency swaps
positions. Therefore, the entire principal value of a currency swap is subject
to the risk that the other party to the swap will default on its contractual
delivery obligations. The Fund will not enter into any currency swap unless the
credit quality of the unsecured senior debt or the claims-paying ability of the
other party thereto is rated in the highest rating category of at least one
nationally recognized statistical rating organization ("NRSRO") at the time of
entering into the transaction. If there is a default by the other party to such
a transaction, a Fund will have contractual remedies pursuant to the agreements
related to the transactions.
--Swaps: Interest Rate Transactions. A Fund may enter into interest
rate swaps, swaption and cap or floor transactions, which may include preserving
a return or spread on a particular investment or portion of its portfolio or
protecting against an increase in the price of securities the Fund anticipates
purchasing at a later date. Unless there is a counterparty default, the risk of
loss to a Fund from interest rate transactions is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the
counterparty to an interest rate transaction defaults, the Fund's risk of loss
consists of the net amount of interest payments that the Fund is contractually
entitled to receive.
Interest rate swaps involve the exchange by a Fund with another
party of payments calculated by reference to specified interest rates (e.g., an
exchange of floating-rate payments for fixed-rate payments) computed based on a
contractually-based principal (or "notional") amount.
An option on a swap agreement, also called a "swaption", is an
option that gives the buyer the right, but not the obligation, to enter into a
swap on a future date in exchange for paying a market-based "premium". A
receiver swaption gives the owner the right to receive the total return of a
specified asset, reference rate, or index. A payer swaption gives the owner the
right to pay the total return of a specified asset, reference rate, or index.
Swaptions also include options that allow an existing swap to be terminated or
extended by one of the counterparties.
Interest rate caps and floors are similar to options in that the
purchase of an interest rate cap or floor entitles the purchaser, to the extent
that a specified index exceeds (in the case of a cap) or falls below (in the
case of a floor) a predetermined interest rate, to receive payments of interest
on a notional amount from the party selling the interest rate cap or floor.
Caps and floors are less liquid than swaps. These transactions do
not involve the delivery of securities or other underlying assets or principal.
A Fund will enter into interest rate swap, swaptions, cap or floor transactions
only with counterparties who have credit ratings of at least A- (or the
equivalent) from any one NRSRO or counterparties with guarantors with debt
securities having such a rating.
--Variance and Correlation Swaps. A Fund may enter into variance or
correlation swaps in an attempt to hedge equity market risk or adjust exposure
to the equity markets. Variance swaps are contracts in which two parties agree
to exchange cash payments based on the difference between the stated level of
variance and the actual variance realized on an underlying asset or index.
Actual "variance" as used here is defined as the sum of the square of the
returns on the reference asset or index (which in effect is a measure of its
"volatility") over the length of the contract term. In other words, the parties
to a variance swap can be said to exchange actual volatility for a contractually
stated rate of volatility. Correlation swaps are contracts in which two parties
agree to exchange cash payments based on the differences between the stated and
the actual correlation realized on the underlying equity securities within a
given equity index. "Correlation" as used here is defined as the weighted
average of the correlations between the daily returns of each pair of securities
within a given equity index. If two assets are said to be closely correlated, it
means that their daily returns vary in similar proportions or along similar
trajectories.
--Synthetic Foreign Equity Securities. A Fund may invest in
different types of derivatives generally referred to as synthetic foreign equity
securities. These securities may include international warrants or local access
products. International warrants are financial instruments issued by banks or
other financial institutions, which may or may not be traded on a foreign
exchange. International warrants are a form of derivative security that may give
holders the right to buy or sell an underlying security or a basket of
securities representing an index from or to the issuer of the warrant for a
particular price or may entitle holders to receive a cash payment relating to
the value of the underlying security or index, in each case upon exercise by the
Fund. Local access products are similar to options in that they are exercisable
by the holder for an underlying security or a cash payment based upon the value
of that security, but are generally exercisable over a longer term than typical
options. These types of instruments may be American style, which means that they
can be exercised at any time on or before their expiration date, or European
style, which means that they may be exercised only on the expiration date.
Other types of synthetic foreign equity securities in which a Fund
may invest include covered warrants and low exercise price warrants. Covered
warrants entitle the holder to purchase from the issuer, typically a financial
institution, upon exercise, common stock of an international company or receive
a cash payment (generally in U.S. Dollars). The issuer of the covered warrant
usually owns the underlying security or has a mechanism, such as owning equity
warrants on the underlying securities, through which they can obtain the
securities. The cash payment is calculated according to a predetermined formula,
which is generally based on the difference between the value of the underlying
security on the date of exercise and the strike price. Low exercise price
warrants are warrants with an exercise price that is very low relative to the
market price of the underlying instrument at the time of issue (e.g., one cent
or less). The buyer of a low exercise price warrant effectively pays the full
value of the underlying common stock at the outset. In the case of any exercise
of warrants, there may be a time delay between the time a holder of warrants
gives instructions to exercise and the time the price of the common stock
relating to exercise or the settlement date is determined, during which time the
price of the underlying security could change significantly. In addition, the
exercise or settlement date of the warrants may be affected by certain market
disruption events, such as difficulties relating to the exchange of a local
currency into U.S. Dollars, the imposition of capital controls by a local
jurisdiction or changes in the laws relating to foreign investments. These
events could lead to a change in the exercise date or settlement currency of the
warrants, or postponement of the settlement date. In some cases, if the market
disruption events continue for a certain period of time, the warrants may become
worthless resulting in a total loss of the purchase price of the warrants.
A Fund's investments in synthetic foreign equity securities will be
those issued by entities deemed to be creditworthy by the Adviser, which will
monitor the creditworthiness of the issuers on an ongoing basis. Investments in
these instruments involve the risk that the issuer of the instrument may default
on its obligation to deliver the underlying security or cash in lieu thereof.
These instruments may also be subject to liquidity risk because there may be a
limited secondary market for trading the warrants. They are also subject, like
other investments in foreign securities, to foreign risk and currency risk.
International warrants also include equity warrants, index warrants,
and interest rate warrants. Equity warrants are generally issued in conjunction
with an issue of bonds or shares, although they also may be issued as part of a
rights issue or scrip issue. When issued with bonds or shares, they usually
trade separately from the bonds or shares after issuance. Most warrants trade in
the same currency as the underlying stock (domestic warrants), but also may be
traded in different currency (euro-warrants). Equity warrants are traded on a
number of foreign exchanges and in over-the-counter markets. Index warrants and
interest rate warrants are rights created by an issuer, typically a financial
institution, entitling the holder to purchase, in the case of a call, or sell,
in the case of a put, respectively, an equity index or a specific bond issue or
interest rate index at a certain level over a fixed period of time. Index
warrants transactions settle in cash, while interest rate warrants can typically
be exercised in the underlying instrument or settle in cash.
A Fund also may invest in long-term options of, or relating to,
international issuers. Long-term options operate much like covered warrants.
Like covered warrants, long term-options are call options created by an issuer,
typically a financial institution, entitling the holder to purchase from the
issuer outstanding securities of another issuer. Long-term options have an
initial period of one year or more, but generally have terms between three and
five years. Unlike U.S. options, long-term European options do not settle
through a clearing corporation that guarantees the performance of the
counterparty. Instead, they are traded on an exchange and subject to the
exchange's trading regulations.
--Eurodollar Instruments. Eurodollar instruments are essentially
U.S. Dollar-denominated futures contracts or options thereon that are linked to
the London Interbank Offered Rate and are subject to the same limitations and
risks as other futures contracts and options.
--Currency Transactions. A Fund may invest in non-U.S.
Dollar-denominated securities on a currency hedged or un-hedged basis. The
Adviser may actively manage the Fund's currency exposures and may seek
investment opportunities by taking long or short positions in currencies through
the use of currency-related derivatives, including forward currency exchange
contracts, futures and options on futures, swaps and options. The Adviser may
enter into transactions for investment opportunities when it anticipates that a
foreign currency will appreciate or depreciate in value but securities
denominated in that currency are not held by the Fund and do not present
attractive investment opportunities. Such transactions may also be used when the
Adviser believes that it may be more efficient than a direct investment in a
foreign currency-denominated security. The Funds 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).
Forward Commitments and When-Issued and Delayed Delivery Securities
Forward commitments for the purchase or sale of securities may
include purchases on a "when-issued" basis or purchases or sales on a "delayed
delivery" basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade). When forward commitment transactions are negotiated, the price is fixed
at the time the commitment is made. The Fund assumes the rights and risks of
ownership of the security, but the Fund does not pay for the securities until
they are received. If a Fund is fully or almost fully invested when forward
commitment purchases are outstanding, such purchases may result in a form of
leverage. Leveraging the portfolio in this manner may increase the Fund's
volatility of returns.
The use of forward commitments enables a Fund to protect against
anticipated changes in exchange rates, interest rates and/or prices. For
instance, a Fund may enter into a forward contract when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). In addition, when a Fund believes that a foreign currency
may suffer a substantial decline against the U.S. Dollar, it may enter into a
forward sale contract to sell an amount of that foreign currency approximating
the value of some or all of that Fund's securities denominated in such foreign
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against a foreign currency, it may enter into a forward
purchase contract to buy that foreign currency for a fixed dollar amount
("position hedge"). If the Adviser were to forecast incorrectly the direction of
exchange rate movements, a Fund might be required to complete such when-issued
or forward transactions at prices inferior to the then current market values.
When-issued securities and forward commitments may be sold prior to
the settlement date. If a Fund chooses to dispose of the right to acquire a
when-issued security prior to its acquisition or dispose of its right to deliver
or receive against a forward commitment, it may incur a gain or loss. Any
significant commitment of Fund assets to the purchase of securities on a "when,
as and if issued" basis may increase the volatility of the Fund's NAV.
At the time a Fund intends to enter into a forward commitment, it
will record the transaction and thereafter reflect the value of the security
purchased or, if a sale, the proceeds to be received, in determining its NAV.
Any unrealized appreciation or depreciation reflected in such valuation of a
"when, as and if issued" security would be canceled in the event that the
required conditions did not occur and the trade was canceled.
Purchases of securities on a forward commitment or when-issued basis
may involve more risk than other types of purchases. For example, by committing
to purchase securities in the future, a Fund subjects itself to a risk of loss
on such commitments as well as on its portfolio securities. Also, a Fund may
have to sell assets which have been set aside in order to meet redemptions. In
addition, if a Fund determines it is advisable as a matter of investment
strategy to sell the forward commitment or "when-issued" or "delayed delivery"
securities before delivery, that Fund may incur a gain or loss because of market
fluctuations since the time the commitment to purchase such securities was made.
Any such gain or loss would be treated as a capital gain or loss for tax
purposes. When the time comes to pay for the securities to be purchased under a
forward commitment or on a "when-issued" or "delayed delivery" basis, a Fund
will meet its obligations from the then available cash flow or the sale of
securities, or, although it would not normally expect to do so, from the sale of
the forward commitment or "when-issued" or "delayed delivery" securities
themselves (which may have a value greater or less than a Fund's payment
obligation). No interest or dividends accrue to the purchaser prior to the
settlement date for securities purchased or sold under a forward commitment. In
addition, in the event the other party to the transaction files for bankruptcy,
becomes insolvent, or defaults on its obligation, a Fund may be adversely
affected.
Illiquid Securities
A Fund will not invest in illiquid securities if immediately after
such investment more than 15% or such other amount permitted by guidance
regarding the 1940 Act of the Fund's net assets would be invested in such
securities. For this purpose, illiquid securities include, among others, (a)
direct placements or other securities which are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
trading in the security is suspended or, in the case of unlisted securities,
market makers do not exist or will not entertain bids or offers), (b) options
purchased by a Fund over-the-counter and the cover for options written by the
Fund over-the-counter, and (c) repurchase agreements not terminable within seven
days. Securities that have legal or contractual restrictions on resale but have
a readily available market are not deemed illiquid for purposes of this
limitation.
Mutual funds do not typically hold a significant amount of
restricted securities (securities that are subject to restrictions on resale to
the general public) or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund may also have to take certain steps
or wait a certain amount of time in order to remove the transfer restrictions
for such restricted securities in order to dispose of them, resulting in
additional expense and delay.
Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), allows a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. An
insufficient number of qualified institutional buyers interested in purchasing
certain restricted securities held by a Fund, however, could affect adversely
the marketability of such portfolio securities and the Fund might be unable to
dispose of such securities promptly or at reasonable prices.
The Adviser, acting under the oversight of the Boards, will monitor
the liquidity of restricted securities in a Fund that are eligible for resale
pursuant to Rule 144A. In reaching liquidity decisions, the Adviser will
consider, among others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers issuing quotations to
purchase or sell the security; (3) the number of other potential purchasers of
the security; (4) the number of dealers undertaking to make a market in the
security; (5) the nature of the security (including its unregistered nature) and
the nature of the marketplace for the security (e.g., the time needed to dispose
of the security, the method of soliciting offers and the mechanics of the
transfer); and (6) any applicable Securities and Exchange Commission ("SEC")
interpretation or position with respect to such type of securities.
Investments in Exchange-Traded Funds and Other Investment Companies
A Fund may invest in shares of ETFs subject to the restrictions and
limitations of the 1940 Act or any applicable rules, exemptive orders or
regulatory guidance. ETFs are pooled investment vehicles, which may be managed
or unmanaged, that generally seek to track the performance of a specific index.
ETFs will not track their underlying indices precisely since the ETFs have
expenses and may need to hold a portion of their assets in cash, unlike the
underlying indices, and the ETFs may not invest in all of the securities in the
underlying indices in the same proportion as the underlying indices for various
reasons. The Funds will incur transaction costs when buying and selling ETF
shares, and indirectly bear the expenses of the ETFs. In addition, the market
value of an ETF's shares, which are based on supply and demand in the market for
the ETFs shares, may differ from their NAV. Accordingly, there may be times when
an ETF's shares trade at a discount to its NAV.
A Fund may also invest in investment companies other than ETFs as
permitted by the 1940 Act or the rules and regulations thereunder. As with ETF
investments, if the Fund acquires shares in other investment companies,
shareholders would bear, indirectly, the expenses of such investment companies
(which may include management and advisory fees), which are in addition to the
Fund's expenses. The Funds intend to invest uninvested cash balances in an
affiliated money market fund as permitted by Rule 12d1-1 under the 1940 Act.
Loans of Portfolio Securities
A Fund may seek to increase income by lending portfolio securities
to brokers, dealers, and financial institutions ("borrowers") to the extent
permitted under the 1940 Act or the rules or regulations thereunder (as such
statute, rules, or regulations may be amended from time to time) or by guidance
regarding, interpretations of, or exemptive orders under, the 1940 Act. Under
the securities lending program, all securities loans will be secured continually
by cash collateral. A principal risk in lending portfolio securities is that the
borrower will fail to return the loaned securities upon termination of the loan
and that the collateral will not be sufficient to replace the loaned securities
upon the borrower's default.
In determining whether to lend securities to a particular borrower,
the Adviser (subject to oversight by the Boards) will consider all relevant
facts and circumstances, including the creditworthiness of the borrower. The
loans would be made only to firms deemed by the Adviser to be creditworthy, and
when, in the judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the attendant risk. A
Fund will be compensated for the loan from a portion of the net return from the
interest earned on the cash collateral after a rebate paid to the borrower
(which may be a negative amount - i.e., the borrower may pay a fee to the
Portfolio in connection with the loan) and payments for fees paid to the
securities lending agent and for certain other administrative expenses.
A Fund will have the right to call a loan and obtain the securities
loaned on notice to the borrower within the normal and customary settlement time
for the securities. While securities are on loan, the borrower is obligated to
pay a Fund amounts equal to any income or other distribution from the
securities.
A Fund will invest any cash collateral in a money market fund that
complies with Rule 2a-7, has been approved by the Board and is expected to be
advised by the Adviser. Any such investment of cash collateral will be subject
to money market fund's investment risk. The Funds may pay reasonable finders',
administrative, and custodial fees in connection with a loan.
A Fund will not have the right to vote any securities having voting
rights during the existence of the loan. A Fund will have the right to regain
record ownership of loaned securities or equivalent securities in order to
exercise voting or ownership rights. When a Fund lends its securities, its
investment performance will continue to reflect the value of securities on loan.
Loan Participations and Assignments
A Fund may invest in direct debt instruments, which are interests in
amounts owed to lenders or lending syndicates by corporate, governmental, or
other borrowers ("Loans") either by participating as co-lender at the time the
loan is originated ("Participations") or by buying an interest in the loan in
the secondary market from a financial institution or institutional investor
("Assignments"). A loan is often administered by a bank or other financial
institution that acts as agent for the holders. The financial status of the
agent interposed between a Fund and a borrower may affect the ability of the
Fund to receive principal and interest payments.
The success of a Fund's investment may depend on the skill with
which an agent administers the terms of the corporate loan agreements, monitors
borrower compliance with covenants, collects principal, interest and fee
payments from borrowers and, where necessary, enforces creditor remedies against
borrowers. The agent typically has broad discretion in enforcing loan
agreements.
A Fund's investment in Participations typically will result in the
Fund having a contractual relationship only with the financial institution
arranging the Loan with the borrower (the "Lender") and not with the borrower
directly. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, a Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the Loan, nor any rights of set-off against the borrower,
and a Fund may not directly benefit from any collateral supporting the Loan in
which it has purchased the Participation. As a result, the Fund may be subject
to the credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, a Fund may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. Certain
Participations may be structured in a manner designed to avoid purchasers of
Participations being subject to the credit risk of the Lender with respect to
the Participation; but even under such a structure, in the event of the Lender's
insolvency, the Lender's servicing of the Participation may be delayed and the
assignability of the Participation impaired. A Fund will acquire Participations
only if the Lender interpositioned between a Fund and the borrower is a Lender
having total assets of more than $25 billion and whose senior unsecured debt is
rated investment grade (i.e., Baa3 or higher by Moody's Investors Service
("Moody's") or BBB- or higher by Standard & Poor's Ratings Services ("S&P") or
higher.
When a Fund purchases Assignments from Lenders it will acquire
direct rights against the borrower on the Loan. Because Assignments are arranged
through private negotiations between potential assignees and potential
assignors, however, the rights and obligations acquired by a Fund as the
purchaser of an assignment may differ from, and be more limited than, those held
by the assigning Lender. The assignability of certain obligations is restricted
by the governing documentation as to the nature of the assignee such that the
only way in which a Fund may acquire an interest in a Loan is through a
Participation and not an Assignment. A Fund may have difficulty disposing of
Assignments and Participations because to do so it will have to assign such
securities to a third party. Because there is no liquid market for such
securities, a Fund anticipates that such securities could be sold only to a
limited number of institutional investors. The lack of a liquid secondary market
may have an adverse impact on the value of such securities and a Fund's ability
to dispose of particular Assignments or Participations when necessary to meet a
Fund's liquidity needs in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for a Fund to assign a value to these securities for purposes of
valuing the Fund's portfolio and calculating its asset value.
Loans in which a Fund may invest may include participations in
"bridge loans", which are loans taken out by borrowers for a short period
(typically less than six months) pending arrangement of more permanent financing
through, for example, the issuance of bonds, frequently high-yield bonds issued
for the purpose of an acquisition. A Fund may also participate in unfunded loan
commitments, which are contractual obligations for future funding, and receive a
commitment fee based on the amount of the commitment.
Mortgage-Related Securities, Other Asset-Backed Securities and Structured
Securities
The mortgage-related securities in which a Fund may invest typically
are securities representing interests in pools of mortgage loans made by lenders
such as savings and loan associations, mortgage bankers and commercial banks and
are assembled for sale to investors (such as a Fund) by governmental,
government-related or private organizations. Private organizations include
commercial banks, savings associations, mortgage companies, investment banking
firms, finance companies, special purpose finance entities (called special
purpose vehicles or SPVs) and other entities that acquire and package loans for
resales as mortgage-related securities. Specifically, these securities may
include pass-through mortgage-related securities, collateralized mortgage
obligations ("CMOs"), CMO residuals, adjustable-rate mortgage securities
("ARMS"), stripped mortgage-backed securities ("SMBSs"), commercial
mortgage-backed securities, mortgage dollar rolls, collateralized obligations
and other securities that directly or indirectly represent a participation in or
are secured by and payable from mortgage loans on real property and other
assets.
Pass-Through Mortgage-Related Securities. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment consisting of both interest and principal
payments. In effect, these payments are a "pass-through" of the monthly payments
made by the individual borrowers on their residential mortgage loans, net of any
fees paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs that may
be incurred. Some mortgage-related securities, such as securities issued by the
Government National Mortgage Association, or GNMA, are described as "modified
pass-through". These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, regardless of
whether or not the mortgagor actually makes the payment.
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rate 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying average life
assumptions. The assumed average life of pools of mortgages having terms of less
than 30 years, is less than 12 years, but typically not less than 5 years.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption.
The principal governmental (i.e., backed by the full faith and
credit of the United States Government) guarantor of mortgage-related securities
is GNMA. GNMA is a wholly-owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of Federal Housing Administration-insured or U.S.
Department of Veterans Affairs-guaranteed mortgages.
Government-related (i.e., not backed by the full faith and credit of
the U.S. Government) guarantors include the Federal National Mortgage
Association, or FNMA, and the Federal Home Loan Mortgage Association, or FHLMC.
FNMA and FHLMC are a government-sponsored corporation or corporate
instrumentality of the U.S. Government respectively (government-sponsored
entities or "GSEs"), which were owned entirely by private stockholders until
2008 when they were placed in conservatorship by the U.S. Government. After
being placed in conservatorship, the GSEs issued senior preferred stock and
common stock to the U.S. Treasury in an amount equal to 79.9% of each GSE in
return for certain funding and liquidity arrangements. The GSEs continue to
operate as going concerns while in conservatorship and each remains liable for
all of its obligations associated with its mortgage-backed securities. The U.S.
Treasury has provided additional funding to the GSEs and their future is unclear
as Congress is considering whether to adopt legislation that would severely
restrict or even terminate their operations. FNMA purchases residential
mortgages from a list of approved seller/servicers which include state and
federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA and are now, in light of the funding and liquidity requirements referenced
above, effectively backed by the full faith and credit of the U.S. Government.
Participation certificates issued by FHLMC, which represent interests in
mortgages from FHLMC's national portfolio, are guaranteed by FHLMC as to the
timely payment of interest and ultimate collection of principal and are now, in
effect, backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan associations, private mortgage
insurance companies, mortgage bankers and other secondary market issuers create
pass-through pools of conventional residential mortgage loans. Securities
representing interests in pools created by non-governmental private issuers
generally offer a higher rate of interest than securities representing interests
in pools created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. However, private
issuers sometimes obtain committed loan facilities, lines of credit, letters of
credit, surety bonds or other forms of liquidity and credit enhancement to
support the timely payment of interest and principal with respect to their
securities if the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are generally
dependent upon the ratings of the providers of such liquidity and credit support
and would be adversely affected if the rating of such an enhancer were
downgraded.
The structuring of the pass-through pool may also provide credit
enhancement. Examples of such credit support arising out of the structure of the
transaction include the issue of senior and subordinated securities (e.g., the
issuance of securities by a SPV in multiple classes or "tranches", with one or
more classes being senior to other subordinated classes as to payment of
principal and interest, with the result that defaults on the underlying mortgage
loans are borne first by the holders of the subordinated class); creation of
"reserve funds" ( in which case cash or investments sometimes funded from a
portion of the payments on the underlying mortgage loans, are held in reserve
against future losses); and "overcollateralization" (in which case the scheduled
payments on, or the principal amount of, the underlying mortgage loans exceeds
that required to make payment of the securities and pay any servicing or other
fees). There can be no guarantee the credit enhancements, if any will be
sufficient to prevent losses in the event of defaults on the underlying mortgage
loans.
In addition, mortgage-related securities that are issued by private
issuers are not subject to the underwriting requirements for the underlying
mortgages that are applicable to those mortgage-related securities that have a
government or government-sponsored entity guaranteed. As a result, the mortgage
loans underlying private mortgage-related securities may, and frequently do,
have less favorable collateral, credit risk or other underwriting
characteristics than government or government-sponsored mortgage-related
securities and have wider variances in a number of terms, including interest
rate, term, size, purposes and borrower characteristics. Privately issued pools
more frequently include second mortgages, high loan-to-value mortgages and
manufactured housing loans. The coupon rates and maturities of the underlying
mortgage loans in a private-label mortgage-related pool may vary to a greater
extent than those included in a government guaranteed pool, and the pool may
include subprime mortgage loans. Subprime loans refer to loans made to borrowers
with weakened credit histories or with a lower capacity to make timely payments
on their loans. For these reasons, the loans underlying these securities have
had in many cases higher default rates than those loans that meet government
underwriting requirements.
Collateralized Mortgage Obligations. Another form of
mortgage-related security is a "pay-through" security, which is a debt
obligation. A Fund may invest in other forms of mortgage-related securities
including CMOs, which are debt obligations of the issuer secured by a pool of
mortgage loans pledged as collateral that is legally required to be paid by the
issuer, regardless of whether payments are actually made on the underlying
mortgages. CMOs are the predominant type of "pay-through" mortgage-related
security. In a CMO, a series of bonds or certificates is issued in multiple
classes. Each class of a CMO, often referred to as a "tranche", is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause one or more
tranches of the CMO to be retired substantially earlier than the stated
maturities or final distribution dates of the collateral. Although payment of
the principal of, and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by GNMA, FNMA or FHLMC, these CMOs represent
obligations solely of the private issuer and are not insured or guaranteed by
GNMA, FNMA, FHLMC, any other governmental agency or any other person or entity.
Adjustable-Rate Mortgage Securities. Another type of
mortgage-related security, known as adjustable-rate mortgage securities
("ARMS"), bears interest at a rate determined by reference to a predetermined
interest rate or index. ARMS may be secured by fixed-rate mortgages or
adjustable-rate mortgages. ARMS secured by fixed-rate mortgages generally have
lifetime caps on the coupon rates of the securities. To the extent that general
interest rates increase faster than the interest rates on the ARMS, these ARMS
will decline in value. The adjustable-rate mortgages that secure ARMS will
frequently have caps that limit the maximum amount by which the interest rate or
the monthly principal and interest payments on the mortgages may increase. These
payment caps can result in negative amortization (i.e., an increase in the
balance of the mortgage loan). Furthermore, since many adjustable-rate mortgages
only reset on an annual basis, the values of ARMS tend to fluctuate to the
extent that changes in prevailing interest rates are not immediately reflected
in the interest rates payable on the underlying adjustable-rate mortgages.
Stripped Mortgage-Related Securities. Stripped mortgage-related
securities ("SMRS") are mortgage-related securities that are usually structured
with separate classes of securities collateralized by a pool of mortgages or a
pool of mortgage backed bonds or pass-through securities, with each class
receiving different proportions of the principal and interest payments from the
underlying assets. A common type of SMRS has one class of interest-only
securities ("IOs") receiving all of the interest payments from the underlying
assets and one class of principal-only securities ("POs") receiving all of the
principal payments from the underlying assets. IOs and POs are extremely
sensitive to interest rate changes and are more volatile than mortgage-related
securities that are not stripped. IOs tend to decrease in value as interest
rates decrease and are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying mortgage assets, and a rapid
rate of principal prepayments may have a material adverse effect on the yield to
maturity of the IO class. POs generally increase in value as interest rates
decrease. If prepayments of the underlying mortgages are greater than
anticipated, the amount of interest earned on the overall pool will decrease due
to the decreasing principal balance of the assets. Due to their structure and
underlying cash flows, SMRS may be more volatile than mortgage-related
securities that are not stripped. Changes in the values of IOs and POs can be
substantial and occur quickly, such as occurred in the first half of 1994 when
the value of many POs dropped precipitously due to increases in interest rates.
A Fund will only invest in SMRS that are issued by the U.S.
Government, its agencies or instrumentalities and supported by the full faith
and credit of the United States. Although SMRS are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, the complexity of these instruments and the smaller number
of investors in the sector can lend to illiquid markets in the sector.
Commercial Mortgage-Backed Securities. Commercial mortgage-backed
securities are securities that represent an interest in, or are secured by,
mortgage loans secured by multifamily or commercial properties, such as
industrial and warehouse properties, office buildings, retail space and shopping
malls, and cooperative apartments, hotels and motels, nursing homes, hospitals
and senior living centers. Commercial mortgage-backed securities have been
issued in public and private transactions by a variety of public and private
issuers using a variety of structures, some of which were developed in the
residential mortgage context, including multi-class structures featuring senior
and subordinated classes. Commercial mortgage-backed securities may pay fixed or
floating-rates of interest. The commercial mortgage loans that underlie
commercial mortgage-related securities have certain distinct risk
characteristics. Commercial mortgage loans generally lack standardized terms,
which may complicate their structure, tend to have shorter maturities than
residential mortgage loans and may not be fully amortizing. Commercial
properties themselves tend to be unique and are more difficult to value than
single-family residential properties. In addition, commercial properties,
particularly industrial and warehouse properties, are subject to environmental
risks and the burdens and costs of compliance with environmental laws and
regulations.
Certain Risks. The value of mortgage-related securities is affected
by a number of factors. Unlike traditional debt securities, which have fixed
maturity dates, mortgage-related securities may be paid earlier than expected as
a result of prepayments of underlying mortgages. Such prepayments generally
occur during periods of falling mortgage interest rates. If property owners make
unscheduled prepayments of their mortgage loans, these prepayments will result
in the early payment of the applicable mortgage-related securities. In that
event, a Fund may be unable to invest the proceeds from the early payment of the
mortgage-related securities in investments that provide as high a yield as the
mortgage-related securities. Early payments associated with mortgage-related
securities cause these securities to experience significantly greater price and
yield volatility than is experienced by traditional fixed-income securities. The
level of general interest rates, general economic conditions and other social
and demographic factors affect the occurrence of mortgage prepayments. During
periods of falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-related securities.
Conversely, during periods of rising interest rates, a reduction in prepayments
may increase the effective life of mortgage-related securities, subjecting them
to greater risk of decline in market value in response to rising interest rates.
If the life of a mortgage-related security is inaccurately predicted, the
Portfolio may not be able to realize the rate of return it expected.
As with other fixed-income securities, there is also the risk of
nonpayment of mortgage-related securities, particularly for those securities
that are backed by mortgage pools that contain subprime loans. Market factors
adversely affecting mortgage loan repayments include a general economic
downturn, high unemployment, a general slowdown in the real estate market, a
drop in the market prices of real estate, or higher mortgage payments required
to be made by holders of adjustable rate mortgages due to scheduled increases or
increases due to higher interest rates.
Subordinated mortgage-related securities may have additional risks.
The subordinated mortgage-related security may serve as credit support for the
senior securities purchased by other investors. In addition, the payments of
principal and interest on these subordinated securities generally will be made
only after payments are made to the holders of securities senior to the
subordinated securities. Therefore, if there are defaults on the underlying
mortgage loans, the holders of subordinated mortgage-related securities will be
less likely to receive payments of principal and interest and will be more
likely to suffer a loss.
Commercial mortgage-related securities, like all fixed-income
securities, generally decline in value as interest rates rise. Moreover,
although generally the value of fixed-income securities increases during periods
of falling interest rates, this inverse relationship is not as marked in the
case of single-family residential mortgage-related securities, due to the
increased likelihood of prepayments during periods of falling interest rates,
and may not be as marked in the case of commercial mortgage-related securities.
The process used to rate commercial mortgage-related securities may focus on,
among other factors, the structure of the security, the quality and adequacy of
collateral and insurance, and the creditworthiness of the originators, servicing
companies and providers of credit support.
Although the market for mortgage-related securities is becoming
increasingly liquid, those issued by certain private organizations may not be
readily marketable. There may be a limited market for the securities, especially
when there is a perceived weakness in the mortgage and real estate market
sectors. In particular, the secondary markets for CMOs, IOs and POs may be more
volatile and less liquid than those for other mortgage-related securities,
thereby potentially limiting the Fund's ability to buy or sell those securities
at any particular time. Without an active trading market, mortgage-related
securities held in the Fund's portfolio may be particularly difficult to value
because of the complexities involved in the value of the underlying mortgages.
In addition, the rating agencies may have difficulties in rating commercial
mortgage-related securities through different economic cycles and in monitoring
such ratings on a longer-term basis.
As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by increases in
general interest rates relative to the yield provided by such securities. Such
an adverse effect is especially possible with fixed-rate mortgage securities. If
the yield available on other investments rises above the yield of the fixed-rate
mortgage securities as a result of general increases in interest rate levels,
the value of the mortgage-related securities will decline.
Other Asset-Backed Securities. A Fund may invest in other
asset-backed securities. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card receivables,
home equity loans, equipment leases and trade receivables, are being securitized
in structures similar to the structures used in mortgage securitizations. For
example, a Fund may invest in collateralized debt obligations ("CDOs"), which
include collateralized bond obligations ("CBOs"), collateralized loan
obligations ("CLOs"), and other similarly structured securities. CBOs and CLOs
are types of asset-backed securities. A CBO is a trust, which is backed by a
diversified pool of high-risk, below investment grade fixed-income securities. A
CLO is a trust typically collateralized by a pool of loans, which may include,
among others, domestic and foreign senior secured loans, senior unsecured loans,
and subordinate corporate loans, including loans that may be rated below
investment grade or equivalent unrated loans. These asset-backed securities are
subject to risks associated with changes in interest rates, prepayment of
underlying obligations and defaults similar to the risks of investment in
mortgage-related securities discussed above.
Each type of asset-backed security also entails unique risks
depending on the type of assets involved and the legal structure used. For
example, credit card receivables are generally unsecured obligations of the
credit card holder and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. There have also been proposals to cap the interest rate that a
credit card issuer may charge. In some transactions, the value of the
asset-backed security is dependent on the performance of a third party acting as
credit enhancer or servicer. Furthermore, in some transactions (such as those
involving the securitization of vehicle loans or leases) it may be
administratively burdensome to perfect the interest of the security issuer in
the underlying collateral and the underlying collateral may become damaged or
stolen.
Structured Securities. A Fund may invest securities issued in
structured financing transactions, which generally involve aggregating types of
debt assets in a pool or special purpose entity and then issuing new securities.
Types of structured financings include, for example, mortgage-related and other
asset-backed securities. A Fund's investments includes investments in structured
securities that represent interests in entities organized and operated solely
for the purpose of restructuring the investment characteristics of debt
obligations. This type of restructuring involves the deposit with or purchase by
an entity, such as a corporation or trust, of specified instruments (such as
commercial bank loans) and the issuance by that entity of one or more classes of
securities ("Structured Securities") backed by, or representing interests in,
the underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued Structured Securities to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to Structured Securities is dependent on the extent of the cash
flow on the underlying instruments. Because Structured Securities of the type in
which the Portfolio anticipates it will invest typically involve no credit
enhancement, their credit risk generally will be equivalent to that of the
underlying instruments.
A Fund is permitted to invest in a class of Structured Securities
that is either subordinated or unsubordinated to the right of payment of another
class. Subordinated Structured Securities typically have higher yields and
present greater risks than unsubordinated Structured Securities.
Under the terms of subordinated securities, payments that would be
made to their holders may be required to be made to the holders of more senior
securities and/or the subordinated or junior securities may have junior liens,
if they have any rights at all, in any collateral (meaning proceeds of the
collateral are required to be paid first to holders of more senior securities).
As a result, subordinated or junior securities will be disproportionately
affected by a default or even a perceived decline in the creditworthiness of the
issuer.
Preferred Stock
A Fund may invest in preferred stock. Preferred stock is an equity
security that has features of debt because it generally entitles the holder to
periodic payments at a fixed rate of return. Preferred stock is subordinated to
any debt the issuer has outstanding but has liquidation preference over common
stock. Accordingly, preferred stock dividends are not paid until all debt
obligations are first met. Preferred stock may be subject to more fluctuations
in market value, due to changes in market participants' perceptions of the
issuer's ability to continue to pay dividends, than debt of the same issuer.
Real Estate Investment Trusts
Real Estate Investment Trusts ("REITs") are pooled investment
vehicles that invest primarily in income-producing real estate or real estate
related loans or interests. REITs are generally classified as equity REITs,
mortgage REITs or a combination of equity and mortgage REITs. Equity REITs
invest the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of principal and interest and payments. Similar to
investment companies, such as the Funds, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the United States Internal Revenue Code of 1986, as amended (the "Code"). A Fund
will indirectly bear its proportionate share of expenses incurred by REITs in
which the Fund invests in addition to the expenses incurred directly by the
Fund.
Investing in REITs involves certain unique risks in addition to
those risks associated with investing in the real estate industry in general.
Equity REITs may be affected by changes in the value of the underlying property
owned by the REITs, while mortgage REITs may be affected by the quality of any
credit extended. REITs are dependent upon management skills, are not
diversified, and are subject to heavy cash flow dependency, default by borrowers
and self-liquidation.
Investing in REITs involves risks similar to those associated with
investing in small-capitalization companies. REITs may have limited financial
resources, may trade less frequently and in a limited volume and may be subject
to more abrupt or erratic price movements than larger company securities.
Historically, small-capitalization stocks, such as REITs, have had more price
volatility than larger capitalization stocks.
REITs are subject to the possibilities of failing to qualify for
tax-free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act. REITs (especially mortgage
REITs) also are subject to interest rate risks. When interest rates decline, the
value of a REIT's investment in fixed-rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of a REIT's investment in
fixed-rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed-rate obligations.
Repurchase Agreements and Buy/Sell Back Transactions
A repurchase agreement is an agreement by which a Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase the
security at an agreed upon price and date, normally one day or a week later. The
purchase and repurchase obligations are transacted under one document. The
resale price is greater than the purchase price, reflecting an agreed-upon
"interest rate" that is effective for the period of time the buyer's money is
invested in the security, and which is related to the current market rate of the
purchased security rather than its coupon rate. During the term of the
repurchase agreement, a Fund monitors on a daily basis the market value of the
securities subject to the agreement and, if the market value of the securities
falls below the resale amount provided under the repurchase agreement, the
seller under the repurchase agreement is required to provide additional
securities or cash equal to the amount by which the market value of the
securities falls below the resale amount. Because a repurchase agreement permits
a Fund to invest temporarily available cash on a fully-collateralized basis,
repurchase agreements permit the Fund to earn a return on temporarily available
cash while retaining "overnight" flexibility in pursuit of investments of a
longer-term nature. Repurchase agreements may exhibit the characteristics of
loans by a Fund.
The obligation of the seller under the repurchase agreement is not
guaranteed, and there is a risk that the seller may fail to repurchase the
underlying security, whether because of the seller's bankruptcy or otherwise. In
such event, the Fund would attempt to exercise its rights with respect to the
underlying security, including possible sale of the securities. A Fund may incur
various expenses in connection with the exercise of its rights and may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying securities, (b) possible reduction in levels of
income and (c) lack of access to the securities (if they are held through a
third-party custodian) and possible inability to enforce the Fund's rights. The
Fund's Board has established procedures, which are periodically reviewed by the
Board, pursuant to which the Adviser monitors the creditworthiness of the
dealers with which the Fund enters into repurchase agreement transactions.
A Fund may enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
such securities. There is no percentage restriction on a Fund's ability to enter
into repurchase agreements. Currently, each Fund intends to enter into
repurchase agreements only with its custodian and such primary dealers.
A Fund may enter into buy/sell back transactions, which are similar
to repurchase agreements. In this type of transaction, a Fund enters a trade to
buy securities at one price and simultaneously enters a trade to sell the same
securities at another price on a specified date. Similar to a repurchase
agreement, the repurchase price is higher than the sale price and reflects
current interest rates. Unlike a repurchase agreement, however, the buy/sell
back transaction, though done simultaneously, is two separate legal agreements.
A buy/sell back transaction also differs from a repurchase agreement in that the
seller is not required to provide margin payments if the value of the securities
falls below the repurchase price because the transaction is two separate
transactions. A Fund has the risk of changes in the value of the purchased
security during the term of the buy/sell back agreement although these
agreements typically provide for the repricing of the original transaction at a
new market price if the value of the security changes by a specific amount.
Reverse Repurchase Agreements
Reverse repurchase agreements involve sales by a Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, a Fund continues to receive principal and interest payments on these
securities. Generally, the effect of such a transaction is that a Fund can
recover all or most of the cash invested in the portfolio securities involved
during the term of the reverse repurchase agreement, while it will be able to
keep the interest income associated with those portfolio securities.
Reverse repurchase agreements can be viewed as a loan to a Fund by
the counterparty, collateralized by the assets subject to repurchase. By
entering into reverse repurchase agreements, a Fund obtains additional cash to
invest in other securities. A Fund may use reverse repurchase agreements for
borrowing purposes if it believes that the cost of this form of borrowing will
be lower than the cost of bank borrowing. Reverse repurchase agreements create
the opportunity for increased income for a Fund's shareholders when the Fund
achieves a higher rate of return on the investment of the reverse repurchase
agreement proceeds than it pays in interest on the reverse repurchase
transactions. However, there is the risk that returns could be reduced if the
rates of interest on the investment proceeds do not exceed the interest paid by
a Fund on the reverse repurchase transactions.
Reverse repurchase agreements involve the risk that the market value
of the securities a Fund is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, a Fund's
use of the proceeds of the agreement may be restricted pending a determination
by the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, the use of these
investments results in leveraging a Fund's assets because the Fund uses the
proceeds to make investments in other securities. See "Certain Risk and Other
Considerations - Borrowing and Use of Leverage" below.
Rights and Warrants
A Fund may invest in rights and warrants, which entitle the holder
to buy equity securities at a specific price for a specific period of time but
will do so only if the equity securities themselves are deemed appropriate by
the Adviser for inclusion in a Fund's portfolio. Rights and warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
securities which may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a right or warrant does not
necessarily change with the value of the underlying securities and a right or
warrant ceases to have value if it is not exercised prior to the expiration
date.
Securities Acquired in Restructurings and Workouts
A Fund's investments may include fixed-income securities
(particularly lower-rated fixed-income securities) or loan participations that
default or are in risk of default ("Distressed Securities"). A Fund's
investments may also include senior obligations of a borrower issued in
connection with a restructuring pursuant to Chapter 11 of the U.S. Bankruptcy
Code (commonly known as "debtor-in-possession" or "DIP" financings). Distressed
Securities may be the subject of restructurings outside of bankruptcy court in a
negotiated workout or in the context of bankruptcy proceedings. In connection
with these investments or an exchange or workout of such securities, a Fund may
determine or be required to accept various instruments. These instruments may
include, but are not limited to, equity securities, warrants, rights,
participation interests in sales of assets and contingent-interest obligations.
Depending upon, among other things, the Adviser's evaluation of the potential
value of such securities in relation to the price that could be obtained at any
given time if they were sold, a Fund may determine to hold the securities in its
portfolio.
Securities Ratings
The ratings of fixed-income securities by Moody's, S&P, and Fitch
Ratings ("Fitch"), Dominion Bond Rating Service Ltd. and A.M. Best Company are a
generally accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of an issuer is
heavily weighted by past developments and does not necessarily reflect probable
future conditions. There is frequently a lag between the time a rating is
assigned and the time it is updated. In addition, there may be varying degrees
of difference in credit risk of securities within each rating category.
Securities rated Baa, BBB+, BBB, or BBB- by S&P or Baa1, Baa2 or
Baa3 by Moody's are considered by Moody's to have speculative characteristics.
Sustained periods of deteriorating economic conditions or rising interest rates
are more likely to lead to a weakening in the issuer's capacity to pay interest
and repay principal than in the case of higher-rated securities.
Non-rated securities will also be considered for investment by a
Fund when the Adviser believes that the financial condition of the issuers of
such securities, or the protection afforded by the terms of the securities
themselves, limits the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's objectives and policies.
The Adviser generally uses ratings issued by S&P, Moody's, Fitch and
Dominion Bond Rating Service Ltd. Some securities are rated by more than one of
these ratings agencies, and the ratings assigned to the security by the rating
agencies may differ. In such an event and for purposes of determining compliance
with restrictions on investments for the Fund, if a security is rated by two or
more rating agencies, the Adviser will deem the security to be rated at the
highest rating. For example, if a security is rated by Moody's and S&P only,
with Moody's rating the security as Ba and S&P as BBB, the Adviser will deem the
security to be rated as the equivalent of BBB (i.e., Baa by Moody's and BBB by
S&P). Or, if a security is rated by Moody's, S&P and Fitch, with Moody's rating
the security as Ba, S&P as BBB and Fitch as BB, the Adviser will deem the
security to be rated as the equivalent of BBB (i.e., Ba1 by Moody's, BBB by S&P
and BBB by Fitch).
The Adviser will try to reduce the risk inherent in a Fund's
investment approach through credit analysis, diversification and attention to
current developments and trends in interest rates and economic conditions.
However, there can be no assurance that losses will not occur. In considering
investments for the Fund, the Adviser will attempt to identify those
high-yielding securities whose financial condition is adequate to meet future
obligations, has improved, or is expected to improve in the future. The
Adviser's analysis focuses on relative values based on such factors as interest
or dividend coverage, asset coverage, earnings prospects, and the experience and
managerial strength of the issuer.
Unless otherwise indicated, references to securities ratings by one
rating agency in this SAI shall include the equivalent rating by another rating
agency.
Short Sales
A Fund may make short sales of securities or maintain a short
position. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of sale. A short sale is against the box to the extent that a Fund
contemporaneously owns or has the right to obtain securities identical to those
sold. A short sale of a security involves the risk that, instead of declining,
the price of the security sold short will rise. If the price of the securities
sold short increases between the time of a short sale and the time a Fund
replaces the borrowed security, the Fund will incur a loss; conversely, if the
price declines, the Fund will realize a gain. The potential for the price of a
fixed-income security sold short to rise is a function of both the remaining
maturity of the obligation, its creditworthiness and its yield. Unlike short
sales of equities or other instruments, the potential for the price of a
fixed-income security to rise may be limited due to the fact that the security
will be no more than par at maturity. However, the short sale of other
instruments or securities generally, including fixed-income securities
convertible into equities or other instruments, a fixed-income security trading
at a deep discount from par or which pays a coupon that is high in relative or
absolute terms, or which is denominated in a currency other than the U.S.
Dollar, involves the possibility of a theoretically unlimited loss since there
is a theoretically unlimited potential for the market price of the security sold
short to increase. Short sales may be used in some cases by a Fund to defer the
realization of gain or loss for federal income tax purposes on securities then
owned by the Fund. See "Dividends, Distributions and Taxes-Tax Straddles" for a
discussion of certain special federal income tax considerations that may apply
to short sales which are entered into by the Fund.
Short-Term Investments
A Fund may invest in short-term investments including corporate
commercial paper and other short-term commercial obligations, in each case rated
or issued by companies with similar securities outstanding that are rated
Prime-1, Aa3 or better by Moody's Investors Service ("Moody's") or A-1, AA- or
better by Standard & Poor's Index Services ("S&P"); obligations (including
certificates of deposit, time deposits, demand deposits, and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa3 or
better by Moody's or A-1, AA- or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
A Fund may invest in short-term debt securities rated BBB- or higher
by S&P or Baa3 or higher by Moody's or, if not rated, of equivalent credit
quality as determined by the Adviser. The Fund expects that it will not retain a
short-term debt security that is downgraded below BBB- or Baa3 (or an equivalent
rating) or, if not rated, determined by the Adviser to have undergone similar
credit quality deterioration, subsequent to purchase by the Fund.
Special Situations
A Fund may invest in special situations. A special situation arises
when, in the opinion of the Fund's management, the securities of a particular
company will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development
particularly or uniquely applicable to that company and regardless of general
business conditions or movements in the market as a whole. Developments creating
special situations might include, among others, the following: liquidations,
reorganizations, recapitalizations or mergers, material litigation,
technological breakthroughs and new management or management policies. Although
large and well-known companies may be involved, special situations often involve
much greater risk than is inherent in ordinary investment securities.
Standby Commitment Agreements
A Fund may from time to time enter into standby commitment
agreements. Such agreements commit a Fund, for a stated period of time, to
purchase a stated amount of a security that may be issued and sold to the Fund
at the option of the issuer. The price and coupon of the security are fixed at
the time of the commitment. At the time of entering into the agreement a Fund is
paid a commitment fee, regardless of whether or not the security is ultimately
issued, which is typically approximately 0.5% of the aggregate purchase price of
the security which the Fund has committed to purchase. The fee is payable
whether or not the security is ultimately issued. A Fund will enter into such
agreements only for the purpose of investing in the security underlying the
commitment at a yield and price which are considered advantageous to the Fund
and which are unavailable on a firm commitment basis.
There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Since the issuance of
the security underlying the commitment is at the option of the issuer, a Fund
will bear the risk of capital loss in the event the value of the security
declines and may not benefit from an appreciation in the value of the security
during the commitment period if the issuer decides not to issue and sell the
security to the Fund.
The purchase of a security subject to a standby commitment agreement
and the related commitment fee will be recorded on the date on which the
security can reasonably be expected to be issued and the value of the security
will thereafter be reflected in the calculation of a Fund's NAV. The cost basis
of the security will be adjusted by the amount of the commitment fee. In the
event the security is not issued, the commitment fee will be recorded as income
on the expiration date of the standby commitment.
Structured Products
A Fund may invest in structured products. Structured products,
including indexed or structured securities, combine the elements of futures
contracts or options with those of debt, preferred equity or a depositary
instrument. Generally, the principal amount, amount payable upon maturity or
redemption, or interest rate of a structured product is tied (either positively
or negatively) to prices, changes in prices, or differences between prices, of
underlying assets, such as securities, currencies, intangibles, goods, articles
or commodities or by reference to an unrelated benchmark related to an objective
index, economic factor or other measure, such as interest rates, currency
exchange rates, commodity indices, and securities indices. The interest rate or
(unlike most fixed income securities) the principal amount payable at maturity
of a structured product may be increased or decreased depending on changes in
the value of the underlying asset or benchmark.
Structured products may take a variety of forms. Most commonly, they
are in the form of debt instruments with interest or principal payments or
redemption terms determined by reference to the value of a currency or commodity
or securities index at a future point in time, but may also be issued as
preferred stock with dividend rates determined by reference to the value of a
currency or convertible securities with the conversion terms related to a
particular commodity.
Investing in structured products may be more efficient and/or less
expensive for a Fund than investing in the underlying assets or benchmarks and
the related derivative. These investments can be used as a means of pursuing a
variety of investment goals, including currency hedging, duration management and
increased total return. In addition, structured products may be a tax-advantaged
investment in that they generate income that may be distributed to shareholders
as income rather than short-term capital gains that may otherwise result from a
derivatives transaction.
Structured products, however, have more risk than traditional types
of debt or other securities. These products may not bear interest or pay
dividends. The value of a structured products or its interest rate may be a
multiple of a benchmark and, as a result, may be leveraged and move (up or down)
more steeply and rapidly than the benchmark. Under certain conditions, the
redemption value of a structured product could be zero. Structured products are
potentially more volatile and carry greater market risks than traditional debt
instruments. The prices of the structured instrument and the benchmark or
underlying asset may not move in the same direction or at the same time.
Structured products may be less liquid and more difficult to price than less
complex securities or instruments or more traditional debt securities. The risk
of these investments can be substantial with the possibility that the entire
principal amount is at risk. The purchase of structured products also exposes a
Fund to the credit risk of the issuer of the structured product.
-Structured Notes and Indexed Securities: The Fund may invest in a
particular type of structured instrument sometimes referred to as a "structured
note". The terms of these notes may be structured by the issuer and the
purchaser of the note. Structured notes are derivative debt instruments, the
interest rate or principal of which is determined by an unrelated indicator (for
example, a currency, security, commodity or index thereof). Indexed securities
may include structured notes as well as securities other than debt securities,
the interest rate or principal of which is determined by an unrelated indicator.
The terms of structured notes and indexed securities may provide that in certain
circumstances no principal is due at maturity, which may result in a total loss
of invested capital. Structured notes and indexed securities may be positively
or negatively indexed, so that appreciation of the unrelated indicator may
produce an increase or a decrease in the interest rate or the value of the
structured note or indexed security at maturity may be calculated as a specified
multiple of the change in the value of the unrelated indicator. Therefore, the
value of such notes and securities may be very volatile. Structured notes and
indexed securities may entail a greater degree of market risk than other types
of debt securities because the investor bears the risk of the unrelated
indicator. Structured notes or indexed securities also may be more volatile,
less liquid, and more difficult to accurately price than less complex securities
and instruments or more traditional debt securities.
-Commodity Index-Linked Notes and Commodity-Linked Notes: Structured
products may provide exposure to the commodities markets. These structured notes
may include leveraged or unleveraged commodity index-linked notes, which are
derivative debt instruments with principal and/or coupon payments linked to the
performance of commodity indices. They also include commodity-linked notes with
principal and/or coupon payments linked to the value of particular commodities
or commodities futures contracts, or a subset of commodities and commodities
future contracts. The value of these notes will rise or fall in response to
changes in the underlying commodity, commodity futures contract, subset of
commodities or commodities futures contracts or commodity index. These notes
expose the Fund economically to movements in commodity prices. These notes also
are subject to risks, such as credit, market and interest rate risks, that in
general affect the values of debt securities. In addition, these notes are often
leveraged, increasing the volatility of each note's market value relative to
changes in the underlying commodity, commodity futures contract or commodity
index. Therefore, the Fund might receive interest or principal payments on the
note that are determined based on a specified multiple of the change in value of
the underlying commodity futures contract or index.
-Credit-Linked Securities: Credit-linked securities are issued by a
limited purpose trust or other vehicle that, in turn, invests in a basket of
derivative instruments, such as credit default swaps, interest rate swaps and
other securities, in order to provide exposure to certain high yield or other
fixed income markets. For example, a Fund may invest in credit-linked securities
as a cash management tool in order to gain exposure to certain high yield
markets and/or to remain fully invested when more traditional income producing
securities are not available. Like an investment in a bond, investments in
credit-linked securities represent the right to receive periodic income payments
(in the form of distributions) and payment of principal at the end of the term
of the security. However, these payments are conditioned on the trust's receipt
of payments from, and the trust's potential obligations to, the counterparties
to the derivative instruments and other securities in which the trust invests.
For instance, the trust may sell one or more credit default swaps, under which
the trust would receive a stream of payments over the term of the swap
agreements provided that no event of default has occurred with respect to the
referenced debt obligation upon which the swap is based. If a default occurs,
the stream of payments may stop and the trust would be obligated to pay the
counterparty the par value (or other agreed upon value) of the referenced debt
obligation. This, in turn, would reduce the amount of income and principal that
a Fund would receive as an investor in the trust. A Fund' investments in these
instruments are indirectly subject to the risks associated with derivative
instruments, including, among others, credit risk, default or similar event
risk, counterparty risk, interest rate risk, and leverage risk and management
risk. These securities are generally structured as Rule 144A securities so that
they may be freely traded among institutional buyers. However, changes in the
market for credit-linked securities or the availability of willing buyers may
result in the securities becoming illiquid.
U.S. Government Securities
U.S. Government securities may be backed by the full faith and
credit of the United States, supported only by the right of the issuer to borrow
from the U.S. Treasury or backed only by the credit of the issuing agency
itself. These securities include: (i) the following U.S. Treasury securities,
which are backed by the full faith and credit of the United States and differ
only in their interest rates, maturities and times of issuance: U.S. Treasury
bills (maturities of one year or less with no interest paid and hence issued at
a discount and repaid at full face value upon maturity), U.S. Treasury notes
(maturities of one to ten years with interest payable every six months) and U.S.
Treasury bonds (generally maturities of greater than ten years with interest
payable every six months); (ii) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities that are supported by the full faith
and credit of the U.S. Government, such as securities issued by GNMA, the
Farmers Home Administration, the Department of Housing and Urban Development,
the Export-Import Bank, the General Services Administration and the Small
Business Administration, including obligations that are issued by private
issuers that are guaranteed as to principal or interest by the U.S. Government,
its agencies or instrumentalities; and (iii) obligations issued or guaranteed by
U.S. Government agencies and instrumentalities that may not be supported by the
full faith and credit of the U.S. Government or a right to borrow from the U.S.
Treasury, such as securities issued by the FNMA and FHLMC, and governmental
collateralized mortgage obligations ("CMOs"). The maturities of the U.S.
Government securities listed in paragraphs (i) and (ii) above usually range from
three months to 30 years. Such securities, except GNMA certificates, normally
provide for periodic payments of interest in fixed amount with principal
payments at maturity or specified call dates.
U.S. Government securities also include certain stripped
mortgage-related securities. Stripped mortgage-related securities and
principal-only securities are described in more detail in "Mortgage-Related
Securities and Other Asset-Backed Securities -Stripped Mortgage-Related
Securities" above. In addition, other U.S. Government agencies and
instrumentalities have issued stripped securities that are similar to SMRS.
Inflation-protected securities, or IPS, such as Treasury
Inflation-Protected Securities, or TIPS, are fixed income securities whose
principal value is periodically adjusted according to the rate of inflation. If
the index measuring inflation falls, the principal value of these securities
will be adjusted downward, and consequently the interest payable on these
securities (calculated with respect to a smaller principal amount) will be
reduced. Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation-protected
securities. For bonds that do not provide a similar guarantee, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.
Inflation-protected securities tend to react to changes in real
interest rates. In general, the price of an inflation-protected security can
fall when real interest rates rise, and can rise when real interest rates fall.
In addition, the value of inflation-protected securities may be vulnerable to
changes in expectations of inflation. Interest payments on inflation-protected
securities can be unpredictable and will vary as the principal and/or interest
is adjusted for inflation.
TIPS, which are issued by the U.S Treasury, use the Consumer Price
Index for Urban Consumers, or the CPI, as the inflation measure. The principal
of a TIPS increases with inflation and decreases with deflation, as measured by
the CPI. When a TIPS matures, the holder is paid the adjusted principal or
original principal, whichever is greater. TIPS pay interest twice a year, at a
fixed rate, which is determined by auction at the time the TIPS are issued. The
rate is applied to the adjusted principal; so, like the principal, interest
payments rise with inflation and fall with deflation. TIPS are issued in terms
of 5, 10, and 20 years.
Guarantees of securities by the U.S. Government or its agencies or
instrumentalities guarantee only the payment of principal and interest on the
securities, and do not guarantee the securities' yield or value or the yield or
value of the shares of the Fund that holds the securities.
U.S. Government securities are considered among the safest of
fixed-income investments. As a result, however, their yields are generally lower
than the yields available from other fixed-income securities.
Variable, Floating and Inverse Floating Rate Securities
These securities have interest rates that are reset at periodic
intervals, usually by reference to some interest rate index or market interest
rate. Some of these securities are backed by pools of mortgage loans. Although
the rate adjustment feature may act as a buffer to reduce sharp changes in the
value of these securities, they are still subject to changes in value based on
changes in market interest rates or changes in the issuer's creditworthiness.
Because the interest rate is reset only periodically, changes in the interest
rate on these securities may lag behind changes in prevailing market interest
rates. Also, some of these securities (or the underlying mortgages) are subject
to caps or floors that limit the maximum change in the interest rate during a
specified period or over the life of the security.
Certain Risk and Other Considerations
Borrowing and Use of Leverage. The Fund may use borrowings for
investment purposes subject to the restrictions of the 1940 Act. Borrowings by
the Fund result in leveraging of the Fund's shares of common stock. The proceeds
of such borrowings will be invested in accordance with the Fund's investment
objective and policies. A Fund also may create leverage through the use of
derivatives or use leverage for investment purposes by entering into transaction
such as reverse repurchase agreements and forward contracts. This means that the
Fund will use the cash proceeds made available during the terms of these
transactions to make investments in other securities.
Utilization of leverage, which is usually considered speculative,
however, involves certain risks to the Fund's shareholders. These include a
higher volatility of the NAV of the Fund's shares of common stock and the
relatively greater effect on the NAV of the shares caused by favorable or
adverse changes in market conditions or interest rates. So long as the Fund is
able to realize a net return on the leveraged portion of its investment
portfolio that is higher than the interest expense paid on borrowings, or the
carrying costs of leveraged transactions, the effect of leverage will be to
cause the Fund's shareholders to realize higher current net investment income
than if the Fund were not leveraged. However, to the extent that the interest
expense on borrowings, or the carrying costs of leveraged transactions,
approaches the net return on the leveraged portion of the Fund's investment
portfolio, the benefit of leverage to the Fund's shareholders will be reduced,
and if the interest expense on borrowings, or the carrying costs of leveraged
transactions, were to exceed the net return to shareholders, the Fund's use of
leverage would result in a lower rate of return than if the Fund were not
leveraged. Similarly, the effect of leverage in a declining market would
normally be a greater decrease in NAV per share than if the Fund were not
leveraged. In an extreme case, if the Fund's current investment income were not
sufficient to meet the interest expense on borrowings or the carrying costs of
leveraged transactions, it could be necessary for the Fund to liquidate certain
of its investments in adverse circumstances, potentially significantly reducing
its NAV.
Certain transactions, such as derivatives transactions, forward
commitments, reverse repurchase agreements and short sales, involve leverage and
may expose a Fund to potential losses that, in some cases, may exceed the amount
originally invested by the Fund. When a Fund engages in such transactions, it
will, in accordance with guidance provided by the SEC or its staff in, among
other things, regulations, interpretative releases and no-action letters,
deposit in a segregated account certain liquid assets with a value at least
equal to the Fund's exposure, on a marked-to-market or other relevant basis, to
the transaction. Transactions for which assets have been segregated will not be
considered "senior securities" for purposes of the Fund's investment restriction
concerning senior securities. The segregation of assets is intended to enable
the Fund to have assets available to satisfy its obligations with respect to
these transactions, but will not limit the Fund's exposure to loss.
Real Estate Investments
If a Fund, including, in particular, Global Real Estate Investment,
receives rental income or income from the disposition of real property acquired
as a result of a default on securities the Fund owns, the receipt of such income
may adversely affect the Fund's ability to retain its tax status as a regulated
investment company. Investments by Global Real Estate Investment in securities
of companies providing mortgage servicing will be subject to the risks
associated with refinancings and their impact on servicing rights.
REITs are subject to the possibilities of failing to qualify for
tax-free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act. REITs (especially mortgage
REITs) also are subject to interest rate risks. When interest rates decline, the
value of a REIT's investment in fixed-rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of a REIT's investment in
fixed-rate obligations can be expected to decline. In contrast, as interest
rates on adjustable rate mortgage loans are reset periodically, yields on a
REIT's investments in such loans will gradually align themselves to reflect
changes in market interest rates, causing the value of such investments to
fluctuate less dramatically in response to interest rate fluctuations than would
investments in fixed rate obligations.
Additional Risks of Futures Contracts, Options on Futures Contracts,
Swaps, Forward Contracts and Options on Foreign Currencies. Unlike transactions
entered into by the Funds in futures contracts, swaps, options on foreign
currencies and forward contracts may not be traded on contract markets regulated
by the CFTC or (with the exception of certain foreign currency options) by the
SEC. Such instruments may be traded through financial institutions acting as
market makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. Similarly, options on
currencies may be traded over-the-counter. In an over-the-counter trading
environment, many of the protections afforded to exchange participants will not
be available. For example, there are no daily price fluctuation limits, and
adverse market movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward contracts could
lose amounts substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are other securities traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default. Further,
a liquid secondary market in options traded on a national securities exchange
may be more readily available than in the over-the-counter market, potentially
permitting the Fund to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions, on exercise.
In addition, futures contracts, options on futures contracts,
forward contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
requirements than in the United States, and (v) lesser trading volume.
Risks of Investments in Foreign Securities. Investors should
understand and consider carefully the substantial risks involved in securities
of foreign companies and governments of foreign nations, some of which are
referred to below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-U.S. companies which are
generally denominated in foreign currencies, and utilization of derivative
investment products denominated in, or the value of which is dependent upon
movements in the relative value of, a foreign currency, involve certain
considerations comprising both risk and opportunity not typically associated
with investing in U.S. companies. These considerations include changes in
exchange rates and exchange control regulations, political and social
instability, expropriation, imposition of foreign taxes, less liquid markets and
less available information than are generally the case in the United States,
higher transaction costs, less government supervision of exchanges, brokers and
issuers, difficulty in enforcing contractual obligations, lack of uniform
accounting and auditing standards and greater price volatility.
There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign issuers are subject to accounting and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and profits appearing on
the financial statements of a foreign issuer may not reflect its financial
position or results of operations in the way they would be reflected had the
financial statement been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules in some of the countries in which
the Fund may invest require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and may not
accurately reflect the real condition of those issuers and securities markets.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
It is contemplated that foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign securities markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New York
Stock Exchange (the "Exchange"), and securities of some foreign companies are
less liquid and more volatile than securities of comparable U.S. companies.
Similarly, volume and liquidity in most foreign bond markets is less than in the
United States and, at times, volatility of price can be greater than in the
United States. Fixed commissions on foreign stock exchanges are generally higher
than negotiated commissions on U.S. exchanges, although a Fund will endeavor to
achieve the most favorable net results on its portfolio transactions. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed companies than in the United States.
Expropriation, confiscatory taxation, nationalization, political,
economic or social instability or other similar developments, such as military
coups, have occurred in the past in countries in which a Fund may invest and
could adversely affect a Fund's assets should these conditions or events recur.
Foreign investment in the securities of companies in certain
countries is restricted or controlled to varying degrees. These restrictions or
controls may at times limit or preclude Fund investment in certain foreign
securities and increase the costs and expenses of a Fund. Certain countries in
which the Fund may invest require governmental approval prior to investments by
foreign persons, limit the amount of investment by foreign persons in a
particular issuer, limit the investment by foreign persons only to a specific
class of securities of an issuer that may have less advantageous rights than the
classes available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.
Certain countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
Income from certain investments held by a Fund could be reduced by
foreign income taxes, including withholding taxes. It is impossible to determine
the effective rate of foreign tax in advance. A Fund's NAV may also be affected
by changes in the rates or methods of taxation applicable to that Fund or to
entities in which that Fund has invested. The Adviser generally will consider
the cost of any taxes in determining whether to acquire any particular
investments, but can provide no assurance that the tax treatment of investments
held by a Fund will not be subject to change. A shareholder otherwise subject to
United States federal income taxes may, subject to certain limitations, be
entitled to claim a credit or deduction for U.S. federal income tax purposes for
his or her proportionate share of such foreign taxes paid by the Fund. See
"United States Federal Income Taxation of the Fund".
Investors should understand that the expense ratio of a Fund
investing in foreign securities may be higher than investment companies
investing only in domestic securities since, among other things, the cost of
maintaining the custody of foreign securities is higher and the purchase and
sale of portfolio securities may be subject to higher transaction charges, such
as stamp duties and turnover taxes.
For many securities of foreign issuers, there are U.S.
Dollar-denominated ADRs which are traded in the United States on exchanges or
over-the-counter and are issued by domestic banks or trust companies and for
which market quotations are readily available. ADRs do not lessen the foreign
exchange risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of foreign issuers,
a Fund can avoid currency risks which might occur during the settlement period
for either purchases or sales.
Foreign Currency Transactions. A Fund may invest in securities
denominated in foreign currencies and a corresponding portion of the Fund's
revenues will be received in such currencies. In addition, a Fund may conduct
foreign currency transactions for hedging and non-hedging purposes on a spot
(i.e., cash) basis or through the use of derivatives transactions, such as
forward currency exchange contracts, currency futures and options thereon, and
options on currencies as described above. The dollar equivalent of a Fund's net
assets and distributions will be adversely affected by reductions in the value
of certain foreign currencies relative to the U.S. Dollar. Such changes will
also affect a Fund's income. A Fund will, however, have the ability to attempt
to protect itself against adverse changes in the values of foreign currencies by
engaging in certain of the investment practices listed above. While a Fund has
this ability, there is no certainty as to whether and to what extent the Fund
will engage in these practices.
Currency exchange rates may fluctuate significantly over short
periods of time causing, along with other factors, a Fund's NAV to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. To the extent
a Fund's total assets adjusted to reflect a Fund's net position after giving
effect to currency transactions is denominated or quoted in the currencies of
foreign countries, a Fund will be more susceptible to the risk of adverse
economic and political developments within those countries.
A Fund will incur costs in connection with conversions between
various currencies. A Fund may hold foreign currency received in connection with
investments when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. Dollars at a later date, based on anticipated
changes in the relevant exchange rate. If the value of the foreign currencies in
which a Fund receives income falls relative to the U.S. Dollar between receipt
of the income and the making of Fund distributions, a Fund may be required to
liquidate securities in order to make distributions if a Fund has insufficient
cash in U.S. Dollars to meet the distribution requirements that the Fund must
satisfy to qualify as a regulated investment company for federal income tax
purposes. Similarly, if the value of a particular foreign currency declines
between the time a Fund incurs expenses in U.S. Dollars and the time cash
expenses are paid, the amount of the currency required to be converted into U.S.
Dollars in order to pay expenses in U.S. Dollars could be greater than the
equivalent amount of such expenses in the currency at the time they were
incurred. In light of these risks, the Fund may engage in certain currency
hedging transactions, which themselves, involve certain special risks.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies
The following investment restrictions, which may not be changed
without approval by the vote of a majority of the Fund's outstanding voting
securities, which means the affirmative vote of (i) 67% or more of the shares of
the Fund represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, whichever is less.
As a matter of fundamental policy, a Fund may not:
(a) concentrate investments in an industry, as concentration may be
defined under the 1940 Act or the rules and regulations thereunder (as such
statute, rules or regulations may be amended from time to time) or by guidance
regarding, interpretations of, or exemptive orders under, the 1940 Act or the
rules or regulations thereunder published by appropriate regulatory
authorities;(1)
(1) Global Real Estate has not adopted policies to concentrate investments in
any one industry. Although Global Real Estate invests generally in the
real estate industry sector, the primary economic characteristics of
companies in this sector are materially different. Global Real Estate
invests in equity and mortgage REITs, each of which seek different types
of investments. Equity REITs invest directly in real estate properties and
mortgage REITs make loans to real estate owners and purchase mortgages on
real estate. In addition, there are many different types of REITs in which
Global Real Estate may invest, including for example, those that invest in
shopping malls, industrial and office buildings, apartments, warehouses,
lodging and hotels, and health care facilities. REITs may also invest in
specific regions, states, or countries. Foreign REITs or other non-U.S.
real estate investments may have significantly different characteristics
than those in the U.S.
(b) issue any senior security (as that term is defined in the 1940
Act) or borrow money, except to the extent permitted by the 1940 Act or the
rules and regulations thereunder (as such statute, rules or regulations may be
amended from time to time) or by guidance regarding, or interpretations of, or
exemptive orders under, the 1940 Act or the rules or regulations thereunder
published by appropriate regulatory authorities. For purposes of this
restriction, margin and collateral arrangements, including, for example, with
respect to permitted borrowings, options, futures contracts, options on futures
contracts and other derivatives such as swaps are not deemed to involve the
issuance of a senior security;
(c) make loans except through (i) the purchase of debt obligations
in accordance with its investment objective and policies; (ii) the lending of
portfolio securities; (iii) the use of repurchase agreements; or (iv) the making
of loans to affiliated funds as permitted under the 1940 Act, the rules and
regulations thereunder (as such statutes, rules or regulations may be amended
from time to time), or by guidance regarding, and interpretations of, or
exemptive orders under, the 1940 Act;
(d) purchase or sell real estate except that it may dispose of real
estate acquired as a result of the ownership of securities or other instruments.
This restriction does not prohibit the Fund from investing in securities or
other instruments backed by real estate or in securities of companies engaged in
the real estate business;
(e) with respect to Discovery Value and International Value,
purchase or sell commodities regulated by the CFTC under the Commodity Exchange
Act or commodities contracts except for futures contracts and options on futures
contracts, and, with respect to Value, Global Value, Growth and Income, Core
Opportunities, Global Risk Allocation, Global Real Estate, Equity Income and
Emerging Markets Equity, may purchase or sell commodities or options thereon to
the extent permitted by applicable law; or
(f) act as an underwriter of securities, except that the Fund may
acquire restricted securities under circumstances in which, if such securities
were sold, the Fund might be deemed to be an underwriter for purposes of the
Securities Act.
As a fundamental policy, each Fund, except Emerging Markets Equity,
is diversified (as that term is defined in the 1940 Act). This means that at
least 75% of a Fund's assets consist of:
o Cash or cash items;
o Government securities;
o Securities of other investment companies; and
o Securities of any one issuer that represent not more than 10%
of the outstanding voting securities of the issuer of the
securities and not more than 5% of the total assets of the
Fund.
Emerging Markets Equity is a "non-diversified" investment company as
described in the 1940 Act, which means the Fund is not limited in the proportion
of its assets that may be invested in the securities of a single issuer. This
policy may be changed without a shareholder vote.
Non-Fundamental Investment Policies
The following are descriptions of operating policies that the Funds
have adopted but that are not fundamental and is subject to change without
shareholder approval.
The Funds may not purchase securities on margin, except (i) as
otherwise provided under rules adopted by the SEC under the 1940 Act or by
guidance regarding the 1940 Act, or interpretations thereof, and (ii) that the
Funds may obtain such short-term credits as are necessary for the clearance of
portfolio transactions, and the Funds may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps, floors, collars
and other financial instruments.
MANAGEMENT OF THE FUNDS
The Adviser
The Adviser, a Delaware limited partnership with principal offices
at 1345 Avenue of the Americas, New York, New York 10105, has been retained
under an investment advisory agreement (the "Advisory Agreement") to provide
investment advice and, in general, to conduct the management and investment
program of each Fund under the supervision of the Boards. The Adviser is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended.
The Adviser is a leading global investment management firm
supervising client accounts with assets as of December 31, 2012, totaling
approximately $430 billion. The Adviser provides management services for many of
the largest U.S. public and private employee benefit plans, endowments,
foundations, public employee retirement funds, banks, insurance companies and
high net worth individuals worldwide.
As of December 31, 2012, the ownership structure of the Adviser,
expressed as a percentage of general and limited partnership interests, was as
follows:
AXA and its subsidiaries 61.0%
Holding 37.5
Unaffiliated holders 1.5
-------
100.0%
=======
|
AXA is a societe anonyme organized under the laws of France and the
holding company for an international group of insurance and related financial
services companies, through certain of its subsidiaries ("AXA and its
subsidiaries"). AllianceBernstein Holding L.P. ("Holding") is a Delaware limited
partnership the units of which, ("Holding Units") are traded publicly on the
Exchange under the ticker symbol "AB". As of December 31, 2012, AXA owned
approximately 1.4% of the issued and outstanding assignments of beneficial
ownership of Holding Units.
AllianceBernstein Corporation (an indirect wholly-owned subsidiary
of AXA) is the general partner of both Holding and the Adviser.
AllianceBernstein Corporation owns 100,000 general partnership units in Holding
and a 1% general partnership interest in the Adviser. Including both the general
partnership and limited partnership interests in Holding and the Adviser, AXA
and its subsidiaries had an approximate 65.5% economic interest in the Adviser
as of December 31, 2012.
Advisory Agreements and Expenses
The Adviser serves as investment manager and adviser of each of the
Funds, continuously furnishes an investment program for each Fund, and manages,
supervises and conducts the affairs of each Fund, subject to the oversight of
the Boards.
Under the Funds' Advisory Agreements, the Adviser furnishes advice
and recommendations with respect to the Funds' portfolios of securities and
investments, and provides persons satisfactory to the Boards to act as officers
of the Funds. Such officers or employees may be employees of the Adviser or of
its affiliates.
The Adviser is, under the Advisory Agreements, responsible for
certain expenses incurred by the Funds, including, for example, office
facilities and certain administrative services, and any expenses incurred in
promoting the sale of shares of the Funds (other than the portion of the
promotional expenses borne by the Funds in accordance with an effective plan
pursuant to Rule 12b-1 under the 1940 Act, and the costs of printing
prospectuses of the Funds and other reports to shareholders and fees related to
registration with the SEC and with state regulatory authorities).
The Funds have, under the Advisory Agreements, assumed the
obligation for payment of all of their other expenses. As to the obtaining of
services other than those specifically provided to the Funds by the Adviser,
each Fund may employ its own personnel. For such services, it may also utilize
personnel employed by the Adviser or its affiliates. In such event, the services
will be provided to the Funds at cost and the payments thereto specifically
approved by the Boards. During the fiscal year ended November 30, 2012, for the
Value Fund, Global Value, International Value, Discovery Value, Core
Opportunities, Global Risk Allocation, Equity Income, Global Real Estate and
Emerging Markets Equity, the amounts paid to the Adviser for such services
amounted to a total of $57,630, $56,606, $52,120, $46,798, $57,947, $80,701,
$61,734, $57,208 and $10,235, respectively, after any waiver or reimbursement.
During the fiscal year ended October 31, 2012, for the Growth and Income Fund,
the amount paid to the Adviser for such services amounted to a total of $64,093
after any waiver or reimbursement.
The Advisory Agreements for each of the Funds except Emerging
Markets Equity continue in effect from year to year provided that their
continuance is specifically approved at least annually by majority vote of the
holders of the outstanding voting securities of each Fund or by the
Directors/Trustees ("Directors"), and, in either case, by a majority of the
Directors who are not parties to the Advisory Agreements or "interested persons"
of any such party at a meeting in person called for the purpose of voting on
such matter. Most recently, continuance of the Advisory Agreements for all Funds
except Emerging Markets Equity was approved by a vote, cast in person, for
additional annual terms by the Board at their meetings held on May 1-3, 2012.
The Advisory Agreement for Emerging Markets Equity became effective
on September 27, 2012. The Advisory Agreement provides that it will continue in
effect for two years from its effective date and thereafter from year to year
provided that its continuance is specifically approved at least annually by
majority vote of the holders of the outstanding voting securities of the Fund or
by the Directors, and, in either case, by a majority of the Directors who are
not parties to the Advisory Agreement or "interested persons" of any such party
at a meeting in person called for the purpose of voting on such matter.
Any material amendment to the Advisory Agreements must be approved
by the vote of a majority of the outstanding securities of the relevant Fund and
by the vote of a majority of the Directors who are not interested persons of the
Fund or the Adviser. The Advisory Agreements are terminable without penalty on
60 days' written notice by a vote of a majority of the outstanding voting
securities of each Fund, by a vote of a majority of the Directors, or by the
Adviser on 60 days' written notice, and will automatically terminate in the
event of their assignment. The Advisory Agreements provide that, in the absence
of willful misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder, the Adviser
shall not be liable for any action or failure to act in accordance with its
duties thereunder.
Certain other clients of the Adviser may have investment objectives
and policies similar to those of the Funds. The Adviser may, from time to time,
make recommendations that result in the purchase or sale of the particular
security by its other clients simultaneously with a purchase or sale thereof by
one or more Funds. If transactions on behalf of more than one client during the
same period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. It is the policy
of the Adviser to allocate advisory recommendations and the placing of orders in
a manner that is deemed equitable by the Adviser to the accounts involved,
including the Funds. When two or more of the Adviser's clients (including a
Fund) are purchasing or selling the same security on a given day through the
same broker or dealer, such transactions may be averaged as to price.
VALUE FUND
For the services rendered by the Adviser under the Advisory
Agreement, Value Fund paid the Adviser a fee of .55% of the first $2.5 billion,
.45% of the excess over $2.5 billion up to $5 billion, and .40% of the excess
over $5 billion as a percentage of the Fund's average daily net assets. The fee
is accrued daily and paid monthly. For the fiscal years of the Fund ended
November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser earned
from the Fund $2,067,349, $2,348,755 and $2,669,026, respectively, in advisory
fees.
DISCOVERY VALUE
For the services rendered by the Adviser under the Advisory
Agreement, Discovery Value paid the Adviser a fee of .75% of the first $2.5
billion, .65% of the excess over $2.5 billion up to $5 billion, and .60% of the
excess over $5 billion as a percentage of the Fund's average daily net assets.
The fee is accrued daily and paid monthly. For the fiscal years of the Fund
ended November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser
earned from the Fund $10,743,541, $9,479,852 and $6,858,598 (net of $464,546,
$1,748,065 and $2,030,591, which was waived by the Adviser), respectively, in
advisory fees.
INTERNATIONAL VALUE
For the services rendered by the Adviser under the Advisory
Agreement, International Value pays the Adviser a fee of .75% of the first $2.5
billion, .65% of the excess over $2.5 billion up to $5 billion, and .60% of the
excess over $5 billion as a percentage of the Fund's average daily net assets.
The fee is accrued daily and paid monthly. For the fiscal years of the Fund
ended November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser
earned from the Fund $6,542,513, $15,226,637 and $25,159,818, respectively, in
advisory fees.
GLOBAL VALUE
For the services rendered by the Adviser under the Advisory
Agreement, Global Value pays the Adviser a fee of .75% of the first $2.5
billion, .65% of the excess over $2.5 billion up to $5 billion, and .60% of the
excess over $5 billion as a percentage of the Fund's average daily net assets.
The fee is accrued daily and paid monthly. For the fiscal years of the Fund
ended November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser
earned from the Fund $440,612, $835,742 and $1,108,892, respectively, in
advisory fees.
GROWTH AND INCOME
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of .55% of the first $2.5 billion,
.45% of the excess over $2.5 billion up to $5 billion and .40% of the excess
over $5 billion as a percentage of the Fund's average daily net assets. The fee
is accrued daily and paid monthly. For the fiscal years of the Fund ended
October 31, 2012, October 31, 2011 and October 31, 2010, the Adviser received
from the Fund advisory fees of $7,430,537, $8,075,100 and $8,842,336,
respectively in advisory fees.
CORE OPPORTUNITIES
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of .55% of the first $2.5 billion,
.45% of the excess over $2.5 billion up to $5 billion, and .40% of the excess
over $5 billion as a percentage of the Fund's average daily net assets. The fee
is accrued daily and paid monthly. For the fiscal years of the Fund ended
November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser earned
from the Fund $357,598, $392,765 and $391,497 (net of $211,499, $174,413 and
$209,281 which were waived by the Adviser), respectively, in advisory fees. The
Adviser has contractually agreed for the period from the effective date of the
Fund's Prospectus to the effective date of the subsequent Prospectus
incorporating the Fund's annual financial statements (the "Period") to waive its
fee and bear certain expenses so that total expenses do not exceed on an annual
basis, 1.35%, 2.05%, 2.05%, 1.05%, 1.55%, 1.30% and 1.05% of aggregate average
daily net assets, respectively, for Class A, Class B, Class C, Advisor Class,
Class R, Class K and Class I shares. The fee waiver and/or expense reimbursement
agreement automatically extends each year unless the Adviser provides notice of
termination to the Fund at least 60 days prior to the end of the Period.
GLOBAL RISK ALLOCATION
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of .60% of the first $200 million,
.50% of the next $200 million, and .40% of the excess over $400 million as a
percentage of the Fund's average daily net assets. The fee is accrued daily and
paid monthly. For the fiscal years ended November 30, 2012, November 30, 2011
and November 30, 2010, the Adviser received from the Fund advisory fees of
$2,820,203, $2,912,785 and $3,271,567, respectively, in advisory fees.
EQUITY INCOME
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of .55% of the first $2.5 billion,
.45% of the excess over $2.5 billion up to $5 billion and .40% of the excess
over $5 billion as a percentage of the Fund's average daily net assets. The fee
is accrued daily and paid monthly. For the fiscal years of the Fund ended
November 30, 2012, November 30, 2011 and November 30, 2010, the Adviser received
from the Fund $2,550,860, $1,400,238 and $787,395, (net of $0, $9,873 and
$96,476, which were waived by the Adviser), respectively, in advisory fees. The
Adviser has agreed for the period from the effective date of the Fund's
Prospectus to the effective date of the subsequent Prospectus incorporating the
Fund's annual financial statements (the "Period") to waive its fees and bear
certain expenses to the extent necessary to limit total operating expenses on an
annual basis to 1.25%, 1.95%, 1.95%, .95%, 1.45%, 1.20% and .95% of the daily
net assets for the Class A, Class B, Class C, Advisor Class, Class R, Class K
and Class I shares, respectively (the "Expense Caps"). The fee waiver and/or
expense reimbursement agreement automatically extends each fiscal year unless
the Adviser provides notice of termination to the Trust at least 60 days prior
to the end of the Period.
GLOBAL REAL ESTATE
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of .55% of the first $2.5 billion,
.45% of the excess over $2.5 billion up to $5 billion and .40% of the excess
over $5 billion as a percentage of the Fund's average daily net assets. The fee
is accrued daily and paid monthly. For the fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the Adviser earned from the Fund
$661,450, $702,041 and $686,455, respectively, in advisory fees.
EMERGING MARKETS EQUITY
For the services rendered by the Adviser under the Advisory
Agreement, the Fund paid the Adviser a fee of 1.175% of the first $1 billion of
the Funds average daily net assets, 1.05% of the excess of $1 billion up to $2
billion, 1.00% of the excess of $2 billion up to $3 billion, 0.90% of the excess
of $3 billion up to $6 billion, and 0.85% of the excess over $6 billion of the
average daily net assets of the Fund. For the fiscal year of the Fund ended
November 30, 2012, the Adviser received from the Fund $0 (net of $10,180, which
was waived by the Adviser) in advisory fees. In addition to the $10,180 in
advisory fees waived by the Adviser, the Adviser waived or reimbursed the Fund,
in connection with its expenses, $75,485 for the fiscal year ended November 30,
2012. The Adviser has contractually agreed to waive its fee and bear certain
expenses so that total expenses (excluding extraordinary expenses, interest
expense, and the fees and expenses of registered investment companies or series
thereof in which the Fund invests other than advisory fees paid by Affiliated
Funds) do not exceed on an annual basis 1.75%, 2.45%, 1.95%, 1.70%, 1.45%,
1.70%, 1.45% and 1.45% of average daily net assets, respectively, for Class A,
Class C, Class R, Class K, Class I, Class 1, Class 2 and Adviser Class shares.
This fee waiver and/or expense reimbursement agreement may not be terminated
before October 12, 2015. Fees waived and expenses borne by the Adviser are
subject to reimbursement by the Fund until October 12, 2015. No reimbursement
payment will be made that would cause the Fund's total annualized operating
expenses to exceed the total expense amount set forth above for each class.
ALL FUNDS
The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is the investment adviser
to the following registered investment companies: AllianceBernstein Blended
Style Series, Inc., AllianceBernstein Bond Fund, Inc., AllianceBernstein Cap
Fund, Inc., AllianceBernstein Core Opportunities Fund, Inc., AllianceBernstein
Corporate Shares, AllianceBernstein Discovery Growth Fund, Inc.,
AllianceBernstein Equity Income Fund, Inc., AllianceBernstein Exchange Reserves,
AllianceBernstein Fixed-Income Shares, Inc., AllianceBernstein Global Bond Fund,
Inc., AllianceBernstein Global Real Estate Investment Fund, Inc.,
AllianceBernstein Global Risk Allocation Fund, Inc., AllianceBernstein Global
Thematic Growth Fund, Inc., AllianceBernstein Growth and Income Fund, Inc.,
AllianceBernstein High Income Fund, Inc., AllianceBernstein Institutional Funds,
Inc., AllianceBernstein International Growth Fund, Inc., AllianceBernstein Large
Cap Growth Fund, Inc., AllianceBernstein Municipal Income Fund, Inc.,
AllianceBernstein Municipal Income Fund II, AllianceBernstein Trust,
AllianceBernstein Unconstrained Bond Fund, Inc., AllianceBernstein Variable
Products Series Fund, Inc., Sanford C. Bernstein Fund, Inc., Sanford C.
Bernstein Fund II, Inc., The AllianceBernstein Pooling Portfolios and The
AllianceBernstein Portfolios, all open-end investment companies; and to
AllianceBernstein Global High Income Fund, Inc., AllianceBernstein Income Fund,
Inc., AllianceBernstein Multi-Manager Alternative Fund, AllianceBernstein
National Municipal Income Fund, Inc., Alliance California Municipal Income Fund,
Inc., and Alliance New York Municipal Income Fund, Inc., all registered
closed-end investment companies. The registered investment companies for which
the Adviser serves as investment adviser are referred to collectively below as
the "AllianceBernstein Fund Complex", while all of these investment companies,
except the Sanford C. Bernstein Fund, Inc. and the AllianceBernstein
Multi-Manager Alternative Fund, are referred to collectively below as the
"AllianceBernstein Funds".
Board of Directors Information
The Boards are comprised of the same Directors for all Funds.
Certain information concerning the Directors is set forth below.
Other Public
Portfolios in Company
AllianceBernstein Directorships
Name, Address,* Principal Occupation(s) Fund Complex Held by
Age and During Past Five Overseen by Director in the
(Year First Elected**) Years or Longer Director Past Five Years
---------------------- ----------------------- ------------- ---------------
INDEPENDENT DIRECTORS
Chairman of the Board Investment Adviser and an 101 None
William H. Foulk, Jr., #, ## Independent Consultant
80 since prior to 2008.
(1992 - Global Risk Previously, he was Senior
Allocation) Manager of Barrett
(1993 - Equity Income) Associates, Inc., a
(1996 - Global Real Estate) registered investment
(1998 - Growth and Income) adviser. He was formerly
(1999 - Core Opportunities) Deputy Comptroller and
(2001 - Value Fund, Chief Investment Officer
Discovery Value, of the State of New York
International Value, Global and, prior thereto, Chief
Value) Investment Officer of the
New York Bank for
Savings. He has served as
a director or trustee of
various AllianceBernstein
Funds since 1983 and has
been Chairman of the
AllianceBernstein Funds
and of the Independent
Directors Committee of
such Funds since 2003.
John H. Dobkin, # Independent Consultant 101 None
71 since prior to 2008.
(1992 - Global Risk Formerly, President of
Allocation) Save Venice, Inc.
(1993 - Equity Income) (preservation
(1996 - Global Real Estate) organization) from
(1998 - Growth and Income) 2001-2002; Senior Advisor
(1999 - Core Opportunities) from June 1999-June 2000
(2001 - Value Fund, and President of Historic
Discovery Value, Hudson Valley (historic
International Value, preservation) from
Global Value) December 1989-May 1999.
Previously, Director of
the National Academy of
Design. He has served as
a director or trustee of
various AllianceBernstein
Funds since 1992.
Michael J. Downey, # Private Investor since 101 Asia Pacific
69 prior to 2008. Formerly, Fund, Inc., and
2005 - All Funds managing partner of The Merger Fund
Lexington Capital, LLC since prior to
(investment advisory 2008 and
firm) from December 1997 Prospect
until December 2003. From Acquisition Corp.
1987 until 1993, Chairman (financial
and CEO of Prudential services) from
Mutual Fund Management, 2007 until 2009
director of the
Prudential mutual funds,
and member of the
Executive Committee of
Prudential Securities
Inc. He has served as a
director or trustee of
the AllianceBernstein
Funds since 2005.
D. James Guzy, # Chairman of the Board of 101 Cirrus Logic
76 PLX Technology Corporation
2005 - All Funds (semi-conductors) and of (semi-conductors) and
SRC Computers Inc., with PLX Technology
which he has been (semi-
associated since prior to conductors) since
2008. He was a director prior to 2008 and
of Intel Corporation Intel Corporation
(semi-conductors) from (semi-
1969 until 2008 and conductors) since
served as Chairman of the prior to 2008
Finance Committee of such
company for several years
until May 2008. He has
served as a director or
trustee of one or more of
the AllianceBernstein
Funds since 1982.
Nancy P. Jacklin, # Professorial Lecturer at 101 None
64 the Johns Hopkins School
2006 - All Funds of Advanced International
Studies since 2008.
Formerly, U.S. Executive
Director of the
International Monetary
Fund (December 2002-May
2006); Partner, Clifford
Chance (1992-2002);
Sector Counsel,
International Banking and
Finance, and Associate
General Counsel, Citicorp
(1985-1992); Assistant
General Counsel
(International), Federal
Reserve Board of
Governors (1982-1985);
and Attorney Advisor,
U.S. Department of the
Treasury (1973-1982).
Member of the Bar of the
District of Columbia and
of New York; and member
of the Council on Foreign
Relations. She has served
as a director or trustee
of the AllianceBernstein
Funds since 2006.
Garry L. Moody, # Independent Consultant. 101 None
60 Formerly, Partner,
2008 - All Funds Deloitte & Touche LLP,
(1995-2008) where he held
a number of senior
positions, including Vice
Chairman, and U.S. and
Global Investment
Management Practice
Managing Partner;
President, Fidelity
Accounting and Custody
Services Company
(1993-1995); and Partner,
Ernst & Young LLP
(1975-1993), where he
served as the National
Director of Mutual Fund
Tax Services. He has
served as a director or
trustee, and as Chairman
of the Audit Committee,
of the AllianceBernstein
Funds since 2008.
Marshall C. Turner, Jr., # Private Investor since 101 Xilinx, Inc.
71 prior to 2008. Interim (programmable
2005 - All Funds CEO of MEMC Electronic logic semi-
Materials, Inc. conductors) and
(semi-conductor and solar MEMC
cell substrates) from Electronic
November 2008 until March Materials, Inc.
2009. He was Chairman and (semi-conductor
CEO of Dupont Photomasks, and solar cell
Inc. (components of substrates) since
semi-conductor prior to 2008
manufacturing),
2003-2005, and President
and CEO, 2005-2006, after
the company was acquired
and renamed Toppan
Photomasks, Inc. He has
served as a director or
trustee of one or more of
the AllianceBernstein
Funds since 1992.
Earl D. Weiner, # Of Counsel, and Partner 101 None
73 prior to January 2007, of
2007 - All Funds the law firm Sullivan &
Cromwell LLP and member
of ABA Federal Regulation
of Securities Committee
Task Force to draft
editions of the Fund
Director's Guidebook. He
has served as director or
trustee of the
AllianceBernstein Funds
since 2007 and is
Chairman of the
Governance and Nominating
Committees of the Funds.
INTERESTED DIRECTOR
Robert M. Keith, +, ++ Senior Vice President of 101 None
52 the Adviser++ and head of
1345 Avenue of the Americas AllianceBernstein
New York, NY 10105 Investments, Inc.
2010 - All Funds ("ABI")++ since July
2008; Director of ABI and
President of the
AllianceBernstein Mutual
Funds. Previously, he
served as Executive
Managing Director of ABI
from December 2006 to
June 2008. Prior to
joining ABI in 2006,
Executive Managing
Director of Bernstein
Global Wealth Management,
and prior thereto, Senior
Managing Director and
Global Head of Client
Service and Sales of the
Adviser's institutional
investment management
business since 2004.
Prior thereto, he was
Managing Director and
Head of North American
Client Service and Sales
in the Adviser's
institutional investment
management business with
which he had been
associated since prior to
2004.
|
* The address for each of the Fund's Independent Directors is c/o
AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the
Americas, New York, NY 10105.
** There is no stated term of office for the Directors.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
## Member of the Fair Value Pricing Committee.
+ Mr. Keith is an "interested person", as defined in Section 2(a)(19) of the
Investment Company Act of 1940, of the Funds due to his position as a
Senior Vice President of the Adviser.
++ The Adviser and ABI are affiliates of the Funds.
The business and affairs of each Fund are overseen by the Boards.
Directors who are not "interested persons" of the Fund, as defined in the 1940
Act, are referred to as "Independent Directors", and Directors who are
"interested persons" of the Fund are referred to as "Interested Directors".
Certain information concerning the Fund's governance structure and each Director
is set forth below.
Experience, Skills, Attributes and Qualifications of the Funds'
Directors. The Governance and Nominating Committee of the Boards, which is
composed of Independent Directors, reviews the experience, qualifications,
attributes and skills of potential candidates for nomination or election by the
Boards, and conducts a similar review in connection with the proposed nomination
of current Directors for re-election by stockholders at any annual or special
meeting of stockholders. In evaluating a candidate for nomination or election as
a Director, the Governance and Nominating Committee takes into account the
contribution that the candidate would be expected to make to the diverse mix of
experience, qualifications, attributes and skills that the Governance and
Nominating Committee believes contributes to good governance for the Funds.
Additional information concerning the Governance and Nominating Committee's
consideration of nominees appears in the description of the Committee below.
The Boards believe that, collectively, the Directors have balanced
and diverse experience, qualifications, attributes and skills, which allow the
Boards to operate effectively in governing the Fund and protecting the interests
of stockholders. The Boards have concluded that, based on each Director's
experience, qualifications, attributes or skills on an individual basis and in
combination with those of the other Directors, each Director is qualified and
should continue to serve as such.
In determining that a particular Director was and continues to be
qualified to serve as a Director, the Boards have considered a variety of
criteria, none of which, in isolation, was controlling. In addition, the Boards
have taken into account the actual service and commitment of each Director
during his or her tenure (including the Director's commitment and participation
in Board and committee meetings, as well as his or her current and prior
leadership of standing and ad hoc committees) in concluding that each should
continue to serve. Additional information about the specific experience, skills,
attributes and qualifications of each Director, which in each case led to the
Boards' conclusion that the Director should serve (or continue to serve) as a
Director, is provided in the table above and in the next paragraph.
Among other attributes and qualifications common to all Directors
are their ability to review critically, evaluate, question and discuss
information provided to them (including information requested by the Directors),
to interact effectively with the Adviser, other service providers, counsel and
the Funds' independent registered public accounting firm, and to exercise
effective business judgment in the performance of their duties as Directors. In
addition to his or her service as a Director of the Fund and other
AllianceBernstein Funds as noted in the table above: Mr. Dobkin has experience
as an executive of a number of organizations and served as Chairman of the Audit
Committee of many of the AllianceBernstein Funds from 2001 to 2008; Mr. Downey
has experience in the investment advisory business including as Chairman and
Chief Executive Officer of a large fund complex and as director of a number of
non-AllianceBernstein funds and as Chairman of a non-AllianceBernstein
closed-end fund; Mr. Foulk has experience in the investment advisory and
securities businesses, including as Deputy Comptroller and Chief Investment
Officer of the State of New York (where his responsibilities included bond
issuances, cash management and oversight of the New York Common Retirement
Fund), has served as Chairman of the AllianceBernstein Funds and of the
Independent Directors Committee since 2003, and is active in a number of mutual
fund related organizations and committees; Mr. Guzy has experience as a
corporate director including as Chairman of a public company and Chairman of the
Finance Committee of a large public technology company; Ms. Jacklin has
experience as a financial services regulator including as U.S. Executive
Director of the International Monetary Fund, which is responsible for ensuring
the stability of the international monetary system, and as a financial services
lawyer in private practice; Mr. Keith has experience as an executive of the
Adviser with responsibility for, among other things, the AllianceBernstein
Funds; Mr. Moody has experience as a certified public accountant including
experience as Vice Chairman and U.S. and Global Investment Management Practice
Partner for a major accounting firm, is a member of the governing council of an
organization of independent directors of mutual funds, and has served as
Chairman of the Audit Committee of most of the AllianceBernstein Funds since
2008; Mr. Turner has experience as a director (including as Chairman and Chief
Executive officer of a number of companies) and as a venture capital investor
including prior service as general partner of three institutional venture
capital partnerships; and Mr. Weiner has experience as a securities lawyer whose
practice includes registered investment companies and as Chairman, director or
trustee of a number of boards, and has served as Chairman of the Governance and
Nominating Committee of most of the AllianceBernstein Funds since 2007. The
disclosure herein of a director's experience, qualifications, attributes and
skills does not impose on such director any duties, obligations, or liability
that are greater than the duties, obligations and liability imposed on such
director as a member of the Boards and any committee thereof in the absence of
such experience, qualifications, attributes and skills.
Board Structure and Oversight Function. The Boards are responsible
for oversight of the Funds. The Funds have engaged the Adviser to manage the
Funds on a day-to-day basis. The Boards are responsible for overseeing the
Adviser and the Funds' other service providers in the operations of the Funds in
accordance with each Fund's investment objective and policies and otherwise in
accordance with its prospectus, the requirements of the 1940 Act and other
applicable Federal, state and other securities and other laws, and the Funds'
charter and bylaws. The Boards typically meet in-person at regularly scheduled
meetings eight times throughout the year. In addition, the Directors may meet
in-person or by telephone at special meetings or on an informal basis at other
times. The Independent Directors also regularly meet without the presence of any
representatives of management. As described below, the Boards have established
four standing committees - the Audit, Governance and Nominating, Independent
Directors, and Fair Value Pricing Committees - and may establish ad hoc
committees or working groups from time to time, to assist the Boards in
fulfilling their oversight responsibilities. Each committee is composed
exclusively of Independent Directors. The responsibilities of each committee,
including its oversight responsibilities, are described further below. The
Independent Directors have also engaged independent legal counsel, and may from
time to time engage consultants and other advisors, to assist them in performing
their oversight responsibilities.
An Independent Director serves as Chairman of the Boards. The
Chairman's duties include setting the agenda for each Board meeting in
consultation with management, presiding at each Board meeting, meeting with
management between Board meetings, and facilitating communication and
coordination between the Independent Directors and management. The Directors
have determined that the Boards' leadership by an Independent Director and its
committees composed exclusively of Independent Directors is appropriate because
they believe it sets the proper tone to the relationships between the Funds, on
the one hand, and the Adviser and other service providers, on the other, and
facilitates the exercise of the Boards' independent judgment in evaluating and
managing the relationships. In addition, the Boards are required to have an
Independent Director as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.
Risk Oversight. The Funds are subject to a number of risks,
including investment, compliance and operational risks. Day-to-day risk
management with respect to the Funds resides with the Adviser or other service
providers (depending on the nature of the risk), subject to supervision by the
Adviser. The Boards have charged the Adviser and its affiliates with (i)
identifying events or circumstances, the occurrence of which could have
demonstrable and material adverse effects on the Funds; (ii) to the extent
appropriate, reasonable or practicable, implementing processes and controls
reasonably designed to lessen the possibility that such events or circumstances
occur or to mitigate the effects of such events or circumstances if they do
occur; and (iii) creating and maintaining a system designed to evaluate
continuously, and to revise as appropriate, the processes and controls described
in (i) and (ii) above.
Risk oversight forms part of the Boards' general oversight of the
Funds' investment program and operations and is addressed as part of various
regular Board and committee activities. The Funds' investment management and
business affairs are carried out by or through the Adviser and other service
providers. Each of these persons has an independent interest in risk management
but the policies and the methods by which one or more risk management functions
are carried out may differ from the Funds' and each other's in the setting of
priorities, the resources available or the effectiveness of relevant controls.
Oversight of risk management is provided by the Boards and the Audit Committee.
The Directors regularly receive reports from, among others, management
(including the Global Heads of Investment Risk and Trading Risk of the Adviser),
each Fund's Senior Officer (who is also the Fund's chief compliance officer),
independent registered public accounting firm and counsel, and internal auditors
for the Adviser, as appropriate, regarding risks faced by the Funds and the
Adviser's risk management programs.
Not all risks that may affect the Funds can be identified, nor can
controls be developed to eliminate or mitigate their occurrence or effects. It
may not be practical or cost-effective to eliminate or mitigate certain risks,
the processes and controls employed to address certain risks may be limited in
their effectiveness, and some risks are simply beyond the reasonable control of
the Funds or the Adviser, its affiliates or other service providers. Moreover,
it is necessary to bear certain risks (such as investment-related risks) to
achieve each Funds' goals. As a result of the foregoing and other factors the
Funds' ability to manage risk is subject to substantial limitations.
Board Committees. The Boards have four standing committees - an
Audit Committee, a Governance and Nominating Committee, a Fair Value Pricing
Committee and an Independent Directors Committee. The members of the Audit,
Governance and Nominating, Fair Value Pricing, and Independent Directors
Committees are identified above.
None of these Committees have met in connection with Emerging
Markets Equity because the Fund only recently commenced operations, except the
Independent Directors Committee met to approve the Advisory and Distribution
Services Agreements for the Fund. The number of committee meetings for all other
Funds is provided below.
The function of the Audit Committee is to assist the Boards in their
oversight of the Funds' financial reporting process. The Audit Committees of the
Boards met twice during each Fund's most recently completed fiscal year.
The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Boards. The Governance and Nominating Committee of the Boards met three times
during each Fund's most recently completed fiscal year.
The Boards have adopted a charter for their Governance and
Nominating Committee. Pursuant to the charter, the Committee assists the Boards
in carrying out their responsibilities with respect to governance of a Fund and
identifies, evaluates and selects and nominates candidates for that Board. The
Committee may also set standards or qualifications for Directors and reviews at
least annually the performance of each Director, taking into account factors
such as attendance at meetings, adherence to Board policies, preparation for and
participation at meetings, commitment and contribution to the overall work of
the Board and its committees, and whether there are health or other reasons that
might affect the Director's ability to perform his or her duties. The Committee
may consider candidates as Directors submitted by a Fund's current Board
members, officers, the Adviser, stockholders and other appropriate sources.
The Governance and Nominating Committee will consider candidates for
nomination as a Director submitted by a shareholder or group of shareholders who
have beneficially owned at least 5% of a Fund's common stock or shares of
beneficial interest for at least two years prior to the time of submission and
who timely provide specified information about the candidates and the nominating
shareholder or group. To be timely for consideration by the Governance and
Nominating Committee, the submission, including all required information, must
be submitted in writing to the attention of the Secretary at the principal
executive offices of the Funds no less than 120 days before the date of the
proxy statement for the previous year's annual meeting of shareholders. If the
Funds did not hold an annual meeting of shareholders in the previous year, the
submission must be delivered or mailed and received within a reasonable amount
of time before the Funds begin to print and mail its proxy materials. Public
notice of such upcoming annual meeting of shareholders may be given in a
shareholder report or other mailing to shareholders or by other means deemed by
the Governance and Nominating Committee or the Boards to be reasonably
calculated to inform shareholders.
Shareholders submitting a candidate for consideration by the
Governance and Nominating Committee must provide the following information to
the Governance and Nominating Committee: (i) a statement in writing setting
forth (A) the name, date of birth, business address and residence address of the
candidate; (B) any position or business relationship of the candidate, currently
or within the preceding five years, with the shareholder or an associated person
of the shareholder as defined below; (C) the class or series and number of all
shares of a Fund owned of record or beneficially by the candidate; (D) any other
information regarding the candidate that is required to be disclosed about a
nominee in a proxy statement or other filing required to be made in connection
with the solicitation of proxies for election of Directors pursuant to Section
20 of the 1940 Act and the rules and regulations promulgated thereunder; (E)
whether the shareholder believes that the candidate is or will be an "interested
person" of the Funds (as defined in the 1940 Act) and, if believed not to be an
"interested person", information regarding the candidate that will be sufficient
for the Funds to make such determination; and (F) information as to the
candidate's knowledge of the investment company industry, experience as a
director or senior officer of public companies, directorships on the boards of
other registered investment companies and educational background; (ii) the
written and signed consent of the candidate to be named as a nominee and to
serve as a Director if elected; (iii) the written and signed agreement of the
candidate to complete a directors' and officers' questionnaire if elected; (iv)
the shareholder's consent to be named as such by the Funds; (v) the class or
series and number of all shares of a fund of the Funds owned beneficially and of
record by the shareholder and any associated person of the shareholder and the
dates on which such shares were acquired, specifying the number of shares owned
beneficially but not of record by each, and stating the names of each as they
appear on the Funds' record books and the names of any nominee holders for each;
and (vi) a description of all arrangements or understandings between the
shareholder, the candidate and/or any other person or persons (including their
names) pursuant to which the recommendation is being made by the shareholder.
"Associated Person of the shareholder" means any person who is required to be
identified under clause (vi) of this paragraph and any other person controlling,
controlled by or under common control with, directly or indirectly, (a) the
shareholder or (b) the associated person of the shareholder.
The Governance and Nominating Committee may require the shareholder
to furnish such other information as it may reasonably require or deem necessary
to verify any information furnished pursuant to the nominating procedures
described above or to determine the qualifications and eligibility of the
candidate proposed by the shareholder to serve on the Boards. If the shareholder
fails to provide such other information in writing within seven days of receipt
of written request from the Governance and Nominating Committee, the
recommendation of such candidate as a nominee will be deemed not properly
submitted for consideration, and will not be considered, by the Committee.
The Governance and Nominating Committee will consider only one
candidate submitted by such a shareholder or group for nomination for election
at an annual meeting of shareholders. The Governance and Nominating Committee
will not consider self-nominated candidates. The Governance and Nominating
Committee will consider and evaluate candidates submitted by shareholders on the
basis of the same criteria as those used to consider and evaluate candidates
submitted from other sources. These criteria include the candidate's relevant
knowledge, experience, and expertise, the candidate's ability to carry out his
or her duties in the best interests of the Funds, and the candidate's ability to
qualify as an Independent Director or Director. When assessing a candidate for
nomination, the Committee considers whether the individual's background, skills,
and experience will complement the background, skills and experience of other
nominees and will contribute to the diversity of the Board.
The function of the Fair Value Pricing Committee is to consider, in
advance if possible, any fair valuation decision of the Adviser's Valuation
Committee relating to a security held by the Funds made under unique or highly
unusual circumstances not previously addressed by the Valuation Committee that
would result in a change in the Funds' NAV by more than $0.01 per share. The
Fair Value Pricing Committee of the Boards did not meet during each Fund's most
recently completed fiscal year.
The function of the Independent Directors Committee is to consider
and take action on matters that the Boards or Committee believes should be
addressed in executive session of the Independent Directors, such as review and
approval of the Advisory and Distribution Services Agreements. The Independent
Directors Committee of the Boards met seven times during each Fund's most
recently completed fiscal year.
The dollar range of each Fund's securities owned by each Director
and the aggregate dollar range of securities of funds in the AllianceBernstein
Fund Complex owned by each Director are set forth below.
DOLLAR RANGE DOLLAR RANGE
DOLLAR RANGE OF EQUITY OF EQUITY
OF EQUITY SECURITIES IN SECURITIES IN
SCURITIES IN DISCOVERY INTERNATIONAL
VALUE FUND AS OF VALUE AS OF VALUE AS OF
DECEMBER 31, 2012 DECEMBER 31, 2012 DECEMBER 31, 2012
--------------- ----------------- -----------------
John H. Dobkin None None None
Michael J. Downey None None $10,001-$50,000
William H. Foulk, Jr. $10,001-$50,000 $10,001-$50,000 $1-$10,000
D. James Guzy None None None
Nancy P. Jacklin None None None
Robert M. Keith None None None
Garry L. Moody None $10,001-$50,000 None
Marshall C. Turner, Jr. None $100,001-$500,000 None
Earl D. Weiner $10,001-$50,000 $1-$10,000 None
DOLLAR RANGE
DOLLAR RANGE DOLLAR RANGE OF EQUITY
OF EQUITY OF EQUITY SECURITIES IN
SECURITIES IN SECURITIES IN CORE
GLOBAL VALUE GROWTH AND OPPORTUNITIES
AS OF INCOME AS OF AS OF
DECEMBER 31, 2012 DECEMBER 31, 2012 DECEMBER 31, 2012
----------------- ----------------- -----------------
John H. Dobkin None $10,001-$50,000 None
Michael J. Downey None None $10,001-$50,000
William H. Foulk, Jr. None None None
D. James Guzy None None None
Nancy P. Jacklin None $10,001-$50,000 None
Robert M. Keith None None None
Garry L. Moody None None None
Marshall C. Turner, Jr. None None $10,001-$50,000
Earl D. Weiner None None None
DOLLAR RANGE
OF EQUITY DOLLAR RANGE DOLLAR RANGE
SECURITIES IN OF EQUITY OF EQUITY
GLOBAL RISK SECURITIES IN SECURITIES IN
ALLOCATION EQUITY INCOME GLOBAL REAL
AS OF AS OF ESTATE AS OF
DECEMBER 31, 2012 DECEMBER 31, 2012 DECEMBER 31, 2012
----------------- ----------------- -----------------
John H. Dobkin None None None
Michael J. Downey None None None
William H. Foulk, Jr. None None None
D. James Guzy None None None
Nancy P. Jacklin None $10,001-$50,000 None
Robert M. Keith None None None
Garry L. Moody None $10,001-$50,000 $10,001-$50,000
Marshall C. Turner, Jr. None None None
Earl D. Weiner None None None
DOLLAR RANGE
OF EQUITY
SECURITIES IN AGGREGATE DOLLAR RANGE
EMERGING OF EQUITY SECURITIES IN
MARKETS EQUITY THE ALLIANCEBERNSTEIN
AS OF FUND COMPLEX AS OF
DECEMBER 31, 2012 DECEMBER 31, 2012
----------------- -----------------------
John H. Dobkin None Over $100,000
Michael J. Downey None Over $100,000
William H. Foulk, Jr. None Over $100,000
D. James Guzy None Over $100,000
Nancy P. Jacklin None Over $100,000
Robert M. Keith None None
Garry L. Moody None Over $100,000
Marshall C. Turner, Jr. None Over $100,000
Earl D. Weiner None Over $100,000
|
Officer Information
Certain information concerning each Fund's officers is set forth below.
NAME, ADDRESS,* POSITION(S) HELD PRINCIPAL OCCUPATION
AND AGE WITH FUND DURING PAST 5 YEARS
--------------- ----------------- -------------------
|
All Funds
---------
Robert M. Keith, President and Chief See biography above.
52 Executive Officer
Philip L. Kirstein, Senior Vice President Senior Vice President and
67 and Independent Independent Compliance
Compliance Officer Officer of the
AllianceBernstein Funds, with
which he has been associated
since October 2004. Prior
thereto, he was Of Counsel to
Kirkpatrick & Lockhart, LLP
from October 2003 to October
2004, and General Counsel of
Merrill Lynch Investment
Managers, L.P. since prior to
March 2003.
Emilie D. Wrapp, Secretary Senior Vice President,
57 Assistant General Counsel and
Assistant Secretary of ABI**,
with which she has been
associated since prior to
2008.
Joseph J. Mantineo, Treasurer and Chief Senior Vice President of
53 Financial Officer ABIS**, with which he has
been associated since prior
to 2008.
Phyllis J. Clarke, Controller Vice President of ABIS**,
52 with which she has been
associated since prior to
2008.
Value Fund
----------
Christopher W. Marx, Vice President Senior Vice President of the
45 Adviser**, with which he has
been associated since prior
to 2008.
Joseph G. Paul, Senior Vice President Senior Vice President of the
53 Adviser**, with which he has
been associated since prior
to 2008.
Gregory L. Powell, Vice President Senior Vice President of the
54 Adviser**, with which he has
been associated since prior
to 2008.
Discovery Value
---------------
James W. MacGregor, Vice President Senior Vice President of the
45 Adviser**, with which he has
been associated since prior
to 2008.
Joseph G. Paul, Senior Vice President See biography above.
53
Andrew J. Weiner, Vice President Senior Vice President of the
44 Adviser**, with which he has
been associated since prior
to 2008.
International Value
Global Value
------------
Takeo Aso, Vice President Senior Vice President of the
48 Adviser**, with which he has
been associated since prior
to 2008.
Sharon E. Fay, Senior Vice President Senior Vice President of the
52 Adviser**, with which she has
been associated since prior
to 2008.
Avi Lavi, Vice President Senior Vice President of the
46 Adviser**, with which he has
been associated since prior
to 2008.
Kevin F. Simms, Senior Vice President Senior Vice President of the
46 Adviser**, with which he has
been associated since prior
to 2008.
Growth and Income
Core Opportunities
------------------
Frank V. Caruso, Senior Vice President Senior Vice President of the
56 Adviser**, with which he has
been associated since prior
to 2008.
Global Risk Allocation
----------------------
Ashwin G. Alankar, Vice President Senior Vice President of the
39 Adviser**, with which he has
been associated since June
2010. Prior thereto, he was a
partner and portfolio manager
of Platinum Grove Asset
Management, a hedge fund
manager, since prior to 2008.
Michael DePalma, Vice President Senior Vice President of the
45 Adviser**, with which he has
been associated since prior
to 2008.
Leon Zhu, Vice President Senior Vice President of the
45 Adviser**, with which he has
been associated since prior
to 2008.
Equity Income
-------------
Christopher W. Marx, Vice President See biography above.
45
Joseph G. Paul, Vice President See biography above.
53
Gregory L. Powell, Vice President See biography above.
54
Global Real Estate
------------------
Eric J. Franco, Vice President Senior Vice President of the
52 Adviser**, with which he has
been associated since prior
to 2008.
Emerging Markets Equity
-----------------------
Henry S. D'Auria, Vice President Senior Vice President of the
51 Adviser**, with which he has
been associated since prior
to 2008.
Sammy S. Suzuki, Vice President Senior Vice President of the
42 Adviser**, with which he has
been associated since prior
to 2008.
--------
|
* The address for each of the Fund's Officers is 1345 Avenue of the
Americas, New York, NY 10105.
** The Adviser, ABI and ABIS are affiliates of each Fund.
The Funds do not pay any fees to, or reimburse expenses of, their
Directors who are considered an "interested person" (as defined in Section
2(a)(19) of the 1940 Act) of the Funds. The aggregate compensation paid to the
Directors by each Fund for the fiscal year ended October 31, 2012 or November
30, 2012, as applicable, the aggregate compensation paid to each of the
Directors during calendar year 2012 by the AllianceBernstein Fund Complex, and
the total number of registered investment companies (and separate investment
portfolios within those companies) in the AllianceBernstein Fund Complex with
respect to which each of the Directors or Trustees serves as a director or
trustee are set forth below. Neither the Funds nor any other registered
investment company in the AllianceBernstein Fund Complex provides compensation
in the form of pension or retirement benefits to any of its directors or
trustees. Each of the Directors is a director or trustee of one or more other
registered investment companies in the AllianceBernstein Fund Complex.
Aggregate Aggregate
Compensation Compensation Aggregate Aggregate
from from Compensation from Compensation
Name of Director Value Fund Discovery Value International Value from Global Value
----------------------- ------------ --------------- ------------------ -----------------
John H. Dobkin $ 6,224 $ 6,226 $ 6,226 $ 6,224
Michael J. Downey $ 6,274 $ 6,418 $ 6,353 $ 6,224
William H. Foulk, Jr. $11,781 $11,781 $11,781 $11,780
D. James Guzy $ 6,381 $ 6,869 $ 6,567 $ 6,241
Nancy P. Jacklin $ 6,290 $ 6,472 $ 6,410 $ 6,224
Robert M. Keith $ 0 $ 0 $ 0 $ 0
Garry L. Moody $ 6,972 $ 7,152 $ 7,088 $ 6,915
Marshall C. Turner, Jr. $ 5,133 $ 6,619 $ 6,605 $ 6,248
Earl D. Weiner $ 6,668 $ 6,669 $ 6,668 $ 6,669
|
Aggregate Aggregate Aggregate Aggregate
Compensation Compensation Compensation Compensation
from Growth from Core from Global Risk from Equity
Name of Director and Income Opportunities Allocation Income
----------------------- ------------ -------------- ---------------- ------------
John H. Dobkin $ 6,187 $ 6,223 $ 6,223 $ 6,223
Michael J. Downey $ 6,439 $ 6,223 $ 6,223 $ 6,281
William H. Foulk, Jr. $10,507 $11,780 $11,780 $11,780
D. James Guzy $ 6,565 $ 6,266 $ 6,223 $ 6,425
Nancy P. Jacklin $ 6,413 $ 6,223 $ 6,223 $ 6,291
Robert M. Keith $ 0 $ 0 $ 0 $ 0
Garry L. Moody $ 7,093 $ 6,915 $ 6,915 $ 6,978
Marshall C. Turner, Jr. $ 6,561 $ 6,249 $ 6,223 $ 6,312
Earl D. Weiner $ 6,627 $ 6,668 $ 6,668 $ 6,668
|
Aggregate Aggregate
Compensation Compensation
from Global from Emerging
Name of Director Real Estate Markets Equity
----------------------- ------------ --------------
John H. Dobkin $ 6,224 $157
Michael J. Downey $ 6,224 $157
William H. Foulk, Jr. $11,780 $298
D. James Guzy $ 6,274 $157
Nancy P. Jacklin $ 6,229 $157
Robert M. Keith $ 0 $ 0
Garry L. Moody $ 6,915 $175
Marshall C. Turner, Jr. $ 6,254 $157
Earl D. Weiner $ 6,669 $168
|
Total
Number of
Investment
Total Number Portfolios
of Investment within the
Companies in the Alliance-
Total AllianceBernstein Bernstein
Compensation Fund Complex, Fund Complex,
from the Including the Including the
Alliance- Funds, as to Funds, as to
Bernstein which the which the
Fund Complex, Director is Director is
Including a Director a Director
Name of Director the Funds or Trustee or Trustee
---------------- ------------ ------------------ -------------
John H. Dobkin $ 252,000 31 101
Michael J. Downey $ 252,000 31 101
William H. Foulk, Jr. $ 477,000 31 101
D. James Guzy $ 252,000 31 101
Nancy P. Jacklin $ 252,000 31 101
Robert M. Keith $ 0 31 101
Garry L. Moody $ 280,000 31 101
Marshall C. Turner, Jr. $ 252,000 31 101
Earl D. Weiner $ 270,000 31 101
|
As of February 20, 2013 for Emerging Markets Equity, and as of
February 1, 2013 for all other Funds, the Directors and officers of the Fund as
a group owned less than 1% of the shares of each Fund.
Additional Information About the Funds' Portfolio Managers
VALUE FUND. The management of, and investment decisions for, the
Fund's portfolio are made by the Adviser's U.S. Value Senior Investment
Management Team. Mr. Christopher W. Marx, Mr. Joseph G. Paul and Mr. Gregory L.
Powell are the investment professionals(2) with the most significant
responsibility for the day-to-day management of the Fund's portfolio. For
additional information about the portfolio management of the Fund, see
"Management of the Funds - Portfolio Managers" in the Fund's Prospectus.
(2) Investment professionals at the Adviser include portfolio managers and
research analysts. Investment professionals are part of investment groups
(or teams) that service individual fund portfolios. The number of
investment professionals assigned to a particular fund will vary from fund
to fund.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND(3)
Christopher W. Marx None
Joseph G. Paul None
Gregory L. Powell(4) None
--------
|
(3) The ranges presented above include vested shares awarded under the
Adviser's Partners Compensation Plan (the "Plan").
(4) For information presented as of the fiscal year ended November 30, 2012,
with respect to Mr. Powell, if the unvested shares awarded for calendar
year 2010 and previous years under the Plan were included, the range would
be $100,001-$500,000.
As of November 30, 2012, employees of the Adviser had approximately
$5,161,392 invested in shares of the Fund and approximately $134,810,365 in
shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money
market funds) through their interests in certain deferred compensation plans,
including the Partners Compensation Plan, including both vested and unvested
amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ----------- ------------- -------------
Christopher W. Marx None None None None
Joseph G. Paul 70 $13,271,000,000 None None
Gregory L. Powell 63 $ 9,970,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Christopher W. Marx 3 $ 67,000,000 None None
Joseph G. Paul 164 $ 2,965,000,000 2 $113,000,000
Gregory L. Powell 144 $ 2,627,000,000 2 $113,000,000
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Christopher W. Marx 23,096 $ 1,836,000,000 None None
Joseph G. Paul 51,131 $ 19,023,000,000 4 $890,000,000
Gregory L. Powell 28,004 $ 16,308,000,000 4 $890,000,000
|
DISCOVERY VALUE. The management of, and investment decisions for,
the Fund's portfolio are made by the Adviser's Discovery Value Senior Investment
Management Team. Mr. James W. MacGregor, Mr. Joseph G. Paul, and Mr. Andrew J.
Weiner are the investment professionals with the most significant responsibility
for the day-to-day management of the Fund's portfolio. For additional
information about the portfolio management of the Fund, see "Management of the
Funds - Portfolio Managers" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND(5)
James W. MacGregor(6) $10,001-$50,000
Joseph G. Paul None
Andrew J. Weiner None
--------
|
(5) The ranges presented above include vested shares awarded under the Plan.
(6) For information presented as of the fiscal year ended November 30, 2012,
with respect to Mr. MacGregor, if unvested shares awarded for calendar
year 2010 and previous years under the Plan were included, the range would
be $10,001-$50,000.
As of November 30, 2012, employees of the Adviser had approximately
$3,671,748 invested in shares of the Fund and approximately $134,810,365 in
shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money
market funds) through their interests in certain deferred compensation plans,
including the Partners Compensation Plan, including both vested and unvested
amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
James W. MacGregor 70 $11,984,000,000 None None
Joseph G. Paul 70 $11,984,000,000 None None
Andrew J. Weiner 35 $ 5,979,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ------------- ------------- ------------
James W. MacGregor 161 $2,898,000,000 2 $113,000,000
Joseph G. Paul 164 $2,965,000,000 2 $113,000,000
Andrew J. Weiner 61 $ 549,000,000 None None
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ---------- -------------
James W. MacGregor 28,035 $17,187,000,000 4 $890,000,000
Joseph G. Paul 51,131 $19,023,000,000 4 $890,000,000
Andrew J. Weiner 27,967 $ 7,684,000,000 1 $ 16,000,000
|
INTERNATIONAL VALUE. The management of, and investment decisions
for, the Fund's portfolio are made by the Adviser's International Value Senior
Investment Management Team. Mr. Takeo Aso, Ms. Sharon E. Fay, Mr. Avi Lavi and
Mr. Kevin F. Simms are the investment professionals with the most significant
responsibility for the day-to-day management of the Fund's portfolio. For
additional information about the portfolio management of the Fund, see
"Management of the Funds - Portfolio Managers" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND
Takeo Aso $10,001-$50,000
Sharon E. Fay None
Avi Lavi None
Kevin F. Simms None
|
Overall, as of November 30, 2012, employees of the Adviser had
approximately $3,375,760 invested in shares of the Fund and approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Takeo Aso 35 $ 5,453,000,000 None None
Sharon E. Fay 75 $12,720,000,000 None None
Avi Lavi 87 $11,002,000,000 None None
Kevin F. Simms 71 $11,502,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ------------ ------------ ------------
Takeo Aso 114 $4,728,000,000 3 $331,000,000
Sharon E. Fay 187 $8,125,000,000 6 $684,000,000
Avi Lavi 231 $4,201,000,000 3 $331,000,000
Kevin F. Simms 165 $7,191,000,000 5 $620,000,000
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Takeo Aso 110 $13,993,000,000 6 $1,217,000,000
Sharon E. Fay 28,073 $25,359,000,000 10 $2,699,000,000
Avi Lavi 28,048 $19,899,000,000 7 $1,233,000,000
Kevin F. Simms 28,063 $24,144,000,000 10 $2,699,000,000
|
GLOBAL VALUE. The management of, and investment decisions for, the
Fund's portfolio are made by the Adviser's Global Value Senior Investment
Management Team. Mr. Takeo Aso, Ms. Sharon E. Fay, Mr. Avi Lavi and Mr. Kevin F.
Simms, are the investment professionals with the most significant responsibility
for the day-to-day management of the Fund's portfolio. For additional
information about the portfolio management of the Fund, see "Management of the
Funds - Portfolio Managers" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND(7)
Takeo Aso $10,001-$50,000
Sharon E. Fay None
Avi Lavi None
Kevin F. Simms None
--------
|
(7) The ranges presented above include vested shares awarded under the Plan.
As of November 30, 2012, employees of the Adviser had approximately
$6,423,368 invested in shares of the Fund and approximately $134,810,365 in
shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money
market funds) through their interests in certain deferred compensation plans,
including the Partners Compensation Plan, including both vested and unvested
amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Takeo Aso 35 $ 6,019,000,000 None None
Sharon E. Fay 75 $13,287,000,000 None None
Avi Lavi 87 $11,568,000,000 None None
Kevin F. Simms 71 $12,068,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Takeo Aso 114 $4,728,000,000 3 $331,000,000
Sharon E. Fay 187 $8,125,000,000 6 $684,000,000
Avi Lavi 231 $4,201,000,000 3 $332,000,000
Kevin F. Simms 165 $7,191,000,000 5 $620,000,000
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Takeo Aso 110 $13,993,000,000 6 $1,217,000,000
Sharon E. Fay 28,073 $25,359,000,000 10 $2,699,000,000
Avi Lavi 28,048 $19,899,000,000 7 $1,233,000,000
Kevin F. Simms 28,063 $24,144,000,000 10 $2,699,000,000
|
GROWTH AND INCOME. Mr. Frank V. Caruso is the investment
professional primarily responsible for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Funds - Portfolio Managers" in the Fund's
Prospectus.
The dollar range of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio manager as of October 31, 2012 is set forth
below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
Frank V. Caruso $100,001-$500,000(8)
(8) Includes shares held via CollegeBoundfund a Section 529 college savings
plan.
As of October 31, 2012, employees of the Adviser had approximately
$1,661,327 invested in shares of the Fund and approximately $120,509,561 in
shares of all AllianceBernstein Mutual Funds (excluding AllianceBernstein money
market funds) through their interests in certain deferred compensation plans,
including the Partners Compensation Plan, including both vested and unvested
amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which Mr. Caruso also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of the Fund's fiscal
year ended October 31, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Frank V. Caruso 29 $6,165,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Frank V. Caruso 47 $745,000,000 None None
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Frank V. Caruso 51,187 $6,922,000,000 1 $16,000,000
|
CORE OPPORTUNITIES. Mr. Frank V. Caruso is the investment
professional primarily responsible for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Funds - Portfolio Managers" in the Fund's
Prospectus.
The dollar range of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio manager as of November 30, 2012 is set
forth below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
Frank V. Caruso None
As of November 30, 2012, employees of the Adviser had approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which Mr. Caruso also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of the Fund's fiscal
year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Frank V. Caruso 28 $7,080,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Frank V. Caruso 47 $762,000,000 None None
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Frank V. Caruso 50,690 $6,856,000,000 1 $16,000,000
|
GLOBAL RISK ALLOCATION. The management of, and investment decisions
for, Global Risk Allocation are made by the Adviser's Quantitative Investment
Strategies Team. Mr. Ashwin G. Alankar, Mr. Michael DePalma, and Mr. Leon Zhu
are the investment professionals with the most significant responsibility for
the day-to-day management of the Fund's portfolio. For additional information
about the portfolio management of the Fund, see "Management of the Funds -
Portfolio Managers" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND
Ashwin G. Alankar None
Michael DePalma None
Leon Zhu None
|
As of November 30, 2012, employees of the Adviser had approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of November
30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Ashwin G. Alankar None $407,000,000 None None
Michael DePalma None $407,000,000 None None
Leon Zhu None $407,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Ashwin G. Alankar 6 $191,000,000 None None
Michael DePalma 6 $191,000,000 None None
Leon Zhu 6 $191,000,000 None None
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other pf Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Ashwin G. Alankar 3 $247,000,000 3 $247,000,000
Michael DePalma 3 $247,000,000 3 $247,000,000
Leon Zhu 3 $247,000,000 3 $247,000,000
|
EQUITY INCOME. The management of, and investment decisions for, the
Fund's portfolio are made by the Adviser's U.S. Equity Senior Investment
Management Team. Mr. Christopher W. Marx, Mr. Joseph G. Paul and Mr. Gregory L.
Powell are the investment professionals with the most significant responsibility
for the day-to-day management of the Fund's portfolio. For additional
information about the portfolio management of the Fund, see "Management of the
Funds - Portfolio Managers" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND
Christopher W. Marx None
Joseph G. Paul None
Gregory L. Powell $100,001-$500,000
|
As of November 30, 2012, employees of the Adviser had approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Christopher W. Marx None None None None
Joseph G. Paul 70 $13,101,000,000 None None
Gregory L. Powell 63 $ 9,800,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Christopher W. Marx 3 $ 67,000,000 None None
Joseph G. Paul 164 $2,965,000,000 2 $113,000,000
Gregory L. Powell 144 $2,627,000,000 2 $113,000,000
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Christopher W. Marx 23,096 $ 1,836,000,000 None None
Joseph G. Paul 51,131 $19,023,000,000 4 $890,000,000
Gregory L. Powell 28,004 $16,308,000,000 4 $890,000,000
|
GLOBAL REAL ESTATE. The management of, and investment decisions for,
the Fund's portfolio are made by the Adviser's Global REIT Senior Investment
Management Team. Mr. Eric J. Franco is the investment professional with the most
significant responsibility for the day-to-day management of the Fund's
portfolio. For additional information about the portfolio management of the
Fund, see "Management of the Funds - Portfolio Managers" in the Fund's
Prospectus.
The dollar range of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 is set
forth below:
DOLLAR RANGE OF EQUITY
SECURITIES IN THE FUND
Eric J. Franco None
As of November 30, 2012, employees of the Adviser had approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Fund's portfolio managers also have day-to-day
management responsibilities. The tables provide the numbers of such accounts,
the total assets in such accounts and the number of accounts and total assets
whose fees are based on performance. The information is provided as of the
Fund's fiscal year ended November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Eric J. Franco 22 $1,090,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Eric J. Franco 76 $408,000,000 None None
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Eric J. Franco 9 $400,000,000 None None
|
EMERGING MARKETS EQUITY. The management of, and investment decisions
for, the Fund's portfolio are made by its senior investment management team.
Henry S. D'Auria and Sammy S. Suzuki are the investment professionals primarily
responsible for the day-to-day management of the Fund's portfolio. For
additional information about the portfolio management of the Fund, see
"Management of the Funds - Portfolio Manager" in the Fund's Prospectus.
The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of November 30, 2012 are set
forth below:
DOLLAR RANGES OF EQUITY
SECURITIES IN THE FUND
Henry S. D'Auria None
Sammy S. Suzuki None
As of November 30, 2012, employees of the Adviser had approximately
$134,810,365 in shares of all AllianceBernstein Mutual Funds (excluding
AllianceBernstein money market funds) through their interests in certain
deferred compensation plans, including the Partners Compensation Plan, including
both vested and unvested amounts.
The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which the Portfolio Manager also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of November 30, 2012.
REGISTERED INVESTMENT COMPANIES
(excluding the Fund)
Total
Number of Assets of
Total Total Registered Registered
Number of Assets of Investment Investment
Registered Registered Companies Companies
Investment Investment Managed with Managed with
Companies Companies Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ---------- ---------- ------------- -------------
Henry S. D'Auria 43 $7,757,000,000 None None
Sammy S. Suzuki 41 $7,728,000,000 None None
|
OTHER POOLED INVESTMENT VEHICLES
Total
Number Assets
Total Total of Other of Other
Number Assets Pooled Pooled
of Other of Other Investment Investment
Pooled Pooled Vehicles Vehicles
Investment Investment Managed with Managed with
Vehicles Vehicles Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ----------- ------------ ------------- ------------
Henry S. D'Auria 111 $5,759,000,000 4 $402,000,000
Sammy S. Suzuki 109 $5,689,000,000 4 $402,000,000
|
OTHER ACCOUNTS
Number Total Assets
Total Total of Other of Other
Number Assets Accounts Accounts
of Other of Other Managed with Managed with
Accounts Accounts Performance- Performance-
Portfolio Manager Managed Managed based Fees based Fees
----------------- ------- ------- ------------ -------------
Henry S. D'Auria 88 $13,070,000,000 6 $2,341,000,000
Sammy S. Suzuki 88 $13,070,000,000 6 $2,341,000,000
|
Investment Professional Conflict of Interest Disclosure
As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. We recognize that conflicts of
interest are inherent in our business and accordingly have developed policies
and procedures (including oversight monitoring) reasonably designed to detect,
manage and mitigate the effects of actual or potential conflicts of interest in
the area of employee personal trading, managing multiple accounts for multiple
clients, including AllianceBernstein Mutual Funds, and allocating investment
opportunities. Investment professionals, including portfolio managers and
research analysts, are subject to the above-mentioned policies and oversight
monitoring to ensure that all clients are treated equitably. We place the
interests of our clients first and expect all of our employees to meet their
fiduciary duties.
Employee Personal Trading. The Adviser has adopted a Code of
Business Conduct and Ethics that is designed to detect and prevent conflicts of
interest when investment professionals and other personnel of the Adviser own,
buy or sell securities which may be owned by, or bought or sold for, clients.
Personal securities transactions by an employee may raise a potential conflict
of interest when an employee owns or trades in a security that is owned or
considered for purchase or sale by a client, or recommended for purchase or sale
by an employee to a client. Subject to the reporting requirements and other
limitations of its Code of Business Conduct and Ethics, the Adviser permits its
employees to engage in personal securities transactions, and also allows them to
acquire investments in certain Funds managed by the Adviser. The Adviser's Code
of Business Conduct and Ethics requires disclosure of all personal accounts and
maintenance of brokerage accounts with designated broker-dealers approved by the
Adviser. The Code of Business Conduct and Ethics also requires preclearance of
all securities transactions (except transactions U.S. Treasuries and open-end
mutual funds) and imposes a 90-day holding period for securities purchased by
employees to discourage short-term trading.
Managing Multiple Accounts for Multiple Clients. The Adviser has
compliance policies and oversight monitoring in place to address conflicts of
interest relating to the management of multiple accounts for multiple clients.
Conflicts of interest may arise when an investment professional has
responsibilities for the investments of more than one account because the
investment professional may be unable to devote equal time and attention to each
account. The investment professional or investment professional teams for each
client may have responsibilities for managing all or a portion of the
investments of multiple accounts with a common investment strategy, including
other registered investment companies, unregistered investment vehicles, such as
hedge funds, pension plans, separate accounts, collective trusts and charitable
foundations. Among other things, the Adviser's policies and procedures provide
for the prompt dissemination to investment professionals of initial or changed
investment recommendations by analysts so that investment professionals are
better able to develop investment strategies for all accounts they manage. In
addition, investment decisions by investment professionals are reviewed for the
purpose of maintaining uniformity among similar accounts and ensuring that
accounts are treated equitably. Investment professional compensation reflects a
broad contribution in multiple dimensions to long-term investment success for
our clients and is generally not tied specifically to the performance of any
particular client's account, nor is it generally tied directly to the level or
change in level of assets under management.
Allocating Investment Opportunities. The investment professionals at
the Adviser routinely are required to select and allocate investment
opportunities among accounts. The Adviser has adopted policies and procedures
intended to address conflicts of interest relating to the allocation of
investment opportunities. These policies and procedures are designed to ensure
that information relevant to investment decisions is disseminated promptly
within its portfolio management teams and investment opportunities are allocated
equitably among different clients. The policies and procedures require, among
other things, objective allocation for limited investment opportunities (e.g.,
on a rotational basis), and documentation and review of justifications for any
decisions to make investments only for select accounts or in a manner
disproportionate to the size of the account. Portfolio holdings, position sizes,
and industry and sector exposures tend to be similar across similar accounts,
which minimizes the potential for conflicts of interest relating to the
allocation of investment opportunities. Nevertheless, access to portfolio funds
or other investment opportunities may be allocated differently among accounts
due to the particular characteristics of an account, such as size of the
account, cash position, tax status, risk tolerance and investment restrictions
or for other reasons.
The Adviser's procedures are also designed to address potential
conflicts of interest that may arise when the Adviser has a particular financial
incentive, such as a performance-based management fee, relating to an account.
An investment professional may perceive that he or she has an incentive to
devote more time to developing and analyzing investment strategies and
opportunities or allocating securities preferentially to accounts for which the
Adviser could share in investment gains.
Portfolio Manager Compensation
The Adviser's compensation program for portfolio managers is
designed to align with clients' interests, emphasizing each portfolio manager's
ability to generate long-term investment success for the Adviser's clients,
including the Funds. The Adviser also strives to ensure that compensation is
competitive and effective in attracting and retaining the highest caliber
employees.
Portfolio managers receive a base salary, incentive compensation and
contributions to AllianceBernstein's 401(k) plan. Part of the annual incentive
compensation is generally paid in the form of a cash bonus, and part through an
award under the firm's Incentive Compensation Award Plan (ICAP). The ICAP awards
vest over a four-year period. Deferred awards are paid in the form of restricted
grants of the firm's Master Limited Partnership Units, and award recipients have
the ability to receive a portion of their awards in deferred cash. The amount of
contributions to the 401(k) plan is determined at the sole discretion of the
Adviser. On an annual basis, the Adviser endeavors to combine all of the
foregoing elements into a total compensation package that considers industry
compensation trends and is designed to retain its best talent.
The incentive portion of total compensation is determined by
quantitative and qualitative factors. Quantitative factors, which are weighted
more heavily, are driven by investment performance. Qualitative factors are
driven by contributions to the investment process and client success.
The quantitative component includes measures of absolute, relative
and risk-adjusted investment performance. Relative and risk-adjusted returns are
determined based on the benchmark in the Funds' Prospectus and versus peers over
one-, three- and five-year calendar periods, with more weight given to
longer-time periods. Peer groups are chosen by Chief Investment Officers, who
consult with the product management team to identify products most similar to
our investment style and most relevant within the asset class. Portfolio
managers of the Funds do not receive any direct compensation based upon the
investment returns of any individual client account, and compensation is not
tied directly to the level or change in level of assets under management.
Among the qualitative components considered, the most important
include thought leadership, collaboration with other investment colleagues,
contributions to risk-adjusted returns of other portfolios in the firm, efforts
in mentoring and building a strong talent pool and being a good corporate
citizen. Other factors can play a role in determining portfolio managers'
compensation, such as the complexity of investment strategies managed, volume of
assets managed and experience.
The Adviser emphasizes four behavioral competencies--relentlessness,
ingenuity, team orientation and accountability--that support its mission to be
the most trusted advisor to its clients. Assessments of investment professionals
are formalized in a year-end review process that includes 360-degree feedback
from other professionals from across the investment teams and the Adviser.
EXPENSES OF THE FUNDS
Distribution Services Agreement
Each Fund has entered into a Distribution Services Agreement (the
"Agreement") with ABI, the Fund's principal underwriter, to permit ABI to
distribute the Fund's shares and to permit the Fund to pay distribution services
fees to defray expenses associated with distribution of its Class A shares,
Class B shares, Class C shares, Class R shares, Class K shares and Class 1
shares in accordance with a plan of distribution that is included in the
Agreement and that has been duly adopted and approved in accordance with Rule
12b-1 adopted by the SEC under the 1940 Act (each a "Plan" and collectively, the
"Plans").
In approving the Plans, the Directors determined that there was a
reasonable likelihood that the Plan would benefit each Fund and its
shareholders. The distribution services fee of a particular class will not be
used to subsidize the provision of distribution services with respect to any
other class.
The Adviser may from time to time and from its own funds or such
other resources as may be permitted by rules of the SEC make payments for
distribution services to ABI; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
The Plans will continue in effect with respect to each Fund and each
class of shares thereof for successive one-year periods provided that such
continuance is specifically approved at least annually by a majority of the
Independent Directors who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto (the "Qualified
Directors") and by a vote of a majority of the entire Board at a meeting called
for that purpose. Most recently the Directors approved the continuance of the
Plans for an additional annual term at their meetings held on May 1-3, 2012.
All material amendments to the Plans will become effective only upon
approval as provided in the preceding paragraph; and the Plans may not be
amended in order to increase materially the costs that a Fund may bear pursuant
to the Plans without the approval of a majority of the holders of the
outstanding voting shares of the Fund or the class or classes of the Fund
affected. An Agreement may be terminated (a) by a Fund without penalty at any
time by a majority vote of the holders of the Fund's outstanding voting
securities, voting separately by class, or by a majority vote of the Qualified
Directors or (b) by ABI. To terminate an Agreement, any party must give the
other parties 60 days' written notice; to terminate the Plans only, a Fund is
not required to give prior notice to ABI. The Agreements will terminate
automatically in the event of their assignment. The Plans are of a type known as
a "reimbursement plan", which means that they reimburse the distributor for the
actual costs of services rendered.
In the event that a Plan is terminated by either party or not
continued with respect to the Class A shares, Class B shares, Class C shares,
Class R shares, Class K shares or Class 1 shares of a Fund, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by that Fund to ABI with respect to that class and (ii) that Fund would not
be obligated to pay ABI for any amounts expended under the Plan not previously
recovered by ABI from distribution services fees in respect of shares of such
class or through deferred sales charges.
Distribution services fees are accrued daily and paid monthly and
charged as expenses of each Fund as accrued. The distribution services fees
attributable to the Class B, Class C, Class R, Class K and Class 1 shares of
each Fund are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of an initial sales charge and at the same
time to permit ABI to compensate broker-dealers in connection with the sale of
such shares. In this regard the purpose and function of the combined contingent
deferred sales charge ("CDSC") and respective distribution services fee on the
Class B shares and Class C shares of each Fund and the distribution services
fees on the Class R shares, Class K shares and Class 1 shares of each Fund are
the same as those of the initial sales charge and distribution services fee with
respect to the Class A shares of each Fund in that in each case the sales charge
and/or distribution services fee provides for the financing of the distribution
of the relevant class of the relevant Fund's shares.
With respect to Class A shares of each Fund, distribution expenses
accrued by ABI in one fiscal year may not be paid from distribution services
fees received from a Fund in subsequent fiscal years. ABI's compensation with
respect to Class B, Class C, Class R, Class K and Class 1 shares of each Fund
under the Rule 12b-1 Plan is directly tied to the expenses incurred by ABI.
Actual distribution expenses for Class B, Class C, Class R, Class K and Class 1
shares of each Fund for any given year, however, will probably exceed the
distribution services fees payable under the Rule 12b-1 Plan with respect to the
class involved and, in the case of Class B, Class C, Class R, Class K and Class
1 shares of each Fund, payments received from CDSCs. The excess will be carried
forward by ABI and reimbursed from distribution services fees payable under the
Rule 12b-1 Plan with respect to the class involved and, in the case of Class B
and Class C shares of each Fund, payments subsequently received through CDSCs,
so long as the Rule 12b-1 Plan is in effect.
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, with respect to Class A shares, the
distribution services fees for expenditures payable to ABI were as follows:
Percentage per annum
of the aggregate
Distribution services average daily net
fees for expenditures assets attributable
Fund payable to ABI to Class A shares
---- --------------------- ----------------------
|
Growth and Income $ 2,904,971 0.28%
Value $ 167,196 0.30%
Discovery Value $ 1,635,697 0.30%
International Value $ 1,140,968 0.30%
Global Value $ 46,882 0.30%
Core Opportunities $ 224,755 0.30%
Global Risk Allocation $ 1,137,233 0.29%
Equity Income $ 726,198 0.30%
Global Real Estate $ 220,274 0.30%
Emerging Markets Equity $ 7 0.30%
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, expenses incurred by each Fund and
costs allocated to each Fund in connection with activities primarily intended to
result in the sale of Class A shares were as follows:
Growth Global Global Emerging
Category of and Discovery International Global Core Risk Equity Real Markets
Expense Income Value Value Value Value Opportunities Allocation Income Estate Equity
------- ------ ----- ---------- ------------- -------- ------------- ---------- ------ ------ ------
Advertising/ $ 10,286 $ 595 $ 3,940 $ 6,034 $ 2,218 $ 3,323 $ 5,805 $ 3,703 $ 2,776 $ 0
Marketing
Printing and $ 2,988 $ 51 $ 551 $ 322 $ 11 $ 97 $ 411 $ 264 $ 73 $ 0
Mailing of
Prospectuses
and
Semi-Annual
and Annual
Reports to
Other than
Current
Shareholders
Compensation $3,080,809 $ 16,213 $ 187,750 $ 217,687 $ 41,982 $115,481 $ 222,994 $ 801,773 $ 90,675 $ 0
to
Underwriters
Compensation $ 421,848 $173,330 $1,684,715 $1,158,044 $ 46,211 $234,211 $1,183,647 $ 108,889 $227,788 $ 2
to
Dealers
Compensation $ 44,137 $ 3,277 $ 108,083 $ 48,839 $ 1,599 $ 9,440 $ 44,926 $ 85,120 $ 22,082 $ 0
to Sales
Personnel
Interest, $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Carrying or
Other
Financing
Charges
Other $ 342,696 $ 14,394 $ 140,835 $ 169,001 $ 46,214 $ 93,019 $ 168,689 $ 94,711 $ 78,243 $ 0
(Includes
Personnel
costs
of those
home office
employees
involved
in the
distribution
effort and
the
travel-
related
expenses
incurred by
the
marketing
personnel
conducting
seminars)
Totals $3,902,764 $207,860 $2,125,874 $1,599,927 $138,235 $455,571 $1,626,472 $1,094,460 $421,637 $ 2
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund and Global
Real Estate Fund, with respect to Class B shares, the distribution services fees
for expenditures payable to ABI were as follows:
Percentage per annum
of the aggregate
Distribution services average daily net
fees for expenditures assets attributable
Fund payable to ABI to Class B shares
---- --------------------- ----------------------
Growth and Income $ 548,415 1.00%
Value*(1) $ 15,436 0.30%
Discovery Value*(2) $ 84,903 0.35%
International Value $ 239,796 1.00%
Global Value $ 8,407 1.00%
Core Opportunities*(3) $ 27,867 0.40%
Global Risk Allocation $ 437,265 1.00%
Equity Income $ 119,735 1.00%
Global Real Estate $ 41,731 1.00%
--------
|
* The Adviser paid $4,627 from its own resources with respect to Class B for the
Value Fund.
* The Adviser paid $10,166 from its own resources with respect to Class B for
the Discovery Value Fund.
* The Adviser paid $264 from its own resources with respect to Class B for the
Core Opportunities Fund.
1. Net of $36,017, which was waived by the distributor.
2. Net of $185,178, which was waived by the distributor.
3. Net of $41,800, which was waived by the distributor.
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund and Global
Real Estate Fund, expenses incurred by each Fund and costs allocated to each
Fund in connection with activities primarily intended to result in the sale of
Class B shares were as follows:
Growth Global Global
Category of and Discovery International Global Core Risk Equity Real
Expense Income Value Value Value Value Opportunities Allocation Income Estate
------- ------ ----- ---------- ------------- -------- ------------- ---------- ------ ------
Advertising/ $ 503 $ 33 $ 92 $ 101 $ 61 $ 60 $ 191 $ 50 $ 40
Marketing
Printing and $ 203 $ 4 $ 22 $ 19 $ 0 $ 5 $ 35 $ 11 $ 3
Mailing of
Prospectuses
and
Semi-Annual
and Annual
Reports to
Other than
Current
Shareholders
Compensation $213,177 $ 787 $ 2,557 $ 2,923 $1,258 $ 1,994 $ 5,828 $41,097 $ 1,767
to
Underwriters
Compensation $ 21,328 $18,334 $88,655 $75,290 $6,472 $24,293 $156,457 $ 1,019 $15,704
to
Dealers
Compensation $ 1,722 $ 136 $ 1,338 $ 674 $ 53 $ 127 $ 800 $ 421 $ 133
to Sales
Personnel
Interest, $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Carrying or
Other
Financing
Charges
Other $ 16,802 $ 769 $ 2,405 $ 2,642 $1,449 $ 1,652 $ 4,883 $ 1,074 $ 1,272
(Includes
Personnel
costs
of those
home office
employees
involved
in the
distribution
effort and
the
travel-
related
expenses
incurred by
the
marketing
personnel
conducting
seminars)
Totals $253,735 $20,063 $95,069 $81,649 $9,293 $28,131 $168,194 $43,672 $18,919
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, with respect to Class C shares, the
distribution services fees for expenditures payable to ABI were as follows:
Percentage per annum
of the aggregate
Distribution services average daily net
fees for expenditures assets attributable
Fund payable to ABI to Class C shares
---- --------------------- ----------------------
|
Growth and Income $ 1,723,166 1.00%
Value $ 165,536 1.00%
Discovery Value $ 1,370,274 1.00%
International Value $ 1,074,685 1.00%
Global Value $ 36,002 1.00%
Core Opportunities $ 189,981 1.00%
Global Risk Allocation $ 707,625 1.00%
Equity Income $ 618,446 1.00%
Global Real Estate $ 185,010 1.00%
Emerging Markets Equity $ 17 1.00%
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, expenses incurred by each Fund and
costs allocated to each Fund in connection with activities primarily intended to
result in the sale of Class C shares were as follows:
Growth Global Global Emerging
Category of and Discovery International Global Core Risk Equity Real Markets
Expense Income Value Value Value Value Opportunities Allocation Income Estate Equity
------- ------ ----- ---------- ------------- -------- ------------- ---------- ------ ------ ------
Advertising/ $ 859 $ 109 $ 794 $ 853 $ 273 $ 773 $ 519 $ 940 $ 429 $0
Marketing
Printing and $ 325 $ 14 $ 136 $ 95 $ 2 $ 15 $ 73 $ 67 $ 21 $0
Mailing of
Prospectuses
and
Semi-Annual
and Annual
Reports to
Other than
Current
Shareholders
Compensation $1,803,578 $ 2,645 $ 31,925 $ 30,184 $ 5,062 $ 24,890 $ 16,442 $677,172 $ 17,168 $0
to
Underwriters
Compensation $ 33,966 $173,474 $1,400,945 $1,116,999 $37,602 $202,815 $737,509 $ 24,342 $194,299 $0
to
Dealers
Compensation $ 3,148 $ 602 $ 19,054 $ 8,341 $ 207 $ 2,334 $ 4,599 $ 24,111 $ 1,568 $0
to Sales
Personnel
Interest, $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $0
Carrying or
Other
Financing
Charges
Other $ 27,036 $ 2,687 $ 26,313 $ 24,485 $ 5,901 $ 21,394 $ 14,161 $ 22,864 $ 12,287 $0
(Includes
Personnel
costs
of those
home office
employees
involved
in the
distribution
effort and
the
travel-
related
expenses
incurred by
the
marketing
personnel
conducting
seminars)
Totals $1,868,912 $179,531 $1,479,167 $1,180,957 $49,047 $252,221 $773,303 $749,496 $225,772 $0
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, with respect to Class R shares, the
distribution services fees for expenditures payable to ABI were as follows:
Percentage per annum
of the aggregate
Distribution services average daily net
fees for expenditures assets attributable
Fund payable to ABI to Class R shares
---- --------------------- ----------------------
Growth and Income $ 15,743 0.50%
Value $ 12,523 0.50%
Discovery Value $ 605,822 0.50%
International Value $ 196,172 0.50%
Global Value $ 4,584 0.50%
Core Opportunities $ 5,638 0.50%
Global Risk Allocation $ 29,765 0.50%
Equity Income $ 47,723 0.50%
Global Real Estate $ 37,865 0.50%
Emerging Markets Equity $ 0 0.50%
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, expenses incurred by each Fund and
costs allocated to each Fund in connection with activities primarily intended to
result in the sale of Class R shares were as follows:
Growth Global Global Emerging
Category of and Discovery International Global Core Risk Equity Real Markets
Expense Income Value Value Value Value Opportunities Allocation Income Estate Equity
------- ------ ----- ---------- ------------- -------- ------------- ---------- ------ ------ ------
Advertising/ $ 474 $ 85 $ 1,243 $ 1,191 $ 233 $ 254 $ 269 $ 282 $ 770 $0
Marketing
Printing and $ 36 $ 1 $ 142 $ 37 $ 1 $ 3 $ 5 $ 10 $ 16 $0
Mailing of
Prospectuses
and
Semi-Annual
and Annual
Reports to
Other than
Current
Shareholders
Compensation $15,769 $ 2,202 $ 64,361 $ 42,748 $ 4,435 $10,967 $ 6,378 $53,130 $28,258 $0
to
Underwriters
Compensation $ 9,006 $13,282 $666,011 $212,536 $ 5,059 $ 6,125 $32,205 $ 6,798 $42,032 $0
to
Dealers
Compensation $ 1,292 $ 488 $ 56,762 $ 10,254 $ 174 $ 955 $ 2,487 $ 5,714 $ 3,561 $0
to Sales
Personnel
Interest, $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $0
Carrying or
Other
Financing
Charges
Other $ 9,497 $ 2,043 $ 49,246 $ 33,710 $ 4,943 $ 8,377 $ 6,348 $ 6,379 $21,509 $0
(Includes
Personnel
costs
of those
home office
employees
involved
in the
distribution
effort and
the
travel-
related
expenses
incurred by
the
marketing
personnel
conducting
seminars)
Totals $36,074 $18,101 $837,765 $300,476 $14,845 $26,681 $47,692 $72,313 $96,146 $0
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, with respect to Class K shares, the
distribution services fees for expenditures payable to ABI were as follows:
Percentage per annum
of the aggregate
Distribution services average daily net
fees for expenditures assets attributable
Fund payable to ABI to Class K shares
---- --------------------- ----------------------
|
Growth and Income $ 6,762 0.25%
Value $ 13,828 0.25%
Discovery Value $ 116,764 0.25%
International Value $ 65,631 0.25%
Global Value $ 2,527 0.25%
Core Opportunities $ 1,636 0.25%
Global Risk Allocation $ 6,928 0.25%
Equity Income $ 11,422 0.25%
Global Real Estate $ 19,469 0.25%
Emerging Markets Equity $ 0 0%
|
During the fiscal year ended October 31, 2012, for the Growth and
Income Fund and during the fiscal year ended November 30, 2012, for the Value
Fund, Discovery Value Fund, International Value Fund, Global Value Fund, Core
Opportunities Fund, Global Risk Allocation Fund, Equity Income Fund, Global Real
Estate Fund and Emerging Markets Equity, expenses incurred by each Fund and
costs allocated to each Fund in connection with activities primarily intended to
result in the sale of Class K shares were as follows:
Growth Global Global Emerging
Category of and Discovery International Global Core Risk Equity Real Markets
Expense Income Value Value Value Value Opportunities Allocation Income Estate Equity
------- ------ ----- ---------- ------------- -------- ------------- ---------- ------ ------ ------
Advertising/ $ 66 $ 195 $ 612 $ 560 $ 153 $ 123 $ 44 $ 143 $ 352 $0
Marketing
Printing and $ 17 $ 6 $ 58 $ 18 $ 0 $ 0 $ 2 $ 6 $ 12 $0
Mailing of
Prospectuses
and
Semi-Annual
and Annual
Reports to
Other than
Current
Shareholders
Compensation $ 6,943 $ 3,582 $ 23,280 $ 18,599 $ 3,676 $2,045 $ 3,022 $13,634 $10,702 $0
to
Underwriters
Compensation $ 2,453 $14,266 $133,199 $ 75,745 $ 2,602 $1,779 $ 8,036 $ 4,530 $20,024 $0
to
Dealers
Compensation $ 238 $ 951 $ 16,005 $ 3,840 $ 162 $ 234 $ 561 $ 3,987 $ 1,329 $0
to Sales
Personnel
Interest, $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $0
Carrying or
Other
Financing
Charges
Other $ 1,999 $ 4,014 $ 20,370 $ 14,756 $ 3,623 $2,398 $ 1,663 $ 3,885 $ 8,807 $0
(Includes
Personnel
costs
of those
home office
employees
involved
in the
distribution
effort and
the
travel-
related
expenses
incurred by
the
marketing
personnel
conducting
seminars)
Totals $11,716 $23,014 $193,524 $113,518 $10,216 $6,579 $13,328 $26,185 $41,226 $0
|
Since the commencement of each Fund's operations, for the Growth and
Income Fund, Value Fund, Discovery Value Fund, International Value Fund, Global
Value Fund, Core Opportunities Fund, Global Risk Allocation Fund, Equity Income
Fund, Global Real Estate Fund and Emerging Markets Equity, the Distributor has
incurred expenses in excess of the distribution expenses incurred and carried
over for reimbursement in future years in respect of the Class B, Class C, Class
R and Class K shares of each Fund as follows:
AMOUNT OF UNREIMBURSED DISTRIBUTION EXPENSES CARRIED OVER
(AS A PERCENTAGE OF THE CLASS' NET ASSETS)
-----------------------------------------------------------
CLASS B CLASS C CLASS R CLASS K
-------- -------- -------- --------
Value Fund $ 489,405 $ 859,874 $ 129,407 $ 60,477
(12.37%) (5.53%) (5.85%) (0.97%)
Discovery Value $ 139,879 $ 2,565,532 $ 1,262,228 $ 395,558
(0.65%) (1.95%) (0.94%) (0.78%)
International Value $ 1,720,575 $ 6,019,237 $ 2,123,051 $ 2,301,478
(8.88%) (6.60%) (6.16%) (14.62%)
Global Value $ 68,511 $ 498,160 $ 176,889 $ 48,635
(4.53%) (16.54%) (24.97%) (4.92%)
Growth and Income $ 20,258,984 $ 10,485,400 $ 200,357 $ 64,632
(43.13%) (6.11%) (5.05%) (2.45%)
Core Opportunities $ 78,099 $ 1,781,045 $ 196,266 $ 37,477
(1.43%) (9.32%) (14.73%) (4.90%)
Global Risk Allocation $ 1,068,676 $ 3,161,030 $ 381,616 $ 235,773
(2.99%) (4.37%) (6.69%) (8.76%)
Equity Income $ 5,923,477 $ 2,482,333 $ 125,592 $ 126,051
(53.52%) (3.42%) (1.03%) (2.21%)
Global Real Estate $ 8,996,196 $ 2,207,812 $ 260,405 $ 117,884
(227.76%) (11.59%) (2.94%) (1.36%)
Emerging Markets Equity $ 0 $ 0 $ 0 $ 0
(0.0%) (0.0%) (0.0%) (0.0%)
|
Transfer Agency Agreement
ABIS, an indirect wholly-owned subsidiary of the Adviser, located
principally at 8000 IH 10 W, 4th Floor, San Antonio, Texas, 78230, receives a
transfer agency fee per account holder of each of the Class A, Class B, Class C,
Class R, Class K, Class I Class 1, Class 2 and Advisor Class shares of each
Fund, plus reimbursement for out-of-pocket expenses. The transfer agency fee
with respect to the Class B shares and Class C shares of each Fund is higher
than the transfer agency fee with respect to the Class A, Class R, Class K,
Class I, Class 1, Class 2 and Advisor Class shares of each Fund, reflecting the
additional costs associated with the Class B and Class C CDSC. For the fiscal
year ended October 31, 2012 for Growth and Income and for the fiscal year ended
November 30, 2012 for Value Fund, Discovery Value, International Value, Global
Value, Core Opportunities, Global Risk Allocation, Equity Income, Global Real
Estate and Emerging Markets Equity, the Fund paid ABIS $1,657,251, $293,372,
$909,961, $960,119, $42,926, $132,832, $432,711, $237,872, $116,408 and $83,
respectively, for transfer agency services.
ABIS acts as the transfer agent for each Fund. ABIS registers the
transfer, issuance and redemption of Fund shares and disburses dividends and
other distributions to Fund shareholders.
Many Fund shares are owned by selected dealers or selected agents,
as defined below, financial intermediaries or other financial representatives
("financial intermediaries") for the benefit of their customers. In those cases,
a Fund often does not maintain an account for you. Thus, some or all of the
transfer agency functions for these accounts are performed by the financial
intermediaries. Each Fund, ABI and/or the Adviser pay to these financial
intermediaries, including those that sell shares of the AllianceBernstein Mutual
Funds, fees for sub-transfer agency and related recordkeeping services in
amounts ranging up to $19 per share customer fund account per annum. Retirement
plans may also hold Fund shares in the name of the plan, rather than the
participant. Plan recordkeepers, who may have affiliated financial
intermediaries who sell shares of the Funds, may be paid for each plan
participant fund account in amounts up to $19 per account per annum and/or up to
0.25% per annum of the average daily assets held in the plan. To the extent any
of these payments for recordkeeping services, transfer agency services or
retirement plan accounts are made by a Fund, they are included in the Funds'
Prospectus in the Fund expense tables under "Fees and Expenses of the Fund". In
addition, financial intermediaries may be affiliates of entities that receive
compensation from the Adviser or ABI for maintaining retirement plan "platforms"
that facilitate trading by affiliated and non-affiliated financial
intermediaries and recordkeeping for retirement plans.
Because financial intermediaries and plan recordkeepers may be paid
varying amounts per class for sub-transfer agency and related recordkeeping
services, the service requirements of which may also vary by class, this may
create an additional incentive for financial intermediaries and their financial
advisors to favor one fund complex over another or one class of shares over
another.
PURCHASE OF SHARES
The following information supplements that set forth in your
Prospectus under the heading "Investing in the Funds".
Effective January 31, 2009, sales of Class B shares to new investors
were suspended. Class B shares are only issued (i) upon the exchange of Class B
shares from another AllianceBernstein Fund, (ii) for purposes of dividend
reinvestment, (iii) through the Fund's Automatic Investment Program for accounts
that established the Program prior to January 31, 2009, or (iv) for purchase of
additional Class B shares by Class B shareholders as of January 31, 2009. The
ability to establish a new Automatic Investment Program for accounts containing
Class B shares was suspended as of January 31, 2009.
General
Shares of each Fund are offered on a continuous basis at a price
equal to their NAV plus an initial sales charge at the time of purchase ("Class
A shares"), with a CDSC ("Class B shares"), without any initial sales charge
and, as long as the shares are held for one year or more, without any CDSC
("Class C shares"), to group retirement plans, as defined below, eligible to
purchase Class R shares, without any initial sales charge or CDSC ("Class R
shares"),to group retirement plans eligible to purchase Class K shares, without
any initial sales charge or CDSC ("Class K shares"), to group retirement plans
and certain investment advisory clients of, and certain other persons associated
with, the Adviser and its affiliates eligible to purchase Class I shares,
without any initial sales charge or CDSC ("Class I shares"), to private clients
("Clients") of Sanford C. Bernstein & Co. LLC ("Bernstein") without any initial
sales charge or CDSC (the "Class 1 shares"), to institutional clients of the
Adviser and Bernstein Clients who have at least $3 million in fixed-income
assets under management with Bernstein without any initial sales charge or CDSC
(the "Class 2 shares"), or, to investors eligible to purchase Advisor Class
shares, without any initial sales charge or CDSC ("Advisor Class shares"), in
each case as described below. "Group retirement plans" are defined as 401(k)
plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money
purchase pension plans, defined benefit plans, and non-qualified deferred
compensation plans where plan level or omnibus accounts are held on the books of
a Fund. All classes of shares of the Funds, except Class I and Advisor Class
shares, are subject to Rule 12b-1 asset-based sales charges. Shares of a Fund
that are offered subject to a sales charge are offered through (i) investment
dealers that are members of the Financial Industry Regulatory Authority (FINRA)
and have entered into selected dealer agreements with ABI ("selected dealers"),
(ii) depository institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with ABI ("selected
agents") and (iii) ABI.
Investors may purchase shares of the Funds either through financial
intermediaries or directly through ABI. A transaction, service, administrative
or other similar fee may be charged by your financial intermediary with respect
to the purchase, sale or exchange of shares of each Fund made through such
financial intermediary. Such financial intermediary may also impose requirements
with respect to the purchase, sale or exchange of shares that are different
from, or in addition to, those imposed by a Fund, including requirements as to
the classes of shares available through such financial intermediary and the
minimum initial and subsequent investment amounts. A Fund is not responsible
for, and has no control over, the decision of any financial intermediary to
impose such differing requirements. Sales personnel of financial intermediaries
distributing a Fund's shares may receive differing compensation for selling
different classes of shares.
In order to open your account, a Fund or your financial intermediary
is required to obtain certain information from you for identification purposes.
This information may include name, date of birth, permanent residential address
and social security/taxpayer identification number. It will not be possible to
establish your account without this information. If a Fund or your financial
intermediary is unable to verify the information provided, your account may be
closed and other appropriate action may be taken as permitted by law.
Frequent Purchases and Sales of Fund Shares
The Funds' Board has adopted policies and procedures designed to
detect and deter frequent purchases and redemptions of Fund shares or excessive
or short-term trading that may disadvantage long-term Fund shareholders. These
policies are described below. There is no guarantee that the Funds will be able
to detect excessive or short-term trading and to identify shareholders engaged
in such practices, particularly with respect to transactions in omnibus
accounts. Shareholders should be aware that application of these policies may
have adverse consequences, as described below, and should avoid frequent trading
in Fund shares through purchases, sales and exchanges of shares. Each Fund
reserves the right to restrict, reject or cancel, without any prior notice, any
purchase or exchange order for any reason, including any purchase or exchange
order accepted by any shareholder's financial intermediary.
Risks Associated With Excessive or Short-Term Trading Generally.
While the Funds will try to prevent market timing by utilizing the procedures
described below, these procedures may not be successful in identifying or
stopping excessive or short-term trading in all circumstances. By realizing
profits through short-term trading, shareholders that engage in rapid purchases
and sales or exchanges of a Fund's shares dilute the value of shares held by
long-term shareholders. Volatility resulting from excessive purchases and sales
or exchanges of Fund shares, especially involving large dollar amounts, may
disrupt efficient portfolio management and cause a Fund to sell shares at
inopportune times to raise cash to accommodate redemptions relating to
short-term trading. In particular, a Fund may have difficulty implementing its
long-term investment strategies if it is forced to maintain a higher level of
its assets in cash to accommodate significant short-term trading activity. In
addition, a Fund may incur increased administrative and other expenses due to
excessive or short-term trading, including increased brokerage costs and
realization of taxable capital gains.
Funds that may invest significantly in securities of foreign issuers
may be particularly susceptible to short-term trading strategies. This is
because securities of foreign issuers are typically traded on markets that close
well before the time a Fund calculates its NAV at 4:00 p.m., Eastern time, which
gives rise to the possibility that developments may have occurred in the interim
that would affect the value of these securities. The time zone differences among
international stock markets can allow a shareholder engaging in a short-term
trading strategy to exploit differences in Fund share prices that are based on
closing prices of securities of foreign issuers established some time before a
Fund calculates its own share price (referred to as "time zone arbitrage"). The
Funds have procedures, referred to as fair value pricing, designed to adjust
closing market prices of securities of foreign issuers to reflect what is
believed to be the fair value of those securities at the time a Fund calculates
its NAV. While there is no assurance, each Fund expects that the use of fair
value pricing, in addition to the short-term trading policies discussed below,
will significantly reduce a shareholder's ability to engage in time zone
arbitrage to the detriment of other Fund shareholders.
A shareholder engaging in a short-term trading strategy may also
target a Fund that does not invest primarily in securities of foreign issuers.
Any Fund that invests in securities that are, among other things, thinly traded,
traded infrequently, or relatively illiquid has the risk that the current market
price for the securities may not accurately reflect current market values. A
shareholder may seek to engage in short term trading to take advantage of these
pricing differences (referred to as "price arbitrage"). The Funds may be
adversely affected by price arbitrage.
Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of the Funds should be made for investment purposes only. The Funds will
seek to prevent patterns of excessive purchases and sales or exchanges of Fund
shares. The Funds seek to prevent such practices to the extent they are detected
by the procedures described below, subject to the Funds' ability to monitor
purchase, sale and exchange activity. The Funds reserve the right to modify this
policy, including any surveillance or account blocking procedures established
from time to time to effectuate this policy, at any time without notice.
o Transaction Surveillance Procedures. The Funds, through their
agents, ABI and ABIS, maintain surveillance procedures to
detect excessive or short-term trading in Fund shares. This
surveillance process involves several factors, which include
scrutinizing transactions in Fund shares that exceed certain
monetary thresholds or numerical limits within a specified
period of time. Generally, more than two exchanges of Fund
shares during any 60-day period or purchases of shares
followed by a sale within 60 days will be identified by these
surveillance procedures. For purposes of these transaction
surveillance procedures, the Funds may consider trading
activity in multiple accounts under common ownership, control,
or influence. Trading activity identified by either, or a
combination, of these factors, or as a result of any other
information available at the time, will be evaluated to
determine whether such activity might constitute excessive or
short-term trading. With respect to managed or discretionary
accounts for which the account owner gives his/her broker,
investment adviser or other third party authority to buy and
sell Fund shares, the Funds may consider trades initiated by
the account owner, such as trades initiated in connection with
a bona fide cash management purposes, separately in their
analysis. These surveillance procedures may be modified from
time to time, as necessary or appropriate to improve the
detection of excessive or short-term trading or to address
specific circumstances.
o Account Blocking Procedures. If the Funds determine, in their
sole discretion, that a particular transaction or pattern of
transactions identified by the transaction surveillance
procedures described above is excessive or short -term trading
in nature, the Funds will take remedial action that may
include issuing a warning, revoking certain account-related
privileges (such as the ability to place purchase, sale and
exchange orders over the internet or by phone) or prohibiting
or "blocking" future purchase or exchange activity. However,
sales of Fund shares back to a Fund or redemptions will
continue to be permitted in accordance with the terms of the
Fund's current Prospectus. As a result, unless the shareholder
redeems his or her shares, which may have consequences if the
shares have declined in value, a CDSC is applicable or adverse
tax consequences may result, and the shareholder may be
"locked" into an unsuitable investment. A blocked account will
generally remain blocked for 90 days. Subsequent detections of
excessive or short-term trading may result in an indefinite
account block or an account block until the account holder or
the associated broker, dealer or other financial intermediary
provides evidence or assurance acceptable to the Fund that the
account holder did not or will not in the future engage in
excessive or short-term trading.
o Application of Surveillance Procedures and Restrictions to
Omnibus Accounts. Omnibus account arrangements are common
forms of holding shares of the Funds, particularly among
certain brokers, dealers and other financial intermediaries,
including sponsors of retirement plans and variable insurance
products. The Funds apply their surveillance procedures to
these omnibus account arrangements. As required by SEC rules,
the Funds have entered into agreements with all of its
financial intermediaries that require the financial
intermediaries to provide the Funds, upon the request of the
Funds or their agents, with individual account level
information about their transactions. If the Funds detect
excessive trading through its monitoring of omnibus accounts,
including trading at the individual account level, the
financial intermediaries will also execute instructions from
the Funds to take actions to curtail the activity, which may
include applying blocks to accounts to prohibit future
purchases and exchanges of Fund shares. For certain retirement
plan accounts, the Funds may request that the retirement plan
or other intermediary revoke the relevant participant's
privilege to effect transactions in Fund shares via the
internet or telephone, in which case the relevant participant
must submit future transaction orders via the U.S. Postal
Service (i.e., regular mail).
Purchase of Shares
Each Fund reserves the right to suspend the sale of its shares to
the public in response to conditions in the securities markets or for other
reasons. If a Fund suspends the sale of its shares, shareholders will not be
able to acquire its shares, including through an exchange.
The public offering price of shares of each Fund is their NAV, plus,
in the case of Class A shares of each Fund, a sales charge. On each Fund
business day on which a purchase or redemption order is received by a Fund and
trading in the types of securities in which a Fund invests might materially
affect the value of that Fund's shares, the per share is computed as of the Fund
Closing Time, which is the close of regular trading on each day the Exchange is
open (ordinarily 4:00 p.m., Eastern time, but sometimes earlier, as in the case
of scheduled half-day trading or unscheduled suspensions of trading) by dividing
the value of the total assets attributable to a class, less its liabilities, by
the total number of its shares then outstanding. A Fund business day is any day
on which the Exchange is open for trading.
The respective NAV of the various classes of shares of each Fund are
expected to be substantially the same. However, the NAV of the Class B, Class C
and Class R shares of each Fund will generally be slightly lower than the NAV of
the Class A, Class K, Class I, Class 1, Class 2 and Advisor Class shares of each
Fund, as a result of the differential daily expense accruals of the higher
distribution and, in some cases, transfer agency fees applicable with respect to
those classes of shares.
The Funds will accept unconditional orders for their shares to be
executed at the public offering price equal to their NAV next-determined (plus
applicable Class A sales charges), as described below. Orders received by ABI
prior to the Fund Closing Time are priced at the NAV computed as of the Fund
Closing Time (plus applicable Class A sales charges). In the case of orders for
purchase of shares placed through financial intermediaries, the applicable
public offering price will be the NAV as so determined, but only if the
financial intermediary receives the order prior to the Fund Closing Time. The
financial intermediary is responsible for transmitting such orders by a
prescribed time to a Fund or its transfer agent. If the financial intermediary
fails to do so, the investor will not receive the day's NAV. If the financial
intermediary receives the order after the Fund Closing Time, the price received
by the investor will be based on the NAV determined as of the Fund Closing Time
on the next business day.
A Fund may, at its sole option, accept securities as payment for
shares of the Fund, including from certain affiliates of the Fund in accordance
with the Fund's procedures, if the Adviser believes that the securities are
appropriate investments for the Fund. The securities are valued by the method
described under "Net Asset Value" below as of the date the Fund receives the
securities and corresponding documentation necessary to transfer the securities
to the Fund. This is a taxable transaction to the shareholder.
Following the initial purchase of a Fund's shares, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Mutual Fund Application or an "Autobuy"
application, both of which may be obtained by calling the "For Literature"
telephone number shown on the cover of this SAI. Except with respect to certain
omnibus accounts, telephone purchase orders with payment by electronic funds
transfer may not exceed $500,000. Payment for shares purchased by telephone can
be made only by electronic funds transfer from a bank account maintained by the
shareholder at a bank that is a member of the National Automated Clearing House
Association ("NACHA"). Telephone purchase requests must be received before the
Fund Closing Time, on a Fund business day to receive that day's public offering
price. Telephone purchase requests received after the Fund Closing Time, are
automatically placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of the Fund
Closing Time on such following business day.
Full and fractional shares are credited to a shareholder's account
in the amount of his or her subscription. As a convenience, and to avoid
unnecessary expense to a Fund, the Funds will not issue share certificates
representing shares of a Fund. Ownership of a Fund's shares will be shown on the
books of that Fund's transfer agent. Each class of shares of each Fund
represents an interest in the same portfolio of investments of the relevant
Fund, have the same rights and are identical in all respects, except that (i)
Class A shares of each Fund bear the expense of CDSC and Class B and Class C
shares of each Fund bear the expense of the CDSC, (ii) Class B shares, Class C
shares and Class R shares of each Fund each bear the expense of a higher
distribution services fee than that borne by Class A, Class K and Class 1 shares
of each Fund, and Class I shares, Class 2 shares and Advisor Class shares do not
bear such a fee (iii) Class B shares and Class C shares of each Fund bear higher
transfer agency costs than those borne by Class A, Class R, Class K, Class I,
Class 1, Class 2 and Advisor Class shares of each Fund, (iv) Class B shares are
subject to a conversion feature and will convert to Class A shares under certain
circumstances, and (v) each of Class A, Class B, Class C, Class R, Class K and
Class 1 shares of each Fund has exclusive voting rights with respect to
provisions of the Plan pursuant to which its distribution services fee is paid
and other matters for which separate class voting is appropriate under
applicable law, provided that, if a Fund submits to a vote of the Class A
shareholders, an amendment to the Plan that would materially increase the amount
to be paid thereunder with respect to the Class A shares of that Fund, then such
amendment will also be submitted to the Class B shareholders of that Fund
because the Class B shares convert to Class A shares under certain circumstances
and the Class A and Class B shareholders will vote separately by class. Each
class has different exchange privileges and certain different shareholder
service options available.
The Directors of the Funds have determined that currently no
conflict of interest exists between or among the classes of shares of any
respective Fund. On an ongoing basis, the Directors of the Funds, pursuant to
their fiduciary duties under the 1940 Act and state law, will seek to ensure
that no such conflict arises.
Alternative Purchase Arrangements
Classes A, B and C Shares. Class A, Class B and Class C shares of
each Fund have the following alternative purchase arrangements: Class A shares
are generally offered with an initial sales charge, Class B shares are generally
offered with a CDSC and Class C shares are sold to investors choosing the
asset-based sales charge alternative. Special purchase arrangements are
available for group retirement plans. See "Alternative Purchase Arrangements -
Group Retirement Plans and Tax-Deferred Accounts" below. These alternative
purchase arrangements permit an investor to choose the method of purchasing
shares that is most beneficial given the amount of purchase, the length of time
the investor expects the hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their investment in a
Fund, the accumulated distribution services fee and CDSC on Class B shares prior
to conversion, or the accumulated distribution services fee and CDSC on Class C
shares, would be less than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to what extent
such differential would be offset by the higher return of Class A shares. Class
A shares will normally be more beneficial than Class B shares to the investor
who qualifies for reduced initial sales charges on Class A shares, as described
below. C shares will normally not be suitable for the investor who qualifies to
purchase Class A shares at NAV. For this reason, ABI will reject any order for
more than $1,000,000 for Class C shares.
Class A shares of a Fund are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher dividends per share
than Class B shares or Class C shares of that Fund. However, because initial
sales charges are deducted at the time of purchase, most investors purchasing
Class A shares of a Fund would not have all their funds invested initially and,
therefore, would initially own fewer shares. Investors not qualifying for
reduced initial sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares of a Fund
because the accumulated continuing distribution charges on Class B shares or
Class C shares of that Fund may exceed the initial sales charge on Class A
shares during the life of the investment. Again, however, such investors must
weigh this consideration against the fact that, because of such initial sales
charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares of a Fund in order to
have all their funds invested initially, although remaining subject to higher
continuing distribution charges and being subject to a CDSC for a four-year and
one-year period, respectively. For example, based on current fees and expenses,
an investor subject to the 4.25% initial sales charge on Class A shares of a
Fund would have to hold his or her investment approximately seven years for the
Class C distribution services fee of that Fund to exceed the initial sales
charge plus the accumulated distribution services fee of Class A shares. In this
example, an investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in NAV or the effect
of different performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the four-year period during
which Class B shares are subject to a CDSC may find it more advantageous to
purchase Class C shares of a Fund.
Compensation Paid to Principal Underwriter
During Value Fund's fiscal years ended November 30, 2012, November
30, 2011 and November 30, 2010, the aggregate amount of underwriting commission
payable with respect to shares of the Fund was $34,640, $28,670 and $53,518,
respectively. Of these amounts, ABI received $1,658, $1,189 and $2,180,
respectively, representing that portion of the sales charges paid on shares of
the Fund sold during the year which was not reallocated to selected dealers (and
was accordingly retained by ABI).
During Discovery Value's fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the aggregate amount of underwriting
commission payable with respect to shares of the Fund was $271,703, $499,657 and
$562,551, respectively. Of these amounts, ABI received $8,656, $19,601 and
$16,808, respectively, representing that portion of the sales charges paid on
shares of the Fund sold during the year which was not reallocated to selected
dealers (and was accordingly retained by ABI).
During International Value's fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the aggregate amount of underwriting
commission payable with respect to shares of the Fund was $83,943, $171,235 and
$398,127, respectively. Of these amounts, ABI received $2,093, $3,667 and
$8,662, respectively, representing that portion of the sales charges paid on
shares of the Fund sold during the year which was not reallocated to selected
dealers (and was accordingly retained by ABI).
During Global Value's fiscal years ended November 30, 2012, November
30, 2011 and November 30, 2010, the aggregate amount of underwriting commission
payable with respect to shares of the Fund was $6,013, $21,493 and $24,379,
respectively. Of these amounts, ABI received $239, $1,668 and $1,291,
respectively, representing that portion of the sales charges paid on shares of
the Fund sold during the year which was not reallocated to selected dealers (and
was accordingly retained by ABI).
During Growth and Income's fiscal years ended October 31, 2012,
October 31, 2011 and October 31, 2010 the aggregate amounts of underwriting
commission payable with respect to shares of the Fund were $326,285, $242,035
and $269,315, respectively. Of that amount, ABI received the amounts of $12,989,
$10,809 and $11,589, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was not
reallocated to selected dealers (and was, accordingly, retained by ABI).
During Core Opportunities' fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the aggregate amount of underwriting
commission payable with respect to shares of the Fund was $72,802, $76,877 and
$71,496, respectively. Of that amount ABI received the amount of $3,803, $4,117
and $4,011, respectively, representing that portion of the sales charges paid on
shares of the Fund sold during the year which was not re-allowed to selected
dealers (and was accordingly retained by ABI).
During Global Risk Allocation's fiscal years ended November 30,
2012, November 30, 2011 and November 30, 2010, the aggregate amounts of
underwriting commission payable with respect to shares of the Fund were
$196,663, $161,087 and $201,985, respectively. Of that amount ABI received the
amounts of $9,143, $6,204 and $7,977, respectively, representing that portion of
the sales charges paid on shares of the Fund sold during the year which was not
re-allowed to selected dealers (and was, accordingly, retained by ABI).
During Equity Income's fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the aggregate amounts of underwriting
commission payable with respect to shares of the Fund were $862,198, $919,457
and $189,967, respectively. Of that amount, ABI received the amount of $52,684,
$55,998 and $16,806, respectively, representing that portion of the sales
charges paid on shares of the Fund sold during the year which was not re-allowed
to selected dealers (and was accordingly retained by ABI).
During Global Real Estate's fiscal years ended November 30, 2012,
November 30, 2011 and November 30, 2010, the aggregate amount of underwriting
commission payable with respect to shares of the Fund was $47,436, $89,232 and
$95,932, respectively. Of that amount, ABI received $2,679, $4,916 and $4,457,
respectively, representing that portion of the sales charges paid on shares of
the Fund sold during the period which was not re-allowed to selected dealers
(and was, accordingly, retained by ABI).
During Emerging Market Equity's fiscal year ended November 30, 2012,
the aggregate amount of underwriting commission payable with respect to shares
of the Fund was $0. Of that amount, ABI received $0, representing that portion
of the sales charges paid on shares of the Fund sold during the period which was
not re-allowed to selected dealers (and was, accordingly, retained by ABI).
The following table shows the CDSCs received by ABI from each share
class during the Funds' last three fiscal years or since inception.
Fiscal Year Amounts Amounts Amounts
Ended ABI Received ABI Received ABI Received
October 31/ In CDSCs From In CDSCs From In CDSCs From
November 30 Fund Class A Shares Class B Shares Class C Shares
----------- ----- -------------- -------------- --------------
2012 Value $ 2,171 $ 2,170 $ 117
2011 2,791 3,746 809
2010 3,488 10,254 820
2012 Discovery Value $ 8,005 $ 6,383 $ 9,728
2011 15,860 10,416 16,630
2010 12,811 21,109 10,397
2012 International Value $18,019 $ 5,890 $ 3,228
2011 24,519 31,297 10,728
2010 26,142 100,289 16,866
2012 Global Value $ 800 $ 713 $ 72
2011 960 2,066 698
2010 620 9,544 704
2012 Growth and Income $10,168 $ 25,693 $ 3,353
2011 15,333 40,372 655
2010 8,481 69,979 3,926
2012 Core Opportunities $ 1,520 $ 2,061 $ 2,313
2011 1,560 4,970 1,301
2010 2,418 8,107 1,953
2012 Global Risk Allocation $16,587 $ 8,595 $ 2,215
2011 7,881 17,934 1,429
2010 5,302 34,350 1,578
2012 Equity Income $ 1,802 $ 3,982 $13,003
2011 12,210 9,328 9,443
2010 1,591 19,645 2,232
2012 Global Real Estate $ 1,633 $ 862 $ 1,751
2011 3,440 2,543 1,037
2010 839 3,151 2,047
2012 Emerging Markets Equity $ 0 N/A $ 0
|
Class A Shares
The public offering price of Class A shares of a Fund is the NAV
plus a sales charge, as set forth below.
Sales Charge
------------
Discount or
Commission to
As % of Dealers or
Amount of As % of Net the Public Agents as % of
Purchase Amount Invested Offering Price Offering Price
-------- --------------- -------------- --------------
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $1,000,000* 1.78 1.75 1.50
-------------
|
* There is no initial sales charge on transactions of $1,000,000 or more.
All or a portion of the initial sales charge may be paid to your
financial representative. With respect to purchases of $1,000,000 or more, Class
A shares of a Fund redeemed within one year of purchase may be subject to a CDSC
of up to 1%. The CDSC on Class A shares will be waived on certain redemptions,
as described below under "--Contingent Deferred Sales Charge". A Fund receives
the entire NAV of its Class A shares sold to investors. ABI's commission is the
sales charge shown above less any applicable discount or commission "re-allowed"
to selected dealers and agents. ABI will re-allow discounts to selected dealers
and agents in the amounts indicated in the table above. In this regard, ABI may
elect to re-allow the entire sales charge to selected dealers and agents for all
sales with respect to which orders are placed with ABI. A selected dealer who
receives re-allowance in excess of 90% of such a sales charge may be deemed to
be an "underwriter" under the Securities Act.
No initial sales charge is imposed on Class A shares of a Fund
issued (i) pursuant to the automatic reinvestment of income dividends or capital
gains distributions, (ii) in exchange for Class A shares of other
"AllianceBernstein Mutual Funds" (as that term is defined under "Combined
Purchase Privilege" below), except that an initial sales charge will be imposed
on Class A shares issued in exchange for Class A shares of AllianceBernstein
Exchange Reserves that were purchased for cash without the payment of an initial
sales charge and without being subject to a CDSC, or (iii) upon the automatic
conversion of Class B shares of a Fund as described below under "Class B
Shares-Conversion Feature".
Commissions may be paid to selected dealers or agents who initiate
or are responsible for Class A share purchases by a single shareholder in excess
of $1,000,000 that are not subject to an initial sales charge at up to the
following rates: 1.00% on purchases up to $3,000,000; 0.75% on purchases over
$3,000,000 to $5,000,000; and 0.50% on purchases over $5,000,000. Commissions
are paid based on cumulative purchases by a shareholder over the life of an
account with no adjustments for redemptions, transfers or market declines.
In addition to the circumstances described above, certain types of
investors may be entitled to pay no initial sales charge in certain
circumstances described below.
Class A Shares - Sales at NAV. A Fund may sell its Class A shares at
NAV (i.e., without any initial sales charge) to certain categories of investors
including:
(i) investment management clients of the Adviser or its
affiliates, including clients and prospective clients of the
Adviser's AllianceBernstein Institutional Investment
Management Division;
(ii) officers and present or former Directors of the Fund or other
investment companies managed by the Adviser, officers,
directors and present or retired full-time employees and
former employees (for subsequent investment in accounts
established during the course of their employment) of the
Adviser, ABI, ABIS and their affiliates; officers, directors
and present and full-time employees of selected dealers or
agents; or the spouse or domestic partner, sibling, direct
ancestor or direct descendant (collectively, "relatives") of
any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person;
(iii) the Adviser, ABI, ABIS and their affiliates; certain employee
benefit plans for employees of the Adviser, ABI, ABIS and
their affiliates;
(iv) persons participating in a fee-based program, sponsored and
maintained by a broker-dealer or other financial intermediary
and approved by ABI, under which persons pay an asset-based
fee for services in the nature of investment advisory or
administrative services, or clients of broker-dealers or other
financial intermediaries approved by ABI who purchase Class A
shares for their own accounts through self-directed brokerage
accounts with the broker-dealers or financial intermediaries
that may or may not charge a transaction fee to its clients;
(v) certain retirement plan accounts, as described under
"Alternative Purchase Arrangements - Group Retirement Plans
and Tax-Deferred Accounts"; and
(vi) current Class A shareholders of AllianceBernstein Mutual Funds
and investors who receive a "Fair Funds Distribution" (a
"Distribution") resulting from an SEC enforcement action
against the Adviser and current Class A shareholders of
AllianceBernstein Mutual Funds who receive a Distribution
resulting from any SEC enforcement action related to trading
in shares of AllianceBernstein Mutual Funds who, in each case,
purchase shares of an AllianceBernstein Mutual Fund from ABI
through deposit with ABI of the Distribution check.
Class B Shares
Effective January 31, 2009, sales of Class B shares to new investors
were suspended. Class B shares will only be issued (i) upon the exchange of
Class B shares from another AllianceBernstein Fund, (ii) for purposes of
dividend reinvestment, (iii) through the Funds' Automatic Investment Program for
accounts that established the Program prior to January 31, 2009, and (iv) for
purchases of additional Class B shares by Class B shareholders as of January 31,
2009. The ability to establish a new Automatic Investment Program for accounts
containing Class B shares was suspended as of January 31, 2009.
Investors may purchase Class B shares of a Fund at the public
offering price equal to the NAV per share of the Class B shares of that Fund on
the date of purchase without the imposition of a sales charge at the time of
purchase. The Class B shares of a Fund are sold without an initial sales charge
so that the Fund will receive the full amount of the investor's purchase
payment.
Conversion Feature. Eight years after the end of the calendar month
in which the shareholder's purchase order was accepted, Class B shares of a Fund
will automatically convert to Class A shares of that Fund and will no longer be
subject to a higher distribution services fee. Such conversion will occur on the
basis of the relative NAVs of the two classes, without the imposition of any
sales load, fee or other charge. The purpose of the conversion feature is to
reduce the distribution services fee paid by holders of Class B shares of a Fund
that have been outstanding long enough for ABI to have been compensated for
distribution expenses incurred in the sale of the shares.
For purposes of conversion to Class A, Class B shares of a Fund
purchased through the reinvestment of dividends and distributions paid in
respect of Class B shares in a shareholder's account will be considered to be
held in a separate sub-account. Each time any Class B shares of a Fund in the
shareholder's account (other than those in the sub-account) convert to Class A
shares of that Fund, an equal pro rata portion of the Class B shares in the
sub-account will also convert to Class A.
The conversion of Class B shares of a Fund to Class A shares is
subject to the continuing availability of an opinion of counsel to the effect
that the conversion of Class B shares to Class A shares does not constitute a
taxable event under federal income tax law. The conversion of Class B shares of
a Fund to Class A shares of that Fund may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In that event, no
further conversions of Class B shares of that Fund would occur, and shares might
continue to be subject to the higher distribution services fee for an indefinite
period which may extend beyond the period ending eight years after the end of
the calendar month in which the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares of a Fund at the public
offering price equal to the NAV per share of the Class C shares of that Fund on
the date of purchase without the imposition of a sales charge either at the time
of purchase or, as long as the shares are held for one year or more, upon
redemption. Class C shares of a Fund are sold without an initial sales charge so
that the Fund will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without a CDSC so that
the investor will receive as proceeds upon redemption the entire NAV of his or
her Class C shares. The Class C distribution services fee enables each Fund to
sell its Class C shares without either an initial sales charge or CDSC, as long
as the shares are held for one year or more. Class C shares of a Fund do not
convert to any other class of shares of that Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and Advisor Class
shares of the relevant Fund, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares and Advisor Class shares.
Contingent Deferred Sales Charge
Class B shares of a Fund that are redeemed within four years of
purchase will be subject to a CDSC at the rates set forth below charged as a
percentage of the dollar amount subject thereto. Class A share purchases of
$1,000,000 or more and Class C shares that are redeemed within one year of
purchase will be subject to CDSC of 1% as are Class A share purchases by certain
group retirement plans (see "Alternative Purchase Arrangements - Group
Retirement Plans and Tax-Deferred Accounts" below). The charge will be assessed
on an amount equal to the lesser of the cost of the shares being redeemed or
their NAV at the time of redemption. Accordingly, no sales charge will be
imposed on increases in NAV above the initial purchase price. In addition, no
charge will be assessed on shares derived from reinvestment of dividends or
capital gains distributions.
To illustrate, assume that an investor purchased 100 Class B shares
of a Fund at $10 per share (at a cost of $1,000) and in the second year after
purchase, the NAV per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares of the Fund upon dividend reinvestment. If
at such time the investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to the charge because
of dividend reinvestment. With respect to the remaining 40 Class B shares, the
charge is applied only to the original cost of $10 per share and not to the
increase in NAV of $2 per share. Therefore, $400 of the $600 redemption proceeds
will be charged at a rate of 3.0% (the applicable rate in the second year after
purchase).
For Class B shares, the amount of the CDSC, if any, will vary
depending on the number of years from the time of payment for the purchase of
Class B shares of a Fund until the time of redemption of such shares.
Contingent Deferred Sales
Charge for the Fund as a
Year Since Purchase % of Dollar Amount Subject to Charge
------------------- ------------------------------------
First 4.00%
Second 3.00%
Third 2.00%
Fourth 1.00%
Fifth and thereafter None
|
In determining the CDSC applicable to a redemption of Class B shares
and Class C shares of a Fund, it will be assumed that the redemption is, first,
of any shares that are not subject to a CDSC (for example, because the shares
were acquired upon the reinvestment of dividends or distributions) and, second,
of shares held longest during the time they are subject to the sales charge.
When shares acquired in an exchange are redeemed, the applicable CDSC and
conversion schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the AllianceBernstein Mutual
Fund originally purchased by the shareholder. If you redeem your shares and
directly invest the proceeds in units of CollegeBoundfund, the CDSC will apply
to the units of CollegeBoundfund. The CDSC period begins with the date of your
original purchase, not the date of exchange for the other Class B shares or
Class C shares, as applicable, or purchase of CollegeBoundfund units.
Proceeds from the CDSC are paid to ABI and are used by ABI to defray
the expenses of ABI related to providing distribution-related services to a Fund
in connection with the sale of Fund shares, such as the payment of compensation
to selected dealers and agents for selling Fund shares. The combination of CDSC
and the distribution services fee enables a Fund to sell shares without a sales
charge being deducted at the time of purchase.
The CDSC is waived on redemptions of shares (i) following the death
or disability, as defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who has attained
the age of 70 1/2, (iii) that had been purchased by present or former Directors
of the Funds, by the relative of any such person, by any trust, individual
retirement account or retirement plan account for the benefit of any such person
or relative, or by the estate of any such person or relative, (iv) pursuant to,
and in accordance with, a systematic withdrawal plan (see "Sales Charge
Reduction Programs for Class A Shares - Systematic Withdrawal Plan" below), (v)
to the extent that the redemption is necessary to meet a plan participant's or
beneficiary's request for a distribution or loan from a group retirement plan or
to accommodate a plan participant's or beneficiary's direction to reallocate his
or her plan account among other investment alternatives available under a group
retirement plan, (vi) due to the complete termination of a trust upon the death
of the trustor/grantor, beneficiary or trustee but only if the trust termination
is specifically provided for in the trust document, or (vii) that had been
purchased with proceeds from a Distribution resulting from any SEC enforcement
action related to trading in shares of AllianceBernstein Mutual Funds through
deposit with ABI of the Distribution check. The CDSC is also waived for (i)
permitted exchanges of shares, (ii) holders of Class A shares who purchased
$1,000,000 or more of Class A shares where the participating broker or dealer
involved in the sale of such shares waived the commission it would normally
receive from ABI or (iii) Class C shares sold through programs offered by
financial intermediaries and approved by ABI where such programs offer only
shares that are not subject to a CDSC, where the financial intermediary
establishes a single omnibus account for each Fund or in the case of a group
retirement plan, a single account for each plan, and where no advance commission
is paid to any financial intermediary in connection with the purchase of such
shares.
Advisor Class Shares
Advisor Class shares of the Funds may be purchased and held solely
(i) through accounts established under fee-based programs, sponsored and
maintained by registered broker-dealers or other financial intermediaries and
approved by ABI, (ii) through defined contribution employee benefit plans (e.g.,
401(k) plans) that have at least $10 million in assets and are purchased
directly by the plan without the involvement of a financial intermediary, (iii)
by officers and present or former Directors of the Funds or other investment
companies managed by the Adviser, officers, directors and present or retired
full-time employees and former employees (for subsequent investments in accounts
established during the course of their employment) of the Adviser, ABI, ABIS and
their affiliates, Relatives of any such person, or any trust, individual
retirement account or retirement plan for the benefit of any such person or (iv)
by the categories of investors described in clauses (i), (iii) and (iv) under
"Class A Shares --Sales at NAV". Generally, a fee-based program must charge an
asset-based or other similar fee and must invest at least $250,000 in Advisor
Class shares of a Fund in order to be approved by ABI for investment in Advisor
Class shares. A transaction fee may be charged by your financial intermediary
with respect to the purchase, sale or exchange of Advisor Class shares made
through such financial intermediary. Advisor Class shares do not incur any
distribution services fees, and will thus have a lower expense ratio and pay
correspondingly higher dividends than Class A, Class B, Class C, Class R, Class
K or Class 1 shares.
Class R Shares
Class R shares are offered only to group retirement plans that have
plan assets of up to $10 million. Class R shares are not available to retail
non-retirement accounts, traditional or Roth IRAs, Coverdell Education Savings
Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and to
AllianceBernstein-sponsored retirement products. Class R shares incur a .50%
distribution services fee and thus have a higher expense ratio than Class A
shares, Class K shares and Class I shares and pay correspondingly lower
dividends than Class A shares, Class K shares and Class I shares.
Class K Shares
Class K shares are available at NAV to group retirement plans that
have plan assets of at least $1 million. Class K shares generally are not
available to retail non-retirement accounts, traditional and Roth IRAs,
Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual
403(b) plans and AllianceBernstein-sponsored retirement products. Class K shares
do not have an initial sales charge or CDSC but incur a .25% distribution
services fee and thus (i) have a lower expense ratio than Class R shares and pay
correspondingly higher dividends than Class R shares and (ii) have a higher
expense ratio than Class I shares and pay correspondingly lower dividends than
Class I shares.
Class I Shares
Class I shares are available at NAV to all group retirement plans
that have plan assets in excess of $10 million and to certain related group
retirement plans with plan assets of less than $10 million in assets if the
sponsor of such plans has at least one group retirement plan with plan assets in
excess of $10 million that invests in Class I shares and to certain investment
advisory clients of, and certain other persons associated with, the Adviser and
its affiliates. Class I shares generally are not available to retail
non-retirement accounts, traditional and Roth IRAs, Coverdell Education Savings
Accounts, SEPs, SAR-SEPs, SIMPLE IRAs, individual 403(b) plans and
AllianceBernstein-sponsored retirement products. Class I shares do not incur any
distribution services fees and will thus have a lower expense ratio and pay
correspondingly higher dividends than Class R and Class K shares.
Class 1 Shares
Class 1 shares are offered only to Bernstein Clients. Class 1 shares
incur a .25% distribution services fee and thus have a lower expense ratio and
pay correspondingly higher dividends than Class A share and Class C shares.
Class 2 Shares
Class 2 shares are offered only to institutional clients of the
Adviser and Bernstein Clients who meet certain minimum requirements for assets
under management with Bernstein after giving effect to their investment in a
Fund. Class 2 shares do not incur any distribution services fees and will thus
have a lower expense ratio and pay correspondingly higher dividends than Class
A, Class C and Class 1 shares.
Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred
Accounts
A Fund offers special distribution arrangements for group retirement
plans. However, plan sponsors, plan fiduciaries and other financial
intermediaries may establish requirements as to the purchase, sale or exchange
of shares of the Fund, including maximum and minimum initial investment
requirements, that are different from those described in this SAI. Group
retirement plans also may not offer all classes of shares of the Fund. In
addition, the Class A and Class B CDSC may be waived for investments made
through certain group retirement plans. Therefore, plan sponsors or fiduciaries
may not adhere to these share class eligibility standards as set forth in your
Prospectus and this SAI. A Fund are not responsible for, and has no control
over, the decision of any plan sponsor or fiduciary to impose such differing
requirements.
Class A Shares. Class A shares are available at NAV to all
AllianceBernstein-sponsored group retirement plans, regardless of size, and to
the AllianceBernstein Link, AllianceBernstein Individual 401(k) and
AllianceBernstein SIMPLE IRA plans with at least $250,000 in plan assets or 100
or more employees. Effective June 30, 2005, for the purposes of determining
whether a SIMPLE IRA plan has at least $250,000 in plan assets, all of the
SIMPLE IRAs of an employer's employees are aggregated. ABI measures the asset
levels and number of employees in these plans once monthly. Therefore, if a plan
that is not eligible at the beginning of a month for purchases of Class A shares
at NAV meets the asset level or number of employees required for such
eligibility, later in that month all purchases by the plan will be subject to a
sales charge until the monthly measurement of assets and employees. If the plan
terminates a Fund as an investment option within one year, then plan purchases
of Class A shares will be subject to a 1%, 1-year CDSC redemption.
Class A shares are also available at NAV to group retirement plans
with plan assets in excess of $10 million. The 1%, 1-year CDSC also generally
applies. However, the 1%, 1-year CDSC may be waived if the financial
intermediary agrees to waive all commissions or other compensation paid in
connection with the sale of such shares (typically up to a 1% advance payment
for sales of Class A shares at NAV) other than the service fee paid pursuant to
the Fund's distribution service plan.
Class B Shares. Class B shares are generally not available for
purchase by group retirement plans. However, Class B shares may continue to be
purchased by group retirement plans that have already selected Class B shares as
an investment alternative under their plan prior to September 2, 2003.
Class C Shares. Class C shares are available to AllianceBernstein
Link, AllianceBernstein Individual 401(k) and AllianceBernstein SIMPLE IRA plans
with less than $250,000 in plan assets and less than 100 employees. Class C
shares are also available to group retirement plans with plan assets of less
than $1 million. If an AllianceBernstein Link, AllianceBernstein Individual
401(k) or AllianceBernstein SIMPLE IRA plan holding Class C shares becomes
eligible to purchase Class A shares at NAV, the plan sponsor or other
appropriate fiduciary of such plan may request ABI in writing to liquidate the
Class C shares and purchase Class A shares with the liquidation proceeds. Any
such liquidation and repurchase may not occur before the expiration of the
1-year period that begins on the date of the plan's last purchase of Class C
shares.
Class R Shares. Class R shares are available to certain group
retirement plans with plan assets of up to $10 million. Class R shares are not
subject to front-end sales charges or CDSCs, but are subject to a .50%
distribution fee.
Class K Shares. Class K shares are available to certain group
retirement plans with plan assets of at least $1 million. Class K shares are not
subject to a front-end sales charge or CDSC, but are subject to a .25%
distribution fee.
Class I Shares. Class I shares are available to certain group
retirement plans with plan assets of at least $10 million and certain
institutional clients of the Adviser who invest at least $2 million in a Fund.
Class I shares are not subject to a front-end sales charge, CDSC or distribution
fee.
Choosing a Class of Shares for Group Retirement Plans. Plan
sponsors, plan fiduciaries and other financial intermediaries may establish
requirements as to the purchase, sale or exchange of shares of a Fund, including
maximum and minimum initial investment requirements, that are different from
those described in this SAI. Plan fiduciaries should consider how these
requirements differ from a Fund's share class eligibility criteria before
determining whether to invest.
Currently, the Funds make their Class A shares available at NAV to
group retirement plans with plan assets in excess of $10 million. Unless waived
under the circumstances described above, a 1%, 1-year CDSC applies to the sale
of Class A shares by a plan. Because Class K shares have no CDSC and lower 12b-1
distribution fees and Class I shares have no CDSC or Rule 12b-1 distribution
fees, plans should consider purchasing Class K or Class I shares, if eligible,
rather than Class A shares.
In selecting among the Class A, Class K and Class R shares, plans
purchasing shares through a financial intermediary that is not willing to waive
advance commission payments (and therefore are not eligible for the waiver of
the 1%, 1-year CDSC applicable to Class A shares) should weigh the following:
o the lower Rule 12b-1 distribution fees (0.30%) and the 1%,
1-year CDSC with respect to Class A shares;
o the higher Rule 12b-1 distribution fees (0.50%) and the
absence of a CDSC with respect to Class R shares; and
o the lower Rule 12b-1 distribution fees (0.25%) and the absence
of a CDSC with respect to Class K shares.
Because Class A and Class K shares have lower Rule 12b-1
distribution fees than Class R shares, plans should consider purchasing Class A
or Class K shares, if eligible, rather than Class R shares.
As described above, effective January 31, 2009, sales of Class B
shares to new investors were suspended. While Class B shares were generally not
available to group retirement plans, Class B shares are available for continuing
contributions from plans that have already selected Class B shares as an
investment option under their plans prior to September 2, 2003. Plans should
weigh the fact that Class B shares will convert to Class A shares after a period
of time against the fact that Class A, Class R, Class K and Class I shares have
lower expenses, and therefore may have higher returns, than Class B shares,
before determining which class to make available to its plan participants.
Sales Charge Reduction Programs for Class A Shares
The AllianceBernstein Mutual Funds offer shareholders various
programs through which shareholders may obtain reduced sales charges or
reductions in CDSC through participation in such programs. In order for
shareholders to take advantage of the reductions available through the combined
purchase privilege, rights of accumulation and letters of intent, a Fund must be
notified by the shareholder or his/her financial intermediary that they qualify
for such a reduction. If a Fund is not notified that a shareholder is eligible
for these reductions, the relevant Fund will be unable to ensure that the
reduction is applied to the shareholder's account.
Combined Purchase Privilege. Shareholders may qualify for the sales
charge reductions by combining purchases of shares of a Fund (or any other
AllianceBernstein Mutual Fund) into a single "purchase." By combining such
purchases, a shareholder may be able to take advantage of the quantity discounts
described under "Alternative Purchase Arrangements - Class A Shares." A
"purchase" means a single purchase or concurrent purchases of shares of any
AllianceBernstein Mutual Fund, including AllianceBernstein Institutional Funds,
by (i) an individual, his or her spouse or domestic partner, or the individual's
children under the age of 21 years purchasing shares of a Fund for his, her or
their own account(s), including certain CollegeBoundfund accounts; (ii) a
trustee or other fiduciary purchasing shares for a single trust, estate or
single fiduciary account with one or more beneficiaries involved; or (iii) the
employee benefit plans of a single employer. The term "purchase" also includes
purchases by any "company", as the term is defined in the 1940 Act, but does not
include purchases by any such company which has not been in existence for at
least six months or which has no purpose other than the purchase of shares of a
Fund or shares of other registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals whose sole
organizational nexus is that the participants therein are credit card holders of
a company, policy holders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.
Currently, the AllianceBernstein Mutual Funds include:
AllianceBernstein Blended Style Series, Inc.
- AllianceBernstein 2000 Retirement Strategy
- AllianceBernstein 2005 Retirement Strategy
- AllianceBernstein 2010 Retirement Strategy
- AllianceBernstein 2015 Retirement Strategy
- AllianceBernstein 2020 Retirement Strategy
- AllianceBernstein 2025 Retirement Strategy
- AllianceBernstein 2030 Retirement Strategy
- AllianceBernstein 2035 Retirement Strategy
- AllianceBernstein 2040 Retirement Strategy
- AllianceBernstein 2045 Retirement Strategy
- AllianceBernstein 2050 Retirement Strategy
- AllianceBernstein 2055 Retirement Strategy
AllianceBernstein Bond Fund, Inc.
- AllianceBernstein Bond Inflation Strategy
- AllianceBernstein Intermediate Bond Portfolio
- AllianceBernstein Limited Duration High Income Portfolio
- AllianceBernstein Municipal Bond Inflation Strategy
- AllianceBernstein Real Asset Strategy
AllianceBernstein Cap Fund, Inc.
- AllianceBernstein Dynamic All Market Fund
- AllianceBernstein Emerging Markets Equity Portfolio
- AllianceBernstein Emerging Markets Multi-Asset Portfolio
- AllianceBernstein International Discovery Equity Portfolio
- AllianceBernstein International Focus 40 Portfolio
- AllianceBernstein Market Neutral Strategy - Global
- AllianceBernstein Market Neutral Strategy - U.S.
- AllianceBernstein Select US Equity Portfolio
- AllianceBernstein Select US Long/Short Portfolio
- AllianceBernstein Small Cap Growth Portfolio
- AllianceBernstein U.S. Strategic Research Portfolio
AllianceBernstein Core Opportunities Fund, Inc.
AllianceBernstein Discovery Growth Fund, Inc.
AllianceBernstein Equity Income Fund, Inc.
AllianceBernstein Exchange Reserves
AllianceBernstein Global Bond Fund, Inc.
AllianceBernstein Global Real Estate Investment Fund, Inc.
AllianceBernstein Global Risk Allocation Fund, Inc.
AllianceBernstein Global Thematic Growth Fund, Inc.
AllianceBernstein Growth and Income Fund, Inc.
AllianceBernstein High Income Fund, Inc.
AllianceBernstein International Growth Fund, Inc.
AllianceBernstein Large Cap Growth Fund, Inc.
AllianceBernstein Municipal Income Fund, Inc.
- AllianceBernstein High Income Municipal Portfolio
- California Portfolio
- National Portfolio
- New York Portfolio
AllianceBernstein Municipal Income Fund II
- Arizona Portfolio
- Massachusetts Portfolio
- Michigan Portfolio
- Minnesota Portfolio
- New Jersey Portfolio
- Ohio Portfolio
- Pennsylvania Portfolio
- Virginia Portfolio
Alliance Bernstein Unconstrained Bond Fund, Inc.
AllianceBernstein Trust
- AllianceBernstein Discovery Value Fund
- AllianceBernstein Global Value Fund
- AllianceBernstein International Value Fund
- AllianceBernstein Value Fund
The AllianceBernstein Portfolios
- AllianceBernstein Balanced Wealth Strategy
- AllianceBernstein Conservative Wealth Strategy
- AllianceBernstein Growth Fund
- AllianceBernstein Tax-Managed Balanced Wealth Strategy
- AllianceBernstein Tax-Managed Conservative Wealth Strategy
- AllianceBernstein Tax-Managed Wealth Appreciation Strategy
- AllianceBernstein Wealth Appreciation Strategy
Sanford C. Bernstein Fund, Inc.
- Intermediate California Municipal Portfolio
- Intermediate Diversified Municipal Portfolio
- Intermediate New York Municipal Portfolio
- International Portfolio
- Overlay A Portfolio
- Overlay B Portfolio
- Short Duration Portfolio
- Tax-Aware Overlay A Portfolio
- Tax-Aware Overlay B Portfolio
- Tax-Aware Overlay C Portfolio
- Tax-Aware Overlay N Portfolio
- Tax-Managed International Portfolio
Prospectuses for the AllianceBernstein Mutual Funds may be obtained
without charge by contacting ABIS at the address or the "For Literature"
telephone number shown on the front cover of this SAI or on the Internet at
www.AllianceBernstein.com.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may be combined with the value
of the shareholder's existing accounts, thereby enabling the shareholder to take
advantage of the quantity discounts described under "Alternative Purchase
Arrangements - Class A Shares". In such cases, the applicable sales charge on
the newly purchased shares will be based on the total of:
(i) the investor's current purchase;
(ii) the higher of cost or NAV (at the close of business on the
previous day) of (a) all shares of the relevant Fund held by
the investor and (b) all shares held by the investor of any
other AllianceBernstein Mutual Fund, including
AllianceBernstein Institutional Funds and certain
CollegeBoundfund accounts for which the investor, his or her
spouse or domestic partner, or child under the age of 21 is a
participant; and
(iii) the higher of cost or NAV of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
The initial sales charge you pay on each purchase of Class A shares
will take into account your accumulated holdings in all classes of shares of
AllianceBernstein Mutual Funds. Your accumulated holdings will be calculated as
(a) the value of your existing holdings as of the day prior to your additional
investment or (b) the amount you invested including reinvested dividends but
excluding appreciation and less any amount of withdrawals, whichever is higher.
For example, if an investor owned shares of an AllianceBernstein
Mutual Fund that were purchased for $200,000 and were worth $190,000 at their
then current NAV and, subsequently, purchased Class A shares of a Fund worth an
additional $100,000, the initial sales charge for the $100,000 purchase would be
at the 2.25% rate applicable to a single $300,000 purchase of shares of that
Fund, rather than the 3.25% rate.
Letter of Intent. Class A investors may also obtain the quantity
discounts described under "Alternative Purchase Arrangements - Class A Shares"
by means of a written Letter of Intent, which expresses the investor's intention
to invest at least $100,000 in Class A shares of the Fund or any
AllianceBernstein Mutual Fund within 13 months. Each purchase of shares under a
Letter of Intent will be made at the public offering price or prices applicable
at the time of such purchase to a single transaction of the dollar amount
indicated in the Letter of Intent.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the AllianceBernstein Mutual Funds under a single
Letter of Intent. The AllianceBernstein Mutual Funds will use the higher of cost
or current NAV of the investor's existing investments and of those accounts with
which investments are combined via Combined Purchase Privileges toward the
fulfillment of the Letter of Intent. For example, if at the time an investor
signs a Letter of Intent to invest at least $100,000 in Class A shares of a
Fund, the investor and the investor's spouse or domestic partner each purchase
shares of that Fund worth $20,000 (for a total of $40,000), but the current NAV
of all applicable accounts is $45,000 at the time a $100,000 Letter of Intent is
initiated, it will only be necessary to invest a total of $55,000 during the
following 13 months in shares of the Fund or any other AllianceBernstein Mutual
Fund, to qualify for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Letter of Intent is not a binding obligation upon the investor
to purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed at their then NAV to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
Investors wishing to enter into a Letter of Intent in conjunction
with their initial investment in Class A shares of a Fund can obtain a form of
Letter of Intent by contacting ABIS at the address or telephone numbers shown on
the cover of this SAI.
Reinstatement Privilege. A shareholder who has redeemed any or all
of his or her Class A shares of a Fund may reinvest all or any portion of the
proceeds from that redemption in Class A shares of any AllianceBernstein Mutual
Fund at NAV without any sales charge, provided that such reinvestment is made
within 120 calendar days after the redemption or repurchase date. Shares are
sold to a reinvesting shareholder at the NAV next-determined as described above.
A reinstatement pursuant to this privilege will not cancel the redemption or
repurchase transaction; therefore, any gain or loss so realized will be
recognized for federal income tax purposes, except that no loss will be
recognized to the extent that the proceeds are reinvested in shares of the Fund
within 30 calendar days after the redemption or repurchase transaction.
Investors may exercise the reinstatement privilege by written request sent to
the relevant Fund at the address shown on the cover of this SAI.
Dividend Reinvestment Program. Shareholders may elect to have all
income and capital gains distributions from their account paid to them in the
form of additional shares of the same class of the Fund pursuant to the Fund's
Dividend Reinvestment Program. No initial sales charge or CDSC will be imposed
on shares issued pursuant to the Dividend Reinvestment Program. Shares issued
under this program will have an aggregate NAV as of the close of business on the
declaration date of the dividend or distribution equal to the cash amount of the
distribution. Investors wishing to participate in the Dividend Reinvestment
Program should complete the appropriate section of the Mutual Fund Application.
Current shareholders should contact ABIS to participate in the Dividend
Reinvestment Program.
In certain circumstances where a shareholder has elected to receive
dividends and/or capital gain distributions in cash but the account has been
determined to be lost due to mail being returned to us by the Postal Service as
undeliverable, such shareholder will automatically be placed within the Dividend
Reinvestment Program for future distributions. No interest will accrue on
amounts represented by uncashed distribution checks.
Dividend Direction Plan. A shareholder who already maintains
accounts in more than one AllianceBernstein Mutual Fund may direct that income
dividends and/or capital gains paid by one AllianceBernstein Mutual Fund be
automatically reinvested, in any amount, without the payment of any sales or
service charges, in shares of the same class of the other AllianceBernstein
Mutual Fund(s). Further information can be obtained by contacting ABIS at the
address or the "For Literature" telephone number shown on the cover of this SAI.
Investors wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section of the Mutual
Fund Application found in your Prospectus. Current shareholders should contact
ABIS to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares of a Fund
having a current NAV of at least $5,000 may establish a systematic withdrawal
plan under which the shareholder will periodically receive a payment in a stated
amount of not less than $50 on a selected date. The $5,000 account minimum does
not apply to a shareholder owning shares through an individual retirement
account or other retirement plan who has attained the age of 70 1/2 who wishes
to establish a systematic withdrawal plan to help satisfy a required minimum
distribution. For Class 1 and Class 2 shares, a systemic withdrawal plan is
available only to shareholders who own book-entry shares worth $25,000 or more.
Systematic withdrawal plan participants must elect to have their dividends and
distributions from a Fund automatically reinvested in additional shares of that
Fund.
Shares of a Fund owned by a participant in each Fund's systematic
withdrawal plan will be redeemed as necessary to meet withdrawal payments and
such payments will be subject to any taxes applicable to redemptions and, except
as discussed below with respect to Class A, Class B and Class C shares, any
applicable CDSC. Shares acquired with reinvested dividends and distributions
will be liquidated first to provide such withdrawal payments and thereafter
other shares will be liquidated to the extent necessary, and depending upon the
amount withdrawn, the investor's principal may be depleted. A systematic
withdrawal plan may be terminated at any time by the shareholder or a Fund.
Withdrawal payments will not automatically end when a shareholder's
account reaches a certain minimum level. Therefore, redemptions of shares under
the plan may reduce or even liquidate a shareholder's account and may subject
the shareholder to a Fund's involuntary redemption provisions. See "Redemption
and Repurchase of Shares--General". Purchases of additional shares concurrently
with withdrawals are undesirable because of sales charges applicable when
purchases are made. While an occasional lump-sum investment may be made by a
holder of Class A shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made by check or
electronically via the Automated Clearing House ("ACH") network. Investors
wishing to establish a systematic withdrawal plan in conjunction with their
initial investment in shares of a Fund should complete the appropriate portion
of the Mutual Fund Application, while current Fund shareholders desiring to do
so can obtain an application form by contacting ABIS at the address or the "For
Literature" telephone number shown on the cover of this SAI.
CDSC Waiver for Class A Shares, Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class A, Class B or
Class C shares of a Fund in a shareholder's account may be redeemed free of any
CDSC.
Class B shares of a Fund that are not subject to a CDSC (such as
shares acquired with reinvested dividends or distributions) will be redeemed
first and will count toward the foregoing limitations. Remaining Class B shares
that are held the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any otherwise
applicable CDSC.
With respect to Class A and Class C shares of a Fund, shares held
the longest will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be subject to any
otherwise applicable CDSC.
Automatic Sale
Class 1 Shares. Under certain circumstances, Bernstein may redeem
your Class 1 shares of a Fund without your consent. Maintaining small
shareholder accounts is costly. Accordingly, if you make a sale that reduces the
value of your account to less than $1,000, we may, on at least 60 days' prior
written notice, sell your remaining Class 1 shares in a Fund and close your
account. We will not close your account if you increase your account balance to
$1,000 during the 60 day notice period.
Class 2 Shares. Under certain circumstances, Bernstein may redeem
your Class 2 shares of a Fund without your consent. Maintaining small
shareholder accounts is costly. Accordingly, if you make a sale that reduces the
value of your account to less than $250,000, we may, on at least 60 days' prior
written notice, sell your remaining Class 2 shares in a Fund and close your
account. We will not close your account if you increase your account balance to
$250,000 during the 60 day notice period.
Payments to Financial Advisors and Their Firms
Financial intermediaries market and sell shares of the Funds. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of a Fund. This compensation is paid from various sources,
including any sales charge, CDSC and/or Rule 12b-1 fee that you or a Fund may
pay. Your individual financial advisor may receive some or all of the amounts
paid to the financial intermediary that employs him or her.
In the case of Class A shares, all or a portion of the initial sales
charge that you pay may be paid by ABI to financial intermediaries selling Class
A shares. ABI may also pay these financial intermediaries a fee of up to 1% on
purchases of $1 million or more. Additionally, up to 100% of the Rule 12b-1 fees
applicable to Class A shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class A shares.
In the case of Class B shares, ABI may pay, at the time of your
purchase, a commission to financial intermediaries selling Class B shares in an
amount equal to 4% of your investment. Additionally, up to 30% of the Rule 12b-1
fees applicable to Class B shares each year may be paid to financial
intermediaries, including your financial intermediary, that sell Class B shares.
In the case of Class C shares, ABI may pay, at the time of your
purchase, a commission to firms selling Class C shares in an amount equal to 1%
of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to
Class C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.
In the case of Class R, Class K and Class 1 shares, up to 100% of
the Rule 12b-1 fee applicable to Class R, Class K and Class 1 shares each year
may be paid to financial intermediaries, including your financial intermediary,
that sell Class R, Class K and Class 1 shares.
In the case of Advisor Class shares, your financial advisor may
charge ongoing fees or transactional fees. ABI may pay a portion of "ticket" or
other transactional charges.
Your financial advisor's firm receives compensation from the Funds,
ABI and/or the Adviser in several ways from various sources, which include some
or all of the following:
o upfront sales commissions;
o Rule 12b-1 fees;
o additional distribution support;
o defrayal of costs for educational seminars and training; and
o payments related to providing shareholder record-keeping
and/or transfer agency services.
Other Payments for Distribution Services and Educational Support
In addition to the commission paid to financial intermediaries at
the time of sale and the fees described under "Asset-Based Sales Charges or
Distribution and/or Service (Rule 12b-1) Fees", in your Prospectus, some or all
of which may be paid to financial intermediaries (and, in turn, to your
financial advisor), ABI, at its expense, currently provides additional payments
to firms that sell shares of the AllianceBernstein Mutual Funds. Although the
individual components may be higher and the total amount of payments made to
each qualifying firm in any given year may vary, the total amount paid to a
financial intermediary in connection with the sale of shares of the
AllianceBernstein Mutual Funds will generally not exceed the sum of (a) 0.25% of
the current year's fund sales by that firm and (b) 0.10% of average daily net
assets attributable to that firm over the year. These sums include payments to
reimburse directly or indirectly the costs incurred by these firms and their
employees in connection with educational seminars and training efforts about the
AllianceBernstein Mutual Funds for the firms' employees and/or their clients and
potential clients. The costs and expenses associated with these efforts may
include travel, lodging, entertainment and meals.
For 2013, ABI's additional payments to these firms for distribution
services and educational support related to the AllianceBernstein Mutual Funds
are expected to be approximately 0.05% of the average monthly assets of the
AllianceBernstein Mutual Funds, or approximately $21 million. In 2012, ABI paid
approximately 0.05% of the average monthly assets of the AllianceBernstein
Mutual Funds, or approximately $19 million, for distribution services and
education support related to the AllianceBernstein Mutual Funds.
A number of factors are considered in determining the additional
payments, including each firm's AllianceBernstein Mutual Fund sales, assets and
redemption rates, and the willingness and ability of the firm to give ABI access
to its financial advisors for educational or marketing purposes. In some cases,
firms will include the AllianceBernstein Mutual Funds on a "preferred list".
ABI's goal is to make the financial advisors who interact with current and
prospective investors and shareholders more knowledgeable about the
AllianceBernstein Mutual Funds so that they can provide suitable information and
advice about the funds and related investor services.
The Funds and ABI also make payments for recordkeeping and other
transfer agency services to financial intermediaries that sell AllianceBernstein
Mutual Fund shares. Please see "Expenses of the Funds - Transfer Agency
Agreement" above. These expenses paid by the Funds are included in "Other
Expenses" under "Fees and Expenses of the Funds - Annual Operating Expenses" in
your Prospectus.
If one mutual fund sponsor makes greater distribution assistance
payments than another, your financial advisor and his or her firm may have an
incentive to recommend on fund complex over another. Similarly, if your
financial advisor or his or her firm receives more distribution assistance for
one share class versus another, then they may have an incentive to recommend
that class.
Please speak with your financial advisor to learn more about the
total amounts paid to your financial advisor and his or her firm by the Funds,
the Adviser, ABI and by sponsors of other mutual funds he or she may recommend
to you. You should also consul disclosures made by your financial advisor at the
time of your purchase.
ABI anticipates that the firms that will receive additional payments
for distribution services and/or educational support include:
Advisor Group, Inc.
Ameriprise Financial Services
AXA Advisors
Cadaret, Grant & Co.
CCO Investment Services Corp.
Chase Investment Services
Citigroup Global Markets, Inc.
Commonwealth Financial Network
Donegal Securities
Financial Network Investment Company
LPL Financial
Merrill Lynch
Morgan Stanley
Multi-Financial Securities Corporation
Northwestern Mutual Investment Services
PrimeVest Financial Services
Raymond James
RBC Wealth Management
Robert W. Baird
UBS Financial Services
Wells Fargo Advisors
ABI expects that additional firms may be added to this list from
time to time.
Although a Fund may use brokers and dealers who sell shares of the
Funds to effect portfolio transactions, the Fund does not consider the sale of
AllianceBernstein Mutual Fund shares as a factor when selecting brokers or
dealers to effect portfolio transactions.
REDEMPTION AND REPURCHASE OF SHARES
The following information supplements that set forth in your
Prospectus under the heading "Investing in the Funds". If you are an Advisor
Class shareholder through an account established under a fee-based program, your
fee-based program may impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different from those
described herein. A transaction fee may be charged by your financial
intermediary with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial intermediary. Similarly, if you are a
shareholder through a group retirement plan, your plan may impose requirements
with respect to the purchase, sale or exchange of shares of a Fund that are
different from those imposed below. Each Fund has authorized one or more brokers
to receive on its behalf purchase and redemption orders. Such brokers are
authorized to designate other intermediaries to receive purchase and redemption
orders on each Fund's behalf. In such cases, orders will receive the NAV next
computed after such order is properly received by the authorized broker or
designee and accepted by the relevant Fund.
Redemption
Subject only to the limitations described below, each Fund will
redeem the shares tendered to them, as described below, at a redemption price
equal to their NAV as next computed following the receipt of shares tendered for
redemption in proper form. Except for any CDSC which may be applicable to Class
A, Class B or Class C shares of a Fund, there is no redemption charge. Payment
of the redemption price normally will be made within seven days after a Fund's
receipt of such tender for redemption. If a shareholder is in doubt about what
documents are required by his or her fee-based program or employee benefit plan,
the shareholder should contact his or her financial intermediary.
The right of redemption may not be suspended or the date of payment
upon redemption postponed for more than seven days after shares are tendered for
redemption, except for any period during which the Exchange is closed (other
than customary weekend and holiday closings) or during which the SEC determines
that trading thereon is restricted, or for any period during which an emergency
(as determined by the SEC) exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or as a result of which it
is not reasonably practicable for a Fund fairly to determine the value of its
net assets, or for such other periods as the SEC may by order permit for the
protection of security holders of a Fund.
Payment of the redemption price normally will be made in cash but,
at the option of a Fund, may be made in-kind. No interest will accrue on
uncashed redemption checks. The value of a shareholder's shares on redemption or
repurchase may be more or less than the cost of such shares to the shareholder,
depending upon the market value of the relevant Fund's portfolio securities at
the time of such redemption or repurchase. Redemption proceeds on Class A, Class
B and Class C shares of a Fund will reflect the deduction of the CDSC, if any.
Payment received by a shareholder upon redemption or repurchase of his or her
shares, assuming the shares constitute capital assets in the shareholder's
hands, will result in long-term or short-term capital gain (or loss) depending
upon the shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of a Fund for which no share certificates have been
issued, the registered owner or owners should forward a letter to the relevant
Fund containing a request for redemption. A Fund may require the signature or
signatures on the letter to be Medallion Signature Guaranteed. Please contact
ABIS to determine whether a Medallion Signature Guarantee is needed.
To redeem shares of a Fund represented by share certificates, the
investor should forward the appropriate stock certificate or certificates,
endorsed in blank or with blank stock powers attached, to the relevant Fund with
the request that the shares represented thereby, or a specified portion thereof,
be redeemed. The stock assignment form on the reverse side of each stock
certificate surrendered to a Fund for redemption must be signed by the
registered owner or owners exactly as the registered name appears on the face of
the certificate or, alternatively, a stock power signed in the same manner may
be attached to the stock certificate or certificates or, where tender is made by
mail, separately mailed to the relevant Fund. The signature or signatures on the
assignment form must be guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each shareholder
of a Fund is entitled to request redemption by electronic funds transfer (of
shares for which no stock certificates have been issued) by telephone at (800)
221-5672 if the shareholder has completed the appropriate portion of the Mutual
Fund Application or, if an existing shareholder has not completed this portion,
by an "Autosell" application obtained from ABIS (except for certain omnibus
accounts). A telephone redemption request by electronic funds transfer may not
exceed $100,000 and must be made before the Fund Closing Time on a Fund business
day. Proceeds of telephone redemptions will be sent by electronic funds transfer
to a shareholder's designated bank account at a bank selected by the shareholder
that is a member of the NACHA.
Telephone Redemption By Check. Each shareholder of a Fund is
eligible to request redemption by check of the relevant Fund shares for which no
share certificates have been issued by telephone at (800) 221-5672 before the
Fund Closing Time, on a Fund business day in an amount not exceeding $100,000.
Proceeds of such redemptions are remitted by check to the shareholder's address
of record. A shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to ABIS or by checking the
appropriate box on the Mutual Fund Application.
Telephone Redemptions - General. During periods of drastic economic,
market or other developments, such as the terrorist attacks on September 11,
2001, it is possible that shareholders would have difficulty in reaching ABIS by
telephone (although no such difficulty was apparent at any time in connection
with the attacks). If a shareholder were to experience such difficulty, the
shareholder should issue written instructions to ABIS at the address shown on
the cover of this SAI. Each Fund reserves the right to suspend or terminate its
telephone redemption service at any time without notice. Telephone redemption is
not available with respect to shares (i) for which certificates have been
issued, (ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within the preceding 30
calendar days, or (iv) held in any retirement plan account. None of the Funds
nor the Adviser, ABI or ABIS will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably believes to be
genuine. Each Fund will employ reasonable procedures in order to verify that
telephone requests for redemptions are genuine, including, among others,
recording such telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If a Fund did not employ such
procedures, the Trust could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Financial intermediaries may charge a
commission for handling telephone requests for redemptions.
A Fund may redeem shares through ABI or financial intermediaries.
The repurchase price will be the NAV next-determined after ABI receives the
request (less the CDSC, if any, with respect to the Class A, Class B and Class C
shares of a Fund), except that requests placed through financial intermediaries
before the Fund Closing Time will be executed at the NAV determined as of the
Fund Closing Time on that day if received by ABI prior to its close of business
on that day (normally 5:00 p.m., Eastern time). The financial intermediary is
responsible for transmitting the request to ABI by 5:00 p.m., Eastern time
(certain financial intermediaries may enter into operating agreements permitting
them to transmit purchase information that was received prior to the close of
business to ABI after 5:00 p.m., Eastern time, and receive that day's NAV). If
the financial intermediary fails to do so, the shareholder's right to receive
that day's closing price must be settled between the shareholder and that
financial intermediary. A shareholder may offer shares of a Fund to ABI either
directly or through a financial intermediary. None of the Funds nor ABI charges
a fee or commission in connection with the redemption of shares (except for the
CDSC, if any, with respect to Class A, Class B and Class C shares of a Fund).
Normally, if shares of a Fund are offered through a financial intermediary, the
redemption is settled by the shareholder as an ordinary transaction with or
through the financial intermediary, who may charge the shareholder for this
service. The redemption of shares of a Fund as described above with respect to
financial intermediaries is a voluntary service of the Funds and a Fund may
suspend or terminate this practice at any time.
General
Each Fund reserves the right to close out an account that has
remained below $1,000 for 90 days. No CDSC will be deducted from the proceeds of
this redemption. In the case of a redemption or repurchase of shares of a Fund
recently purchased by check, redemption proceeds will not be made available
until that Fund is reasonably assured that the check has cleared, normally up to
15 calendar days following the purchase date.
SHAREHOLDER SERVICES
The following information supplements that set forth in your
Prospectus under the heading "Investing in the Funds". The shareholder services
set forth below are applicable to all classes of shares of a Fund unless
otherwise indicated. If you are an Advisor Class shareholder through an account
established under a fee-based program or a shareholder in a group retirement
plan, your fee-based program or retirement plan may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares of the Fund
that are different from those described herein.
Automatic Investment Program
Investors may purchase shares of the Funds through an automatic
investment program utilizing electronic funds transfer drawn on the investor's
own bank account. Under such a program, pre-authorized monthly drafts for a
fixed amount are used to purchase shares through the financial intermediary
designated by the investor at the public offering price next determined after
ABI receives the proceeds from the investor's bank. The monthly drafts must be
in minimum amounts of either $50 or $200, depending on the investor's initial
purchase. If an investor makes an initial purchase of at least $2,500, the
minimum monthly amount for pre-authorized drafts is $50. If an investor makes an
initial purchase of less than $2,500, the minimum monthly amount for
pre-authorized drafts is $200 and the investor must commit to a monthly
investment of at least $200 until the investor's account balance is $2,500 or
more. In electronic form, drafts can be made on or about a date each month
selected by the shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment should complete
the appropriate portion of the Mutual Fund Application. As of January 31, 2009,
the Automatic Investment Program is available for purchase of Class B shares
only if a shareholder were enrolled in the Program prior to January 31, 2009.
Current shareholders should contact ABIS at the address or telephone numbers
shown on the cover of this SAI to establish an automatic investment program.
Shareholders committed to monthly investments of $25 or more through
the Automatic Investment Program by October 15, 2004 are able to continue their
programs despite the $50 monthly minimum.
Exchange Privilege
You may exchange your investment in a Fund for shares of the same
class of other AllianceBernstein Mutual Funds (including AllianceBernstein
Exchange Reserves, a money market fund managed by the Adviser) if the other
AllianceBernstein Mutual Fund in which you wish to invest offers shares of the
same class. In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any AllianceBernstein Mutual
Fund, (iii) certain employee benefit plans for employees of the Adviser, ABI,
ABIS and their affiliates and (iv) certain persons participating in a fee-based
program, sponsored and maintained by a registered broker-dealer or other
financial intermediary and approved by ABI, under which such persons pay an
asset-based fee for service in the nature of investment advisory or
administrative services may, on a tax-free basis, exchange Class A or Class C
shares of the Fund for Advisor Class shares of the Fund or Class C shares of the
Fund for Class A shares of the Fund. Exchanges of shares are made at the NAV
next-determined and without sales or service charges. Exchanges may be made by
telephone or written request. In order to receive a day's NAV, ABIS must receive
and confirm a telephone exchange request by the Fund Closing Time.
Shares will continue to age without regard to exchanges for purposes
of determining the CDSC, if any, upon redemption and, in the case of Class B
shares of a Fund, for the purpose of conversion to Class A shares of that Fund.
After an exchange, your Class B shares will automatically convert to Class A
shares in accordance with the conversion schedule applicable to the Class B
shares of the AllianceBernstein Mutual Fund you originally purchased for cash
("original shares"). When redemption occurs, the CDSC applicable to the original
shares is applied.
Please read carefully the prospectus of the AllianceBernstein Mutual
Fund into which you are exchanging before submitting the request. Call ABIS at
(800) 221-5672 to exchange uncertificated shares. Except with respect to
exchanges of Class A or Class C shares of a Fund for Advisor Class shares or
Class C shares for Class A shares of the same Fund, exchanges of shares as
described above in this section are taxable transactions for federal income tax
purposes. The exchange service may be modified, restricted, or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment requirements and
any other applicable terms set forth in the prospectus for the AllianceBernstein
Mutual Fund whose shares are being acquired. An exchange is effected through the
redemption of the shares tendered for exchange and the purchase of shares being
acquired at their respective NAVs as next-determined following receipt by the
AllianceBernstein Mutual Fund whose shares are being exchanged of (i) proper
instructions and all necessary supporting documents as described in such fund's
prospectus or (ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges involving the
redemption of shares recently purchased by check will be permitted only after
the AllianceBernstein Mutual Fund whose shares have been tendered for exchange
is reasonably assured that the check has cleared, normally up to 15 calendar
days following the purchase date. Exchange of shares of AllianceBernstein Mutual
Funds will generally result in the realization of a capital gain or loss for
federal income tax purposes.
Each shareholder of a Fund and the shareholder's financial
intermediary are authorized to make telephone requests for exchanges unless ABIS
receives written instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate box on the Mutual
Fund Application. Such telephone requests cannot be accepted with respect to
shares then represented by stock certificates. Shares acquired pursuant to a
telephone request for exchange will be held under the same account registration
as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange should telephone
ABIS with their account number and other details of the exchange, at (800) 221
5672 before the Fund Closing Time on a Fund business day, as defined above.
Telephone requests for exchange received before the Fund Closing Time, on a Fund
business day will be processed as of the close of business on that day. During
periods of drastic economic, market or other developments (such as the terrorist
attacks on September 11, 2001) it is possible that shareholders would have
difficulty in reaching ABIS by telephone (although no such difficulty was
apparent at any time in connection with the attacks). If a shareholder were to
experience such difficulty, the shareholder should issue written instructions to
ABIS at the address shown on the cover of this SAI.
A shareholder may elect to initiate a monthly "Auto Exchange"
whereby a specified dollar amount's worth of his or her Fund shares (minimum
$25) is automatically exchanged for shares of another AllianceBernstein Mutual
Fund.
None of the AllianceBernstein Mutual Funds, the Adviser, ABI or ABIS
will be responsible for the authenticity of telephone requests for exchanges
that a Fund reasonably believes to be genuine. The Funds will employ reasonable
procedures in order to verify that telephone requests for exchanges are genuine,
including, among others, recording such telephone instructions and causing
written confirmations of the resulting transactions to be sent to shareholders.
If a Fund did not employ such procedures, it could be liable for losses arising
from unauthorized or fraudulent telephone instructions. Financial intermediaries
may charge a commission for handling telephone requests for exchanges.
The exchange privilege is available only in states where shares of
the AllianceBernstein Mutual Fund being acquired may be legally sold. Each
AllianceBernstein Mutual Fund reserves the right, at any time on 60 days' notice
to its shareholders, to reject any order to acquire its shares through exchange
or otherwise to modify, restrict or terminate the exchange privilege.
Statements and Reports
Each shareholder of a Fund receives semi-annual and annual reports
which include a portfolio of investments, financial statements and, in the case
of the annual report, the report of each Fund's independent registered public
accounting firm, Ernst & Young LLP, 5 Times Square, New York, New York 10036, as
applicable, as well as a confirmation of each purchase and redemption. By
contacting his or her financial intermediary or ABIS, a shareholder can arrange
for copies of his or her account statements to be sent to another person.
NET ASSET VALUE
The NAV of each Fund is computed at the next close of regular
trading on each day the Exchange is open (ordinarily 4:00 p.m., Eastern time,
but sometimes earlier, as in the case of scheduled half-day trading or
unscheduled suspensions of trading) following receipt of a purchase or
redemption order by a Fund on each Fund business day on which such an order is
received and on such other days as the Board deems appropriate or necessary in
order to comply with Rule 22c-1 under the 1940 Act. Each Fund's NAV is
calculated by dividing the value of that Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act and the
Funds' pricing policies and procedures adopted by the Boards ("Pricing
Policies"), portfolio securities are valued at current market value or at fair
value as determined in accordance with procedures established by and under the
general supervision of the Board. The Board has delegated to the Adviser,
subject to the Board's continuing oversight, certain of its duties with respect
to the Pricing Policies. The Adviser has established a Valuation Committee,
which operates under policies and procedures approved by the Boards, to value a
Fund's assets on behalf of the Fund.
Whenever possible, securities are valued based on market information
on the business day as of which the value is being determined as follows:
(a) a security listed on the Exchange, on other national or foreign
exchange (other than securities listed on the NASDAQ Stock Exchange ("NASDAQ")),
is valued at the last sale price reflected on the consolidated tape at the close
of the exchange. If there has been no sale on the relevant business day, the
security is valued at the last traded price from the previous day. On the
following day, the security is valued in good faith at fair value by, or in
accordance with procedures approved by, the Board;
(b) a security traded on NASDAQ is valued at the NASDAQ Official
Closing Price;
(c) a security traded on more than one exchange is valued in
accordance with paragraph (a) above by reference to the principal exchange on
which the securities are traded;
(d) a listed or OTC put or call option is valued at the mid level
between the current bid and asked prices (for options or futures contracts, see
item (e). If neither a current bid nor a current ask price is available, the
Adviser will have discretion to determine the best valuation (e.g., last trade
price) and then bring the issue to the Valuation Committee the next day;
(e) an open futures contract and any option thereon are valued at
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 relevant business
day, the security is valued at the last available closing settlement price;
(f) a listed right is valued at the last traded price provided by
vendors. If there has been no sale on the relevant business day, the right is
valued at the last traded price from the previous day. On the following day, the
security is valued in good faith at fair value. For an unlisted right, the
calculation used in determining a value is the price of the reference security
minus the subscription price multiplied by the terms of the right. There may be
some instances when the subscription price is greater than the referenced
security right. In such instances, the right would be valued as worthless;
(g) a listed warrant is valued at the last traded price provided by
vendors. If there is no sale on the relevant business day, the warrant is valued
at the last traded price from the previous day. On the following day, the
security is valued in good faith at fair value. All unlisted warrants are valued
in good faith at fair value. Once a warrant has expired, it will no longer be
valued;
(h) preferred securities are valued based on prices received from
approved vendors that use last trade data for listed preferreds and evaluated
bid prices for non-listed preferreds, as well as for listed preferreds when
there is no trade activity;
(i) a U.S. Government security and any other debt instrument having
60 days or less remaining until maturity generally is valued at amortized cost
if its original maturity was 60 days or less, or by amortizing its fair value as
of the 61st day prior to maturity if the original term to maturity exceeded 60
days, unless in either case the Adviser determines, in accordance with
procedures established by the Board, that this method does not represent fair
value. The Adviser is responsible for monitoring whether any circumstances have
incurred that indicate that the use of amortized cost method for any security is
not appropriate due to such factors as, but not limited to, an impairment of the
creditworthiness of the issuer or material changes in interest rates;
(j) a fixed-income security is typically valued on the basis of bid
prices provided by a pricing vendor when the Adviser believes that such prices
reflect the fair market value of the security. In certain markets, the market
convention may be to use the mid price between bid and offer. Fixed-income
securities may be valued on the basis of mid prices when either the approved
pricing vendors normally provides mid prices, reflecting the conventions of
particular markets. The prices provided by a pricing vendor may take into
account many factors, including institutional size trading in similar groups of
securities and any developments related to specific securities. If the Adviser
determines that an appropriate pricing vendor does not exist for a security in a
market that typically values such securities on the basis of a bid price, the
security is valued on the basis of a quoted bid price or spread over the
applicable yield curve (a bid spread) by a broker-dealer in such security. The
second highest price will be utilized whenever two or more quoted bid prices are
obtained. If an appropriate pricing vendor does not exist for a security in a
market where convention is to use the mid price, the security is valued on the
basis of a quoted mid price by a broker-dealer in such security. The second
highest price will be utilized whenever two or more quoted mid prices are
obtained;
(k) a mortgage-backed or asset-backed security is valued on the
basis of bid prices obtained from pricing vendors or bid prices obtained from
multiple major broker-dealers in the security when the Adviser believes that
these prices reflect the market value of the security. In cases in which
broker-dealer quotes are obtained, the Adviser has procedures for using changes
in market yields or spreads to adjust, on a daily basis, a recently obtained
quoted bid price on a security. The second highest price will be utilized
whenever two or more quoted bid prices are obtained;
(l) bank loans are valued on the basis of bid prices provided by a
pricing vendor;
(m) bridge loans are valued at value, which equates to the
outstanding loan amount unless it is determined by the Valuation Committee that
any particular bridge loan should be valued at something other than outstanding
loan amount. This may occur from a significant change in the high yield market
and/or a significant change in the states of any particular issuer or issuers of
bridge loans;
(n) whole loans: residential and commercial mortgage whose loans and
whole loan pools are fair market priced by Clayton IPS (Independent Pricing
Service);
(o) forward and spot currency pricing is provided by WM Reuters. The
rate provide by WM Reuters is a mid price for forward and spot rates. In most
instances whenever both an "onshore" rate and an "offshore" (i.e., non
deliverable forward "NDF") rate is available, the Adviser will use the offshore
(NDF) rate. NDF contracts are used for currencies where it is difficult (and
sometimes impossible) to take actual delivery of the currency;
(p) swap pricing: Various external sources (Super Derivatives,
Bloomberg, Barclays, Markit Partners, etc.) are used to obtain pricing
information and analysis, This information is placed into various pricing models
(depending on the type of derivative) to devise a price for each investment.
These pricing models are monitored/reviewed on an ongoing basis by the Adviser;
(q) interest rate caps and floors are valued at the latest present
value of the terms of the agreement, which is provided by approved vendors; and
(r) open-end mutual funds are valued at the closing NAV per share
and closed-end funds and exchange-traded funds are valued at the closing market
price per share.
Each Fund values its securities at their current market value
determined on the basis of market quotations as set forth above or, if market
quotations are not readily available or are unreliable, at "fair value" as
determined in accordance with procedures established by and under the general
supervision of the Funds' Board. When a Fund uses fair value pricing, it may
take into account any factors it deems appropriate. A Fund may determine fair
value based upon developments related to a specific security, current valuations
of foreign stock indices (as reflected in U.S. futures markets) and/or U.S.
sector or broader stock market indices. The prices of securities used by a Fund
to calculate its NAV may differ from quoted or published prices for the same
securities. Fair value pricing involves subjective judgments and it is possible
that the fair value determined for a security is materially different than the
value that could be realized upon the sale of that security.
Each Fund expects to use fair value pricing for securities primarily
traded on U.S. exchanges only under very limited circumstances, such as the
early closing of the exchange on which a security is traded or suspension of
trading in the security. A Fund may use fair value pricing more frequently for
securities primarily traded in non-U.S. markets because, among other things,
most foreign markets close well before each 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. For example, a Fund believes that foreign security
values may be affected by events that occur after the close of foreign
securities markets. To account for this, the Fund may frequently value many of
its foreign equity securities using fair value prices based on third party
vendor modeling tools to the extent available.
Each Fund may suspend the determination of its NAV(and the offering
and sales of shares), subject to the rules of the SEC and other governmental
rules and regulations, at a time when: (1) the Exchange is closed, other than
customary weekend and holiday closings, (2) an emergency exists as a result of
which it is not reasonably practicable for a Fund to dispose of securities owned
by it or to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the SEC by order permits a suspension of the right
of redemption or a postponement of the date of payment on redemption.
For purposes of determining each Fund's NAV per share, all assets
and liabilities initially expressed in a foreign currency will be converted into
U.S. Dollars at the mean of the current bid and asked prices of such currency
against the U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks. If such quotations are not available as of the close of the Exchange, the
rate of exchange will be determined in good faith by, or under the direction of,
the Board.
The assets attributable to the each class of shares will be invested
together in a single portfolio for each Fund. The NAV of each class will be
determined separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the provisions of a
plan adopted by each Fund in accordance with Rule 18f-3 under the 1940 Act.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends paid by a Fund, if any, with respect to Class A, Class B,
Class C, Class R, Class K, Class I and Advisor Class shares of that Fund will be
calculated in the same manner at the same time on the same day and will be in
the same amount, except that the higher distribution services applicable to
Class B and C shares, and any incremental transfer agency costs relating to
Class B and Class C shares, will be borne exclusively by the class to which they
relate.
The following summary addresses only the principal United States
federal income tax considerations pertinent to the Funds and to shareholders of
the Funds. This summary does not address the United States federal income tax
consequences of owning shares to all categories of investors, some of which may
be subject to special rules. This summary is based upon the advice of counsel
for the Funds and upon current law and interpretations thereof. No confirmation
has been obtained from the relevant tax authorities. There is no assurance that
the applicable laws and interpretations will not change.
In view of the individual nature of tax consequences, each
shareholder is advised to consult the shareholder's own tax adviser with respect
to the specific tax consequences of being a shareholder of a Fund, including the
effect and applicability of federal, state, local, foreign, and other tax laws
and the effects of changes therein.
United States Federal Income Taxation of Dividends and Distributions
General
Each Fund intends for each taxable year to qualify to be taxed as a
"regulated investment company" under the Code. To so qualify, a Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, certain
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in stock,
securities or currency or net income derived from interests in certain
"qualified publicly traded partnerships"; and (ii) diversify its holdings so
that, at the end of each quarter of its taxable year, the following two
conditions are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies and other securities with respect to which the
Fund's investment is limited, in respect of any one issuer, to an amount not
greater than 5% of the value of the Fund's assets and to not more than 10% of
the outstanding voting securities of such issuer and (b) not more than 25% of
the value of the Fund's assets is invested in (i) securities of any one issuer
(other than U.S. Government securities or securities of other regulated
investment companies), (ii) securities (other than securities of other regulated
investment companies) of any two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses or related trades
or businesses, or (iii) securities of one or more "qualified publicly traded
partnerships".
If a Fund qualifies as a regulated investment company for any
taxable year and makes timely distributions to its shareholders of 90% or more
of its investment company taxable income for that year (calculated without
regard to its net capital gain, i.e., the excess of its net long-term capital
gain over its net short-term capital loss) it will not be subject to federal
income tax on the portion of its taxable income for the year (including any net
capital gain) that it distributes to shareholders.
Each Fund will also avoid the 4% federal excise tax that would
otherwise apply to certain undistributed income for a given calendar year if it
makes timely distributions to the shareholders equal to at least the sum of (i)
98% of its ordinary income for that year; (ii) 98.2% of its capital gain net
income and foreign currency gains for the twelve-month period ending on October
31 of that year or later, if the Fund is permitted to so elect and so elects;
and (iii) any ordinary income or capital gain net income from the preceding
calendar year that was not distributed during such year. For this purpose,
income or gain retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund during such year. For federal
income and excise tax purposes, dividends declared and payable to shareholders
of record as of a date in October, November or December of a given year but
actually paid during the immediately following January will be treated as if
paid by the Fund on December 31 of such earlier calendar year and will be
taxable to these shareholders for the year declared and not for the year in
which the shareholders actually receive the dividend.
The information set forth in the Prospectus and the following
discussion relate solely to the significant United States federal income taxes
on dividends and distributions by a Fund and assume that the Fund qualifies to
be taxed as a regulated investment company. An investor should consult his or
her own tax advisor with respect to the specific tax consequences of being a
shareholder in a Fund, including the effect and applicability of federal, state,
local and foreign tax laws to his or her own particular situation and the
possible effects of changes therein.
Dividends and Distributions
Each Fund intends to make timely distributions of its respective
taxable income (including any net capital gain) so that none of the Funds will
be subject to federal income or excise taxes. Dividends of each Fund's net
ordinary income and distributions of any net realized short-term capital gain
will generally be taxable to shareholders as ordinary income. In the case of
corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the relevant Fund.
Some or all of the distributions from the Fund may be treated as
"qualified dividend income", taxable to individuals, trusts and estates at the
reduced tax rates applicable to long-term capital gains. A distribution from the
Fund will be treated as qualified dividend income to the extent that it is
comprised of dividend income received by the Fund from taxable domestic
corporations and certain qualified foreign corporations, and provided that the
Fund meets certain holding period and other requirements with respect to the
security with respect to which the dividend is paid. In addition, the
shareholder must meet certain holding period requirements with respect to the
shares of the Fund in order to take advantage of this preferential tax rate. To
the extent distributions from the Fund are attributable to other sources, such
as taxable interest or short-term capital gains, dividends paid by the Fund will
not be eligible for the lower rates. The Fund will notify shareholders as to how
much of the Fund's distributions, if any, would qualify for the reduced tax
rate, assuming that the shareholder also satisfies the holding period
requirements.
Distributions of net capital gain are taxable as long-term capital
gain, regardless of how long a shareholder has held shares in the Funds. Any
dividend or distribution received by a shareholder on shares of a Fund will have
the effect of reducing the NAV of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made shortly after the
purchase of such shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to him or her as described
above. Dividends are taxable in the manner discussed regardless of whether they
are paid to the shareholder in cash or are reinvested in additional shares of a
Fund.
After the end of the calendar year, a Fund will notify shareholders
of the federal income tax status of any distributions made by the Fund to
shareholders during such year.
Tax Qualified Plans. A dividend or capital gains distribution with
respect to shares of a Fund held by a tax-deferred or qualified plan, such as an
individual retirement account, 403(b)(7) retirement account or corporate pension
or profit-sharing plan, generally will not be taxable to the plan. Distributions
from such plans will be taxable to individual participants under applicable tax
rules without regard to the character of the income earned by the qualified
plan.
Backup Withholding. Any distributions and redemption proceeds
payable to a shareholder may be subject to "backup withholding" tax (at a rate
of 28%) if such shareholder fails to provide the relevant Fund with his or her
correct taxpayer identification number, fails to make required certifications,
or is notified by the Internal Revenue Service ("IRS") that he or she is subject
to backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from such backup withholding. Backup
withholding is not an additional tax; any amounts so withheld may be credited
against a shareholder's U.S. federal income tax liability or refunded by filing
a refund claim with the IRS, provided that the required information is furnished
to the IRS.
Sales and Redemptions. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss if a Fund's
shares are held as a capital asset, and will be long-term capital gain or loss
if such shareholder has held such shares for more than one year at the time of
the sale or redemption; otherwise it will be short-term capital gain or loss. If
a shareholder has held shares in a Fund for six months or less and during that
period has received a distribution of net capital gain, any loss recognized by
the shareholder on the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the distribution. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange of shares
of a Fund will be disallowed to the extent the shares disposed of are reacquired
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are sold or exchanged. For this purpose, acquisitions pursuant to the
relevant Fund's Dividend Reinvestment Plan would constitute a reacquisition if
made within the period. If a loss is disallowed, then such loss will be
reflected in an upward adjustment to the basis of the shares acquired.
Cost Basis Reporting. As part of the Energy Improvement and
Extension Act of 2008, mutual funds are required to report to the Internal
Revenue Service the "cost basis" of shares acquired by a shareholder on or after
January 1, 2012 ("covered shares") and subsequently redeemed. These requirements
do not apply to investments through a tax-deferred arrangement, such as a 401(k)
plan or an individual retirement plan. The "cost basis" of a share is generally
its purchase price adjusted for dividends, return of capital, and other
corporate actions. Cost basis is used to determine whether a sale of the shares
results in a gain or loss. The amount of gain or loss recognized by a
shareholder on the sale or redemption of shares is generally the difference
between the cost basis of such shares and their sale price. If you redeem
covered shares during any year, then the Fund will report the cost basis of such
covered shares to the IRS and you on Form 1099-B along with the gross proceeds
received on the redemption, the gain or loss realized on such redemption and the
holding period of the redeemed shares.
Your cost basis in your covered shares is permitted to be calculated
using any one of three alternative methods: Average Cost, First In-First Out
(FIFO) and Specific Share Identification. You may elect which method you want to
use by notifying the Fund. This election may be revoked or changed by you at any
time up to the date of your first redemption of covered shares. If you do not
affirmatively elect a cost basis method then the Fund's default cost basis
calculation method, which is currently the Average Cost method - will be applied
to your account(s). The default method will also be applied to all new accounts
established unless otherwise requested.
If you hold Fund shares through a broker (or another nominee),
please contact that broker (nominee) with respect to the reporting of cost basis
and available elections for your account.
You are encouraged to consult your tax advisor regarding the
application of the new cost basis reporting rules and, in particular, which cost
basis calculation method you should elect.
Foreign Taxes. Investment income received by the Funds from sources
within foreign countries may also be subject to foreign income taxes, including
taxes withheld at the source. The United States has entered into tax treaties
with many foreign countries which entitle a Fund to a reduced rate of such taxes
or exemption from taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of each Fund's assets
to be invested within various countries is not known.
If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign income taxes paid by the Fund. Pursuant to such election,
shareholders would be required: (i) to include in gross income (in addition to
taxable dividends actually received), their respective pro-rata shares of
foreign taxes paid by the Fund; (ii) treat their pro rata share of such foreign
taxes as having been paid by them; and (iii) either to deduct their pro rata
share of foreign taxes in computing their taxable income, or to use it as a
foreign tax credit against federal income taxes (but not both). No deduction for
foreign taxes could be claimed by a shareholder who does not itemize deductions.
In addition, certain shareholders may be subject to rules which limit their
ability to fully deduct, or claim a credit for, their pro rata share of the
foreign taxes paid by the Fund. A shareholder's foreign tax credit with respect
to a dividend received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least 15 other days
during the 30-day period beginning 15 days prior to the ex-dividend date.
Each shareholder will be notified within 60 days after the close of
each taxable year of the Fund whether the foreign taxes paid by the Fund will
"pass through" for that year, and, if so, the amount of each shareholder's
pro-rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's
gross income from foreign sources. Shareholders who are not liable for federal
income taxes, such as retirement plans qualified under section 401 of the Code,
will not be affected by any such "pass through" of foreign taxes.
The federal income tax status of each year's distributions by the
Fund will be reported to shareholders and to the IRS. The foregoing is only a
general description of the treatment of foreign taxes under the United States
federal income tax laws. Because the availability of a foreign tax credit or
deduction will depend on the particular circumstances of each shareholder,
potential investors are advised to consult their own tax advisers.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant United
States federal income tax consequences to the Fund with respect to the
determination of its "investment company taxable income" each year. This
discussion assumes that the Fund will be taxed as a regulated investment company
for each of its taxable years.
Passive Foreign Investment Companies. If a Fund owns shares in a
foreign corporation that constitutes a "passive foreign investment company" (a
"PFIC") for federal income tax purposes and the Fund does not elect or is unable
to elect to either treat such foreign corporation as a "qualified electing fund"
within the meaning of the Code or "mark-to-market" the stock of such foreign
corporation, the Fund may be subject to United States federal income taxation on
a portion of any "excess distribution" it receives from the PFIC or any gain it
derives from the disposition of such shares, even if such income is distributed
as a taxable dividend by the Fund to its shareholders. A Fund may also be
subject to additional interest charges in respect of deferred taxes arising from
such distributions or gains. Any tax paid by a Fund as a result of its ownership
of shares in a PFIC will not give rise to a deduction or credit to the Fund or
to any shareholder. A foreign corporation will be treated as a PFIC if, for the
taxable year involved, either (i) such foreign corporation derives at least 75%
of its gross income from "passive income" (including, but not limited to,
interest, dividends, royalties, rents and annuities), or (ii) on average, at
least 50% of the value (or adjusted tax basis, if elected) of the assets held by
the corporation produce or are held for production of "passive income". In some
cases, a Fund may be able to elect to "mark-to-market" stock in a PFIC. If a
Fund makes such an election, the Fund would include in its taxable income each
year an amount equal to the excess, if any, of the fair market value of the PFIC
stock as of the close of the taxable year over the Fund's adjusted basis in the
PFIC stock. A Fund would be allowed a deduction for the excess, if any, of the
adjusted basis of the PFIC stock over the fair market value of the PFIC stock as
of the close of the taxable year, but only to the extent of any net
mark-to-market gains included in the Fund's taxable income for prior taxable
years. A Fund's adjusted basis in the PFIC stock would be adjusted to reflect
the amounts included in, or deducted from, income under this election. Amounts
included in income pursuant to this election, as well as gain realized on the
sale or other disposition of the PFIC stock, would be treated as ordinary
income. The deductible portion of any mark-to-market loss, as well as loss
realized on the sale or other disposition of the PFIC stock to the extent that
such loss does not exceed the net mark-to-market gains previously included by a
Fund, would be treated as ordinary loss. A Fund generally would not be subject
to the deferred tax and interest charge provisions discussed above with respect
to PFIC stock for which a mark-to-market election has been made. If a Fund
purchases shares in a PFIC and the Fund elects to treat the foreign corporation
as a "qualified electing fund" under the Code, the Fund may be required to
include in its income each year a portion of the ordinary income and net capital
gains of such foreign corporation, even if this income is not distributed to the
Fund. Any such income would be subject to the 90% and calendar year distribution
requirements described above.
Options, Futures Contracts, and Forward Foreign Currency Contracts.
Certain listed options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for federal income
tax purposes. Section 1256 contracts held by the Fund at the end of each taxable
year will be "marked to market" and treated for federal income tax purposes as
though sold for fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other than forward
foreign currency contracts will be considered 60% long-term and 40% short-term
capital gain or loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described above. The Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.
Gain or loss realized by the Fund on the lapse or sale of put and
call options on foreign currencies which are traded over-the-counter or on
certain foreign exchanges will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described above. The amount
of such gain or loss shall be determined by subtracting the amount paid, if any,
for or with respect to the option (including any amount paid by the Fund upon
termination of an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received by the Fund
upon termination of an option held by the Fund). In general, if the Fund
exercises such an option on a foreign currency, or if such an option that the
Fund has written is exercised, gain or loss on the option will be recognized in
the same manner as if the Fund had sold the option (or paid another person to
assume the Fund's obligation to make delivery under the option) on the date on
which the option is exercised, for the fair market value of the option. The
foregoing rules will also apply to other put and call options which have as
their underlying property foreign currency and which are traded over-the-counter
or on certain foreign exchanges to the extent gain or loss with respect to such
options is attributable to fluctuations in foreign currency exchange rates.
Tax Straddles. Any option, futures contract or other position
entered into or held by the Fund in conjunction with any other position held by
the Fund may constitute a "straddle" for federal income tax purposes. A straddle
of which at least one, but not all, the positions are section 1256 contracts may
constitute a "mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's gains and losses
with respect to straddle positions by requiring, among other things, that (i)
loss realized on disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the other position
in such straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain being treated as
short-term capital gain rather than long-term capital gain); (iii) losses
recognized with respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as 60% long-term
and 40% short-term capital loss; (iv) losses recognized with respect to certain
straddle positions which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may be deferred.
Various elections are available to the Fund which may mitigate the effects of
the straddle rules, particularly with respect to mixed straddles. In general,
the straddle rules described above do not apply to any straddles held by the
Fund all of the offsetting positions of which consist of section 1256 contracts.
Currency Fluctuations -- "Section 988" Gains or Losses. Under the
Code, gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to fluctuations in the
value of the foreign currency between the date of acquisition of the asset and
the date of disposition also are treated as ordinary income or loss. These gains
or losses, referred to under the Code as "section 988" gains or losses, increase
or decrease the amount of the Fund's investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of the Fund's net capital gain. Because section 988
losses reduce the amount of ordinary dividends the Fund will be allowed to
distribute for a taxable year, such section 988 losses may result in all or a
portion of prior dividend distributions for such year being recharacterized as a
non-taxable return of capital to shareholders, rather than as an ordinary
dividend, reducing each shareholder's basis in his or her Fund shares. To the
extent that such distributions exceed such shareholder's basis, each will be
treated as a gain from the sale of shares.
Other Taxes
The Funds may be subject to other state and local taxes.
Taxation of Foreign Stockholders
Taxation of a shareholder who, under the Code, is a nonresident
alien individual, foreign trust or estate, foreign corporation or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by the
foreign shareholder.
If the income from a Fund is not effectively connected with the
foreign shareholder's U.S. trade or business, then, except as discussed below,
distributions of the Fund attributable to ordinary income and short-term capital
gain paid to a foreign shareholder by the Fund will be subject to U.S.
withholding tax at the rate of 30% (or lower treaty rate) upon the gross amount
of the distribution. However, distributions of a Fund attributable to short-term
capital gains and U.S. source portfolio interest income paid during taxable
years of the Fund beginning before January 1, 2014 will not be subject to this
withholding tax if so designated.
A foreign shareholder generally would be exempt from Federal income
tax on distributions of a Fund attributable to net long-term capital gain and on
gain realized from the sale or redemption of shares of the Fund. Special rules
apply in the case of a shareholder that is a foreign trust or foreign
partnership.
If the income from a Fund is effectively connected with a foreign
shareholder's U.S. trade or business, then ordinary income distributions,
capital gain distributions, and any gain realized upon the sale of shares of the
Fund will be subject to Federal income tax at the rates applicable to U.S.
citizens or U.S. corporations.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein.
The tax rules of other countries with respect to an investment in
the Fund may differ from the Federal income taxation rules described above.
These foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisors as to the consequences of foreign tax rules with
respect to an investment in the Fund.
PORTFOLIO TRANSACTIONS
Subject to the general oversight of the Directors, the Adviser is
responsible for the investment decisions and the placing of orders for portfolio
transactions for the Funds. The Adviser determines the broker or dealer to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission (for transactions on which a
commission is payable) and the best price obtainable on each transaction
(generally defined as "best execution"). In connection with seeking best price
and execution, a Fund does not consider sales of shares of the Fund or other
investment companies managed by the Adviser as a factor in the selection of
brokers and dealers to effect portfolio transactions and has adopted a policy
and procedures reasonably designed to preclude such considerations.
When consistent with the objective of obtaining best execution,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if a Fund
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of the brokerage, research and statistical services
provided by the executing broker.
Neither the Funds nor the Adviser has entered into agreements or
understandings with any brokers regarding the placement of securities
transactions because of research services they provide. To the extent that such
persons or firms supply investment information to the Adviser for use in
rendering investment advice to the Funds, such information may be supplied at no
cost to the Adviser and, therefore, may have the effect of reducing the expenses
of the Adviser in rendering advice to the Funds. While it is impossible to place
an actual dollar value on such investment information, the Adviser believes that
its receipt probably does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934, as amended,
and is designed to augment the Adviser's own internal research and investment
strategy capabilities. Research services furnished by brokers through which the
Funds effect securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its clients' accounts
but not all such services may be used by the Adviser in connection with a Fund.
The extent to which commissions that will be charged by
broker-dealers selected by a Fund may reflect an element of value for research
cannot presently be determined. To the extent that research services of value
are provided by broker-dealers with or through whom a Fund places portfolio
transactions, the Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers as a result of the placement
of portfolio transactions could be useful and of value to the Adviser in
servicing its other clients as well as the Funds; on the other hand, certain
research services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value to it in
servicing a Fund.
A Fund may deal in some instances in securities which are not listed
on a national securities exchange but are traded in the over-the-counter market.
It may also purchase listed securities through the third market, i.e., from a
dealer that is not a member of the exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third market, the
Fund will seek to deal with the primary market makers; but when necessary in
order to obtain best execution, they will utilize the services of others. In all
cases, the Fund will attempt to negotiate best execution.
Investment decisions for a Fund are made independently from those
for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
by the same Adviser, particularly when a security is suitable for the investment
objectives of more than one of such companies or accounts. When two or more
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions are allocated to the
respective companies or accounts both as to amount and price, in accordance with
a method deemed equitable to each company or account. In some cases this system
may adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund.
Allocations are made by the officers of a Fund or of the Adviser.
Purchases and sales of portfolio securities are determined by the Adviser and
are placed with broker-dealers by the order department for the Adviser.
The Funds' portfolio transactions in equity securities may occur on
foreign stock exchanges. Transactions on stock exchanges involve the payment of
brokerage commissions. On many foreign stock exchanges these commissions are
fixed. Securities traded in foreign over-the-counter markets (including most
fixed-income securities) are purchased from and sold to dealers acting as
principal. Over-the-counter transactions generally do not involve the payment of
a stated commission, but the price usually includes an undisclosed commission or
markup. The prices of underwritten offerings, however, generally include a
stated underwriter's discount. The Adviser expects to effect the bulk of its
transactions in securities of companies based in foreign countries through
brokers, dealers or underwriters located in such countries. U.S. Government or
other U.S. securities constituting permissible investments will be purchased and
sold through U.S. brokers, dealers or underwriters.
The aggregate brokerage commissions paid by the Funds during the
three most recent fiscal years or since inception are set forth below:
Fiscal Year
Ended
October 31/ Aggregate Amount of
November 30 Fund Brokerage Commissions
----------- ---- ---------------------
2012 Value $ 379,785
2011 610,132
2010 672,292
2012 Discovery Value $2,151,461
2011 3,493,277
2010 1,703,159
2012 International Value $1,306,782
2011 3,336,804
2010 4,408,743
2012 Global Value $ 106,143
2011 187,095
2010 206,025
2012 Growth and Income $1,793,568
2011 2,282,659
2010 1,991,907
2012 Core Opportunities $ 126,872
2011 161,240
2010 145,167
2012 Global Risk Allocation $ 540,726
2011 608,163
2010 563,203
2012 Equity Income $ 434,575
2011 320,546
2010 231,669
2012 Global Real Estate $ 334,433
2011 217,183
2010 177,987
2012 Emerging Markets Equity $ 4,957
|
The Funds may, from time to time, place orders for the purchase or
sale of securities (including listed call options) with SCB & Co., an affiliate
of the Adviser (the "Affiliated Broker"). In such instances, the placement of
orders with such brokers would be consistent with each Fund's objective of
obtaining best execution and would not be dependent upon the fact that the
Affiliated Broker is an affiliate of the Adviser. With respect to orders placed
with the Affiliated Broker for execution on a national securities exchange,
commissions received must conform to Section 17(e)(2)(A) of the 1940 Act and
Rule 17e-1 thereunder, which permit an affiliated person of a registered
investment company (such as the Trust), or any affiliated person of such person,
to receive a brokerage commission from such registered investment company
provided that such commission is reasonable and fair compared to the commissions
received by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time.
The aggregate amount of brokerage commissions paid to the Affiliated
Broker during each Fund's three most recent fiscal years, and, during the most
recent fiscal year, the Affiliated Broker's percentage of the aggregate
brokerage commissions and the aggregate dollar amount of brokerage transactions,
respectively, are set forth below:
% of Fund's
Aggregate Dollar
Aggregate % of Fund's Amount of
Amount of Aggregate Brokerage
Fiscal Brokerage Brokerage Transactions
Year Commissions Commissions Involving Payment
Ended Paid to Paid to of Commissions
October 31/ Affiliated Affiliated Through
November 30 Fund Broker Broker Affiliated Broker
------------ ------- ----------- ------------- --------------------
2012 International Value $ 14,264 1.09% 3.57%
2011 13,610
2010 61,949
2012 Global Value $ 991 0.93% 2.89%
2011 356
2010 1,652
2012 Growth and Income $ 2,519 0.14% 0.15%
2011 385
2010 $ 46,028
2012 Core Opportunities $ 1,731 1.36% 1.89%
2011 0
2010 0
2012 Global Risk Allocation $ 443 0.08% 0.03%
2011 0
2010 6,192
2012 Global Real Estate $ 0 0.00% 0.00%
2011 0
2010 893
|
Disclosure of Portfolio Holdings
Each Fund believes that the ideas of the Adviser's investment staff
should benefit the Fund and its shareholders, and does not want to afford
speculators an opportunity to profit by anticipating Fund trading strategies or
using Fund information for stock picking. However, each Fund also believes that
knowledge of the Fund's portfolio holdings can assist shareholders in monitoring
their investment, making asset allocation decisions, and evaluating portfolio
management techniques.
The Adviser has adopted, on behalf of each Fund, policies and
procedures relating to disclosure of the Fund's portfolio securities. The
policies and procedures relating to disclosure of the Fund's portfolio
securities are designed to allow disclosure of portfolio holdings information
where necessary to the operation of the Fund or useful to the Fund's
shareholders without compromising the integrity or performance of the Fund.
Except when there are legitimate business purposes for selective disclosure and
other conditions (designed to protect the Fund and its shareholders) are met,
the Fund does not provide or permit others to provide information about the
Fund's portfolio holdings on a selective basis.
The Fund includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser may post portfolio holdings information on
the Adviser's website (www.AllianceBernstein.com). The Adviser posts on the
website a complete schedule of the Fund's portfolio securities, as of the last
day of each calendar month, approximately 30 days after the end of that month.
This posted information generally remains accessible on the website for three
months. For each portfolio security, the posted information includes its name,
the number of shares held by a Fund, the market value of the Fund's holdings,
and the percentage of the Fund's assets represented by Fund's holdings. In
addition to the schedule of portfolio holdings, the Adviser may post information
about the number of securities the Fund holds, a summary of the Fund's top ten
holdings (including name and the percentage of the Fund's assets invested in
each holding), and a percentage breakdown of the Fund's investments by country,
sector and industry, as applicable approximately 10-15 days after the end of the
month. The day after portfolio holdings information is publicly available on the
website, it may be mailed, e-mailed or otherwise transmitted to any person.
The Adviser may distribute or authorize the distribution of
information about a Fund's portfolio holdings that is not publicly available, on
the website or otherwise, to the Adviser's employees and affiliates that provide
services to the Fund. In addition, the Adviser may distribute or authorize
distribution of information about a Fund's portfolio holdings that is not
publicly available, on the website or otherwise, to the Fund's service providers
who require access to the information in order to fulfill their contractual
duties relating to the Funds, to facilitate the review of the Funds by rating
agencies, for the purpose of due diligence regarding a merger or acquisition, or
for the purpose of effecting in-kind redemption of securities to facilitate
orderly redemption of portfolio assets and minimal impact on remaining Fund
shareholders. The Adviser does not expect to disclose information about a Fund's
portfolio holdings that is not publicly available to the Fund's individual or
institutional investors or to intermediaries that distribute the Fund's shares.
Information may be disclosed with any frequency and any lag, as appropriate.
Before any non-public disclosure of information about a Fund's
portfolio holdings is permitted, however, the Adviser's Chief Compliance Officer
(or his designee) must determine that the Fund has a legitimate business purpose
for providing the portfolio holdings information, that the disclosure is in the
best interests of the Fund's shareholders, and that the recipient agrees or has
a duty to keep the information confidential and agrees not to trade directly or
indirectly based on the information or to use the information to form a specific
recommendation about whether to invest in the Fund or any other security. Under
no circumstances may the Adviser or its affiliates receive any consideration or
compensation for disclosing the information.
The Adviser has established procedures to ensure that a Fund's
portfolio holdings information is only disclosed in accordance with these
policies. Only the Adviser's Chief Compliance Officer (or his designee) may
approve the disclosure, and then only if he or she and a designated senior
officer in the Adviser's product management group determines that the disclosure
serves a legitimate business purpose of a Fund and is in the best interest of
the Fund's shareholders. The Adviser's Chief Compliance Officer (or his
designee) approves disclosure only after considering the anticipated benefits
and costs to the Fund and its shareholders, the purpose of the disclosure, any
conflicts of interest between the interests of the Fund and its shareholders and
the interests of the Adviser or any of its affiliates, and whether the
disclosure is consistent with the policies and procedures governing disclosure.
Only someone approved by the Adviser's Chief Compliance Officer (or his
designee) may make approved disclosures of portfolio holdings information to
authorized recipients. The Adviser reserves the right to request certifications
from senior officers of authorized recipients that the recipient is using the
portfolio holdings information only in a manner consistent with the Adviser's
policy and any applicable confidentiality agreement. The Adviser's Chief
Compliance Officer (or his designee) or another member of the compliance team
reports all arrangements to disclose portfolio holdings information to the
Fund's Board on a quarterly basis. If the Board determines that disclosure was
inappropriate, the Adviser will promptly terminate the disclosure arrangement.
In accordance with these procedures, each of the following third
parties have been approved to receive information concerning the Funds'
portfolio holdings: (i) the Fund's independent registered public accounting
firm, for use in providing audit opinions; (ii) RR Donnelley Financial, Data
Communique International and, from time to time, other financial printers, for
the purpose of preparing Fund regulatory filings; (iii) the Fund's custodian in
connection with its custody of the assets of the Funds; (iv) Risk Metrics for
proxy voting services; and (v) data aggregators, such as Vestek. Information may
be provided to these parties at any time with no time lag. Each of these parties
is contractually and ethically prohibited from sharing a Fund's portfolio
holdings information unless specifically authorized.
GENERAL INFORMATION
The Trust
The Trust is organized as a Massachusetts business trust under the
laws of The Commonwealth of Massachusetts by an Agreement and Declaration of
Trust ("Declaration of Trust") dated December 12, 2000, a copy of which is on
file with the Secretary of State of The Commonwealth of Massachusetts. The Trust
is a "series" company as described in Rule 18f-2 under the 1940 Act.
The Declaration of Trust permits the Directors to issue an unlimited
number of full and fractional shares of each series and of each class of shares
thereof. The shares of each Fund and each class thereof do not have any
preemptive rights. Upon termination of any Fund or any class thereof, whether
pursuant to liquidation of the Trust or otherwise, shareholders of that Fund or
that class are entitled to share pro rata in the net assets of that Fund or that
class then available for distribution to such shareholders.
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust or any Fund, however, may be terminated at any time by vote of
at least two thirds of the outstanding shares of each Fund affected or by the
Trustees by written notice to the shareholders. The Declaration of Trust further
provides that the Trustees may also terminate the Trust upon written notice to
the shareholders.
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Funds.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Funds and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Funds
or the Directors. The Declaration of Trust provides for indemnification out of a
Fund's property for all loss and expense of any shareholder of that Fund held
liable on account of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund of which he or she was a shareholder
would be unable to meet its obligations.
The AB Funds
GROWTH AND INCOME
Growth and Income was organized as a corporation in Maryland in 1932
under the name "Dividend Shares, Inc.". The name of the Fund became "Alliance
Growth and Income Fund" on October 20, 1989 and "AllianceBernstein Growth and
Income Fund, Inc." on March 31, 2003.
CORE OPPORTUNITIES
Core Opportunities was incorporated under the laws of the State of
Maryland on July 6, 1999, as "Alliance Disciplined Value Fund, Inc." The Fund
changed its name to "AllianceBernstein Disciplined Value Fund, Inc." on February
28, 2001, to "AllianceBernstein Focused Growth & Income Fund, Inc." on December
15, 2004, and to "AllianceBernstein Core Opportunities Fund, Inc." on March 1,
2010.
GLOBAL RISK ALLOCATION
Global Risk Allocation is a Maryland corporation organized in 1932.
The name of the Fund became "Alliance Balanced Shares" on March 10, 1987,
"AllianceBernstein Balanced Shares, Inc." on March 31, 2003 and
AllianceBernstein Global Risk Allocation Fund, Inc. on October 5, 2012.
EQUITY INCOME
Equity Income is a Maryland corporation organized in 1980 under the
name "Alliance Utility Income Fund, Inc." The name of the Fund became
"AllianceBernstein Utility Income Fund, Inc." on February 28, 2001. The Fund
changed its name to "AllianceBernstein Equity Income Fund, Inc." on September 1,
2010.
GLOBAL REAL ESTATE
Global Real Estate is a Maryland corporation organized in 1996 under
the name "Alliance Real Estate Investment Fund, Inc." The Fund's name was
changed to "AllianceBernstein Real Estate Investment Fund, Inc." on February 28,
2001 and became "AllianceBernstein Global Real Estate Investment Fund, Inc." on
March 1, 2007.
The Company
EMERGING MARKETS EQUITY
Emerging Markets Equity is a series of AllianceBenstein Cap Fund,
Inc., a Maryland corporation. The Fund was organized in 2011 under the name
"AllianceBernstein Emerging Markets Equity Portfolio".
ALL FUNDS
It is anticipated that annual shareholder meetings will not be held
for the Funds; shareholder meetings will be held only when required by federal
or state law. Shareholders have available certain procedures for the removal of
Directors.
A shareholder will be entitled to share pro rata with other holders
of the same class of shares all dividends and distributions arising from a
Fund's assets and, upon redeeming shares, will receive the then-current NAV of
the Fund represented by the redeemed shares less any applicable CDSC. A Fund is
empowered to establish, without shareholder approval, additional portfolios,
which may have different investment objectives and policies than those of the
Fund and additional classes of shares within the Fund. If an additional
portfolio or class were established in the Fund, each share of the portfolio or
class would normally be entitled to one vote for all purposes. Generally shares
of each portfolio and class would vote together as a single class on matters,
such as the election of Directors, that affect each portfolio and class in
substantially the same manner. Each class of shares of a Fund represents an
interest in the same portfolio of investments, and has the same rights and is
identical in all respects, except that each of Class A, Class B, Class C, Class
R, Class K, Class 1 and Class 2 shares of a Fund bears its own distribution and
transfer agency expenses and Class B shares convert to Class A shares under
certain circumstances. Each class of shares of the Fund votes separately with
respect to the Fund's Rule 12b-1 distribution plan and other matters for which
separate class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of the Fund, are entitled to receive the net assets of the Fund.
Principal Holders
To the knowledge of each Fund, the following persons owned of record
or beneficially, 5% or more of a class of outstanding shares of the Fund as of
February 20, 2013 for Emerging Markets Equity, and as of February 1, 2013 for
all other Funds:
No. of % of
Fund Name and Address Shares Class
---- ----------------- ------- ------
Value Fund First Clearing, LLC
---------- Special Custody Account for the
Class A Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 333,296 6.36%
LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046 293,156 5.59%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 762,570 14.55%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 424,330 8.10%
UBS WM USA
Omni Account M/F
Attn: Department Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 318,025 6.07%
Value Fund First Clearing, LLC
---------- Special Custody Acct for the
Class B Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 26,966 7.04%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 44,075 11.51%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 41,271 10.77%
Value Fund First Clearing, LLC
---------- Special Custody Acct for the
Class C Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 100,369 6.47%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 441,862 28.48%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 233,338 15.04%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 96,126 6.20%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 139,592 9.00%
Value Fund American United Life Cust
---------- FBO American United Trust
Class R Separate Accounts Administration
------- P.O. Box 368
Indianapolis, IN 46206-0368 12,566 5.47%
Harford Life Insurance Company
Separate Account
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 38,961 16.95%
ING National Trust
Qualified Plan
1 Orange Way, #B3N
Windsor, CT 06095-4773 16,115 7.01%
MG Trust Co. Cust. FBO
Cross Shore Capital Management, LLC
700 17th Street, Suite 300
Denver, CO 80202-3531 21,545 9.37%
MLPF&S For the Sole Benefit
of its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 58,453 25.43%
Value Fund Great-West Trust Company LLC
---------- TTEE C Crystal Steel 401K
Class K Savings Plan
------- 8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 33,459 5.38%
Great-West Trust Company LLC
TTEE C Minnesota Surgical Associates
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 60,547 9.74%
Great-West Trust Company LLC
TTEE C Informa Financial
Information Inc. D
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 86,835 13.96%
Great-West Trust Company LLC
TTEE C Cranemere LLC 401K
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 32,208 5.18%
Great-West Trust Company LLC
TTEE C Cardiology PC PSP
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 53,638 8.63%
Randall J. Lewis, Anthony S. Unger
& Richard W. Barth
MD's PC PS 401K
2021 K Street, NW, Suite 400
Washington, D.C. 20006-1009 40,887 6.58%
Value Fund MLPF&S for the Sole Benefit of
---------- its Customers
Class I Attn: Fund Admin
------- 4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 168,194 68.40%
Arthur F. Grant, Beda L. Johnson
Or Don Taylor TTEES
Cadaret, Grant 401K/PSP
110 W. Fayette Street, Floor 5
Syracuse, NY 13202-1324 71,246 28.97%
Value Fund CollegeBound Fund
---------- AllianceBernstein Value Fund
Advisor Class Customized Allocation
------------- 1345 Avenue of the Americas
New York, NY 10105-0302 3,399,142 12.15%
Discovery MLPF&S for the Sole Benefit of
Value its Customers
--------- Attn: Fund Admin
Class A 4800 Deer Lake Dr., East
------- 2nd Floor
Jacksonville, FL 32246-6484 3,726,783 12.13%
National Financial Services LLC
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 2,071,792 6.74%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 1,715,373 5.58%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 1,870,071 6.09%
Discovery First Clearing, LLC
Value Special Custody Acct for the
---------- Exclusive Benefit of Customer
Class B 2801 Market Street
------- Saint Louis, MO 63103-2523 101,398 8.00%
LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046 151,024 11.91%
MLPF&S for the Sole Benefit
of its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 290,637 22.92%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 104,781 8.26%
Discovery First Clearing, LLC
Value Special Custody Acct for the
--------- Exclusive Benefit of Customer
Class C 2801 Market Street
------- Saint Louis, MO 63103-2523 661,124 8.15%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 2,164,083 26.68%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 803,120 9.90%
National Financial Services LLC
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 656,884 8.10%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 560,408 6.91%
Raymond James
Omnibus for Mutual Funds
House Acct Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102 473,018 5.83%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 433,283 5.34%
Discovery Hartford Life Insurance Company
Value Separate Account
--------- Attn: UIT Operations
Class R P.O. Box 2999
------- Hartford, CT 06104-2999 1,519,750 18.82%
Hartford Securities Distribution
Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 482,366 5.97%
MLPF&S For the Sole Benefit
of its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 459,164 5.69%
Minnesota Life Separate Account
(An Insurance Co Exempt Gr Annuity)
400 Robert Street North
Saint Paul, MN 55101-2037 1,263,455 15.65%
State Street Corporation TTEE
C/F ADP Access
1 Lincoln Street
Boston, MA 02111-2901 596,332 7.39%
Discovery AIG Retirement Services Company
Value FBO AIGFSB CUST TTEE FBO
--------- Kelsey-Seybold Health System
Class K 2929 Allen Parkway, A6-20
------- Houston, TX 77019-2155 210,077 6.94%
Nationwide Life Insurance Company
QPVA
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 255,792 8.45%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 455,469 15.04%
New York Life Trust Company FBO
Southern California Pipe Traders
401(k) Plan
51 Madison Ave., Rm 117A
New York, NY 10010-1612 437,997 14.47%
Discovery Charles Schwab & Co.
Value For the Exclusive Benefit
--------- of Customers
Class I Mutual Fund Operations
------- 211 Main Street
San Francisco, CA 94105-1905 1,846,250 18.96%
City National Bank Cust.
555 S. Flower St., Ste. 1000
Los Angeles, CA 90071-2429 1,030,957 10.59%
FIIOC
As Agent for Certain Employee
Benefit Plans
100 Magellan Way KWIC
Convington, KY 41015-1987 1,241,836 12.75%
MAC & Co.
FBO Mercer
Attn: Mutual Fund Operations
P.O. Box 3198
525 William Penn Place
Pittsburgh, PA 15230-3198 2,375,380 24.39%
Reliance Trust Company
FBO Retirement Plans Serviced
by Metlife
c/o Fascore LLC
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 594,962 6.11%
United of Omaha
For Various Retirement Plans
700 17th Street, Suite 300
Denver, CO 80202-3531 659,137 6.77%
Discovery CollegeBound Fund
Value CBF - AllianceBernstein Small Cap
--------- Customized Allocation 529 Plan
Advisor Class 1345 Avenue of the Americas
------------- New York, NY 10105-0302 2,070,022 5.68%
MLPF&S for the Sole Benefit of its
Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 2,176,079 5.97%
International First Clearing, LLC
Value Special Custody Acct for the
------------- Exclusive Benefit of Customer
Class A 2801 Market Street
------- Saint Louis, MO 63103-2523 1,292,114 5.28%
Hartford Life Insurance Company
Separate Account
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 1,448,855 5.92%
MLPF&S for the Sole Benefit of its
Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 2,307,879 9.42%
National Financial Services LLC
For the Exclusive Benefit
Of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 2,687,004 10.97%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 2,621,203 10.70%
International First Clearing, LLC
Value Special Custody Acct for the
------------- Exclusive Benefit of Customer
Class B 2801 Market Street
------- Saint Louis, MO 63103-2523 198,114 11.71%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East,
2nd Floor
Jacksonville, FL 32246-6484 286,314 16.93%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 222,149 13.13%
National Financial Services LLC
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 95,779 5.66%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 187,851 11.11%
International First Clearing, LLC
Value Special Custody Account for the
------------- Exclusive Benefit of Customer
Class C 2801 Market Street
------- Saint Louis, MO 63103-2523 578,543 7.21%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 2,364,424 29.46%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 1,597,179 19.90%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 438,607 5.47%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 477,101 5.95%
International Hartford Life Insurance Company
Value Separate Account
------------- Attn: UIT Operations
Class R P.O. Box 2999
------- Hartford, CT 06104-2999 1,043,282 35.61%
Hartford Securities Distribution
Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 474,716 16.20%
MLPF&S For the Sole Benefit
Of Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 355,555 12.14%
International Great-West Trust Company LLC TTEE C
Value Minnesota Surgical Associates
------------- 8515 E. Orchard Road, 2T2
Class K Greenwood Village, CO 80111-5002 79,520 5.72%
-------
PRIAC Cust
FBO Various Retirement Plans
Invest Prod & Adv Serv
280 Trumbull Street
One Commercial Plaza
Hartford, CT 06103-3509 89,895 6.47%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 502,973 36.19%
WTRISC As Agent FBO
EPlan Services Group Trust Plan
C/O Mutual Funds
P.O. Box 52129
Phoenix, AZ 85072-2129 113,567 8.17%
International Arthur F. Grant, Beda L. Johnson
Value Or Don Taylor TTEES
------------- Cadaret, Grant 401K/PSP
Class I 110 W. Fayette St., 5th Floor
------- Syracuse, NY 13202-1324 31,335 6.06%
MLPF&S For the Sole Benefit
Of Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 103,534 20.01%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 50,129 9.69%
NFS LLC FEBO
State Street Bank Trust Co.
TTEE Various Retirement Plans
440 Mamaroneck Ave.
Harrison, NY 10528-2418 100,429 19.41%
SEI Private Trust Co.
C/O First Tennessee Bank
Attn: Mutual Funds
One Freedom Valley Drive
Oaks, PA 19456-9989 169,668 32.80%
International CollegeBound Fund
Value CBF-AllianceBernstein Inter. Value
------------- Customized Allocation 529 Plan
Advisor Class 1345 Avenue of the Americas
------------- New York, NY 10105-0302 3,074,412 26.24%
First Clearing, LLC
Special Custody Account for the
Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523 995,783 8.50%
MLPF&S For the Sole Benefit
Of Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 884,003 7.54%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 1,310,142 11.18%
NFS LLC FEBO
State Street Bank Trust Co.
1200 Crown Colony Drive
Quincy, MA 02169-0938 606,897 5.18%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 1,051,896 8.98%
Global Value First Clearing, LLC
------------ Special Custody Acct for the
Class A Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 86,640 5.32%
Great-West Trust Company LLC
TTEE CAEA Investors LLC
401K Savings Plan
8515 East Orchard Road, 2T2
Greenwood Village, CO 80111-5002 85,689 5.26%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 109,134 6.70%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 126,010 7.74%
Global Value MLPF&S For the Sole Benefit of
------------ its Customers
Class B Attn: Fund Admin
------- 4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 25,606 14.27%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 19,447 10.84%
National Financial Services LLC
For the Exclusive Benefit of
Our Customers
Attn: Mutual Fund Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 9,464 5.27%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2502 20,300 11.31%
Global Value First Clearing, LLC
------------ Special Custody Acct for the
Class C Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 33,779 9.80%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 71,331 20.69%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 68,301 19.81%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 29,473 8.55%
Global Value American United Life Cust
------------ FBO AUL American Group
Class R Retirement Annuity Separate
------- Accounts Administration
P.O. Box 368
Indianapolis, IN 46206-0368 12,437 15.43%
American United Life Cust FBO
American United Trust
Separate Accounts Administration
P.O. Box 368
Indianapolis, IN 46206-0368 5,222 6.48%
Hartford Life Insurance Company
Separate Account
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 17,846 22.14%
Hartford Securities Distribution
Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 23,347 28.97%
Mid Atlantic Trust Co.
FBO Simon Eye Associates 401K
PSP & Trust
1251 Waterfront Place, Suite 525
Pittsburgh, PA 15222-4228 4,184 5.19%
ING National Trust
Qualified Plan
1 Orange Way, #B3N
Windsor, CT 06095-4773 6,876 8.53%
State Street Bank & Trust
FBO ADP/MSDW Alliance
Attn: Ralph Campbell
105 Rosemont Road
Westwood, MA 02090-2318 7,900 9.80%
Global Value Nationwide Trust Company FSB
------------ C/O IPO Portfolio Accounting
Class K P.O. Box 182029
------- Columbus, OH 43218-2029 19,304 13.65%
Great-West Trust Company LLC TTEE C
Krass Monroe PA 401(K)
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 7,488 5.29%
Great-West Trust Company LLC TTEE F
Keane and Beane PC 401K
Retirement Plan
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 20,002 14.14%
Great-West Trust Company LLC TTEE C
Aronson Security Group Inc 401K PSP
C/O Fascore LLC
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 17,591 12.44%
Great-West Trust Company LLC TTEE C
Sperber Denenberg & Kahan PC PSP
C/O Fascore LLC
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 13,148 9.30%
Otis McAllister Inc. TTEE FBO
Otis McAllister Inc. 401K PSP
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 18,366 12.98%
Global Value Great-West Trust Company LLC
------------ TTEE C George Little
Class I Management LLC 401K Plan
------- 8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 85,798 89.70%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 9,849 10.30%
Global Value Charles Schwab & Co
------------ For the Exclusive Benefit of
Advisor Class Customers Mutual Fund Operations
------------- 211 Main Street
San Francisco, CA 94105-1905 464,422 21.26%
Jonathan A. Reiss & Marion
Kaplan Reiss JTWROS
90 Riverside Drive
New York, NY 10024-5306 129,004 5.91%
Sanford Bernstein & Co. LLC
1 N. Lexington Ave.
17th Floor
White Plains, NY 10601-1785 240,161 11.00%
Growth and Income First Clearing, LLC
----------------- Special Custody Acct For the
Class A Exclusive Benefit of Customer
------- 2801 Market St.
Saint Louis, MO 63103-2523 20,735,012 8.06%
MLPF&S For the Sole Benefit of
Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 25,677,278 9.99%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 18,431,457 7.17%
Growth and Income MLPF&S For the Sole Benefit of
----------------- its Customers
Class B Attn: Fund Admin
------- 4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 818,140 7.45%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 936,567 8.53%
Growth and Income First Clearing, LLC
----------------- Special Custody Acct For the
Class C Exclusive Benefit of Customer
------- 2801 Market St.
Saint Louis, MO 63103-2523 4,084,930 9.77%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 11,324,649 27.10%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 5,908,351 14.14%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2502 2,979,000 7.13%
UBS WM USA
Omni Account M/F
Attn: Dept. Manager
1000 Harbor Blvd., 5th Floor
Weehawken, NJ 07086-6761 2,931,081 7.01%
Growth and Income Charles Schwab Bank Cust.
----------------- Professional Emergency Phys. PSP
Class R 2423 East Lincoln Drive, #208770
------- Phoenix, AZ 85016-1215 177,337 20.02%
Hartford Securities Distribution
Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 61,244 6.91%
Liberty Bank of Arkansas
Southern Marketing Affiliates Inc.
401K Plan
Attn: Trust Dept.
715 Southwest Drive
Jonesboro, AR 72401-7034 105,263 11.88%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 76,892 8.68%
MG Trust Company Cust. FBO
Redmon, Peyton & Braswell LLP
700 17th Street, Suite 300
Denver, CO 80202-3531 58,948 6.66%
State Street Corporation TTEE
C/F ADP Access
1 Lincoln Street
Boston, MA 02111-2901 140,625 15.88%
Growth and Income Great-West Trust Company LLC
----------------- TTEE C John F. Dillon & Company
Class K LLC 401K
------- 8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 64,294 12.41%
Great-West Trust Company LLC
TTEE C Margolis & Tisman
LLP 401K PSP
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 35,779 6.91%
Great-West Trust Company LLC
TTEE C Minnesota Surgical Associates
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 167,662 32.37%
Great-West Trust Company LLC
TTEE C Partners For A Drug
Free America
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 43,705 8.44%
Great-West Trust Company LLC
TTEE F Shore Urology PA 401K
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 29,967 5.79%
Great-West Trust Company LLC
TTEE C Valensi Rose PLC
Cash or Deferred P
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 67,604 13.05%
Growth and Income AllianceBernstein L.P.
----------------- Attn: Brent Mather-Seed Acct
Class I 1 N. Lexington Ave.
------- White Plains, NY 10601-1712 3,049 99.96%
Growth and Income CollegeBound Fund
----------------- CBF-Growth & Income
Advisor Class Customized Portfolio 529 Plan
------------- 1345 Avenue of the Americas
New York, NY 10105-0302 13,510,229 64.19%
First Clearing, LLC
Special Custody Acct for
the Exclusive Benefit of Customer
2801 Market Street
Saint Louis, MO 63103-2523 1,461,495 6.94%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 1,541,395 7.32%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 1,466,207 6.97%
Core Opportunities First Clearing, LLC
------------------ Special Custody Acct for the
Class A Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 337,798 6.31%
LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046 367,897 6.87%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 466,038 8.70%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 327,058 6.11%
National Financial Services LLC
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 304,025 5.68%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 668,152 12.48%
Core Opportunities LPL Financial
------------------ FBO Customer Accounts
Class B Attn: Mutual Fund Operations
------- P.O. Box 509046
San Diego, CA 92150-9046 25,590 6.62%
MLPF&S for the Sole Benefit of
its Customer
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 28,058 7.26%
National Financial Services
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 21,140 5.47%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 31,774 8.22%
Core Opportunities First Clearing, LLC
------------------ Special Custody Account for the
Class C Exclusive Benefit of Customer
------- 2801 Market Street
Saint Louis, MO 63103-2523 120,309 7.95%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 244,836 16.18%
National Financial Services
For the Exclusive Benefit of
Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 117,243 7.75%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 300,892 19.88%
Raymond James
Omnibus for Mutual Fund
House Acct Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102 106,492 7.04%
Core Opportunities American United Life Cust FBO
------------------ AUL American Group Retirement Annuity
Class R Separate Accounts Administration
------- P.O. Box 368
Indianapolis, IN 46206-0368 31,453 28.10%
American United Life Cust FBO
American United Trust
Separate Accounts Administration
P.O. Box 368
Indianapolis, IN 46206-0368 20,980 18.74%
MLPF&S for the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 12,243 10.94%
MG Trust Company FBO
The Summit Dental Group 401K
700 17th Street, Suite 300
Denver, CO 80202-3531 7,993 7.14%
MG Trust Company FBO
Mechanical Contractors Assoc. 401K
700 17th Street, Suite 1300
Denver, CO 80202-3304 11,103 9.92%
Mid Atlantic Trust Company FBO
Gates Realty Corp. 401K PSP & Trust
1251 Waterfront Place, Suite 525
Pittsburgh, PA 15222-4228 11,229 10.03%
Core Opportunities Nationwide Trust Company FSB
------------------ C/O IPO Portfolio Accounting
Class K P.O. Box 182029
------- Columbus, OH 43218-2029 24,832 26.44%
Road, 2T2MG Trust Company Cust. FBO
Compass Medical PC
717 17th Street, Suite 1300
Denver, CO 80202-3304 57,023 60.71%
Road, 2T2 Great-West Trust Company LLC
TTEE C Mansfield
Tanick & Cohen PS 401K PS
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 7,042 7.50%
Core Opportunities AllianceBernstein L.P
------------------ Attn: Brent Mather-Seed Acct
Class I 1 N. Lexington Ave.
------- White Plains, NY 10601-1712 655 75.16%
Frontier Trust Co FBO
Red River Employees FCU
P.O. Box 10758
Fargo, ND 58106-0758 213 24.41%
Core Opportunities First Clearing, LLC
------------------ Special Custody Account for the
Advisor Class Exclusive Benefit of Customer
------------- 2801 Market Street
Saint Louis, MO 63103-2523 47,092 57.69%
Janney Montgomery Scott LLC
International Association of Campus
Law Enforcement Administrators
1717 Arch Street
Philadelphia, PA 19103-2713 9,542 11.69%
LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046 8,690 10.65%
Global Risk Charles Schwab & Co.
Allocation For the Exclusive Benefit
----------- of Customers
Class A Mutual Fund Operations
------- 211 Main Street
San Francisco, CA 94105-1905 1,775,415 7.55%
First Clearing, LLC
Special Custody Acct For the
Exclusive Benefit of Customer
2801 Market St.
Saint Louis, MO 63103-2523 1,430,703 6.09%
MLPF&S For the Sole Benefit of
Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 2,465,988 10.49%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 1,728,298 7.35%
Global Risk Charles Schwab & Co.
Allocation For the Exclusive Benefit
----------- of Customers
Class B Mutual Fund Operations
------- 211 Main Street
San Francisco, CA 94105-1905 277,209 12.84%
First Clearing, LLC
Special Custody Acct
For the Exclusive Benefit of Customer
2801 Market St.
Saint Louis, MO 63103-2523 172,189 7.98%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 342,131 15.85%
National Financial Services LLC
For the Exclusive Benefit
Of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 119,103 5.52%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 344,980 15.98%
Global Risk First Clearing, LLC
Allocation 2801 Market St.
----------- Saint Louis, MO 63103-2523 495,134 11.00%
Class C
-------
MLPF&S For the Sole Benefit
of Its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 1,144,233 25.43%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 450,768 10.02%
Global Risk Hartford Life Insurance Company
Allocation Separate Account
----------- Attn: UIT Operations
Class R P.O. Box 2999
------- Hartford, CT 06104-2999 78,173 22.93%
Hartford Securities
Distribution Company
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 31,938 9.37%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 30,335 8.90%
Mid Atlantic Trust Company FBO
J&S Oil Co., 401 K Profit
Sharing Plan & Trust
1251 Waterfront Place, Suite 525
Pittsburgh, PA 15222-4228 30,014 8.80%
Mid Atlantic Trust Company FBO
Smythe Volvo Inc., 401 K Profit
Sharing Plan & Trust
1251 Waterfront Place, Suite 525
Pittsburgh, PA 15222-4228 48,244 14.15%
Reliance Trust Co.
FBO Act Nextmed 401K
P.O. Box 48529
Atlanta, GA 30362-1529 65,284 19.15%
TD Ameritrade Trust Company
P.O. Box 17748
Denver, CO 80217-0748 20,634 6.05%
Global Risk AIG Retirement Services Company
Allocation FBO AIGFSB Cust TTEE FBO
----------- City of Elk Grove
Class K 2929 Allen Parkway, A6-20
------- Houston, TX 77019-2155 19,211 12.14%
AIG Retirement Services Company
FBO AIGFSB Cust TTEE FBO
City of Elk Grove
2929 Allen Parkway, A6-20
Houston, TX 77019-2155 12,427 7.85%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 67,847 42.87%
Selzer Gurvitch Rabin & Obecny
401(k) Profit Sharing Plan
4416 East West Hwy.
4th Floor
Bethesda, MD 20814-4565 10,371 6.55%
Global Risk Nationwide Trust Company FSB
Allocation C/O IPO Portfolio Accounting
----------- P.O. Box 182029
Class I Columbus, OH 43218-2029 4,613 99.84%
-------
Global Risk AARC Pension
Allocation P.O. Box 2180
----------- Tulsa, OK 74101-2180 123,812 5.65%
Advisor Charles Schwab & Co.
Class For the Exclusive Benefit of
------- Customers Mutual Fund
Operations
211 Main Street
San Francisco, CA 94105-1905 290,817 13.28%
FIIOC FBO
Cincom Systems Inc.
100 Magellan Way (KWIC)
Covington, KY 41015-1987 111,930 5.11%
Great-West Trust Company LLC
TTEE C FBO: College of
Westchester Business School 401K
C/O Fascore LLC
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 127,264 5.81%
LPL Financial
FBO Customer Accounts
Attn: Mutual Fund Operations
P.O. Box 509046
San Diego, CA 92150-9046 351,444 16.05%
Providence Ear Nose & Throat
Assoc. Inc.
401K PS Plan
Steven W. Fisher TTEE
2112 Providence Avenue
Chester, PA 19013-5507 154,154 7.04%
Servco Oil Inc 401K Plan
Attn: Lynn Morin
387 Danbury Road
Wilton, CT 06897-2529 111,864 5.11%
Equity Income First Clearing, LLC
------------- Special Custody Acct
Class A For the Exclusive Benefit of Customer
------- 2801 Market St.
Saint Louis, MO 63103-2523 792,359 6.72%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 1,040,620 8.83%
National Financial Services LLC
For the Exclusive Benefit
Of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 833,373 7.07%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 1,974,859 16.75%
State Street Corporation TTEE
C/F ADP Access
1 Lincoln Street
Boston, MA 02111-2901 628,677 5.33%
Equity Income First Clearing, LLC
------------- Special Custody Acct For the
Class B Exclusive Benefit of Customer
------- 2801 Market St.
Saint Louis, MO 63103-2523 40,201 8.50%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 84,093 17.78%
National Financial Services LLC
For the Exclusive Benefit
Of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310 32,170 6.80%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 64,322 13.60%
Equity Income First Clearing, LLC
------------- Special Custody Acct For the
Class C Exclusive Benefit of Customer
------- 2801 Market St.
Saint Louis, MO 63103-2523 364,667 11.02%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 764,692 23.12%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 314,373 9.50%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 366,448 11.08%
Raymond James
Omnibus for Mutual Funds
House Acct Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102 335,284 10.13%
Equity Income Capital Bank & Trust Company
------------- TTEE F
Class R Ashok & Yogini Kathari PSP 401K
------- 8515 E. Orchard Rd., 2T2
Greenwood Village, CO 80111-5002 33,969 6.14%
Hartford Securities Distribution
Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 29,406 5.31%
State Street Corporation TTEE
C/F ADP Access
1 Lincoln Street
Boston, MA 02111-2901 208,019 37.58%
Equity Income Great-West Trust Company LLC
------------- TTEE F Richardson
Class K Kontogouris Emerson
------- 8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 16,543 7.08%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 146,365 62.63%
Equity Income PIMS/Prudential Retirement
------------- As Nominee for the TTEE/Custodian
Class I PL Consolidated Container
------- 3101 Towercreek Parkway, Suite 300
Atlanta, GA 30339-3256 189,960 89.82%
PIMS/Prudential Retirement
As Nominee for the TTEE/Custodian
PL Consolidated Container Co.
3101 Towercreek Parkway, Suite 300
Atlanta, GA 30339-3256 16,656 7.88%
Equity Income First Clearing, LLC
------------- Special Custody Acct For the
Advisor Class Exclusive Benefit of Customer
------------- 2801 Market St.
Saint Louis, MO 63103-2523 1,099,192 15.80%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246-6484 676,681 9.72%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 484,884 6.97%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 1,203,587 17.30%
PIMS/Prudential Retirement Plan
Nominee Trusteee Custodian
005 New York City
160 Water Street, Room 620
New York, NY 10038-4922 610,847 8.78%
Global Real MLPF&S for the Sole Benefit of
Estate its Customers
----------- Attn: Fund Admin
Class A 4800 Deer Lake Dr., East
------- 2nd Floor
Jacksonville, FL 32246-6484 672,289 9.82%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 354,539 5.18%
Global Real First Clearing, LLC
Estate Special Custody Account for the
----------- Exclusive Benefit of Customer
Class B 2801 Market Street
------- Saint Louis, MO 63103-2523 17,142 5.60%
MLPF&S for the Sole Benefit
of its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 30,903 10.09%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 25,972 8.48%
Global Real First Clearing, LLC
Estate Special Custody Account for the
----------- Exclusive Benefit of Customer
Class C 2801 Market Street
------- Saint Louis, MO 63103-2523 85,978 5.44%
Hartford Securities
Distribution Company INC/PRG
Attn: UIT Operations
P.O. Box 2999
Hartford, CT 06104-2999 86,912 5.50%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 350,317 22.15%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 141,188 8.93%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 235,609 14.90%
Raymond James
Omnibus for Mutual Funds
House Acct Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102 89,253 5.64%
Global Real Hartford Securities
Estate Distribution Company INC/PRG
----------- Attn: UIT Operations
Class R P.O. Box 2999
------- Hartford, CT 06104-2999 86,451 11.14%
PAI Trust Company, Inc.
South Dekalb Family
Medical Association
1300 Enterprise Drive
De Pere, WI 54115-4934 39,974 5.15%
State Street Corporation TTEE
C/F ADP Access
1 Lincoln Street
Boston, MA 02111-2901 151,741 19.56%
Global Real Great-West Trust Company LLC
Estate TTEE CAEA Investors LLC
----------- 401K Savings Plan
Class K 8515 E. Orchard Rd., 2T2
------- Greenwood Village, CO 80111-5002 48,147 6.59%
Nationwide Trust Company FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029 45,093 6.17%
Global Real Great-West Trust Company LLC
Estate TTEE F Employee Benefits
----------- Clients 401K
Class I 8515 E. Orchard Road, 2T2
------- Greenwood Village, CO 80111-5002 10,968 7.63%
Great-West Trust Company LLC
TTEE C George Little
Management LLC 401K P
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 7,632 5.31%
Great-West Trust Company LLC
TTEE C Webcor Builders
401K PSP
8515 E. Orchard Road, 2T2
Greenwood Village, CO 80111-5002 101,063 70.34%
Wilmington Trust Risc TTEE
C/F Bowie Gridley Architects 401K
P.O. Box 52129
Phoenix, AZ 85072-2129 13,151 9.15%
Global Real First Clearing, LLC
Estate Special Custody Account for the
----------- Exclusive Benefit of Customer
Advisor Class 2801 Market Street
------------- Saint Louis, MO 63103-2523 126,571 14.32%
MLPF&S For the Sole Benefit of
its Customers
Attn: Fund Admin
4800 Deer Lake Dr., East
2nd Floor
Jacksonville, FL 32246-6484 52,614 5.95%
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza II, 3rd Floor
Jersey City, NJ 07311 311,214 35.20%
Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052 163,860 18.53%
Emerging AllianceBernstein L.P
Markets Attn: Brent Mather-Seed Acct
Equity 1 N. Lexington Ave.
-------- White Plains, NY 10601-1712 1,000 12.34%
Class A
------- Frontier Trust Company
Chestnut Investment Group Inc.
Elizabeth F. Deutsch
78 Montebello Commons Drive
Suffern, NY 10901-4250 940 11.60%
Frontier Trust Company
Chestnut Investment Group Inc.
Neal A. Deutsch
78 Montebello Commons Drive
Suffern, NY 10901-4250 1,382 17.06%
Frontier Trust Company
C/F Karen Bierwert Roth Conv.
99 Nonotuck Street
Florence, MA 01062-1905 925 11.42%
Frontier Trust Company
C/F Jean Koneman Roth Conv.
2615 Meadow Lane
La Marque, TX 77568-5043 1,315 16.23%
Frontier Trust Company
FBO Linda S.D. Campeta IRA Rollover
645 Fish Game Road
Hudson, NY 12534-9105 1,907 23.53%
Emerging AllianceBernstein L.P
Markets Attn: Brent Mather-Seed Acct
Equity 1 N. Lexington Ave.
-------- White Plains, NY 10601-1712 498,000 97.26%
Advisor Class
-------------
Emerging AllianceBernstein L.P
Markets Attn: Brent Mather-Seed Acct
Equity 1 N. Lexington Ave.
-------- White Plains, NY 10601-1712 1,000 79.23%
Class C
------- Frontier Trust Company
John M. Palatiello & Associates Inc.
John L. Byrd
1259 Pierce Road
Berryville, VA 22611-2313 134 10.60%
Frontier Trust Company
John M. Palatiello & Associates Inc.
Sally D. Palatiello
11623 Deer Forest Road
Reston, VA 20194-1104 128 10.14%
|
Custodian
State Street Bank and Trust Company ("State Street"), One Lincoln
Street, Boston, MA 02111, acts as the custodian for the assets of Value Fund,
Discovery Value, International Value, Global Value, Growth and Income, Core
Opportunities, Global Risk Allocation, Equity Income Fund and Emerging Markets
Equity but will play no part in deciding the purchase or sale of portfolio
securities. Subject to the supervision of each Fund's Directors, State Street
may enter into sub-custodial agreements for the holding of each Fund's foreign
securities.
Brown Brothers Harriman & Co. ("Brown Brothers"), 40 Water Street,
Boston, MA 02109, acts as the custodian for the assets of Global Real Estate
Investment Fund but plays no part in deciding the purchase or sale of portfolio
securities. Subject to the supervision of the Fund's Directors, Brown Brothers
may enter into sub-custodial agreements for the holding of the Fund's foreign
securities.
Principal Underwriter
ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, NY 10105, is the Funds' Principal
Underwriter and as such may solicit orders from the public to purchase shares of
the Funds. Under the Distribution Services Agreement, each Fund has agreed to
indemnify ABI, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the shares of
Common Stock offered hereby are passed upon by Seward & Kissel LLP, New York,
NY.
Independent Registered Public Accounting Firm
Ernst & Young LLP, 5 Times Square, New York, NY 10036, has been
appointed as the independent registered public accounting firm for each of the
Funds.
Code of Ethics and Proxy Voting Policies and Procedures
The Funds, the Adviser and ABI have each adopted codes of ethics
pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics permit personnel
subject to the codes to invest in securities, including securities that may be
purchased or held by a Fund.
The Funds have adopted the Adviser's proxy voting policies and
procedures. The Adviser's proxy voting policies and procedures are attached as
Appendix A.
Information regarding how each Fund voted proxies related to
portfolio securities during the most recent 12-month period ended June 30, 2012
is available (i) without charge, upon request, by calling (800) 227-4618; or on
or through the Funds' website at www.AllianceBernstein.com; or both; and (ii) on
the SEC's website at www.sec.gov.
Additional Information
Any shareholder inquiries may be directed to the shareholder's
financial intermediary or to ABIS at the address or telephone numbers shown on
the front cover of this SAI. This SAI does not contain all the information set
forth in the Registration Statement filed by the Funds with the SEC under the
Securities Act. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The financial statements of each of Value Fund, Discovery Value,
International Value, Global Value, Core Opportunities, Global Real Estate,
Global Risk Allocation, Equity Income and Emerging Markets Equity for the fiscal
year ended November 30, 2012 and the reports of Ernst & Young LLP, independent
registered public accounting firm, are incorporated herein by reference to each
Fund's annual report. The annual report for each Fund was filed on Form N-CSR
with the SEC on January 31, 2013. Each Fund's annual report is available without
charge upon request by calling ABIS at (800) 227-4618 or on the Internet at
www.AllianceBernstein.com.
The financial statements of Growth and Income for the fiscal year
ended October 31, 2012 and the reports of Ernst & Young LLP, independent
registered public accounting firm, are incorporated herein by reference to the
Fund's annual report. The annual report for the Fund was filed on Form N-CSR
with the SEC on January 7, 2013. The Fund's annual report is available without
charge upon request by calling ABIS at (800) 227-4618 or on the Internet at
www.AllianceBernstein.com.