This is filed pursuant to Rule 497(e)
File No. 2-48227



[A/B]
LOGO

                 AB INFLATION STRATEGIES

                 -AB Bond Inflation Strategy
                  (Class A-ABNAX; Class C-ABNCX; Advisor Class-ABNYX; Class R-
                  ABNRX; Class K-ABNKX; Class I-ANBIX; Class 1-ABNOX; Class 2-
                  ABNTX; Class Z - ABNZX)
                 -AB Municipal Bond Inflation Strategy
                  (Class A-AUNAX; Class C-AUNCX; Advisor Class-AUNYX; Class 1-
                  AUNOX; Class 2-AUNTX)
                 -AB All Market Real Return Portfolio
                  (Class A-AMTAX; Class C-ACMTX; Advisor Class-AMTYX; Class R-
                  AMTRX; Class K-AMTKX; Class I-AMTIX; Class 1-AMTOX; Class 2-
                  AMTTX; Class Z-AMTZX)

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                 c/o AllianceBernstein Investor Services, Inc.
                 P.O. Box 786003, San Antonio, Texas 78278-6003
                           Toll Free: (800) 221-5672
                    For Literature: Toll Free (800) 227-4618

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                      STATEMENT OF ADDITIONAL INFORMATION
                 January 29, 2016, as amended November 7, 2016

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            This Statement of Additional Information ("SAI") is not a
prospectus, but supplements and should be read in conjunction with the current
prospectuses, dated January 29, 2016, for the AB Bond Inflation Strategy ("Bond
Inflation Strategy") offering Class A, Class C, Advisor Class, Class R, Class K,
Class I, Class Z, Class 1 and Class 2 shares, the current prospectuses, dated
January 29, 2016, for the AB All Market Real Return Portfolio ("All Market Real
Return Portfolio") offering Class A, Class C, Advisor Class, Class R, Class K,
Class I, Class Z, Class 1 and Class 2 shares, and the current prospectuses,
dated January 29, 2016, for the AB Municipal Bond Inflation Strategy ("Municipal
Bond Inflation Strategy" and together with Bond Inflation Strategy and All
Market Real Return Portfolio, each a "Fund" and collectively the "Funds")
offering Class A, Class C, Advisor Class, Class 1 and Class 2 shares
(collectively, the "Prospectuses"). Financial statements for the Funds for the
year ended October 31, 2015 are included in each Fund's annual report to
shareholders and financial statements for the six-month period ended April 30,
2016 for the All Market Real Market Return Portfolio are included in the Fund's
semi-annual report to shareholders and are incorporated into the SAI by
reference. Copies of the Prospectuses 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.ABglobal.com.



                               TABLE OF CONTENTS
                               -----------------
                                                                            Page
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INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS..............................3
INVESTMENT RESTRICTIONS.......................................................52
MANAGEMENT OF THE FUNDS.......................................................54
EXPENSES OF THE FUNDS.........................................................79
PURCHASE OF SHARES............................................................90
REDEMPTION AND REPURCHASE OF SHARES..........................................112
SHAREHOLDER SERVICES.........................................................115
NET ASSET VALUE..............................................................117
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................121
PORTFOLIO TRANSACTIONS.......................................................132
GENERAL INFORMATION..........................................................136
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM..............................................................150
APPENDIX A:  PROXY VOTING POLICY STATEMENT...................................A-1

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



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               INFORMATION ABOUT THE FUNDS AND THEIR INVESTMENTS

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Introduction to the Funds
-------------------------

            Each Fund is a series of the AB Bond Fund, Inc. (the "Company"). The
Company is an open-end investment company.

            Except as noted, the Funds' investment policies and practices
described below are not "fundamental policies" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), and may, therefore,
be changed by the Board of Directors of the Company (the "Board" or the
"Directors") with respect to a Fund 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 that 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 the 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 Prospectuses.

Derivatives
-----------

            A Fund may, but is not required to, use derivatives for hedging or
other risk management purposes or as part of its investment practices.
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
contracts, 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 include listed and cleared transactions, where a Fund's derivative
trade counterparty is an exchange or clearinghouse, and non-cleared bilateral
"over-the-counter" ("OTC") transactions where the Fund's derivative trade
counterparty is a financial institution. Exchange-traded or cleared derivatives
transactions tend to be more liquid and subject to less counterparty 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
security, commodity or other asset for an agreed-upon price at a future date. A
forward contract generally is settled by physical delivery of the security,
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 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). Generally, the notional principal
amount is used solely to calculate the payment streams but is not exchanged.
Certain standardized swaps, including certain interest rate swaps and credit
default swaps, are subject to mandatory central clearing. Cleared swaps are
transacted through futures commission merchants ("FCMs") that are members of
central clearinghouses with the clearinghouse serving as central counterparty,
similar to transactions in futures contracts. Funds post initial and variation
margin to support their obligations under cleared swaps by making payments to
their clearing member FCMs. Central clearing is expected to reduce counterparty
credit risks and increase liquidity, but central clearing does not make swap
transactions risk free. Centralized clearing will be required for additional
categories of swaps on a phased-in basis based on Commodity Futures Trading
Commission ("CFTC") approval of contracts for central clearing. Bilateral swap
agreements are two-party contracts entered into primarily by institutional
investors and are not cleared through a third party.

            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
                  derivatives traded on an exchange or through a clearinghouse
                  is generally less than for uncleared OTC derivatives, since
                  the exchange or clearinghouse, which is the issuer or
                  counterparty to each 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
                  uncleared OTC derivatives, there is no similar clearing agency
                  guarantee. Therefore, a Fund considers the creditworthiness of
                  each counterparty to an uncleared OTC derivative in evaluating
                  potential credit risk.

                  -- Counterparty Risk. The value of an OTC derivative will
                  depend on the ability and willingness of a Fund's counterparty
                  to perform its obligations under the transaction. If the
                  counterparty defaults, a Fund will have contractual remedies
                  but may choose not to enforce them to avoid the cost and
                  unpredictability of legal proceedings. In addition, if a
                  counterparty fails to meet its contractual obligations, a Fund
                  could miss investment opportunities or otherwise be required
                  to retain investments it would prefer to sell, resulting in
                  losses for the Fund. Participants in OTC derivatives markets
                  generally are not subject to the same level of credit
                  evaluation and regulatory oversight as are exchanges or
                  clearinghouses. As a result, OTC derivatives generally expose
                  a Fund to greater counterparty risk than derivatives traded on
                  an exchange or through a clearinghouse.

                        New regulations affecting derivatives transactions
                  require certain standardized derivatives, including many types
                  of swaps, to be subject to mandatory central clearing. Under
                  these new requirements, a central clearing organization is
                  substituted as the counterparty to each side of the
                  derivatives transaction. Each party to derivatives
                  transactions is required to maintain its positions with a
                  clearing organization through one or more clearing brokers.
                  Central clearing is intended to reduce, but not eliminate,
                  counterparty risk. A Fund is subject to the risk that its
                  clearing member or clearing organization will itself be unable
                  to perform its obligations.

                  -- 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.

                  -- Regulatory Risk. The U.S. Government is in the process of
                  adopting and implementing additional regulations governing
                  derivatives markets, including clearing as discussed above,
                  margin, reporting and registration requirements. While the
                  full extent and cost of these regulations is currently
                  unclear, these regulations could, among other things, restrict
                  a Fund's ability to engage in derivatives transactions and/or
                  increase the cost of such derivatives transactions (through
                  increased margin or capital requirements). In addition,
                  Congress, various exchanges and regulatory and self-regulatory
                  authorities have undertaken reviews of options and futures
                  trading in light of market volatility. Among the actions that
                  have been taken or proposed to be taken are new limits and
                  reporting requirements for speculative positions new or more
                  stringent daily price fluctuation limits for futures and
                  options transactions, and increased margin requirements for
                  various types of futures transactions. These regulations and
                  actions may adversely affect the instruments in which a Fund
                  invests and its ability to execute 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.

            Other. 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 CFTC thereunder.
Under CFTC rules, a registered investment company that conducts more than a
minimal amount of trading in futures contracts, commodity options, swaps and
other commodity interests is a commodity pool and its adviser must register as a
commodity pool operator ("CPO"). Under such rules, registered investment
companies that are commodity pools are subject to additional recordkeeping,
reporting and disclosure requirements. The Funds, except All Market Real Return
Portfolio, have claimed an exclusion from the definition of commodity pool
operator under CFTC Rule 4.5 under the CEA with respect to the Funds and are not
currently subject to these registration, disclosure and reporting requirements.
The trading exemption in Rule 4.5 is not available to All Market Real Return
Portfolio and AllianceBernstein L.P., the Funds' adviser (the "Adviser") has
registered as a CPO with respect to that Fund. This registration subjects All
Market Real Return Portfolio to certain registration and reporting requirements
but, under rules recently adopted by the CFTC, compliance with Securities and
Exchange Commission ("SEC") disclosure and filing requirements will, for the
most part, constitute compliance with comparable CFTC requirements.

Use of Options, Futures Contracts, 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.

            The Bond Inflation Strategy and All Market Real Return Portfolio
may, for example, enter into forward currency exchange contracts to attempt to
minimize the risk to the Funds 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 their 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, the Funds 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 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 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, the 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 and Municipal and U.S. Government
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 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 may write a put or call option in return for a premium, which
is retained by the 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, which
could be substantial, equal to the difference between the option price and the
market price of the security.

            A Fund may also, 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 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.

            The Funds may purchase or write options on securities of the types
in which they are permitted to invest in privately-negotiated (i.e., OTC)
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.

            The Funds 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 Funds 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 declined 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 offset 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.

            --Options on Foreign Currencies. Bond Inflation Strategy and All
Market Real Return Portfolio 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 Funds may purchase put options on the
foreign currency. If the value of the currency does decline, the Funds 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, the 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.

            Bond Inflation Strategy and All Market Real Return Portfolio may
write options on foreign currencies for hedging purposes or to increase return.
For example, where the Funds anticipate a decline in the dollar value of
non-U.S. Dollar-denominated securities due to adverse fluctuations in exchange
rates they 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, the 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, Bond Inflation Strategy and All Market Real Return Portfolio may also
invest in options on foreign currencies for non-hedging purposes as a means of
making direct investments in foreign currencies. The Funds 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, each Fund may purchase call
options in anticipation of an increase in the market value of a currency. The
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 the Fund for the
purpose of benefiting from a decline in the value of a currency that the Fund
does not own. The 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 Bond
Inflation Strategy and All Market Real Return Portfolio 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 net asset value ("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 contracts 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 are used
for hedging or risk management 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 in
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 Fund 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 in 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.

            --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 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. Bond Inflation Strategy and All Market Real Return
Portfolio 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. Currency swaps may
involve the exchange of actual principal amounts of currencies by the
counterparties at the initiation, and again upon termination of the transaction.
Currency swaps may be bilateral and privately negotiated, with the Fund
expecting to achieve an acceptable degree of correlation between its portfolio
investments and its currency swaps positions. The Funds 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
short-term rating category of at least one nationally recognized statistical
rating organization ("NRSRO") at the time of entering into the transaction.

            --Swaps: Interest Rate Transactions. A Fund may enter into interest
rate swap, 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
obligated 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, swaption, 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.

            --Inflation (CPI) Swaps. Inflation swap agreements are contracts in
which one party agrees to pay the cumulative percentage increase in a price
index (the Consumer Price Index with respect to CPI swaps) over the term of the
swap (with some lag on the inflation index), and the other pays a compounded
fixed rate. Inflation swap agreements may be used to protect the NAV of the Fund
against an unexpected change in the rate of inflation measured by an inflation
index since the value of these agreements is expected to increase if unexpected
inflation increases.

            --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
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 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. Certain standardized swaps, including interest rate swaps and
credit default swaps, are, or soon will be, subject to mandatory central
clearing. Central clearing is expected, among other things, to reduce
counterparty credit risk, but does not eliminate it completely.

            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.

            --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. Bond Inflation Strategy and All Market Real
Return Portfolio may invest in non-U.S. Dollar-denominated securities on a
currency hedged or un-hedged basis. The Adviser may actively manage a Fund's
currency exposures and may seek investment opportunities by taking long or short
positions in currencies through the use of currency-related derivatives,
including forward currency exchange contracts, futures contracts and options on
futures contracts, swaps and options. The Adviser may enter into transactions
for investment opportunities when it anticipates that a foreign currency will
appreciate or depreciate in value but securities denominated in that currency
are not held by 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. A
Fund may also conduct currency exchange contracts on a spot basis (i.e., for
cash at the spot rate prevailing in the currency exchange market for buying or
selling securities).

Bank Obligations
----------------

            A Fund may invest in bank obligations, including certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdraw on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. The Fund will not invest
in fixed time deposits which (1) are not subject to prepayment or (2) provide
for withdrawal penalties upon prepayment (other than overnight deposits) if, in
the aggregate, more than 15% of its net assets would be invested in such
deposits, repurchase agreements maturing in more than seven days and other
illiquid assets.

            Obligations of foreign banks involve somewhat different investment
risks than those affecting obligations of U.S. banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of U.S. banks, that a foreign jurisdiction might impose
withholding taxes on interest income payable on those obligations, that foreign
deposits may be seized or nationalized, that foreign governmental restrictions
such as exchange controls may be adopted which might adversely affect the
payment of principal and interest on those obligations and that the selection of
those obligations may be more difficult because there may be less publicly
available information concerning foreign banks or the accounting, auditing and
financial reporting standards, practices and requirements applicable to foreign
banks may differ from those applicable to U.S. banks. Foreign banks are not
generally subject to examination by any U.S. Government agency or
instrumentality.

Event-linked Securities
-----------------------

            Event-linked securities are variable-rate or fixed-rate fixed-income
securities or types of equity securities for which the return of principal and
payment of interest are contingent on the non-occurrence of various catastrophe
exposures, which may be specific trigger events or a diversified group of
events, such as hurricanes, typhoons, wind events or earthquakes. The most
common type of fixed-income securities are known as "catastrophe" or "CAT"
bonds. In some cases, the trigger event(s) will not be deemed to have occurred
unless the event(s) happened in a particular geographic area and was of a
certain magnitude (based on independent scientific readings) or caused a certain
amount of actual or modeled loss. If the trigger event(s) occurs prior to the
securities' maturity, a Fund may lose all or a portion of its principal and
forgo additional interest.

            These securities may have a special condition that states that if
the issuer (i.e., an insurance or reinsurance company) suffers a loss from a
particular pre-defined catastrophe, then the issuer's obligation to pay interest
and/or repay the principal is either deferred or completely forgiven. For
example, if a Fund holds a fixed-income security that covers an insurer's losses
due to a hurricane with a "trigger" at $1 billion and a hurricane hits causing
$1 billion or more in losses to such insurer, then the Fund will lose all or a
portion of its principal invested in the security and forgo any future interest
payments. If the trigger event(s) does not occur, the Fund will recover its
principal plus interest. Interest typically accrues and is paid on a quarterly
basis. Although principal typically is repaid only on the maturity date, it may
be repaid in installments, depending on the terms of the securities.

            Event-linked securities may be issued by government agencies,
insurance companies, reinsurers, special purpose companies or other on-shore or
off-shore entities. Event-linked securities are a relatively new type of
financial instrument. As a result, there is no significant trading history of
these securities and these securities may be illiquid or the markets for these
instruments may not be liquid at all times. These securities may be rated,
generally below investment grade or the unrated equivalent, and have the same or
equivalent risks as higher yield debt securities ("junk bonds"). The rating
primarily reflects the rating agency's calculated probability that a pre-defined
trigger event will occur as well as the overall expected loss to the principal
of the security.

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. A 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.

            Forward commitments include "to be announced" ("TBA")
mortgage-backed securities, which are contracts for the purchase or sale of
mortgage-backed securities to be delivered at a future agreed-upon date, whereby
the specific mortgage pool number 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. Subsequent to the time of the trade, a mortgage pool or pools
guaranteed by the Government National Mortgage Association, or GNMA, the Federal
National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage
Association, or FHLMC (including fixed-rate or variable-rate mortgages) are
allocated to the TBA mortgage-backed securities transactions.

            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, the 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, the 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, the 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 the 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 ("Rule 144A Securities") to qualified
institutional buyers. To the extent permitted by applicable law, Rule 144A
Securities will not be treated as illiquid for purposes of the foregoing
restriction so long as such securities meet the liquidity guidelines established
by the Board. Pursuant to these guidelines, the Adviser will monitor the
liquidity of a Fund's investment in Rule 144A Securities. 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 Board, 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 SEC interpretation or position with respect to
such type of securities.

Infrastructure Investments
--------------------------

            The All Market Real Return Portfolio may invest in
infrastructure-related securities. Infrastructure entities include companies in
the infrastructure business and infrastructure projects and assets representing
a broad range of businesses, types of projects and assets. The risks that may be
applicable to an infrastructure entity vary based on the type of business,
project or asset, its location, the developmental stage of a project and an
investor's level of control over the management or operation of the entity.

            Infrastructure entities are typically subject to significant
government regulations and other regulatory and political risks, including
expropriation; political violence or unrest, including war, sabotage or
terrorism; and unanticipated regulatory changes by a government or the failure
of a government to comply with international treaties and agreements.
Additionally, an infrastructure entity may do business with state-owned
suppliers or customers that may be unable or unwilling to fulfill their
contractual obligations. Changing public perception and sentiment may also
influence a government's level of support or involvement with an infrastructure
entity.

            Companies engaged in infrastructure development and construction and
infrastructure projects or assets that have not been completed will be subject
to construction risks, including construction delays; delays in obtaining
permits and regulatory approvals; unforeseen expenses resulting from budget and
cost overruns; inexperienced contractors and contractor errors; and problems
related to project design and plans. Due to the numerous risks associated with
construction and the often incomplete or unreliable data about projected
revenues and income for a project, investing in the construction of an
infrastructure project involves significant risks. The ability to obtain initial
or additional financing for an infrastructure project is often directly tied to
its stage of development and the availability of operational data. A project
that is complete and operational is more likely to obtain financing than a
project at an earlier stage of development. Additionally, an infrastructure
entity may not be able to obtain needed additional financing, particularly
during periods of turmoil in the capital markets. The cost of compliance with
international standards for project finance may increase the cost of obtaining
capital or financing for a project. Alternatively, an investment in debt
securities of infrastructure entities may also be subject to prepayment risk if
lower-cost financing becomes available.

            Infrastructure projects or assets may also be subject to operational
risks, including the project manager's ability to manage the project; unexpected
maintenance costs; government interference with the operation of an
infrastructure project or asset; obsolescence of project; and the early exit of
a project's equity investors. Additionally, the operator of an infrastructure
project or asset may not be able pass along the full amount of any cost
increases to customers.

            An infrastructure entity may be organized under a legal regime that
may provide investors with limited recourse against the entity's assets, the
sponsor or other non-project assets and there may be restrictions on the ability
to sell or transfer assets. Financing for infrastructure projects and assets is
often secured by cash flows, underlying contracts, and project assets. An
investor may have limited options and there may be significant costs associated
with foreclosing upon any assets that secure repayment of financing.

Insured Bonds
-------------

            Municipal Bond Inflation Strategy may obtain insurance on its
municipal bonds or purchase insured municipal bonds covered by policies issued
by monoline insurance companies. Currently, only Assured Guaranty Municipal
Corp. ("AGM") is writing policies on newly issued municipal bonds. AGM
(formerly, Financial Security Assurance Holdings Ltd.) is an indirect subsidiary
of Assured Guaranty Ltd. ("Assured"). Prior to the recent financial crisis,
there were several other insurers writing policies on municipal bonds, but the
ratings of these insurers have been severely downgraded and, while they are
still insuring municipal bonds under policies written prior to the financial
crisis, they are no longer writing new policies. These insurers include National
Public Finance Guarantee Corporation ("National"), a wholly-owned subsidiary of
MBIA Inc. ("MBIA"); Financial Guaranty Insurance Company ("FGIC"); Ambac
Assurance Corporation ("Ambac"), a wholly-owned subsidiary of Ambac Financial
Group, Inc.; ACA Financial Guaranty Corporation ("ACA"); Radian Asset Assurance,
Inc. (formerly, Asset Guaranty Insurance Company) ("Radian"), a wholly-owned
subsidiary of Radian Group, Inc.; Syncora Guarantee Inc. ("Syncora") (formerly
XL Capital Assurance, Inc.), a wholly-owned subsidiary of Syncora Holdings Ltd.
(formerly Security Capital Assurance Ltd.); CIFG Assurance North America, Inc.
(formerly, CDC IXIS Financial Guaranty North America, Inc.) ("CIFG NA"); and
Berkshire Hathaway Assurance Corporation ("BHAC"), a wholly owned subsidiary of
Berkshire Hathaway Inc. As noted above, most of these insurers have been
downgraded and it is possible that additional downgrades may occur. Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Ratings Services
("S&P") ratings reflect the respective rating agency's current assessment of the
creditworthiness of each insurer and its ability to pay claims on its policies
of insurance. Any further explanation as to the significance of the ratings may
be obtained only from the applicable rating agency. The ratings are not
recommendations to buy, sell or hold the municipal bonds, and such ratings may
be subject to revision or withdrawal at any time by the rating agencies. Any
downward revision or withdrawal of either or both ratings may have an adverse
effect on the market price of the municipal bonds.

            It should be noted that insurance is not a substitute for the basic
credit of an issuer, but supplements the existing credit and provides additional
security therefor. Moreover, while insurance coverage for the municipal
securities held by the Fund may reduce credit risk, it does not protect against
market fluctuations caused by changes in interest rates and other factors. As a
result of declines in the credit quality and associated downgrades of most fund
insurers, insurance has less value than it did in the past. The market now
values insured municipal securities primarily based on the credit quality of the
issuer of the security with little value given to the insurance feature. In
purchasing insured municipal securities, the Adviser currently evaluates the
risk and return of such securities through its own research.

Investment in Exchange-Traded Funds and Other Investment Companies
------------------------------------------------------------------

            A Fund may invest in shares of exchange-traded funds, or ETFs,
subject to the restrictions and limitations of the 1940 Act, or any applicable
rules, exemptive orders or regulatory guidance. 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 its 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 or exemptive orders
thereunder. As with ETF investments, if the Fund acquires shares in other
investment companies, shareholders would bear, indirectly, the expenses of such
investment companies (which may include management and advisory fees), which 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.

Investments in Pre-IPO Securities.
----------------------------------

            The Funds may invest in pre-IPO securities. Pre-IPO securities, or
venture capital investments, are investments in new and early stage companies,
often funded by venture capital and referred to as "venture capital companies",
whose securities have not been offered to the public and that are not publicly
traded. These investments may present significant opportunities for capital
appreciation but involve a high degree of risk that may result in significant
decreases in the value of these investments. Venture capital companies may not
have established products, experienced management or earnings history. The Funds
may not be able to sell such investments when the portfolio managers and/or
investment personnel deem it appropriate to do so because they are not publicly
traded. As such, these investments are generally considered to be illiquid until
a company's public offering (which may never occur) and are often subject to
additional contractual restrictions on resale following any public offering that
may prevent the Funds from selling their shares of these companies for a period
of time. Market conditions, developments within a company, investor perception
or regulatory decisions may adversely affect a venture capital company and delay
or prevent a venture capital company from ultimately offering its securities to
the public.

Investments in the Wholly-Owned Subsidiary
------------------------------------------

            The All Market Real Return Portfolio seeks to gain exposure to
commodities and commodity-related investments and derivatives primarily through
investments in AllianceBernstein Cayman Inflation Strategy, Ltd., a wholly-owned
subsidiary of the Fund organized under the laws of the Cayman Islands (the
"Subsidiary"). Investments in the Subsidiary are expected to provide the All
Market Real Return Portfolio with exposure to the commodity markets within the
limitations of Subchapter M of the U.S. Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder (the "Code") and recent
Internal Revenue Service (the "IRS") revenue rulings, as discussed below under
"Dividends, Distributions and Taxes". The Subsidiary is a company organized
under the laws of the Cayman Islands, and is overseen by its own board of
directors. The Fund is the sole shareholder of the Subsidiary, and it is not
currently expected that shares of the Subsidiary will be sold or offered to
other investors.

            The Subsidiary is advised by the Adviser, and has the same
investment objective and will generally be subject to the same fundamental,
non-fundamental and certain other investment restrictions as the Fund; however,
the Subsidiary (unlike the Fund), may invest without limitation in
commodity-linked swap agreements and other commodity-linked derivative
instruments. The Fund and the Subsidiary may test for compliance with certain
investment restrictions on a consolidated basis, except that with respect to its
investments in certain securities, that may involve leverage, the Subsidiary
will comply with asset segregation or "earmarking" requirements to the same
extent as the Fund. By investing in the Subsidiary, the Fund is indirectly
exposed to the risks associated with the Subsidiary's investments. The
derivatives and other investments held by the Subsidiary are generally similar
to those held by the Fund and are subject to the same risks that apply to
similar investments if held directly by the Fund.

            It is expected that the Subsidiary will invest primarily in
commodity-linked derivative instruments, including swap agreements, commodity
options, futures contracts and options on futures contracts, backed by a
portfolio of inflation-indexed securities and other fixed-income securities.
Although the Fund may enter into these commodity-linked derivative instruments
directly, the Fund will likely gain exposure to these derivative instruments
indirectly by investing in the Subsidiary. To the extent that the Adviser
believes that these commodity-linked derivative instruments are better suited to
provide exposure to the commodities market than commodity index-linked notes,
the Fund's investment in the Subsidiary will likely increase. The Subsidiary
will also invest in inflation-indexed securities and other fixed-income
securities, which are intended to serve as margin or collateral for the
Subsidiary's derivatives position. To the extent that the Fund invests in the
Subsidiary, the Fund may be subject to the risks associated with those
derivative instruments and other securities, which are discussed elsewhere in
the Prospectuses and this SAI.

            While the Subsidiary may be considered similar to an investment
company, it is not registered under the 1940 Act and, unless otherwise noted in
the Prospectuses and this SAI, is not subject to all of the investor protections
of the 1940 Act and other U.S. regulations. Changes in the laws of the United
States and/or the Cayman Islands could result in the inability of the Fund
and/or the Subsidiary to operate as described in the Prospectuses and this SAI
and could negatively affect the Fund and its shareholders.

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
statutes, rules or regulations may be amended from time to time) or by guidance
regarding, interpretations of or exemptive orders under the 1940 Act. Under the
Fund's securities lending program, all securities loans will be secured
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
Board) 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. The 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 Fund 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 at any time 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 the Fund amounts equal to any income or other distributions
from the securities.

            A Fund will invest cash collateral from its securities lending
activities in shares of an affiliated money market fund managed by the Adviser
and approved by the Board. Any such investment of cash collateral will be
subject to the money market fund's investment risk. The Fund 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. The Fund will have the right to regain
record ownership of loaned securities or equivalent securities in order to
exercise voting or ownership rights. When the Fund lends securities, its
investment performance will continue to reflect changes in the value of the
securities loaned.

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"). The financial status of an institution interposed between a
Fund and a borrower may affect the ability of the Fund to receive principal and
interest payments.

            A Fund's investment may depend on the skill with which an agent bank
administers the terms of the corporate loan agreements, monitors borrower
compliance with covenants, collects principal, interest and fee payments from
borrowers and, where necessary, enforces creditor remedies against borrowers.
Agent banks typically have broad discretion in enforcing loan agreements.

            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. A 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, the 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 the 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, the 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 the 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 or BBB- or higher by
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 the 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 the 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, the 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 the Fund's
ability to dispose of particular Assignments or Participations when necessary to
meet the Fund's liquidity needs in response to a specific economic event such as
a deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the 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 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 the 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, TBA 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
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 U.S. Government) guarantor of mortgage-related securities is GNMA.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. 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 FNMA and 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 provided additional
funding to the GSEs, but recently the GSEs have been paying dividends to the
U.S. Treasury in a cumulative amount almost equal to the payments made to the
GSEs by the U.S. Treasury since 2008. The future of the GSEs 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. 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.

            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 guarantee. 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 or by other U.S. Government sponsored entities.
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, a Fund 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 a Fund's ability to buy or sell those securities at
any particular time. Without an active trading market, mortgage-related
securities held in a 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 in 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 include 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 Fund 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 payments. Similar to investment
companies, REITs are not taxed on income distributed to shareholders provided
they comply with several requirements of the Code. All Market Real Return
Portfolio may invest in REITs and will indirectly bear its proportionate share
of expenses incurred by REITs in which it invests in addition to the expenses it
incurs directly.

            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 the 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, a 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 the 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
Board has established procedures, which are periodically reviewed by the Board,
pursuant to which the Adviser monitors the creditworthiness of the dealers with
which a Fund enters into repurchase agreement transactions.

            A Fund may enter into buy/sell back transactions, which are similar
to repurchase agreements. In this type of transaction, the 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 are identical to repurchase
agreements, except that rather than buying securities for cash subject to their
repurchase by the seller, a Fund sells portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price slightly higher than the sale price. During the reverse repurchase
agreement period, the Fund continues to receive principal and interest payments
on these securities. Generally, the effect of a reverse repurchase agreement is
that the 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. Such transactions are advantageous only if the "interest cost" to
the Fund of the reverse repurchase transaction, i.e., the difference between the
sale and repurchase price for the securities, is less than the cost of otherwise
obtaining the cash invested in portfolio securities.

            Reverse repurchase agreements are considered to be a loan to a Fund
by the counterparty, collateralized by the assets subject to repurchase because
the incidents of ownership are retained by the Fund. By entering into reverse
repurchase agreements, the Fund obtains additional cash to invest in other
securities. The 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 leverage
and are speculative transactions because they allow the Fund to achieve a return
on a larger capital base relative to its NAV. The use of leverage creates the
opportunity for increased income for the Fund's shareholders when the Fund
achieves a higher rate of return on the investment of the reverse repurchase
agreement proceeds that it pays in interest on the reverse repurchase
transactions. However, there is a risk that returns could be reduced if the
rates of interest on the investment proceeds do not exceed the interest paid by
the Fund on the reverse repurchase transactions.

            Reverse repurchase agreements involve the risk that the market value
of the securities the 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, the
Fund's use of the proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities. In addition, the use of
these investments results in leveraging the Fund's common stock because the Fund
uses the proceeds to make investments in other securities. See "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 the 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 Ratings
------------------

            The ratings of fixed-income securities by Moody's, S&P, 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 a 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 Funds, 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.

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 institutions; 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
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 zero-coupon securities and
principal-only securities and certain stripped mortgage-related securities.
Zero-coupon securities are described in more detail in "Zero-Coupon Securities"
below, and 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-indexed securities, 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-indexed securities tend to react to changes in real
interest rates. In general, the price of these securities can fall when real
interest rates rise, and can rise when real interest rates fall. In addition,
the value of these securities may be vulnerable to changes in expectations of
inflation. Interest payments on these securities can be unpredictable and will
vary as the principal and/or interest is adjusted for inflation.

            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.

Municipal Securities
--------------------

            Municipal Bond Inflation Strategy invests in municipal securities.
Municipal securities include municipal bonds as well as short-term (i.e.,
maturing in under one year to as much as three years) municipal notes, demand
notes and tax-exempt commercial paper. In the event Municipal Bond Inflation
Strategy invests in demand notes, the Adviser will continually monitor the
ability of the obligor under such notes to meet its obligations. Typically,
municipal bonds are issued to obtain funds used to construct a wide range of
public facilities, such as schools, hospitals, housing, mass transportation,
airports, highways and bridges. The funds may also be used for general operating
expenses, refunding of outstanding obligations and loans to other public
institutions and facilities.

            Municipal bonds have two principal classifications: general
obligation bonds and revenue or special obligation bonds. General obligation
bonds are secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue or special obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific revenue source but not from general tax and other unrestricted
revenues of the issuer. The term "issuer" means the agency, authority,
instrumentality or other political subdivision whose assets and revenues are
available for the payment of principal of and interest on the bonds. Certain
types of private activity bonds are also considered municipal bonds if the
interest thereon is exempt from federal income tax.

            Private activity bonds are in most cases revenue bonds and do not
generally constitute the pledge of the credit or taxing power of the issuer of
such bonds. The payment of the principal and interest on such private activity
bonds depends solely on the ability of the user of the facilities financed by
the bonds to meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment.

            Municipal Bond Inflation Strategy may also invest in municipal
securities of issuers in Puerto Rico or other U.S. territories, which are exempt
from federal, state, and, where applicable, local income taxes. These municipal
securities may have more risks than those of U.S. issuers generally. Like many
U.S. states and municipalities, Puerto Rico, in particular, experienced a
significant downturn during the recent recession. As a result of Puerto Rico's
challenging economic and fiscal environment, many ratings organizations have
downgraded a number of municipal securities issued in Puerto Rico or placed them
on a "negative watch". If the economic situation in Puerto Rico persists or
worsens, the volatility and credit quality of Puerto Rican municipal securities
could be adversely affected.

            Municipal Bond Inflation Strategy may invest a portion of its assets
in municipal securities that pay interest at a coupon rate equal to a base rate
plus additional interest for a certain period of time if short-term interest
rates rise above a predetermined level or "cap". Although the specific terms of
these municipal securities may differ, the amount of any additional interest
payment typically is calculated pursuant to a formula based upon an applicable
short-term interest rate index multiplied by a designated factor. The additional
interest component of the coupon rate of these municipal securities generally
expires before the maturity of the underlying instrument. These municipal
securities may also contain provisions that provide for conversion at the option
of the issuer to constant interest rates in addition to standard call features.

            Municipal Bond Inflation Strategy may invest in zero-coupon
securities, which are debt obligations that do not entitle the holder to any
periodic payments prior to maturity and are issued and traded at a discount from
their face amounts. The discount varies depending on the time remaining until
maturity, prevailing interest rates, liquidity of the security and perceived
credit quality of the issuer. The market prices of zero-coupon securities are
generally more volatile than the market prices of securities that pay interest
periodically and are likely to respond to changes in interest rates to a greater
degree than do securities having similar maturities and credit quality that do
pay periodic interest.

            Municipal Bond Inflation Strategy may also invest in municipal
securities, the interest rate on which has been divided into two different and
variable components, which together result in a fixed interest rate. Typically,
the first of the components (the "Auction Component") pays an interest rate that
is reset periodically through an auction process, whereas the second of the
components (the "Residual Component") pays a current residual interest rate
based on the difference between the total interest paid by the issuer on the
municipal securities and the auction rate paid on the Auction Component. The
Fund may purchase both Auction and Residual Components.

            Because the interest rate paid to holders of Residual Components is
generally determined by subtracting the interest rate paid to the holders of
Auction Components from a fixed amount, the interest rate paid to Residual
Component holders will decrease the Auction Component's rate increases and
increase as the Auction Component's rate decreases. Moreover, the extent of the
increases and decreases in market value of Residual Components may be larger
than comparable changes in the market value of an equal principal amount of a
fixed rate municipal security having similar credit quality, redemption
provisions and maturity.

            Municipal Bond Inflation Strategy may also invest in (i)
asset-backed securities, which are securities issued by special purpose entities
whose primary assets consist of, for the purposes of the Fund's investment, a
pool of municipal securities, or (ii) partnership and grantor trust-type
derivative securities, whose ownership allows the purchaser to receive principal
and interest payments on underlying municipal securities. The securities may be
in the form of a beneficial interest in a special purpose trust, limited
partnership interest or other debt securities issued by a special purpose
corporation. Although the securities may have some form of credit or liquidity
enhancement, payments on the securities depend predominately upon the municipal
securities held by the issuer. There are many types of these securities,
including securities in which the tax-exempt interest rate is determined by an
index, a swap agreement, or some other formula, for example, the interest rate
payable on the security may adjust either at pre-designated periodic intervals
or whenever there is a change in the market rate to which the security's
interest rate is tied. Other features may include the right of the Fund to
tender the security prior to its stated maturity. The Fund will not purchase an
asset-backed or derivatives security unless it has opinion of counsel in
connection with the purchase that interest earned by the Fund from the
securities is exempt from, as applicable, Federal and state income taxes.

            Municipal notes in which the Fund may invest include demand notes,
which are tax-exempt obligations that have stated maturities in excess of one
year, but permit the holder to sell back the security (at par) to the issuer
within 1 to 7 days notice. The payment of principal and interest by the issuer
of these obligations will ordinarily be guaranteed by letters of credit offered
by banks. The interest rate on a demand note may be based upon a known lending
rate, such as a bank's prime rate, and may be adjusted when such rate changes,
or the interest rate on a demand note may be a market rate that is adjusted at
specified intervals.

            Other short-term obligations constituting municipal notes include
tax anticipation notes, revenue anticipation notes, bond anticipation notes and
tax-exempt commercial paper.

            Tax anticipation notes are issued to finance working capital needs
of municipalities. Generally, they are issued in anticipation of various
seasonal tax revenues, such as ad valorem, income, sales, use and business
taxes. Revenue anticipation notes are issued in expectation of receipt of other
types of revenues, such as federal revenues available under the Federal Revenue
Sharing Programs. Bond anticipation notes are issued to provide interim
financing until long-term financing can be arranged. In most such cases, the
long-term bonds provide the money for the repayment of the notes.

            Tax-exempt commercial paper is a short-term obligation with a stated
maturity of 365 days or less (however, issuers typically do not issue such
obligations with maturities longer than seven days). Such obligations are issued
by state and local municipalities to finance seasonal working capital needs or
as short-term financing in anticipation of longer-term financing.

            There are, of course, variations in the terms of, and the security
underlying, municipal securities, both within a particular rating classification
and between such classifications, depending on many factors. The ratings of
Moody's, S&P and Fitch represent their opinions of the quality of the municipal
securities rated by them. It should be emphasized that such ratings are general
and are not absolute standards of quality. Consequently, municipal securities
with the same maturity, coupon and rating may have different yields, while the
municipal securities of the same maturity and coupon, but with different
ratings, may have the same yield. The Adviser appraises independently the
fundamental quality of the securities included in the Fund's portfolios.

            Yields on municipal securities are dependent on a variety of
factors, including the general conditions of the municipal securities market,
the size of a particular offering, the maturity of the obligation and the rating
of the issue. An increase in interest rates generally will reduce the market
value of portfolio investments, and a decline in interest rates generally will
increase the value of portfolio investments. Municipal securities with longer
maturities tend to produce higher yields and are generally subject to greater
price movements than obligations with shorter maturities. However, the Fund does
not have any restrictions on the maturity of municipal securities in which it
may invest. The Fund will seek to invest in municipal securities of such
maturities that, in the judgment of the Adviser, will provide a high level of
current income consistent with liquidity requirements and market conditions. The
achievement of the Fund's respective investment objectives depends in part on
the continuing ability of the issuers of municipal securities in which the Fund
invests to meet their obligations for the payment of principal and interest when
due. Municipal securities historically have not been subject to registration
with the SEC, although from time to time there have been proposals which would
require registration in the future.

            After purchase by the Fund, a municipal security may cease to be
rated, its rating may be reduced below the minimum required for purchase by the
Fund or it may default. These events do not require sales of such securities by
the Fund, but the Adviser will consider such event in its determination of
whether the Fund should continue to hold the security. To the extent that the
ratings given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, the Adviser will attempt to use such
changed ratings in a manner consistent with the Fund's quality criteria as
described in the Prospectuses.

            Obligations of issuers of municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Code. In addition, the
obligations of such issuers may become subject to laws enacted in the future by
Congress, state legislatures or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement of
such obligations or upon the ability of municipalities to levy taxes. There is
also the possibility that, as a result of litigation or other conditions, the
ability of any issuer to pay, when due, the principal or the interest on its
municipal bonds may be materially affected.

            Proposals have been considered by Congress for the purpose of
restricting or eliminating the federal income tax exemption for interest on
municipal securities. If such a proposal were enacted, the availability of
municipal securities for investment by the Fund and the NAV and yield of the
Fund would be affected. Additionally, the Fund's investment objectives and
policies would likely need to be reevaluated.

Standby Commitment Agreements
-----------------------------

            A Fund may, from time to time, enter into standby commitment
agreements. Such agreements commit the Fund, for a stated period of time, to
purchase a stated amount of a security which 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 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, the 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 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 product 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: A 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 a 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 upon a specified multiple of the change in value
of the underlying commodity, 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's 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, 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.

Tender Option Bond Transactions
-------------------------------

            Municipal Bond Inflation Strategy may enter into tender option bond
transactions ("TOBs") in which the Fund may sell a municipal security to a
broker, which, in turn deposits the bond into a special purpose vehicle, which
is generally organized as a trust), sponsored by the broker (the "Trust"). The
Fund receives cash and a residual interest security (sometimes referred to as
"inverse floaters") issued by the Trust in return. The Trust simultaneously
issues securities, which pay an interest rate that is reset each week based on
an index of high-grade short-term demand notes. These securities, sometimes
referred to as "floaters", are bought by third parties, including tax-exempt
money market funds, and can be tendered by these holders to a liquidity provider
at par, unless certain events occur. Under certain circumstances, the Trust may
be terminated or collapsed, either by the Fund or upon the occurrence of certain
events, such as a downgrade in the credit quality of the underlying bond or in
the event holders of the floaters tender their securities to the liquidity
provider. The Fund continues to earn all the interest from the transferred bond
less the amount of interest paid on the floaters and the expenses of the Trust,
which include payments to the trustee and the liquidity provider and
organizational costs. The Fund uses the cash received from the transaction for
investment purposes, which involves leverage risk. For a discussion of the risks
of TOBs, see "Leverage" below.

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.

Zero-Coupon Securities
----------------------

            A zero-coupon security pays no interest to its holder during its
life. An investor acquires a zero-coupon security at a discounted price from the
face value of the security, which is generally based upon its present value, and
which, depending upon the time remaining until maturity, may be significantly
less than its face value (sometimes referred to as a "deep discount" price).
Upon maturity of the zero-coupon security, the investor receives the face value
of the security.

            A Fund may invest in zero-coupon Treasury securities, which consist
of Treasury bills or the principal components of U.S. Treasury bonds or notes. A
Fund may also invest in zero-coupon securities issued by U.S. Government
agencies or instrumentalities that are supported by the full faith and credit of
the United States, which consist of the principal components of securities of
U.S. Government agencies or instrumentalities.

            Currently, the only U.S. Treasury security issued without coupons is
the Treasury bill. The zero-coupon securities purchased by a Fund may consist of
principal components held in STRIPS form issued through the U.S. Treasury's
STRIPS program, which permits the beneficial ownership of the component to be
recorded directly in the Treasury book-entry system. In addition, in the last
few years a number of banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sold them separately in the form of receipts or certificates
representing undivided interests in these instruments (which instruments are
generally held by a bank in a custodial or trust account).

            Because zero-coupon securities trade at a discount from their face
or par value but pay no periodic interest, they are subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make periodic distributions of
interest.

            Current federal tax law requires that a holder (such as the Funds)
of a zero-coupon security accrue a portion of the discount at which the security
was purchased as income each year even though the holder receives no interest
payment in cash on the security during the year (generally referred to as
"original issue discount" or "OID"). As a result, in order to make the
distributions necessary for a Fund not to be subject to federal income or excise
taxes, the Fund may be required to pay out as an income distribution each year
an amount, obtained by liquidation of portfolio securities or borrowings if
necessary, greater than the total amount of cash that the Fund has actually
received as interest during the year. The Funds believe, however, that it is
highly unlikely that it would be necessary to liquidate portfolio securities or
borrow money in order to make such required distributions or to meet its
investment objective.

Certain Risk and Other Considerations
-------------------------------------

            Borrowing and Use of Leverage. A Fund may use borrowings for
investment purposes subject to the restrictions of the 1940 Act. Borrowings by
the Fund result in the leveraging of the Fund's shares of common stock. The
proceeds of such borrowings will be invested in accordance with the Fund's
investment objectives and policies. The Fund also may create leverage through
the use of derivatives or use leverage for investment purposes by entering into
transactions such as reverse repurchase agreements, forward contracts and dollar
rolls, and, for Municipal Bond Inflation Strategy, TOBs. This means that the
Fund will use the cash proceeds made available during the term 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 a higher net return 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. During periods of
rising short-term interest rates, the interest paid on floaters in TOBs would
increase, which may adversely affect the Municipal Bond Inflation Strategy's net
return. If rising short-term rates coincide with a period of rising long-term
rates, the value of the long-term municipal bonds purchased with the proceeds of
leverage would decline, adversely affecting the Fund's NAV. In certain
circumstances, adverse changes in interest rates or other events could cause a
TOB Trust to terminate or collapse, potentially requiring a Fund to liquidate
longer-term municipal securities at unfavorable prices to meet the Trust's
outstanding obligations.

            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.

            Cyber Security Risk. As the use of the Internet and other
technologies has become more prevalent in the course of business, the Funds and
their service providers, including the Adviser, have become more susceptible to
operational and financial risks associated with cyber security. Cyber security
incidents can result from deliberate attacks such as gaining unauthorized access
to digital systems (e.g., through "hacking" or malicious software coding) for
purposes of misappropriating assets or sensitive information, corrupting data,
or causing operational disruption, or from unintentional events, such as the
inadvertent release of confidential information. Cyber security failures or
breaches of the Funds or their service providers or the issuers of securities in
which the Funds invest have the ability to cause disruptions and affect business
operations, potentially resulting in financial losses, the inability of Fund
shareholders to transact business, violations of applicable privacy and other
laws, regulatory fines, reputational damage, reimbursement or other compensation
costs, and/or additional compliance costs. While measures have been developed
that are designed to reduce the risks associated with cyber security, there is
no guarantee that those measures will be effective, particularly since the Funds
do not control the cyber security defenses or plans of their service providers,
financial intermediaries and companies in which they invest or with which they
do business.

            Investments in Lower-Rated and Unrated Instruments. Bond Inflation
Strategy may invest in lower-rated securities (commonly referred to as "junk
bonds") and unrated securities of equivalent investment quality. Debt securities
with such a rating are considered by the rating organizations to be subject to
greater risk of loss of principal and interest than higher-rated securities and
are considered to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal, which may in any case decline
during sustained periods of deteriorating economic conditions or rising interest
rates. These securities are considered to have extremely poor prospects of ever
attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal.

            Lower-rated securities generally are considered to be subject to
greater market risk than higher-rated securities in times of deteriorating
economic conditions. In addition, lower-rated securities may be more susceptible
to real or perceived adverse economic and competitive industry conditions than
investment-grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
The market for lower-rated securities may be thinner and less active than that
for higher-quality 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 lower-rated securities, the Adviser may experience
difficulty in valuing such securities and, in turn, the Fund's assets. In
addition, adverse publicity and investor perceptions about lower-rated
securities, whether or not based on fundamental analysis, may tend to decrease
the market value and liquidity of such lower-rated securities. Transaction costs
with respect to lower-rated securities may be higher, and in some cases
information may be less available, than is the case with investment-grade
securities.

            Many fixed-income securities, including certain U.S. corporate
fixed-income securities in which the Fund may invest, contain call or buy-back
features that permit the issuer of the security to call or repurchase it. Such
securities may present risks based on payment expectations. If an issuer
exercises such a "call option" and redeems the security, the Fund may have to
replace the called security with a lower yielding security, resulting in a
decreased rate of return for the Fund.

            In seeking to achieve the Fund's investment objectives, there will
be times, such as during periods of rising interest rates, when depreciation and
realization of capital losses on securities in the Fund's portfolio will be
unavoidable. Moreover, medium- and lower- rated securities and non-rated
securities of comparable quality may be subject to wider fluctuations in yield
and market values than higher-rated securities under certain market conditions.
Such fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the NAV of the Fund.

            U.S. Corporate Fixed-Income Securities. A Fund may invest in U.S.
corporate fixed-income securities that may include securities issued in
connection with corporate restructurings such as takeovers or leveraged buyouts,
which may pose particular risks. Securities issued to finance corporate
restructurings may have special credit risks due to the highly leveraged
conditions of the issuer. In addition, such issuers may lose experienced
management as a result of the restructuring. Finally, the market price of such
securities may be more volatile to the extent that expected benefits from the
restructuring do not materialize. A Fund may also invest in U.S. corporate
fixed-income securities that are not current in the payment of interest or
principal or are in default, so long as the Adviser believes such investment is
consistent with the Fund's investment objectives. A Fund's rights with respect
to defaults on such securities will be subject to applicable U.S. bankruptcy,
moratorium and other similar laws.

            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 U.S. 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 Bond
Inflation Strategy and All Market Real Return Portfolio will 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 are less than in
the United States and, at times, volatility of price can be greater than in the
U.S. 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 Bond Inflation Strategy
and All Market Real Return Portfolio may invest and could adversely affect the
Funds' assets should these conditions or events recur.

            In June 2016, the United Kingdom ("UK") voted in a referendum to
leave the European Union ("EU"). It is expected that the UK will seek to
withdraw from the EU with an anticipated completion date within two years of
notifying the European Council of its intention to withdraw. There is still
considerable uncertainty relating to the potential consequences and timeframe of
the withdrawal. During this period and beyond, the impact on the UK and European
economies and the broader global economy could be significant, resulting in
increased volatility and illiquidity, currency fluctuations, impacts on
arrangements for trading and on other existing cross-border cooperation
arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise),
and in potentially lower growth for companies in the UK, Europe and globally,
which could have an adverse effect on the value of a Fund's investments.

            Foreign investment in certain foreign securities is restricted or
controlled to varying degrees. These restrictions or controls may at times limit
or preclude foreign investment in certain foreign securities and increase the
costs and expenses of Bond Inflation Strategy. 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.

            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.

            Income from certain investments held by Bond Inflation Strategy and
All Market Real Return Portfolio could be reduced by foreign income taxes,
including withholding taxes. It is impossible to determine the effective rate of
foreign tax in advance. Each Fund's NAV may also be affected by changes in the
rates or methods of taxation applicable to the Fund or to entities in which the
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 the Fund will not be
subject to change. A shareholder otherwise subject to U.S. 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 "Foreign Income Taxes" below.

            For many foreign securities, there are U.S. Dollar-denominated
American Depository Receipts ("ADRs") that 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. A Fund may purchase foreign
securities directly, as well as through ADRs.

            Risks of Forward Currency Exchange Contracts, Foreign Currency
Futures Contracts and Options thereon, Options on Foreign Currencies and
Over-the-Counter Options on Securities. Transactions in forward currency
exchange contracts, as well as futures, options on foreign currencies and swaps,
are subject to all of the correlation, liquidity and other risks outlined above.
In addition, however, such transactions are subject to the risk of governmental
actions affecting trading in or the prices of currencies underlying such
contracts, which could restrict or eliminate trading and could have a
substantial adverse effect on the value of positions held by Bond Inflation
Strategy and All Market Real Return Portfolio. In addition, the value of such
positions could be adversely affected by a number of other complex political and
economic factors applicable to the countries issuing the underlying currencies.

            Further, unlike trading in most other types of instruments, there is
no systematic reporting of last sale information with respect to the foreign
currencies underlying contracts thereon. As a result, the available information
on which trading decisions will be based may not be as complete as the
comparable data on which Bond Inflation Strategy and All Market Real Return
Portfolio make investment and trading decisions in connection with other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market but will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing the Funds from responding to such events in a timely manner.

            Settlements of exercises of OTC forward currency exchange contracts
or foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires traders to accept or make delivery
of such currencies in conformity with any U.S. or foreign restrictions and
regulations regarding the maintenance of foreign banking relationships and fees,
taxes or other charges.

           Unlike transactions entered into by Bond Inflation Strategy and All
Market Real Return Portfolio in futures contracts and exchange-traded options,
options on foreign currencies, forward currency exchange contracts and OTC
options on securities and securities indices may not be traded on contract
markets regulated by the CFTC or (with the exception of certain foreign currency
options) the SEC. Such instruments are instead 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, that are subject to SEC
regulation. In an OTC 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 could lose
amounts substantially in excess of the initial investment due to the margin and
collateral requirements associated with such positions.

           In addition, OTC transactions can be entered into only with a
financial institution willing to take the opposite side, as principal, of a
Fund's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Fund. Where
no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of OTC contracts, and a Fund could be required to retain options purchased or
written, or forward currency exchange contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's ability to profit
from open positions or to reduce losses experienced, and could result in greater
losses.

            Further, OTC transactions are not subject to the guarantee of an
exchange clearinghouse, and Bond Inflation Strategy and All Market Real Return
Portfolio will therefore be subject to the risk of default by, or the bankruptcy
of, the financial institution serving as its counterparty. The Fund will enter
into an over-the-counter transaction only with parties whose creditworthiness
has been reviewed and found to be satisfactory by the Adviser.

            Transactions in OTC options on foreign currencies are subject to a
number of conditions regarding the commercial purpose of the purchaser of such
option. Bond Inflation Strategy and All Market Real Return Portfolio are not
able to determine at this time whether or to what extent additional restrictions
on the trading of OTC options on foreign currencies may be imposed at some point
in the future, or the effect that any such restrictions may have on the hedging
strategies to be implemented by them.

            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 OTC market, potentially permitting
Bond Inflation Strategy and All Market Real Return Portfolio 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,
the 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, if the OCC 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, the OCC may 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.

            Options on U.S. Government Securities, futures contracts, options on
futures contracts, forward currency exchange 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 the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States, (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States and (v) lesser trading volume
period.

            Foreign Currency Transactions. Bond Inflation Strategy and All
Market Real Return Portfolio may invest, sometimes substantially, in securities
denominated in foreign currencies and a corresponding portion of the Funds'
revenues will be received in such currencies. In addition, the Funds 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 the Funds'
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 the Funds' income. The Funds will, however, have the ability to
attempt to protect themselves against adverse changes in the values of foreign
currencies by engaging in certain of the investment practices listed above.
While the Funds have this ability, there is no certainty as to whether, and to
what extent, the Funds will engage in these practices.

            Currency exchange rates may fluctuate significantly over short
periods of time, causing, along with other factors, Funds' 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
the Funds' total assets adjusted to reflect the Funds' net position after giving
effect to currency transactions are denominated or quoted in the currencies of
foreign countries, the Funds will be more susceptible to the risk of adverse
economic and political developments within those countries.

            Bond Inflation Strategy and All Market Real Return Portfolio will
incur costs in connection with conversions between various currencies. The Funds
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 each Fund
receives its income falls relative to the U.S. Dollar between receipt of the
income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if the Fund has insufficient
cash in U.S. Dollars to meet distribution requirements.

            If the value of the foreign currencies in which Bond Inflation
Strategy and All Market Real Return Portfolio receive income falls relative to
the U.S. Dollar between receipt of the income and the making of Fund
distributions, the Funds may be required to liquidate securities in order to
make distributions if the Funds have insufficient cash in U.S. Dollars to meet
the distribution requirements that the Funds 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 the Funds incur
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 Funds may
engage in certain currency hedging transactions, which themselves, involve
certain special risks.

--------------------------------------------------------------------------------

                            INVESTMENT RESTRICTIONS

--------------------------------------------------------------------------------

Fundamental Investment Policies
-------------------------------

            Each Fund has adopted the following fundamental investment policies,
which may not be changed without approval by the vote of a majority of a 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:

                  (a) may not 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;

                   (b) may not 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) may not 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) may not 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 Bond Inflation Strategy and Municipal
Bond Inflation Strategy, may purchase or sell commodities or options thereon to
the extent permitted by applicable law and, with respect to All Market Real
Return Portfolio, may not purchase or sell commodities except to the extent that
the Fund may do so in accordance with applicable law and the Fund's Prospectuses
and SAI, as they may be amended from time to time, and without registering as a
commodity pool operator under the Commodity Exchange Act; or

                   (f) may not 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, which cannot be changed without shareholder
approval, each of Bond Inflation Strategy and Municipal Bond Inflation Strategy
is diversified (as that term is defined in the 1940 Act). This means that at
least 75% of the 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.

            All Market Real Return Portfolio is non-diversified as that term is
described in the 1940 Act. This means the Fund is not limited in the proportion
of its assets that may be invested in the securities of a single issuer.

Non-Fundamental Investment Policies
-----------------------------------

            The following are descriptions of operating policies that the Funds
have adopted but that are not fundamental and are 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 Board (see "Management of the
Funds" in your Prospectuses). 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 March 31, 2016, totaling
approximately $479 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 March 31, 2016, the ownership structure of the Adviser,
expressed as a percentage of general and limited partnership interests, was as
follows:

                 AXA and its subsidiaries               62.7%
                 AllianceBernstein Holding L.P.         36.0%
                 Unaffiliated holders                    1.3%
                                                   ---------------
                                                         100%
                                                   ===============


            As of March 31, 2016, AXA, 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"), owned approximately 1.5% of the issued and
outstanding assignments of beneficial ownership of limited partnership interests
("Holding Units") in AllianceBernstein Holding L.P., a Delaware limited
partnership ("Holding"). Holding Units trade publicly on the Exchange under the
ticker symbol "AB".

            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 63.2% economic interest in the Adviser
as of March 31, 2016.

Advisory Agreements and Expenses
--------------------------------

            Under the Funds' Advisory Agreement, 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 oversight of the Board. The Adviser also
provides persons satisfactory to the Board 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 Funds' Advisory Agreement, responsible for
any expenses incurred by a Fund in promoting the sale of Fund shares (other than
the portion of the promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the costs of
printing and mailing Fund prospectuses and other reports to shareholders and all
expenses and fees related to proxy solicitations and registrations and filings
with the SEC and with state regulatory authorities).

            Each Fund has, under the Advisory Agreement, assumed the obligation
for payment of all of its 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. The Advisory Agreement provides for reimbursement to
the Adviser of the costs of certain non-advisory services provided to a Fund.
Costs currently reimbursed include the costs of the Adviser's personnel
performing certain administrative services for the Funds, including clerical,
accounting, legal and other services ("administrative services"), and associated
overhead costs, such as office space, supplies and information technology. The
administrative services are provided to the Funds on a fully-costed basis (i.e.,
includes each personnel's total compensation and a factor reflecting the
Adviser's total cost relating to that personnel, including all related overhead
expenses). The reimbursement of these costs to the Adviser will be specifically
approved by the Board. For the fiscal year ended October 31, 2015, Bond
Inflation Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio paid the Adviser in respect of such services $49,296, $54,539 and
$49,900, respectively.

            The Advisory Agreement continues in effect with respect to each Fund
so long as such continuance is specifically approved at least annually by the
Company's Directors or by a majority vote of the holders of the outstanding
voting securities of each Fund 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. Most recently, continuance of the Advisory Agreement for an
additional annual term was approved by vote, cast in person, by the Board, at
their meetings held on November 3-5, 2015.

            Any material amendment to the Advisory Agreement must be approved by
the vote of a majority of the outstanding voting 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 may be terminated without
penalty by the Adviser, by vote of the Directors or by vote of a majority of the
outstanding voting securities of the relevant Fund upon 60 days' written notice,
and it terminates automatically in the event of its assignment. The Advisory
Agreement provides 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.

            Bond Inflation Strategy has contractually agreed to pay a monthly
fee to the Adviser at an annualized rate of .50 of 1% of the first $2.5 billion,
..45 of 1% of the excess over $2.5 billion up to $5 billion and .40 of 1% of the
excess over $5 billion of the Fund's average net assets. The Adviser has
contractually agreed for the period from the effective date of the Fund's
Prospectuses to the effective date of the subsequent Prospectuses incorporating
the Fund's annual financial statements (the "Period") to waive its fee and bear
certain expenses so that total operating expenses, excluding interest expense,
do not, on an annual basis, exceed .75%, 1.50%, .50%, 1.00%, .75%, .50%, .50%
..60% and .50% for Class A, Class C, Advisor Class, Class R, Class K, Class I,
Class Z, Class 1 and Class 2 shares, respectively. This fee waiver and/or
expense reimbursement agreement automatically extends each year unless the
Adviser provides notice 60 days prior to the end of the Period. Until February
1, 2016, the Adviser had agreed to waive its fees and to bear certain expenses
so that total operating expenses, excluding interest expense, did not, on an
annual basis, exceed .80% for Class A shares. Until February 1, 2014, the
Adviser had agreed to waive its fees and to bear certain expenses so that total
operating expenses, excluding interest expense, did not, on an annual basis,
exceed .75%, 1.45%, .45%, .95%, .70% and .45%, .55% and .45% for Class A, Class
C, Advisor Class, Class R, Class K, Class I, Class 1 and Class 2 shares,
respectively. For the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, the Adviser received under the Advisory Agreement the amount
of $1,761,015, $2,079,818 and $964,250, respectively, as advisory fees from the
Fund. Under the expense limitation undertaking, $767,870, $715,454 and $775,537
was waived and/or reimbursed by the Adviser for the fiscal years ended October
31, 2015, October 31, 2014 and October 31, 2013, respectively.

            Municipal Bond Inflation Strategy has contractually agreed to pay a
monthly fee to the Adviser at an annualized rate of .50 of 1% of the first $2.5
billion, .45 of 1% of the excess over $2.5 billion up to $5 billion and .40 of
1% of the excess over $5 billion of the Fund's average net assets. The Adviser
has contractually agreed for the period from the effective date of the Fund's
Prospectuses to the effective date of the subsequent Prospectuses incorporating
the Fund's annual financial statements (the "Period") to waive its fee and bear
certain expenses so that total operating expenses, excluding interest expense,
do not, on an annual basis, exceed the net expenses reflected in the "Fees and
Expenses of the Fund" at the beginning of the Prospectuses. This fee waiver
and/or expense reimbursement agreement automatically extends each year unless
the Adviser provides notice 60 days prior to the end of the Period. For the
fiscal years ended October 31, 2015, October 31, 2014 and October 31, 2013, the
Adviser received under the Advisory Agreement the amount of $4,151,538,
$4,497,915 and $3,168,638, respectively, as advisory fees from the Fund. Under
the expense limitation undertaking, $664,123, $650,568 and $632,966 was
waived and/or reimbursed by the Adviser for the fiscal years ended October 31,
2015, October 31, 2014 and October 31, 2013, respectively.

            All Market Real Return Portfolio has contractually agreed to pay a
monthly fee to the Adviser at an annualized rate of .75 of 1% of the Fund's
average daily net assets.  The Adviser has contractually agreed for the
period from the effective date of the Fund's Prospectuses to the effective date
of the subsequent Prospectuses incorporating the Fund's annual financial
statements (the "Period") to waive its fee and bear certain expenses so that
total operating expenses, excluding interest expense, do not, on an annual
basis, exceed 1.30%, 2.05%, 1.05%, 1.55%, 1.30%, 1.05%, 1.05%, 1.30% and 1.05%,
respectively, for Class A, Class C, Advisor Class, Class R, Class K, Class I,
Class Z, Class 1 and Class 2 shares of the Fund. This fee waiver and/or expense
reimbursement agreement automatically extends each year unless the Adviser
provides notice 60 days prior to the end of the Period. Until February 1, 2016,
the Adviser had agreed to waive its fees and to bear certain expenses so that
total operating expenses, excluding interest expense, did not, on an annual
basis, exceed 1.30%, 2.00%, 1.00%, 1.50%, 1.25%, 1.00%, 1.00%, 1.25% and 1.00%
of daily average net assets for Class A, Class C, Advisor Class, Class R, Class
K, Class I, Class Z, Class 1 and Class 2 shares, respectively. Until February 1,
2014, the Adviser had agreed to waive its fees and to bear certain expenses so
that total operating expenses, excluding interest expense, did not, on an annual
basis, exceed 1.05%, 1.75%, 0.75%, 1.25%, 1.00%, 0.75%, 1.00%, 1.00% and 0.75%
of daily average net assets for Class A, Class C, Advisor Class, Class R, Class
K, Class I, Class Z, Class 1 and Class 2 shares, respectively. For the fiscal
years ended October 31, 2015, October 31, 2014 and October 31, 2013, the Adviser
received under the Advisory Agreement the amount of $4,332,368, $4,736,595 and
$2,628,753, respectively, as advisory fees from the Fund. Under the expense
limitation undertaking, $114,288, $103,010 and $1,008,824 was waived and/or
reimbursed by the Adviser for the fiscal years ended October 31, 2015, October
31, 2014 and October 31, 2013, respectively.

            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.

            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: AB Cap Fund, Inc., AB Core
Opportunities Fund, Inc., AB Corporate Shares, AB Discovery Growth Fund, Inc.,
AB Equity Income Fund, Inc.,  AB Fixed-Income Shares, Inc., AB Global Bond Fund,
Inc., AB Global Real Estate Investment Fund, Inc., AB Global Risk Allocation
Fund, Inc., AB Global Thematic Growth Fund,Inc., AB Government Exchange
Reserves, AB Growth and Income Fund, Inc., AB High Income Fund, Inc., AB
Institutional Funds, Inc., AB International Growth Fund, Inc., AB Large Cap
Growth Fund, Inc., AB Municipal Income Fund, Inc., AB Municipal Income Fund II,
AB Trust, AB Unconstrained Bond Fund, Inc., AB Variable Products Series Fund,
Inc., Bernstein Fund, Inc., Sanford C. Bernstein Fund, Inc., Sanford C.
Bernstein Fund II, Inc., The AB Pooling Portfolios and The AB Portfolios, all
open-end investment companies; and to AllianceBernstein Global High Income Fund,
Inc., AllianceBernstein National Municipal Income Fund, Inc., Alliance
California Municipal Income Fund, Inc. and AB Multi-Manager Alternative Fund,
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 "AB Fund Complex", while all of these investment
companies, except the Sanford C. Bernstein Fund, Inc. and AB Multi-Manager
Alternative Fund, are referred to collectively below as the "AB Funds".

Board of Directors Information
------------------------------

              Certain information concerning the Directors is set forth below.





                                                                                   OTHER PUBLIC
                                                                     PORTFOLIOS    COMPANY
                             PRINCIPAL                               IN AB FUND    DIRECTORSHIPS
NAME, ADDRESS,*              OCCUPATION(S)                           COMPLEX       CURRENTLY
AGE AND (YEAR                DURING PAST FIVE                        OVERSEEN BY   HELD BY
FIRST ELECTED**)             YEARS OR LONGER                         DIRECTOR      DIRECTOR
----------------             ------------------                      -----------   -----------------
                                                                          
INDEPENDENT DIRECTORS

Marshall C. Turner, Jr., #   Private Investor since prior to 2011.   108           Xilinx, Inc.
Chairman of the Board        Former Chairman and CEO of Dupont                     (programmable logic
74                           Photomasks, Inc. (components of                       semi-conductors)
(2005)                       semi-conductor manufacturing).  He                    since 2007
                             has extensive operating leadership
                             and venture capital investing
                             experience, including five interim or
                             full-time CEO roles and prior
                             service as general partner of
                             institutional venture capital
                             partnerships. He also has extensive
                             non-profit board leadership
                             experience, and currently serves on
                             the boards of two education and
                             science-related non-profit
                             organizations. He has served as a
                             director of one AB fund since 1992,
                             and director or trustee of multiple
                             AB Funds since 2005. He has been
                             Chairman of the AB Funds since
                             January 2014, and the Chairman of the
                             Independent Directors Committees of
                             such Funds since February 2014.

John H. Dobkin, #            Independent Consultant since prior to   108           None
74                           2011.  Formerly, President of Save
(1998)                       Venice, Inc. (preservation
                             organization) from 2001-2002; Senior
                             Advisor from June 1999-June 2000 and
                             President of Historic Hudson Valley
                             (historic preservation) from December
                             1989-May 1999.  Previously, Director
                             of the National Academy of Design. He
                             has served as a director or trustee
                             of various AB Funds since 1992 and as
                             Chairman of the Audit Committees of a
                             number of such Funds from 2001-2008.

Michael J. Downey, #         Private Investor since prior to 2011.   108           Asia Pacific Fund,
72                           Formerly, managing partner of                         Inc.(registered
(2005)                       Lexington Capital, LLC (investment                    investment company)
                             advisory firm) from December 1997                     since prior to 2011
                             until December 2003. He also served
                             as a Director of Prospect Acquisition
                             Corp. (financial services) from 2007
                             until 2009. From 1987 until 1993,
                             Chairman and CEO of Prudential Mutual
                             Fund Management, 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 AB Funds
                             since 2005 and is a director and
                             chairman of one other registered
                             investment company.

William H. Foulk, Jr., #     Investment Adviser and an Independent   108           None
83                           Consultant since prior to 2011.
(1998)                       Previously, he was Senior Manager of
                             Barrett Associates, Inc., a
                             registered investment adviser. He was
                             formerly Deputy Comptroller and Chief
                             Investment Officer of the State of
                             New York and, prior thereto, Chief
                             Investment Officer of the New York
                             Bank for Savings. He has served as a
                             director or trustee of various AB
                             Funds since 1983 and was Chairman of
                             the Independent Directors Committees
                             of the AB Funds from 2003 until
                             February 2014. He served as Chairman
                             of such Funds from 2003 through
                             December 2013. He is also active in a
                             number of mutual fund related
                             organizations and committees.

D. James Guzy, #             Chairman of the Board of SRC            108           None
80                           Computers, Inc. (semi-conductors),
(2005)                       with which he has been associated
                             since prior to 2011.  He served as
                             Chairman of the Board of PLX
                             Technology (semi-conductors) since
                             prior to 2011 until November 2013.
                             He was a director of Intel
                             Corporation (semi-conductors) from
                             1969 until 2008, and served as
                             Chairman of the 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 AB Funds since 1982.

Nancy P. Jacklin, #          Professorial Lecturer at the Johns      108           None
68                           Hopkins School of Advanced
(2006)                       International Studies (2008-2015).
                             U.S. Executive Director of the
                             International Monetary Fund (which
                             is responsible for ensuring the
                             stability of the international
                             monetary system), (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 New
                             York; and member of the Council on
                             Foreign Relations. She has served as
                             a director or trustee of the AB Funds
                             since 2006 and has been Chairman of
                             the Governance and Nominating
                             Committees of the AB Funds since
                             August 2014.

Carol C. McMullen, #         Managing Director and Advisor,          108           None
61                           Leadership Development, Strategy,
(2016)                       Corporate Social Responsibility of
                             Slalom Consulting (consulting) since
                             2014; Director of Graebel Companies,
                             Inc. (relocation services) and member
                             of the Risk Management, Audit and
                             Compliance Committees since 2014;
                             Director and member of
                             Finance/Investment and Audit
                             Committees of Norfolk & Dedham Group
                             (property and casualty insurance)
                             since 2011. She is also lead
                             investment director for business and
                             family assets at Sydney Associates
                             (real estate development) from prior
                             to 2011 to present and serves on a
                             number of non-profit boards. Formerly,
                             Principal and Managing Director of The
                             Crossland Group (consulting) from 2012
                             until 2013. She has served as a director
                             or trustee of the AB Funds since June
                             2016.

Garry L. Moody, #            Independent Consultant. Formerly,       108           None
64                           Partner, Deloitte & Touche LLP
(2008)                       (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), where he was
                             responsible for accounting, pricing,
                             custody and reporting for the Fidelity
                             mutual funds; and Partner, Ernst & Young LLP
                             (1975-1993), where he served as the
                             National Director of Mutual Fund Tax
                             Services and Managing Partner of its
                             Chicago Office Tax department.
                             He is a member of the Trustee Advisory
                             Board of BoardIQ, a biweekly publication
                             focused on issues and news affecting
                             directors of mutual funds.  He has
                             served as a director or trustee, and
                             as Chairman of the Audit Committees,
                             of the AB Funds since 2008.

Earl D. Weiner, #            Of Counsel, and Partner prior to        108           None
77                           January 2007, of the law firm
(2007)                       Sullivan & Cromwell LLP and is a
                             former member of the ABA Federal
                             Regulation of Securities Committee
                             Task Force to draft editions of the
                             Fund Director's Guidebook. He also
                             serves as a director or trustee of
                             various non-profit organizations and
                             has served as Chairman or Vice
                             Chairman of a number of them. He has
                             served as a director or trustee of
                             the AB Funds since 2007 and served as
                             Chairman of the Governance and
                             Nominating Committees of the AB Funds
                             from 2007 until August 2014.

INTERESTED DIRECTOR

Robert M. Keith, +           Senior Vice President of the            108           None
56                           Adviser++ and the head of
(2010)                       AllianceBernstein Investments Inc.
                             ("ABI")++ since July 2008; Director
                             of ABI and President of the AB 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,
                             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 Company's 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 Company's Directors.
#     Member of the Audit Committee, the Governance and Nominating Committee and
      the Independent Directors Committee.
+     Mr. Keith is an "interested person", as defined in Section 2(a)(19) of the
      1940 Act, of the Company due to his position as a Senior Vice President of
      the Adviser.
++    The Adviser and ABI are affiliates of the Fund.

            In addition to the public company directorships currently held by
the Directors set forth in the table above, Mr. Turner was a director of
SunEdison, Inc. (solar materials and power plants) since prior to 2011 until
July 2014, Mr. Downey was a director of The Merger Fund (a registered investment
company) since prior to 2011 until 2013, Mr. Guzy was a director of Cirrus Logic
Corporation (semi-conductors) from prior to 2011 until July 2011 and served as
Chairman of the Board of PLX Technology (semi-conductors) since prior to 2011
until November 2013, and Mr. Moody was a director of Greenbacker Renewable
Energy Company LLC (renewable energy and energy efficiency projects) from August
2013 until January 2014.

            The business and affairs of the Company are overseen by the Board.
Directors who are not "interested persons" of the Company, as defined in the
1940 Act, are referred to as "Independent Directors", and Directors who are
"interested persons" of the Company are referred to as "Interested Directors".
Certain information concerning the Company's governance structure and each
Director is set forth below.

            Experience, Skills, Attributes, and Qualifications of the Company's
Directors. The Governance and Nominating Committee of the Board, which is
composed of Independent Directors, reviews the experience, qualifications,
attributes and skills of potential candidates for nomination or election by the
Board, 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 Fund.
Additional information concerning the Governance and Nominating Committee's
consideration of nominees appears in the description of the Committee below.

            The Board believes that, collectively, the Directors have balanced
and diverse experience, qualifications, attributes and skills, which allow the
Board to operate effectively in governing the Company and protecting the
interests of shareholders. The Board has 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 Board has considered a variety of
criteria, none of which, in isolation, was controlling. In addition, the Board
has 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 Board's
conclusion that the Director should serve (or continue to serve) as trustee or
director of the Fund, 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 Company's
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 Company and other AB 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 Committees of many of the AB
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-AB funds and as Chairman of a non-AB
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), served as Chairman of the Independent Directors Committees from 2003
until early February 2014, served as Chairman of the AB Funds from 2003 through
December 2013, 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, as U.S. Executive Director of the International Monetary Fund (which
is responsible for ensuring the stability of the international monetary system),
as a financial services lawyer in private practice, and has served as Chairman
of the Governance and Nominating Committees of the AB Funds since August 2014;
Mr. Keith has experience as an executive of the Adviser with responsibility for,
among other things, the AB Funds; Ms. McMullen has experience as an executive or
director of a number of organizations as well as investment and risk management
expertise; 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 both the governing council
of an organization of independent directors of mutual funds, and the Trustee
Advisory Board of BoardIQ, a biweekly publication focused on issues and news
affecting directors of mutual funds, and has served as a director or trustee and
Chairman of the Audit Committees of the AB 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 has
served as Chairman of the AB Funds since January 2014 and Chairman of the
Independent Directors Committees of such Funds since February 2014; and Mr.
Weiner has experience as a securities lawyer whose practice includes registered
investment companies and as director or trustee of various non-profit
organizations and Chairman or Vice Chairman of a number of them, and served as
Chairman of the Governance and Nominating Committees of the AB Funds from 2007
until August 2014. 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 Board and any
committee thereof in the absence of such experience, qualifications, attributes
and skills.

            Board Structure and Oversight Function. The Board is responsible for
oversight of the Company. The Company has engaged the Adviser to manage the Fund
on a day-to-day basis. The Board is responsible for overseeing the Adviser and
the Company's other service providers in the operations of the Company in
accordance with the Company'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 Company's
charter and bylaws. The Board typically meets 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 Board has established
three standing committees - the Audit, Governance and Nominating, and
Independent Directors Committees - and may establish ad hoc committees or
working groups from time to time, to assist the Board in fulfilling its
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 Board. 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 Board's 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 Fund, on
the one hand, and the Adviser and other service providers, on the other, and
facilitates the exercise of the Board's independent judgment in evaluating and
managing the relationships. In addition, the Company is required to have an
Independent Director as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.

            Risk Oversight. The Company is subject to a number of risks,
including investment, compliance and operational risks, including cyber risks.
Day-to-day risk management with respect to the Company resides with the Adviser
or other service providers (depending on the nature of the risk), subject to
supervision by the Adviser. The Board has 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 Fund; (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 Board's general oversight of the
Company's investment program and operations and is addressed as part of various
regular Board and committee activities. The Company's 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 Company's 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 Board and the Audit Committee.
The Directors regularly receive reports from, among others, management
(including the Chief Risk Officer and the Global Heads of Investment Risk and
Trading Risk of the Adviser), the Company's Senior Officer (who is also the
Company's Independent Compliance Officer), the Company's Chief Compliance
Officer, the Company's independent registered public accounting firm and
counsel, the Adviser's Chief Compliance Officer and internal auditors for the
Adviser, as appropriate, regarding risks faced by the Company and the Adviser's
risk management programs. In addition, the Directors receive regular updates on
cyber security matters from the Adviser.

            Not all risks that may affect the Company 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 Company or the Adviser, its affiliates or other service providers. Moreover,
it is necessary to bear certain risks (such as investment-related risks) to
achieve the Company's goals. As a result of the foregoing and other factors the
Company's ability to manage risk is subject to substantial limitations.

            Board Committees. The Board has three standing committees -- an
Audit Committee, a Governance and Nominating Committee, and an Independent
Directors Committee. The members of the Audit, Governance and Nominating, and
Independent Directors Committees are identified above.

            The function of the Audit Committee is to assist the Board in its
oversight of each Fund's accounting and financial reporting policies and
practices. The Audit Committee met three times during the Funds' 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
Board. The Governance and Nominating Committee met three times during the Funds'
most recently completed fiscal year.

            The Board has adopted a charter for its Governance and Nominating
Committee. Pursuant to the charter, the Committee assists the Board in carrying
out its responsibilities with respect to governance of the Company and
identifies, evaluates, selects and nominates candidates for the 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 the Company's current Board
members, officers, the Adviser, stockholders and other appropriate sources.

            Pursuant to the charter, 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 Fund no
less than 120 days before the date of the proxy statement for the previous
year's annual meeting of shareholders. If the Fund 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 Fund begins
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 Board 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 Fund (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 Fund 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 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 Board. 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 Company, and the candidate's ability
to qualify as an Independent 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 Independent Directors Committee is to consider
and take action on matters that the Board 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 met eight times during the Funds' 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 AB Fund Complex
owned by each Director are set forth below.


                               Dollar Range of Equity Securities in the Funds
                                          As of December 31, 2015
                                          -----------------------

                                             Municipal Bond      All Market Real
Name of Director          Bond Inflation       Inflation              Return
----------------          --------------       ---------              ------

John H. Dobkin                 None               None                 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               None           $10,001-$50,000
Robert M. Keith*               None               None                 None
Carol C. McMullen**            None               None                 None
Garry L. Moody                 None               None                 None
Marshall C. Turner, Jr.   $10,001-$50,000         None                 None
Earl D. Weiner                 None               None                 None

                              Aggregate Dollar Range of Equity Securities in the
Name of Director                   AB Fund Complex as of December 31, 2015
----------------                   ---------------------------------------

John H. Dobkin                                  Over $100,000
Michael J. Downey                               Over $100,000
William H. Foulk, Jr.                           Over $100,000
D. James Guzy                                   Over $100,000
Nancy P. Jacklin                                Over $100,000
Robert M. Keith*                                    None
Carol C. McMullen**                                 None
Garry L. Moody                                  Over $100,000
Marshall C. Turner, Jr.                         Over $100,000
Earl D. Weiner                                  Over $100,000
-------------------
*For information presented as of December 31, 2015 with respect to Mr. Keith,
unvested interests in certain deferred compensation plans, including the Partner
Compensation Plan are not included.

**Ms. McMullen was elected a Director of the Funds effective June 22, 2016.

Officer Information
-------------------

            Certain information concerning each Fund's officers is set forth
below.





NAME, ADDRESS*                       POSITION(S) HELD               PRINCIPAL OCCUPATION
AND AGE                              WITH THE FUND                  DURING PAST FIVE YEARS
--------------                       ----------------               -----------------------

                                                              
Robert M. Keith,                     President and Chief            See above.
55                                   Executive Officer

Philip L. Kirstein,                  Senior Vice President and      Senior Vice President and
70                                   Independent Compliance         Independent Compliance Officer of
                                     Officer                        the funds in the AB Fund Complex,
                                                                    with which he has been associated
                                                                    since 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, Assistant
60                                                                  General Counsel and Assistant
                                                                    Secretary of ABI,** with which she
                                                                    has been associated since prior to
                                                                    2011.

Joseph J. Mantineo,                  Treasurer and Chief            Senior Vice President of ABIS,**
56                                   Financial Officer              with which he has been associated
                                                                    since prior to 2011.

Vincent S. Noto,                     Chief Compliance Officer       Senior Vice President since 2015 and
51                                                                  Mutual Fund Chief Compliance Officer
                                                                    of the Adviser** since 2014.  Prior
                                                                    thereto, he was Vice President and
                                                                    Director of Mutual Fund Compliance
                                                                    of the Adviser** since prior to
                                                                    2011.

Phyllis J. Clarke,                   Controller                     Vice President of ABIS,** with which
55                                                                  she has been associated since prior
                                                                    to 2011.

Bond Inflation Strategy
-----------------------

Michael Canter,                      Vice President                 Senior Vice President of the
46                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Paul J. DeNoon,                      Vice President                 Senior Vice President of the
53                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Shawn E. Keegan,                     Vice President                 Senior Vice President of the
44                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Greg J. Wilensky,                    Vice President                 Senior Vice President of the
48                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Municipal Bond Inflation Strategy
---------------------------------

Robert B. (Guy) Davidson III,        Vice President                 Senior Vice President of the
54                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Terrance T. Hults,                   Vice President                 Senior Vice President of the
49                                                                  Adviser,** with which he has been
                                                                    associated since prior to 2011.

Matthew Norton,                      Vice President                 Vice President of the Adviser,**
33                                                                  with which he has been associated
                                                                    since prior to 2011.

All Market Real Return Portfolio
--------------------------------

Vinod Chathlani,                     Vice President                 Vice President of the Adviser, with
33                                                                  which he has been associated in a
                                                                    similar capacity to his current
                                                                    position since December 2013. Prior
                                                                    thereto, he was an investment risk
                                                                    manager at Oppenheimer Funds and a
                                                                    corporate strategist at Reliance
                                                                    Communications since prior to 2011.

Daniel J. Loewy,                     Vice President                 Senior Vice President of the
41                                                                  Adviser, with which he has been
                                                                    associated in a substantially
                                                                    similar capacity to his current
                                                                    position since prior to 2011, and
                                                                    Chief Investment Officer and Co-Head
                                                                    of Multi-Asset Solutions and
                                                                    Co-Chief Investment Officer and
                                                                    Director of Research of Dynamic
                                                                    Asset Allocation Strategies.

Vadim Zlotnikov,                     Vice President                 Senior Vice President, Chief Market
53                                                                  Strategist, Co-Head of Multi-Asset
                                                                    Solutions, and Chief Investment
                                                                    Officer of Systematic and Index
                                                                    Strategies of the Adviser.
                                                                    Previously, he was Chief Investment
                                                                    Officer of Growth Equities from 2008
                                                                    until 2010.


--------
*     The address for each of the Funds' Officers is 1345 Avenue of the
      Americas, New York, NY 10105.
**    The Adviser, ABI and ABIS are affiliates of the Funds.

            The Funds do not pay any fees to, or reimburse expenses of, their
Directors who are considered an "interested person" of the Fund. The aggregate
compensation paid to the Directors by each Fund for the fiscal year ended
October 31, 2015, the aggregate compensation paid to each of the Directors
during calendar year 2015 by the AB Fund Complex, and the total number of
registered investment companies (and separate investment portfolios within those
companies) in the AB Fund Complex with respect to which each of the Directors
serves as a director or trustee, are set forth below. Neither the Funds nor any
other registered investment company in the AB 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 AB Fund Complex.



                                                                                Total
                                                           Total Number         Number of
                                                           of Investment        Investment
                                                           Companies            Portfolios within
                                           Total           in the AB Fund       the AB Fund
                                           Compensation    Complex,             Complex,
                                           from the        Including the        Including the
                                           AB Fund         Funds, as to         Funds, as to
                          Aggregate        Complex,        which the Director   which the Director
Name of Director          Compensation     Including       is a Director        is a Director
of the Funds              from the Funds   the Funds       or Trustee           or Trustee
----------------------    --------------   -------------   ------------------   ------------------
                                                                          

John H. Dobkin              $ 5,937        $285,000              28                   108
Michael J. Downey           $ 5,937        $285,000              28                   108
William H. Foulk, Jr.       $ 5,937        $285,000              28                   108
D. James Guzy               $ 5,937        $285,000              28                   108
Nancy P. Jacklin            $ 6,315        $303,000              28                   108
Robert M. Keith             $     0        $      0              28                   108
Carol C. McMullen*          $     0        $      0              28                   108
Garry L. Moody              $ 6,671        $320,000              28                   108
Marshall C. Turner, Jr.     $10,032        $480,000              28                   108
Earl D. Weiner              $ 5,937        $285,000              28                   108


-------------------
*Ms. McMullen was elected a Director of the Funds effective June 22, 2016.

            As of August 19, 2016, the Directors and officers of the Funds as a
group owned less than 1% of the shares of each Fund and each class of shares
thereof.

Additional Information About the Funds' Portfolio Managers
----------------------------------------------------------

BOND INFLATION STRATEGY

            The management of, and investment decisions for, the Fund's
portfolio are made by the Adviser's U.S. Core Fixed-Income Team. Michael Canter,
Paul J. DeNoon, Shawn E. Keegan and Greg J. Wilensky are the investment
professionals(1) 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 Funds' Prospectuses.

--------
(1)   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 October 31, 2015 are set
forth below.

                DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(2)

                Michael Canter                     None
                Paul J. DeNoon                     None
                Shawn E. Keegan                    None
                Greg J. Wilensky                   None

--------
(2)   The dollar range of equity securities in the Fund includes vested shares
      awarded under the Adviser's Partners Compensation Plan (the "Plan").

            As of October 31, 2015, employees of the Adviser had approximately
$69,860,967 invested in shares of all AB Mutual Funds (excluding AB 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 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 October 31, 2015.

--------------------------------------------------------------------------------
                         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
--------------------------------------------------------------------------------

Michael Canter             None         None               None           None
--------------------------------------------------------------------------------
Paul J. DeNoon              18      $9,612,000,000         None           None
--------------------------------------------------------------------------------
Shawn E. Keegan             2         $323,000,000         None           None
--------------------------------------------------------------------------------
Greg J. Wilensky            50      $9,359,000,000         None           None


--------------------------------------------------------------------------------
                        OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
                                                                    Total
                        Total                        Number of      Assets of
                        Number of                    Other Pooled   Other Pooled
                        Other       Total Assets of  Investment     Investment
                        Pooled      Other Pooled     Vehicles       Vehicles
                        Investment  Investment       Managed with   Managed with
                        Vehicles    Vehicles         Performance-   Performance-
Portfolio Manager       Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Michael Canter               5        $905,000,000         None           None
--------------------------------------------------------------------------------
Paul J. DeNoon              40     $29,722,000,000         None           None
--------------------------------------------------------------------------------
Shawn E. Keegan             16     $17,022,000,000         None           None
--------------------------------------------------------------------------------
Greg J. Wilensky            31      $1,172,000,000         None           None


--------------------------------------------------------------------------------
                                 OTHER ACCOUNTS
--------------------------------------------------------------------------------
                                                                  Total
                                                   Number of      Assets of
                      Total                        Other          Other
                      Number of                    Accounts       Accounts
                      Other       Total Assets of  Managed with   Managed with
                      Accounts    Other Accounts   Performance-   Performance-
Portfolio Manager     Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Michael Canter             2         $972,000,000          1        $406,000,000
--------------------------------------------------------------------------------
Paul J. DeNoon            15      $10,833,000,000          2      $1,477,000,000
--------------------------------------------------------------------------------
Shawn E. Keegan           34      $59,944,000,000          1      $3,903,000,000
--------------------------------------------------------------------------------
Greg J. Wilensky         124       $9,749,000,000          3        $578,000,000

MUNICIPAL BOND INFLATION STRATEGY


            The management of, and investment decisions for, the Fund's
portfolio are made by the Adviser's Municipal Bond Investment Team. Robert B.
(Guy) Davidson III, Terrance T. Hults and Matthew Norton 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 Prospectuses.

            The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's Portfolio Managers as of October 31, 2015 are set
forth below.

                DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(3)

                Robert B. (Guy) Davidson III    Over $1,000,000
                Terrance T. Hults              $50,001-$100,000
                Matthew Norton                      None

--------
(3)   The dollar range of equity securities in the Fund includes vested shares
      awarded under the Adviser's Partners Compensation Plan (the "Plan").

            As of October 31, 2015, employees of the Adviser had approximately
$69,860,967 invested in shares of all AB Mutual Funds (excluding AB 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 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 October 31, 2015.

--------------------------------------------------------------------------------
                         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
--------------------------------------------------------------------------------

Robert B. (Guy)
Davidson III                33      $18,344,000,000        None           None
--------------------------------------------------------------------------------
Terrance T. Hults           33      $18,344,000,000        None           None
--------------------------------------------------------------------------------
Matthew Norton              33      $18,344,000,000        None           None

--------------------------------------------------------------------------------
                        OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
                                                                    Total
                        Total                        Number of      Assets of
                        Number of                    Other Pooled   Other Pooled
                        Other       Total Assets of  Investment     Investment
                        Pooled      Other Pooled     Vehicles       Vehicles
                        Investment  Investment       Managed with   Managed with
                        Vehicles    Vehicles         Performance-   Performance-
Portfolio Manager       Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Robert B. (Guy)
Davidson III                 12     $1,683,000,000        None           None
--------------------------------------------------------------------------------
Terrance T. Hults            12     $1,683,000,000        None           None
--------------------------------------------------------------------------------
Matthew Norton               12     $1,683,000,000        None           None


--------------------------------------------------------------------------------
                                 OTHER ACCOUNTS
--------------------------------------------------------------------------------
                                                                    Total
                                                     Number of      Assets of
                        Total                        Other          Other
                        Number of                    Accounts       Accounts
                        Other       Total Assets of  Managed with   Managed with
                        Accounts    Other Accounts   Performance-   Performance-
Portfolio Manager       Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Robert B. (Guy)
Davidson III              1,745     $12,068,000,000         3       $343,000,000
--------------------------------------------------------------------------------
Terrance T. Hults         1,745     $12,068,000,000         3       $343,000,000
--------------------------------------------------------------------------------
Matthew Norton            1,745     $12,068,000,000         3       $343,000,000

ALL MARKET REAL RETURN PORTFOLIO

            The management of, and investment decisions for, the Fund's
portfolio are made by the Adviser's All Market Real Return Portfolio Team. Vinod
Chathlani, Daniel J. Loewy and Vadim Zlotnikov 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 Fund - Portfolio Managers" in the Fund's
Prospectuses.

            The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's Portfolio Managers as of October 31, 2015 are set
forth below.

                DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(4)

               Vinod Chathlani                        None
               Daniel J. Loewy                    $50,001-$100,000
               Vadim Zlotnikov                        None

--------
(4)   The dollar range of equity securities in the Fund includes vested shares
      awarded under the Adviser's Partners Compensation Plan (the "Plan").

            As of October 31, 2015, employees of the Adviser had approximately
$69,860,967 invested in shares of all AB Mutual Funds (excluding AB 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 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 October 31, 2015.

--------------------------------------------------------------------------------
                         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
--------------------------------------------------------------------------------

Vinod Chathlani            None         None              None            None
--------------------------------------------------------------------------------
Daniel J. Loewy             48     $10,224,000,000        None            None
--------------------------------------------------------------------------------
Vadim Zlotnikov             88     $11,966,000,000        None            None

--------------------------------------------------------------------------------
                        OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
                                                                    Total
                        Total                        Number of      Assets of
                        Number of                    Other Pooled   Other Pooled
                        Other       Total Assets of  Investment     Investment
                        Pooled      Other Pooled     Vehicles       Vehicles
                        Investment  Investment       Managed with   Managed with
                        Vehicles    Vehicles         Performance-   Performance-
Portfolio Manager       Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Vinod Chathlani             20        $15,000,000           None          None
--------------------------------------------------------------------------------
Daniel J. Loewy             225     $21,857,000,000         None          None
--------------------------------------------------------------------------------
Vadim Zlotnikov             208     $22,073,000,000         None          None


--------------------------------------------------------------------------------
                                 OTHER ACCOUNTS
--------------------------------------------------------------------------------
                                                                  Total
                                                   Number of      Assets of
                      Total                        Other          Other
                      Number of                    Accounts       Accounts
                      Other       Total Assets of  Managed with   Managed with
                      Accounts    Other Accounts   Performance-   Performance-
Portfolio Manager     Managed     Managed          based Fees     based Fees
--------------------------------------------------------------------------------

Vinod Chathlani          None          None              None          None
--------------------------------------------------------------------------------
Daniel J. Loewy           64      $25,784,000,000        None          None
--------------------------------------------------------------------------------
Vadim Zlotnikov           127     $36,823,000,000         23      $9,112,000,000

Investment Professional Conflict of Interest Disclosure
-------------------------------------------------------

            As an investment adviser and fiduciary, the Adviser owes its clients
and shareholders an undivided duty of loyalty. The Adviser recognizes that
conflicts of interest are inherent in its business and accordingly has 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 AB 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. The Adviser places
the interests of its clients first and expects all of its 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 in U.S. Treasuries and open-end
mutual funds) and imposes a 60-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
clients of the Adviser 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
-------------------------------

            The Company has entered into a Distribution Services Agreement (the
"Agreement") with ABI, the Company's principal underwriter, to permit ABI to
distribute the Funds' shares and to permit the Funds to pay distribution
services fees to defray expenses associated with distribution of its Class A
shares, Class C shares, Class 1 shares, Class R shares and Class K 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 (the "Plan").

            In approving the Plan, 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 Plan 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 of the Company 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 Plan for an additional annual term at their meetings held on
November 3-5, 2015.

            All material amendments to the Plan will become effective only upon
approval as provided in the preceding paragraph; and the Plan may not be amended
in order to increase materially the costs that a Fund may bear pursuant to the
Plan 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.

            The Agreement may be terminated (a) by any Fund without penalty at
any time by a majority vote of the holders of a Fund's outstanding voting
securities voting separately by class or by majority vote of the Qualified
Directors, or (b) by ABI. To terminate the Plan or the Agreement, any party must
give the other party 60 days' prior written notice, except that a Fund may
terminate the Plan without giving prior notice to ABI. The Agreement will
terminate automatically in the event of an assignment. The Plan is of a type
known as a "reimbursement plan", which means that it compensates the distributor
for the actual costs of services rendered.

            In the event that the Plan is terminated by either party or not
continued with respect to the Class A, Class C, Class 1, Class R or Class K
shares, (i) no distribution services fees (other than current amounts accrued
but not yet paid) would be owed by a Fund to ABI with respect to that class, and
(ii) a Fund would not be obligated to pay ABI for any amounts expended under the
Agreement not previously recovered by ABI from distribution services fees in
respect of shares of such class or through deferred sales charges.

            During the fiscal year ended October 31, 2015, for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, with respect to Class A shares, the distribution services fees for
expenditures payable to ABI were as follows:

                                             Percentage Per Annum of the
              Distribution Services Fees     Aggregate Average Daily Net
              for  Expenditures Payable to   Assets Attributable to Class A
Fund          ABI                            Shares*
------------  ----------------------------   ------------------------------

Bond
Inflation
Strategy                 $45,200                           .25%

Municipal
Bond
Inflation
Strategy                $132,034                           .25%

All Market
Real Return
Portfolio                $62,789                           .25%

--------
*     The maximum fee allowed under the Rule 12b-1 Plan for the Class A shares
      of the Funds is.30% of the aggregate average daily net assets. The Board
      currently limits the payments to .25%.

            For the fiscal year ended October 31, 2015 for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, 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:

Category of           Bond Inflation     Municipal Bond      All Market Real
  Expense                Strategy      Inflation Strategy    Return Portfolio
  -------                --------      ------------------    ----------------


Advertising/
Marketing                   $412              $1,332                $552

Printing and
Mailing of
Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders                 $27                 $82                 $35

Compensation to
Underwriters              $5,369            $163,196             $70,350

Compensation to
Dealers                  $50,930             $17,826              $7,466

Compensation to
Sales Personnel           $1,137              $2,149              $1,940

Interest, Carrying
or Other Financing
Charges                       $0                  $0                  $0

Other (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)                 $6,654             $22,176              $9,308

Totals                   $64,529            $206,761             $89,651

            During the fiscal year ended October 31, 2015, for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, with respect to Class C shares, the distribution services fees for
expenditures payable to ABI were as follows:

                                                  Percentage Per Annum of the
                     Distribution Services Fees   Aggregate Average Daily Net
                     for  Expenditures Payable    Assets Attributable to Class C
Fund                 to ABI                       Shares
-----------------    --------------------------   ------------------------------


Bond
Inflation
Strategy                       $ 31,279                    1.00%

Municipal
Bond
Inflation
Strategy                       $169,905                    1.00%

All Market
Real Return
Portfolio                      $ 61,367                    1.00%

            For the fiscal year ended October 31, 2015 for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, 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:

Category of           Bond Inflation     Municipal Bond      All Market Real
  Expense                Strategy      Inflation Strategy    Return Portfolio
  -------                --------      ------------------    ----------------


Advertising/
Marketing                    $85                 $450                $160

Printing and
Mailing of
Prospectuses
and Semi-
Annual and
Annual Reports
to Other than
Current
Shareholders                  $4                  $27                  $9

Compensation
to Underwriters           $1,115             $178,436             $61,250

Compensation
to Dealers               $34,264               $6,047              $2,185

Compensation
to Sales
Personnel                   $268                 $303                $112

Interest,
Carrying or
Other Financing
Charges                       $0                   $0                  $0

Other (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)                 $1,385               $7,540              $2,736

Totals                   $37,121             $192,803             $66,452

            During the fiscal year ended October 31, 2015, for Bond Inflation
Strategy and All Market Real Return Portfolio, with respect to Class R shares,
the distribution services fees for expenditures payable to ABI were as follows:

                                             Percentage Per Annum of the
              Distribution Services Fees     Aggregate Average Daily Net
              for  Expenditures Payable to   Assets Attributable to Class R
Fund          ABI                            Shares
------------  ----------------------------   ------------------------------

Bond
Inflation
Strategy                     $696                         .50%

All Market
Real Return
Portfolio                    $820                         .50%

            For the fiscal year ended October 31, 2015 for Bond Inflation
Strategy and All Market Real Return Portfolio, 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:

Category of                     Bond Inflation     All Market Real
  Expense                          Strategy       Return Portfolio
  -------                          --------       ----------------


Advertising/
Marketing                               $4                 $4

Printing and
Mailing of
Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders                            $0                 $0

Compensation to
Underwriters                           $51               $866

Compensation to
Dealers                               $761                $55

Compensation to
Sales Personnel                        $18                $44

Interest, Carrying
or Other Financing
Charges                                 $0                 $0

Other (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)                              $59                $68

Totals                                $893             $1,037

            During the fiscal year ended October 31, 2015, for Bond Inflation
Strategy and All Market Real Return Portfolio, with respect to Class K shares,
the distribution services fees for expenditures payable to ABI were as follows:

                                             Percentage Per Annum of the
              Distribution Services Fees     Aggregate Average Daily Net
              for  Expenditures Payable to   Assets Attributable to Class K
Fund          ABI                            Shares
------------  ----------------------------   ------------------------------

Bond
Inflation
Strategy                  $4,922                         .25%

All Market
Real Return
Portfolio                 $4,777                         .25%

            For the fiscal year ended October 31, 2015, for Bond Inflation
Strategy and All Market Real Return Portfolio, 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:

Category of                     Bond Inflation     All Market Real
  Expense                          Strategy       Return Portfolio
  -------                          --------       ----------------


Advertising/
Marketing                              $53                $51

Printing and
Mailing of
Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders                            $3                 $3

Compensation to
Underwriters                          $701             $4,825

Compensation to
Dealers                             $4,916               $683

Compensation to
Sales Personnel                       $153               $162

Interest, Carrying
or Other Financing
Charges                                 $0                 $0

Other (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)                             $874               $844

Totals                              $6,700             $6,568

            During the fiscal year ended October 31, 2015, for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, with respect to Class 1 shares, the distribution services fees for
expenditures payable to ABI were as follows:

                                             Percentage Per Annum of the
              Distribution Services Fees     Aggregate Average Daily Net
              for  Expenditures Payable to   Assets Attributable to Class 1
Fund          ABI                            Shares
------------  ----------------------------   ------------------------------

Bond
Inflation
Strategy               $272,232                           .10%

Municipal
Inflation
Strategy               $400,283                           .10%

All Market
Real Return
Portfolio              $1,232,120                         .10%

            For the fiscal year ended October 31, 2015 for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, expenses incurred by each Fund and costs allocated to each Fund in
connection with activities primarily intended to result in the sale of Class 1
shares were as follows:

Category of           Bond Inflation     Municipal Bond      All Market Real
  Expense                Strategy      Inflation Strategy    Return Portfolio
  -------                --------      ------------------    ----------------



Advertising/
Marketing                  $7,418            $10,933                $13,588

Printing and
Mailing of
Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders                 $479               $704                   $846

Compensation to
Underwriters              $97,025           $399,951             $1,230,462

Compensation to
Dealers                  $271,976           $142,630               $176,208

Compensation to
Sales Personnel           $22,974            $46,373               $109,262

Interest, Carrying
or Other Financing
Charges                        $0                 $0                     $0

Other (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)                $120,181           $176,566               $217,557

Totals                   $520,053           $777,157             $1,747,923

            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 C, Class 1, Class R and Class K 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 C shares of each Fund and the distribution services fees on the
Class 1 shares, Class R shares and the Class K 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 the Fund in subsequent fiscal years. ABI's compensation with
respect to Class C, Class 1, Class R and Class K shares of each Fund under the
Plan is directly tied to the expenses incurred by ABI. Actual distribution
expenses for Class C shares, Class 1 shares, Class R shares and Class K shares
of each Fund for any given year, however, will probably exceed the distribution
services fee payable under the Plan with respect to the class involved and, in
the case of Class C 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 Plan with respect to the class involved and, in the case
of Class C shares, payments subsequently received through CDSCs, so long as the
Plan is in effect.

            For the fiscal year ended October 31, 2015 for Bond Inflation
Strategy, Municipal Bond Inflation Strategy and All Market Real Return
Portfolio, unreimbursed distribution expenses incurred and carried over of
reimbursement in future years in respect of the Class C, Class R, Class K and
Class 1 shares of each Fund, as applicable, were as follows:





                           Bond                 Municipal Bond        All Market Real
Class                      Inflation Strategy   Inflation Strategy    Return Portfolio
-----                      ------------------   ------------------    ----------------
                                                             
Class C                    $232,090             $314,332              $145,679
   (% of the net
   assets of Class C)      8.66%                2.39%                 3.47%

Class R                    $15,914              N/A                   $14,160
   (% of the net
   assets of Class R)      78,67%               N/A                   8.74%

Class K                    $18,962              N/A                   $20,431
   (% of the net
   assets of Class K)      1.17%                N/A                   1.22%

   Class 1                 $1,742,684           $2,043,431         $2,305,314
   (% of the net
   assets of Class 1)      .68%                 .53%                   .48%


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, acts as the
transfer agent for the Funds. ABIS registers the transfer, issuance and
redemption of Fund shares and disburses dividends and other distributions to
Fund shareholders, receives a transfer agency fee per account holder of each of
the Class A, Class C, Class 1, Class 2, Class R, Class K, Class I and Advisor
Class shares of the Funds, plus reimbursement for out-of-pocket expenses. For
the fiscal year ended October 31, 2015 for Bond Inflation Strategy, Municipal
Bond Inflation Strategy and All Market Real Return Portfolio, the Company paid
ABIS $96,225, $55,822 and $110,359, respectively, for transfer agency services.

            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,
the Funds often do not maintain an account for you. Thus, some or all of the
transfer agency functions for these accounts are performed by the financial
intermediaries. The Funds, ABI and/or the Adviser pays to these financial
intermediaries, including those that sell shares of the AB 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 a Fund, 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 Funds' Prospectuses 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
Prospectuses under the heading "Investing in the Funds".

General
-------

            Shares of the Funds are offered on a continuous basis at a price
equal to their NAV plus an initial sales charge at the time of purchase (the
"Class A shares"), without any initial sales charge and, as long as the shares
are held for one year or more, without any CDSC (the "Class C 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 (the
"Advisor Class shares"), and, except for Municipal Bond Inflation Strategy, to
group retirement plans, as defined below, eligible to purchase Class R shares,
without any initial sales charge or CDSC (the "Class R shares"), to group
retirement plans eligible to purchase Class K shares, without any initial sales
charge or CDSC (the "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 (the "Class I shares"), with respect to Bond
Inflation Strategy and All Market Real Return Portfolio to group retirement
plans, as described below, eligible to purchase Class Z shares, without any
initial sales charge or CDSC ("Class Z shares"), in each case as described
below. All of the classes of shares of the Funds, except Class 2, Advisor Class,
Class I and Class Z shares, are subject to Rule 12b-1 asset-based sales charges.
Shares of the Funds 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 intermediaries 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 the Funds, including
requirements as to the classes of shares available through that financial
intermediary and the minimum initial and subsequent investment amounts. The
Funds are not responsible for, and have no control over, the decision of any
financial intermediary to impose such differing requirements. Sales personnel of
financial intermediaries distributing the Funds' 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 the 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 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 a Fund will be able to
detect excessive or short-term trading or to identify shareholders engaged in
such practices, particularly with respect to transactions in omnibus accounts.
Shareholders should be aware that application of these policies may have adverse
consequences, as described below, and should avoid frequent trading in Fund
shares through purchases, sales and exchanges of shares. The Funds reserve 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.

            A Fund 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 each Fund ordinarily calculates its NAV at 4:00 p.m.,
Eastern time, which gives rise to the possibility that developments may have
occurred in the interim that would affect the value of these securities. The
time zone differences among international stock markets can allow a shareholder
engaging in a short-term trading strategy to exploit differences in Fund share
prices that are based on closing prices of securities of foreign issuers
established some time before the Fund calculates its own share price (referred
to as "time zone arbitrage"). A Fund has procedures, referred to as fair value
pricing, designed to adjust closing market prices of securities of foreign
issuers to reflect what is believed to be the fair value of those securities at
the time the Fund calculates its NAV. While there is no assurance, the Funds
expect that the use of fair value pricing, in addition to the short-term trading
policies discussed below, will significantly reduce a shareholder's ability to
engage in time zone arbitrage to the detriment of other Fund shareholders.

            A shareholder engaging in a short-term trading strategy may also
target a Fund 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"). All Funds may be
adversely affected by price arbitrage.

            Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of a Fund should be made for investment purposes only. A Fund 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. A Fund reserves 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
                  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, 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     Applications of Surveillance Procedures and Restrictions to
                  Omnibus Accounts. Omnibus account arrangements are common
                  forms of holding shares of a Fund, particularly among certain
                  brokers, dealers and other financial intermediaries, including
                  sponsors of retirement plans and variable insurance products.
                  A Fund applies its surveillance procedures to these omnibus
                  account arrangements. As required by SEC rules, each Fund has
                  entered into agreements with all of its financial
                  intermediaries that require the financial intermediaries to
                  provide a Fund, upon the request of the Fund or its agents,
                  with individual account level information about their
                  transactions. If the Fund detects excessive trading through
                  its monitoring of omnibus accounts, including trading at the
                  individual account level, the financial intermediaries will
                  also execute instructions from the Fund to take actions to
                  curtail the activity, which may include applying blocks to
                  accounts to prohibit future purchases and exchanges of Fund
                  shares. For certain retirement plan accounts, the Fund may
                  request that the retirement plan or other intermediary revoke
                  the relevant participant's privilege to effect transactions in
                  Fund shares via the internet or telephone, in which case the
                  relevant participant must submit future transaction orders via
                  the U.S. Postal Service (i.e., regular mail).

Purchase of Shares
------------------

            A 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 its NAV, plus,
in the case of Class A shares of the Fund, a sales charge. On each Fund business
day on which a purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might materially affect the
value of the Fund's shares, the NAV per share is computed as of 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 NAVs of the various classes of shares of a Fund are
expected to be substantially the same. However, the NAVs of the Class C and
Class R shares of the Fund will generally be slightly lower than the NAVs of the
Class A, Class 1, Class 2, Class K, Class I, Class Z and Advisor Class shares of
the 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.

            A Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to its NAV next determined (plus
applicable Class A sales charges), as described below. Orders received by ABI
prior to 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) are priced at the NAV next computed on that day (plus applicable
Class A sales charges). In the case of orders for purchases 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 that 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 Company in
accordance with the Company'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 the 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 the Fund, the Fund will not issue share certificates
representing shares of the Fund. Ownership of the Fund's shares will be shown on
the books of the Company's transfer agent. Lost certificates will not be
replaced with another certificate, but will be shown on the books of the
Company's transfer agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost or stolen
certificates.

            Each class of shares in a Fund represents an interest in the same
portfolio of investments of that Fund, has the same rights and is identical in
all respects, except that (i) Class A shares bear the expense of the initial
sales charge (or CDSC, when applicable) and Class C shares bear the expense of
the CDSC, (ii) depending on the Fund, Class C and Class R shares typically each
bear the expense of a higher distribution services fee than those borne by Class
A, Class 1 and Class K shares and Class I, Class 2, Class Z and Advisor Class
shares do not bear such a fee, and (iii) each of Class A, Class C, Class 1,
Class R and Class K shares 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. Each class has different exchange privileges and certain
different shareholder service options available.

            The Directors have determined that currently no conflict of interest
exists between or among the classes of shares of the Fund. On an ongoing basis,
the Directors, 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 and C Shares. Class A and Class C shares have the
following alternative purchase arrangements: Class A shares are generally
offered with an initial sales charge 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. "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. 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 the purchase, the length of time the
investor expects to 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 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 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 with respect to Bond Inflation Strategy and for more than
$500,000 for Class C shares with respect to Municipal Bond Inflation Strategy.

            Class A shares are subject to a lower distribution services fee and,
accordingly, pay correspondingly higher dividends per share than Class C shares.
However, because initial sales charges are deducted at the time of purchase,
most investors purchasing Class A shares would not have all of 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 because the accumulated continuing distribution charges on Class C shares
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 C shares 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 one-year period. For example, based on
current fees and expenses, an investor subject to the 4.25% initial sales charge
on Class A shares of Bond Inflation Strategy would have to hold his or her
investment approximately seven years for the Class C distribution services fee
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.

Compensation Paid to Principal Underwriter
------------------------------------------

            During the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, the aggregate amount of underwriting commission payable with
respect to Class A shares of Bond Inflation Strategy was $4,611, $8,004 and
$51,689, respectively. Of that amount ABI received amounts of $233, $601 and
$3,214, 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 the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, the aggregate amount of underwriting commission payable with
respect to Class A shares of Municipal Bond Inflation Strategy was $29,384,
$35,125 and $520,465, respectively. Of that amount ABI received amounts of $0,
$0 and $0, 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 the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, the aggregate amount of underwriting commission payable with
respect to Class A shares of All Market Real Return Portfolio was $28,291,
$24,998 and $110,734, respectively. Of that amount ABI received amounts of
$1,109, $996 and $4,924, 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).

            The following table shows the CDSCs received by ABI from each share
class during the Funds' last three fiscal years.

                                      Amounts ABI            Amounts ABI
Fiscal Year                           Received in            Received in
Ended                                 CDSCs From             CDSCs From
October 31     Fund                   Class A Shares         Class C Shares
----------     ----                   --------------         --------------

2015           Bond Inflation              $   47                  $  214
2014           Strategy                         0                     319
2013                                           18                   1,105

2015           Municipal Bond              $5,626                  $  619
2014           Inflation Strategy          35,125                   4,148
2013                                       36,212                  10,174

2015           All Market Real             $    8                  $  818
2014           Return Portfolio               150                     625
2013                                            0                   6,807

            Class A Shares. The public offering price of Class A shares is the
NAV per share plus a sales charge, as set forth below.

BOND INFLATION STRATEGY AND ALL MARKET REAL RETURN PORTFOLIO


                                  Sales Charge
                                  ------------

                                                                  Discount or
                                   As %           As %            Commission
                                  of Net         of the         to Dealers or
                                  Amount         Public        Agents of up to
Amount of Purchase               Invested    Offering Price  % of 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.

MUNICIPAL BOND INFLATION STRATEGY

                                  Sales Charge
                                  ------------

                                                                 Discount or
                                  As %           As %             Commission
                                 of Net         of the          to Dealers or
                                 Amount         Public         Agents of up to
Amount of Purchase              Invested    Offering Price   % of Offering Price
------------------              --------    --------------   -------------------

Up to $100,000................    3.09          3.00               3.00
$100,000 up to $250,000.......    2.04          2.00               2.00
$250,000 up to $500,000*......    1.01          1.00               1.00

--------
*     There is no initial sales charge on transactions of $500,000 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 for
Bond Inflation Strategy and with respect to purchases of $500,000 or more for
Municipal Bond Inflation Strategy, Class A shares 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". The Funds receive the entire NAV of their Class A shares
sold to investors. ABI's commission is the sales charge shown in the
Prospectuses 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
a 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 issued (i)
pursuant to the automatic reinvestment of income dividends or capital gains
distributions or (ii) in exchange for Class A shares of other "AB 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 AB Government Exchange Reserves that were purchased for cash
without the payment of an initial sales charge and without being subject to a
CDSC. The Fund receives the entire NAV of its Class A shares sold to investors.
ABI's commission is the sales charge shown in the Prospectuses 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 reallowance in
excess of 90% of such a sales charge may be deemed to be an "underwriter" under
the Securities Act.

            Commissions may be paid to selected dealers or agents who initiate
or are responsible for Class A share purchases by a single shareholder of
$500,000 or more for Municipal Bond Inflation Strategy or $1,000,000 or more for
Bond Inflation Strategy that are not subject to an initial sales charge at up to
the following rates: 1.00% on purchase amounts up to $5,000,000; plus 0.50% on
purchase amounts over $5,000,000. Commissions may be paid to selected dealers or
agents who initiate or are responsible for Class A share purchases by a single
shareholder of $1,000,000 or more for All Market Real Return Portfolio 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 Institutional Investment Management Division;

            (ii)  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 investment 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 registered broker-dealer or other financial
                  intermediary and approved by ABI, under which such 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 AB 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 AB Mutual Funds who
                  receive a Distribution resulting from any SEC enforcement
                  action related to trading in shares of AB Mutual Funds who, in
                  each case, purchase shares of an AB Mutual Fund from ABI
                  through deposit with ABI of the Distribution check.

            Class C Shares. Investors may purchase Class C shares at the public
offering price equal to the NAV per share of the Class C shares 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 are sold without an initial sales charge so that a 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 a Fund to sell 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 do not convert to any other class of shares of a
Fund and incur higher distribution services fees and transfer agency costs than
Class A shares and Advisor Class shares, 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 A share purchases of
$1,000,000 or more with respect to Bond Inflation Strategy and Class A share
purchases of $500,000 or more with respect to Municipal Bond Inflation Strategy
and Class C shares that are redeemed within one year of purchase will be subject
to a 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.

            In determining the CDSC applicable to a redemption of Class C
shares, 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 AB Mutual Fund originally purchased by the
shareholder.

            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 the
CDSC and the distribution services fee enables the 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 that has attained
the age of 70 1/2, (iii) that had been purchased by present or former Directors,
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 -
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 AB 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.

            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 shares
and Class C shares.

            Class 2 Shares. Class 2 shares are offered only to institutional
clients of the Adviser and Bernstein Clients who have at least $3 million in
fixed-income assets under management with Bernstein after giving effect to their
investment in the Funds. 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.

            Asset Allocation. Bernstein may, at a Client's request, maintain a
specified percentage of the Client's assets in one or more of the Funds, or vary
the percentage based on Bernstein's opinion of a client's asset allocation. In
keeping with these Client mandates or for tax considerations, Bernstein may,
without additional instructions from the Client, purchase or sell Class 1 and
Class 2 shares of any Fund from time to time.

            Class R Shares (not offered for Municipal Bond Inflation Strategy).
Class R shares are offered to certain group retirement plans. 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 and pay correspondingly lower dividends than Class A shares.

            Class K Shares (not offered for Municipal Bond Inflation Strategy).
Class K shares are available at NAV to group retirement plans. 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 (not offered for Municipal Bond Inflation Strategy).
Class I shares are available at NAV to group retirement plans 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 Z Shares. (not offered for Municipal Bond Inflation Strategy).
Class Z shares are available at NAV, without an initial sales charge, to 401(k)
plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and money
purchase pension plans, defined benefit plans, and non-qualified deferred
compensation plans where plan level or omnibus accounts are held on the books of
the Company ("group retirement plans").

            Class Z shares are also available to certain
AllianceBernstein-sponsored group retirement plans. Class Z shares generally are
not available to retail non-retirement accounts, traditional and Roth IRAs,
Coverdell Education Savings Accounts, SEPs, SAR-SEPs, SIMPLE IRAs and individual
403(b) plans. Class Z shares are not currently available to group retirement
plans in the AllianceBernstein-sponsored programs known as the "Informed Choice"
programs.

            Class Z 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.

            Advisor Class Shares. Advisor Class shares 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 self-directed defined contribution employee
benefit plans (e.g., 401(k) plans) that purchase shares directly without the
involvement of a financial intermediary, (iii) 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 C, Class 1, Class R or Class K shares.

Alternative Purchase Arrangements - Group Retirement Plans and Tax-Deferred
Accounts
---------------------------------------------------------------------------

            Each Fund, except for Municipal Bond Inflation Strategy, 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 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 the Prospectuses and this SAI. The Fund is 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. 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 all plan purchases of Class A shares
will be subject to a 1%, 1-year CDSC on redemption. Class A shares are also
available at NAV to group retirement plans. 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 Company's distribution plan.

            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. 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. Class R shares are not subject to a front-end sales charge or
CDSC, but are subject to a .50% distribution fee.

            Class K Shares. Class K shares are available to certain group
retirement plans. 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 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 a distribution fee.

            Class Z Shares. Class Z shares are available to certain group
retirement plans and certain institutional clients of the Adviser who invest at
least $2 million in a Fund. Class Z shares are not subject to front-end sales
charges or CDSCs or distribution fees.

            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 the Fund's share class eligibility criteria before
determining whether to invest.

            Currently, each Fund makes its Class A shares available at NAV to
group retirement plans. 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 and Class Z
shares have no CDSC or Rule 12b-1 distribution fees, plans should consider
purchasing Class K, Class I or Class Z 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 (currently limited to 0.25%);

      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.

Sales Charge Reduction Programs for Class A Shares
--------------------------------------------------

            The AB 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 or her financial intermediary that they qualify for such a
reduction. If a Fund is not notified that a shareholder is eligible for these
reductions, that 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 AB
Mutual Fund) into a single "purchase". By combining such purchases, shareholders
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 the Fund or any other AB
Mutual Fund, including AB 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 for his, her or their own account(s); (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 that has not been in existence for at least six
months or that has no purpose other than the purchase of shares of the 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 AB Mutual Funds include:

AB Bond Fund, Inc.
 - AB All Market Real Return Portfolio
 - AB Bond Inflation Strategy
 - AB Credit Long/Short Portfolio
 - AB Government Reserves Portfolio
 - AB High Yield Portfolio
 - AB Income Fund
 - AB Intermediate Bond Portfolio
 - AB Limited Duration High Income Portfolio
 - AB Municipal Bond Inflation Strategy
 - AB Tax-Aware Fixed Income Portfolio
AB Cap Fund, Inc.
 - AB All Market Alternative Return Portfolio
 - AB All Market Income Portfolio
 - AB Asia ex-Japan Equity Portfolio
 - AB Concentrated Growth Fund
 - AB Concentrated International Growth Portfolio
 - AB Emerging Markets Core Portfolio
 - AB Emerging Markets Growth Portfolio
 - AB Emerging Markets Multi-Asset Portfolio
 - AB Global Core Equity Portfolio
 - AB Multi-Manager Alternative Strategies Fund
 - AB Multi-Manager Select Retirement Allocation Fund
 - AB Multi-Manager Select 2010 Fund
 - AB Multi-Manager Select 2015 Fund
 - AB Multi-Manager Select 2020 Fund
 - AB Multi-Manager Select 2025 Fund
 - AB Multi-Manager Select 2030 Fund
 - AB Multi-Manager Select 2035 Fund
 - AB Multi-Manager Select 2040 Fund
 - AB Multi-Manager Select 2045 Fund
 - AB Multi-Manager Select 2050 Fund
 - AB Multi-Manager Select 2055 Fund
 - AB Select US Equity Portfolio
 - AB Select US Long/Short Portfolio
 - AB Small Cap Growth Portfolio
 - AB Small Cap Value Portfolio
AB Core Opportunities Fund, Inc.
AB Discovery Growth Fund, Inc.
AB Equity Income Fund, Inc.
AB Global Bond Fund, Inc.
AB Global Real Estate Investment Fund, Inc.
AB Global Risk Allocation Fund, Inc.
AB Global Thematic Growth Fund, Inc.
AB Government Exchange Reserves
AB Growth and Income Fund, Inc.
AB High Income Fund, Inc.
AB International Growth Fund, Inc.
AB Large Cap Growth Fund, Inc.
AB Municipal Income Fund, Inc.
 - AB California Portfolio
 - AB High Income Municipal Portfolio
 - AB National Portfolio
 - AB New York Portfolio
AB Municipal Income Fund II
 - AB Arizona Portfolio
 - AB Massachusetts Portfolio
 - AB Michigan Portfolio
 - AB Minnesota Portfolio
 - AB New Jersey Portfolio
 - AB Ohio Portfolio
 - AB Pennsylvania Portfolio
 - AB Virginia Portfolio
AB Trust
 - AB Discovery Value Fund
 - AB International Value Fund
 - AB Value Fund
AB Unconstrained Bond Fund, Inc.
The AB Portfolios
 - AB Balanced Wealth Strategy
 - AB Conservative Wealth Strategy
 - AB Growth Fund
 - AB Tax-Managed Balanced Wealth Strategy
 - AB Tax-Managed Conservative Wealth Strategy
 - AB Tax-Managed Wealth Appreciation Strategy
 - AB Wealth Appreciation Strategy
Sanford C. Bernstein Fund, Inc.
 - Intermediate California Municipal Portfolio
 - Intermediate Diversified Municipal Portfolio
 - Intermediate New York Municipal Portfolio
 - International Portfolio
 - Short Duration Portfolio
 - Tax-Managed International Portfolio
            Prospectuses for the AB 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.ABglobal.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 AB Mutual Fund, including AB Institutional Funds 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 class of shares of AB
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 have invested including reinvested distributions but excluding
appreciation less the amount of any withdrawals, whichever is higher.

            For example, if an investor owned shares of an AB 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 the 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 AB 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 AB Mutual Funds under a single Letter of
Intent. The AB Mutual Funds will use the higher of cost or current NAV of the
investor's existing investments and of those accounts with which investments are
combined via Combined Purchase Privileges toward the fulfillment of the Letter
of Intent. For example, if at the time an investor signs a Letter of Intent to
invest at least $100,000 in Class A shares of the Fund, the investor and the
investor's spouse or domestic partner each purchase shares of the 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 Bond Inflation Strategy or any other AB 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 AB 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. Under a Fund's Dividend Reinvestment
Program, unless you specify otherwise, your dividends and distributions will be
automatically reinvested in the same class of shares of the Fund without an
initial sales charge or CDSC. If you elect to receive your distributions in
cash, you will only receive a check if the distribution is equal to or exceeds
$25.00. Distributions of less than $25.00 will automatically be reinvested in
Fund shares. To receive distributions of less than $25.00 in cash, you must have
bank instructions associated to your account so that distributions can be
delivered to you electronically via Electronic Funds Transfer using the
Automated Clearing House or "ACH". If you elect to receive distributions by
check, your distributions and all subsequent distributions may nonetheless be
reinvested in additional shares of the Fund under the following circumstances:

            (a) the postal service is unable to deliver your checks to your
            address of record and the checks are returned to the Fund's transfer
            agent as undeliverable; or

            (b) your checks remain uncashed for nine months.

            Additional shares of the Fund will be purchased at the then current
NAV. You should contact the Fund's transfer agent to change your distribution
option. Your request to do so must be received by the transfer agent before the
record date for a distribution in order to be effective for that distribution.
No interest will accrue on amounts represented by uncashed distribution checks.

            Dividend Direction Plan. A shareholder who already maintains
accounts in more than one AB Mutual Fund may direct that income dividends and/or
capital gains paid by one AB Mutual Fund be automatically reinvested, in any
amount, without the payment of any sales or service charges, in shares of any
eligible class of one or more other AB Mutual Fund(s) at which the shareholder
maintains an account. 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 Prospectuses. 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 systematic 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 the Fund automatically reinvested in additional shares of the
Fund.

            Shares of a Fund owned by a participant in the 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 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 the 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. The proceeds of
the sales under a systematic withdrawal plan will be sent directly to you or
your designee. 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 and Class C Shares. Under the
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 or Class C shares in a
shareholder's account may be redeemed free of any CDSC.

            With respect to Class A and Class C shares, 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.

Payments to Financial Advisors and Their Firms
----------------------------------------------

            Financial intermediaries market and sell shares of a Fund. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of the Funds. This compensation is paid from various sources,
including any sales charge, CDSC and/or Rule 12b-1 fee that you or the Funds may
pay. Your individual financial advisor may receive some or all of the amounts
paid to the financial intermediary that employs him or her.

            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 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 1 shares up to 100% of the Rule 12b-1 fee
applicable to Class 1 shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class 1 shares.

            In the case of Class R and Class K shares up to 100% of the Rule
12b-1 fee applicable to Class R and Class K shares each year may be paid to
financial intermediaries, including your financial intermediary, that sell Class
R and Class K 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 recordkeeping and/or
            administrative services.

            Please read your Prospectuses carefully for information on this
compensation.

Other Payments for Distribution Services and Educational Support
----------------------------------------------------------------

            In addition to the commissions 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 Prospectuses, 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 AB 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 AB 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 for distribution analytical data
regarding AB Mutual Fund sales by financial advisors of these firms and to
reimburse directly or indirectly the costs incurred by these firms and their
employees in connection with educational seminars and training efforts about the
AB 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 2016, ABI expects to pay approximately 0.05% of the average
monthly assets of the AB Mutual Funds, or approximately $21 million, for
distribution services and education support related to the AB Mutual Funds. In
2015, ABI paid approximately 0.05% of the average monthly assets of the AB
Mutual Funds or approximately $21 million for distribution services and
educational support related to the AB Mutual Funds.

            A number of factors are considered in determining the additional
payments, including each firm's AB 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 and marketing purposes. In some cases, firms
will include the AB 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 AB 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 AB Mutual Fund
shares. Please see "Expenses of the Funds - Transfer Agency Agreement" above.
These expenses paid by a Fund are included in "Other Expenses" under "Fees and
Expenses of the Fund - Annual Fund Operating Expenses" in your Prospectuses.

            If one mutual fund sponsor makes greater distribution assistance
payments than another, your financial advisor and his or her firm may have an
incentive to recommend one fund complex over another. Similarly, if your
financial advisor or his or her firm receives more distribution assistance for
one share class versus another, then they may have an incentive to recommend
that class.

            Please speak with your financial advisor to learn more about the
total amounts paid to your financial advisor and his or her firm by the Fund,
the Adviser, ABI and by sponsors of other mutual funds he or she may recommend
to you. You should also consult disclosures made by your financial advisor at
the time of 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.
     Citigroup Global Markets
     Citizens Securities
     Commonwealth Financial Network
     Donegal Securities
     JP Morgan Securities
     Lincoln Financial Advisors Corp.
     Lincoln Financial Securities Corp.
     LPL Financial
     Merrill Lynch
     Morgan Stanley
     Northwestern Mutual Investment Services
     PNC Investments
     Raymond James
     RBC Wealth Management
     Robert W. Baird
     Santander Securities
     SunTrust Bank
     UBS Financial Services
     US Bancorp Investments
     Wells Fargo Advisors

            ABI expects that additional firms may be added to this list from
time to time.

            Although the Funds may use brokers and dealers who sell shares of
the Funds to effect portfolio transactions, the Funds do not consider the sale
of AB 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
Prospectuses 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 a 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 the 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 Fund.

Redemption
----------

            Subject only to the limitations described below, each Fund will
redeem the shares tendered to it, 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 or Class C shares, there is no redemption charge. Payment of the redemption
price normally will be made within seven days after the 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 the 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 the Fund.

            Payment of the redemption price normally will be made in cash but
may be made, at the option of a Fund, 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 Fund's portfolio securities at the time
of such redemption or repurchase. Redemption proceeds from Class A and Class C
shares 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 his or her 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 that Fund
containing a request for redemption. The Fund may require the signature or
signatures on the letter to be Medallion Signature Guaranteed. Please contact
ABIS to confirm whether a Medallion Signature Guarantee is needed.

            To redeem shares of a Fund represented by stock certificates, the
investor should forward the appropriate stock certificate or certificates,
endorsed in blank or with blank stock powers attached, to the 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 share
certificate surrendered to that 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 share certificate or certificates or, where tender is made by
mail, separately mailed to that 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 Fund
shareholder is entitled to request redemption by electronic funds transfer (of
shares for which no share 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 Fund shareholder is eligible to
request redemption by check of 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. The 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. Neither the Funds,
the Adviser, ABI nor ABIS will be responsible for the authenticity of telephone
requests for redemptions that a Fund reasonably believes to be genuine. The 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, it 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 and Class C shares),
except that requests placed through financial intermediaries before the Fund
Closing Time will be executed at the NAV determined as of 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. Neither
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 and Class C
shares). Normally, if shares of a Fund are offered through a financial
intermediary, the repurchase is settled by the shareholder as an ordinary
transaction with or through that 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
Fund and the Fund may suspend or terminate this practice at any time.

Account Closure and Sale
------------------------

            Account Closure. 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 the Fund is reasonably assured that the check has cleared,
normally up to 15 calendar days following the purchase date.

            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 the 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.

            Sale--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 the 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.

--------------------------------------------------------------------------------

                              SHAREHOLDER SERVICES

--------------------------------------------------------------------------------

            The following information supplements that set forth in your
Prospectuses 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 shares of a Fund that are different
from those described herein.

Automatic Investment Program
----------------------------

            Investors may purchase shares of a Fund 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. 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
program despite the $50 monthly minimum.

Exchange Privilege
------------------

            You may exchange your investment in the Funds for shares of the same
class of other AB Mutual Funds if the other AB 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 AB
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 on that day.

            Shares will continue to age without regard to exchanges for purpose
of determining the CDSC, if any, upon redemption. When redemption occurs, the
CDSC applicable to the original shares is applied.

            Please read carefully the prospectus of the AB 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 AB 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 AB 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 of shares of AB Mutual Funds will generally
result in the realization of a capital gain or loss for federal income tax
purposes.

            Each Fund shareholder 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 the Fund business day as defined above.
Telephone requests for exchange received before the Fund Closing Time on the
Fund business day will be processed as of the close of business on that day.
During periods of drastic economic, market or other developments, 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 AB Mutual Fund.

            None of the AB 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. Each Fund 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 AB Mutual Funds being acquired may legally be sold. Each AB Mutual Fund
reserves the right, at any time on 60 days' written notice to its shareholders,
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 the Funds' independent registered public
accounting firm, Ernst & Young LLP, 5 Times Square, New York, New York 10036, 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 calculated at the close of regular trading
on any day the Exchange is open (ordinarily 4:00 p.m., Eastern time, but
sometimes earlier, as in the case of scheduled half-day trading or unscheduled
suspensions of trading) 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 per share NAV is calculated by
dividing the value of the 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.

            Portfolio securities are valued at current market value or, if
market quotations are not readily available or are unreliable, at fair value as
determined in accordance with applicable rules under the 1940 Act and the Funds'
pricing policies and procedures (the "Pricing Policies") 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 the Board's
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) an equity security listed on the Exchange, or on another
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 then valued at the last-traded price;

            (b) an equity security traded on NASDAQ is valued at the NASDAQ
Official Closing Price;

            (c) an OTC equity security is valued at the mid level between the
current bid and ask prices. If the mid price is not available, the security
will be valued at the bid price. An equity security traded on more than one
exchange is valued in accordance with paragraph (a) above by reference to the
principal exchange (as determined by the Adviser) on which the security is
traded;

            (d) a listed or OTC put or call option is valued at the mid level
between the current bid and ask 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 is 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
approved 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
approved 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) U.S. Government securities and any other debt instrument having
60 days or less remaining until maturity generally are valued at market by an
independent pricing service, if a market price is available. If a market price
is not available, the securities are valued at amortized cost. This methodology
pertains to short-term securities that have an original maturity of 60 days or
less, as well as short term securities that had an original term to maturity
that exceeded 60 days. In instances in which amortized cost is utilized, the
Valuation Committee must reasonably conclude that the utilization of amortized
cost is approximately the same as the fair value of the security. The factors
the Valuation Committee will consider include, but are not limited to, an
impairment of the creditworthiness of the issuer or material changes in interest
rates. The Adviser is responsible for monitoring any instances when a market
price is not applied to a short term security and will report any instances to
the Valuation Committee for review;

            (j) a fixed-income security is typically valued on the basis of bid
prices provided by an approved pricing vendor when the Adviser reasonably
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
such prices reflect the conventions of the particular markets. The prices
provided by an approved 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 security 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. If the Adviser
receives multiple broker quotes that are deemed to be reliable, then the Adviser
will utilize the second highest broker quote. 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;

            (k) bank loans are valued on the basis of bid prices provided by a
pricing vendor;

            (l) bridge loans are valued at fair value, which equates to the
outstanding loan amount unless it is determined by the Adviser that any
particular bridge loan should be valued at something other than outstanding loan
amount. This may occur, due to, for example, a significant change in the high
yield market and/or a significant change in the status of any particular issuer
or issuers of bridge loans;

            (m) whole loans: residential and commercial mortgage whole loans and
whole loan pools are market priced by an approved vendor;

            (n) forward and spot currency pricing is provided by an independent
pricing vendor. The rate provided by the approved vendor is a mid price for
forward and spot rates. In most instances whenever both an "onshore" rate and an
"offshore" (i.e., 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;

            (o) OTC derivatives pricing: various independent pricing vendors are
used to obtain derivatives values or obtain information used to derive a price
for each investment. This information is placed into various pricing models that
can be sourced by the Adviser or from approved vendors (depending on the type of
derivative) to derive a price for each investment. These pricing models are
monitored/reviewed on an ongoing basis by the Adviser;

            (p) mutual funds and other pooled vehicles: the Adviser receives
pricing information for mutual funds and other pooled vehicles from various
sources (including AB Global Fund Administrator and the external custodian
banks). Open-end mutual funds are valued at the closing NAV per share and
closed-end funds and ETFs are valued at the closing market price per share;

            (q) repurchase agreements and reverse repurchase agreements:
repurchase agreements and reverse repurchase agreements will be valued based on
their original cost plus accrued interest;

            (r) hedge funds: hedge funds will be priced at the most recent
available closing NAV per share;

            (s) equity-linked notes: prices are sourced at the end of the
pricing day from approved vendors. The vendor methodology is to source the
relevant underlying non-U.S. dollar exchange closing prices and convert them to
U.S. dollars; and

            (t) credit-linked notes: prices are sourced on the reference bond
consistent with fixed-income security methodology as noted above, which are
passed through as the price on the credit-linked note. Alternatively, broker
marks are obtained.

            If the Adviser becomes aware of any news/market events that would
cause the Valuation Committee to believe the last traded or market-based price,
as applicable, does not reflect fair value, the security is then valued in good
faith at fair value by, or in accordance with, procedures approved by the 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. Each 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 ordinarily values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim. 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, that 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.

            The Board may suspend the determination of its NAV (and the offering
and sale 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 the 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, if 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 a 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 Class A shares, Class C shares, Class
1 shares, Class 2 shares, Class R shares, Class K shares, Class I shares and
Advisor Class shares are invested together in a single portfolio. 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 a 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 and Class
C shares 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
fees applicable to Class C shares will be borne exclusively by the class to
which they relate.

            The following summary addresses only the principal U.S. federal
income tax considerations pertinent to the Funds and to shareholders of the
Funds. This summary does not address the U.S. 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 the Funds, including
the effect and applicability of federal, state, local, foreign and other tax
laws and the effects of changes therein.

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 securities of any one issuer
(other than U.S. Government securities or securities of other regulated
investment companies), or 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 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, if later during the calendar year, the last day of the
Fund's taxable year (i.e., November 30 or December 31) if the Fund is eligible
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 that
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 in the year declared,
and not in the year in which the shareholders actually receive the dividend.

            The information set forth in the Prospectuses and the following
discussion relate solely to the significant U.S. 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 the 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 it will not 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. For information
about Municipal Bond Inflation Strategy distributions, see "U.S. Federal Income
Taxation of the Municipal Bond Inflation Strategy" below.

            Some or all of the distributions from a 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 a
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 a Fund. Any
dividend or distribution received by a shareholder on shares of the 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 the 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.

            Sales and Redemptions. Any gain or loss arising from a sale or
redemption of Fund shares generally will be capital gain or loss if the Fund
shares are held as a capital asset, and will be long-term capital gain or loss
if the 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
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 IRS 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 Funds 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 Funds. 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 Funds' 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 the Funds' 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.

            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 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.

            Tax Straddles. Any option, futures contract, interest rate swap, cap
or floor, or other position entered into or held by a 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 Bond Inflation Strategy or All Market Real Return Portfolio
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.

            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 Bond Inflation Strategy or All
Market Real Return Portfolio 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 a Fund on the lapse or sale of put and call
options on foreign currencies which are traded OTC 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 OTC 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.

            Foreign Income Taxes. Investment income received by the Bond
Inflation Strategy and the All Market Real Return Portfolio from sources within
foreign countries may 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 the Funds 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 the Fund's assets
to be invested within various countries is not known.

            If more than 50% of the value of a 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 Fund intends to meet for each fiscal year the requirements of
the Code to "pass through" to its shareholders foreign income taxes paid, but
there can be no assurance that the Fund will be able to do so. 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 U.S. 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.

            Passive Foreign Investment Companies. If Bond Inflation Strategy or
All Market Real Return Portfolio 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 U.S. 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. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising from such
distributions or gains. Any tax paid by the 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". A Fund
will generally be permitted to "mark-to-market" stock in a PFIC. If the 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. The 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. The 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
the Fund, would be treated as ordinary loss. The 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 the
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.

U.S. Federal Income Taxation of the Municipal Bond Inflation Strategy
---------------------------------------------------------------------

            The following discussion relates to certain significant U.S. 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.

            Distributions to shareholders out of tax-exempt interest income
earned by the Fund is not subject to federal income tax if, at the close of each
quarter of such Fund's taxable year, at least 50% of the value of such Fund's
total assets consists of tax-exempt obligations. The Fund intends to meet this
requirement. Insurance proceeds received by the Fund under any insurance
policies in respect of scheduled interest payments on defaulted municipal
securities, as described herein, will be excludable from gross income in the
same manner as interest payments from the insured municipal securities, and
consequently such insurance proceeds may be included in exempt-interest
dividends which are designated and paid by the Fund.

            Substantially all of the dividends paid by the Fund are anticipated
to be exempt from federal income taxes. Shortly after the close of each calendar
year, a notice is sent to each shareholder advising him of the total dividends
paid into his account for the year and the portion of such total that is exempt
from federal income taxes. This portion is determined by the ratio of the
tax-exempt income to total income for the entire year and, thus, is an annual
average rather than a day-by-day determination for each shareholder.

            Distributions out of taxable interest income, other investment
income, and short-term capital gains are taxable to shareholders as ordinary
income. Since the Fund's investment income is derived from interest rather than
dividends, no portion of such distributions is eligible for the
dividends-received deduction available to corporations. Furthermore, since the
Fund's investment income is derived from interest rather than dividends, it is
expected that for non-corporate shareholders no portion of such distributions
will be treated as "qualified dividend income" taxable at the reduced tax rates
applicable to long-term capital gains. Long-term capital gains, if any,
distributed by the Fund to a shareholder are taxable to the shareholder as
long-term capital gain, irrespective such shareholder's holding period in his or
her shares.

            If the Fund's distributions exceed its income and capital gains
realized in any year and the Fund has current and accumulated earnings and
profits for federal income tax purposes, then all or a portion of those
distributions may be treated as ordinary income to shareholders for federal
income tax purposes.

            If a shareholder holds shares for six months or less and during that
time receives a distribution of long-term capital gains, any loss realized on
the sale of the shares during such six-month period would be a long-term capital
loss to the extent of such distribution. If a shareholder holds shares for six
months or less and during that time receives a distribution of tax-exempt
interest income, any loss realized on the sale of the shares would be disallowed
to the extent of the distribution.

            Options and Futures Contracts. Certain listed options and regulated
futures 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 will generally be
considered 60% long-term and 40% short-term capital gain or loss. 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.

            With respect to over-the-counter options, gain or loss realized by
the Fund upon the lapse or sale of such options held by the Fund will be either
long-term or short-term capital gain or loss depending upon the Fund's holding
period with respect to such option. However, gain or loss realized upon the
lapse or closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the Fund exercises an
option, or an option that the Fund has written is exercised, gain or loss on the
option will not be separately recognized but the premium received or paid will
be included in the calculation of gain or loss upon disposition of the property
underlying the option.

            Original Issue Discount and Market Discount Obligations. Under the
current original issue discount rules, the Fund will include in its net
investment income as interest each year, in addition to stated interest received
on obligations held by the Fund, tax-exempt interest income attributable to the
Fund from holding zero-coupon municipal securities. These rules require that a
holder (such as the Fund) of a discount obligation accrue as income each year a
portion of the original issue discount (i.e., the amount equal to the excess of
the stated redemption price of the security at maturity over its issue price)
attributable to such obligation even though the Fund does not receive interest
payments in cash on the security during the year which reflect the accrued
discount. As a result of the above rules, in order to make the distributions
necessary for the Fund not to be subject to federal income or excise taxes, the
Fund may be required to pay out as an income distribution each year an amount
greater than the total amount of cash which the Fund has actually received as
interest during the year. Such distributions will be made from the cash assets
of the Fund, from borrowings or by liquidation of portfolio securities, if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The Fund may
realize a gain or loss from such sales. In the event the Fund realizes capital
gains from such sales, its shareholders may receive larger distributions than
they would receive in the absence of such sales. Under the market discount
rules, a Fund may recognize ordinary income from the sale of bonds which it
purchased at a discount to their issue price in the secondary market.

U.S. Federal Income Taxation of the All Market Real Return Portfolio
--------------------------------------------------------------------

            The following discussion relates to certain significant U.S. federal
income tax consequences to the All Market Real Return Portfolio 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.

            Investments in the Wholly-Owned Subsidiary. As described in the
Prospectuses, the Fund may gain exposure to the commodities markets through
investments in commodity-linked derivative instruments. On December 16, 2005,
the IRS issued Revenue Ruling 2006-1 which held that income derived from
commodity index-linked swaps would not be qualifying income. As such, the Fund's
ability to utilize commodity index-linked swaps as part of its investment
strategy is limited to a maximum of 10 percent of its gross income.

            A subsequent revenue ruling, Revenue Ruling 2006-31, clarified the
holding of Revenue Ruling 2006-1 by providing that income from alternative
investment instruments (such as certain commodity index-linked notes) that
create commodity exposure may be considered qualifying income under the Code.
The IRS has also issued several private letter rulings in which the IRS
specifically concluded that income from certain commodity index-linked swaps is
qualifying income, in certain circumstances. Based on the reasoning in such
rulings, the Fund will seek to gain exposure to the commodity markets primarily
through investments in commodity-linked derivative instruments and through
investments in its Subsidiary (as discussed below). The Fund has received a
private letter ruling from the IRS confirming that income derived from the
Fund's investment in the Subsidiary will constitute qualifying income to the
Fund.

            As discussed in "Information about the Funds and Their Investments -
Investments in the Wholly-Owned Subsidiary", the Fund intends to invest a
portion of its assets in the Subsidiary, which will be classified as a
corporation for U.S. federal income tax purposes. The IRS has also issued
private rulings in which the IRS specifically concluded that income derived from
investment in a subsidiary will be classified as "subpart F income" and also be
qualifying income.

            The Subsidiary will be treated as a controlled foreign corporation
("CFC"). The Fund will be treated as a "U.S. shareholder" of the Subsidiary. As
a result, the Fund will be required to include in gross income for U.S. federal
income tax purposes all of the Subsidiary's "subpart F income", whether or not
such income is distributed by the Subsidiary. It is expected that all of the
Subsidiary's income will be "subpart F income". The Fund's recognition of the
Subsidiary's "subpart F income" will increase the Fund's tax basis in the
Subsidiary. Distributions by the Subsidiary to the Fund will be tax-free, to the
extent of its previously undistributed "subpart F income", and will
correspondingly reduce the Fund's tax basis in the Subsidiary. "Subpart F
income" is generally treated as ordinary income, regardless of the character of
the Subsidiary's underlying income. If a net loss is realized by the Subsidiary,
such loss is not generally available to offset the income earned by the Fund.

            Foreign corporations, such as the Subsidiary, will generally not be
subject to U.S. federal income taxation unless they are deemed to be engaged in
a U.S. trade or business. It is expected that the Subsidiary will conduct its
activities in a manner so as to meet the requirements of a safe harbor under
Section 864(b)(2) of the Code under which the Subsidiary may engage in trading
in stocks or securities or certain commodities without being deemed to be
engaged in a U.S. trade or business. However, if certain of the Subsidiary's
activities were determined not to be of the type described in the safe harbor
(which is not expected), then the activities of the Subsidiary may constitute a
U.S. trade or business, or be taxed as such.

            In general, foreign corporations, such as the Subsidiary, that do
not conduct a U.S. trade or business are nonetheless subject to tax at a flat
rate of 30 percent (or lower tax treaty rate), generally payable through
withholding, on the gross amount of certain U.S.-source income that is not
effectively connected with a U.S. trade or business. There is presently no tax
treaty in force between the U.S. and the Cayman Islands that would reduce this
rate of withholding tax. It is not expected that the Subsidiary will derive
income subject to such withholding tax.

            Based, in part, on Revenue Ruling 2006-31, IRS guidance and advice
of counsel, the Fund will seek to gain exposure to the commodity markets
primarily through investments in commodity-linked derivatives and through
investments in the Subsidiary. The use of commodity-linked derivative
instruments involves specific risks. The Prospectuses, under the heading
"Additional Information about the Fund's Risks and Investments - Derivatives"
provide further information regarding commodity-linked derivative instruments,
including the risks associated with these instruments.

            Stripped-Mortgage Related Securities. Certain classes of SMRS which
are issued at a discount, the payments of which are subject to acceleration by
reason of prepayments of the underlying Mortgage Assets securing such classes,
are subject to special rules for determining the portion of the discount at
which the class was issued which must be accrued as income each year. Under Code
section 1272(a)(6), a principal-only class or a class which receives a portion
of the interest and a portion of the principal from the underlying Mortgage
Assets is subject to rules which require accrual of interest to be calculated
and included in the income of a holder (such as the Fund) based on the increase
in the present value of the payments remaining on the class, taking into account
payments includable in the class's stated redemption price at maturity which are
received during the accrual period. For this purpose, the present value
calculation is made at the beginning of each accrual period (i) using the yield
to maturity determined for the class at the time of its issuance (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period), calculated on the assumption
that certain prepayments will occur, and (ii) taking into account any
prepayments that have occurred before the close of the accrual period. Since
interest included in the Fund's income as a result of these rules will have been
accrued and not actually paid, the Fund may be required to pay out as an income
distribution each year an amount which is greater than the total amount of cash
interest it actually received, with possible results as described above.

Other Taxes
-----------

            A Fund 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 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.
Distributions of the Fund attributable to long-term and short-term capital gains
and U.S. source portfolio interest income are not subject to this withholding
tax.

            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 a
Fund can 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 Board, 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.

            Most of the transactions for the Funds, including transactions in
listed securities, are executed in the over-the-counter market by approximately
fifteen (15) principal market maker dealers with whom the Adviser maintains
regular contact. Most transactions made by the Funds will be principal
transactions at net prices and the Funds will incur little or no brokerage
costs. However, a Fund may make opportunistic investments in equities from time
to time and All Market Real Return Portfolio regularly invests in equity
securities. The Funds will incur brokerage commissions on those transactions.
Where possible, securities will be purchased directly from the issuer or from an
underwriter or market maker for the securities unless the Adviser believes a
better price and execution are available elsewhere. Purchases from underwriters
of newly-issued securities for inclusion in the Funds' portfolios usually will
include a concession paid to the underwriter by the issuer, and purchases from
dealers serving as market makers will include the spread between the bid and
ask price.

            With respect to equity securities, 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, the Funds do not consider sales of shares of the Funds or other
investment companies managed by the Adviser as a factor in the selection of
brokers and dealers to effect portfolio transactions and have adopted policies
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 it is
determined 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.

            No Fund has an obligation to enter into transactions in portfolio
securities with any broker, dealer, issuer, underwriter or other entity. In
placing orders, it is the policy of a Fund to obtain the best price and
execution for its transactions. Where best price and execution may be obtained
from more than one broker or dealer, the Adviser may, in its discretion,
purchase and sell securities through brokers and dealers who provide research,
statistical and other information to the Adviser. Such services may be used by
the Adviser for all of its investment advisory accounts and, accordingly, not
all such services may be used by the Adviser in connection with the Funds. The
supplemental information received from a dealer is in addition to the services
required to be performed by the Adviser under the Advisory Agreements, and the
expenses of the Adviser will not necessarily be reduced as a result of the
receipt of such information.

            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. A broker-dealer may
provide the Adviser with research or related services with an expectation, but
not necessarily an explicit agreement or contract, that the Adviser will use the
broker-dealer to execute client transactions in the future. To the extent that
such persons or firms supply investment information to the Adviser for use in
rendering investment advice to a Fund, 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 Fund. 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 a
Fund effects 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.

            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 a Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
in accordance with a similar strategy by the 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.

            During the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, Bond Inflation Strategy incurred brokerage commissions
amounting in the aggregate to $5,075, $5,365 and $7,236, respectively.

            During the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, Municipal Bond Inflation Strategy incurred no brokerage
commissions.

            During the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013, All Market Real Return Portfolio incurred brokerage
commissions amounting in the aggregate to $465,209, $629,704 and $547,278,
respectively.

            All Market Real Return Portfolio may, from time to time, place
orders for the purchase or sale of securities (including listed call options)
with SCB & Co. and SCB Limited (a United Kingdom broker-dealer), affiliates of
the Adviser (the "Affiliated Brokers"). In such instances the placement of
orders with the Affiliated Brokers would be consistent with All Market Real
Return Portfolio's objective of obtaining best execution and would not be
dependent upon the fact that the Affiliated Brokers are affiliates of the
Adviser. With respect to orders placed with the Affiliated Brokers 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 All Market Real
Return Portfolio), 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.

            During the fiscal years ended October 31, 2015, October 31, 2014 and
October 31, 2013 All Market Real Return Portfolio paid brokerage commissions to
the Affiliated Brokers amounting in the aggregate to $0, $2,520 and $0. During
the fiscal year ended October 31, 2015, the percentage of aggregate brokerage
commissions paid to the Affiliated Brokers and the percentage aggregate dollar
amount of transactions involving payment of commissions effected through the
Affiliated Brokers by All Market Real Return Portfolio was 0% and 0%,
respectively.

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 Fund's operation 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.

            Each 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.ABglobal.com). The Adviser generally posts on the
website a complete schedule of the Fund's portfolio securities, generally 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 the Fund, the market value of the Fund's
holdings, and the percentage of the Fund's assets represented by the 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 the 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 Fund, and to facilitate the review of the Fund 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 the
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 the 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 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 has been approved to receive information concerning a Fund's 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 Fund's assets; (iv) Institutional Shareholder Services,
Inc. 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 the
Fund's portfolio holdings information unless specifically authorized.

--------------------------------------------------------------------------------

                              GENERAL INFORMATION

--------------------------------------------------------------------------------

Description of the Funds
------------------------

            Each Fund is a series of AB Bond Fund, Inc., a Maryland corporation.
The Funds were organized in 2009 under the name of "AllianceBernstein Bond
Inflation Strategy", "AllianceBernstein Municipal Bond Inflation Strategy" and
"AllianceBernstein Multi-Asset Inflation Strategy", respectively.
AllianceBernstein Multi-Asset Inflation Strategy's name became
"AllianceBernstein Real Asset Strategy" on September 27, 2010. AllianceBernstein
Real Asset Strategy's name became "AllianceBernstein All Market Real Return
Portfolio" on December 12, 2014. On January 20, 2015, the Company changed its
name from "AllianceBernstein Bond Fund, Inc." to "AB Bond Fund, Inc.," and the
Funds changed their names from AllianceBernstein Bond Inflation Strategy,
AllianceBernstein Municipal Bond Inflation Strategy, and AllianceBernstein All
Market Real Return Portfolio to "AB Bond Inflation Strategy," "AB Municipal Bond
Inflation Strategy", and "AB All Market Real Return Portfolio", respectively.

            A shareholder will be entitled to share pro-rata with other holders
of the same class of shares all dividends and distributions arising from the
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. The
Company 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 a 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 the 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 and Class C shares of the Fund bears its
own distribution expenses and Advisor Class shares convert to Class A shares
under certain circumstances. Each class of shares of the Fund votes separately
with respect to the Company's Rule 12b-1 distribution plan and other matters for
which separate class voting is appropriate under applicable law. Shares are,
when issued, fully paid and non-assessable, freely transferable, entitled to
dividends as determined by the Directors and, in liquidation of a Fund, entitled
to receive the net assets of a Fund.

            It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal or state law.
Shareholders have available certain procedures for the removal of Directors.

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 Bond Inflation
Strategy and Municipal Bond Inflation Strategy as of January 11, 2016 and All
Market Real Return as of August 19, 2016:

Class A Shares





Fund                 Name and Address                            Number of Class A Shares        % of Class A Shares
----                 ----------------                            ------------------------        -------------------
                                                                                        
Bond Inflation       Charles Schwab & Co.
Strategy             For the Exclusive Benefit of
                     Customers
                     Mutual Fund Operations
                     211 Main St.
                     San Francisco, CA 94105-1905                       719,727                        57.04%

                     LPL Financial
                     Omnibus Customer Account
                     Attn: Mutual Fund Trading
                     4707 Executive Dr.
                     San Diego, CA 92121-3091                           80,123                         6.35%

                     National Financial Services, LLC
                     For the Exclusive Benefit of Our
                     Customers
                     Attn: Mutual Funds Dept.
                     499 Washington Blvd., 4th Floor
                     Jersey City, NJ 07310                              95,343                         7.56%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                         99,660                         7.90%

Municipal Bond       First Clearing, LLC
Inflation Strategy   Special Custody Acct. for the
                     Exclusive Benefit of Customer
                     2801 Market St.
                     Saint Louis, MO 63103-2523                         634,330                        16.22%

                     MLPF&S
                     For the Sole Benefit of Its
                     Customers
                     Attn: Fund Admin.
                     4800 Deer Lake Dr., East, 2nd Floor
                     Jacksonville, FL 32246-6484                        402,020                        10.28%

                     Morgan Stanley Smith Barney
                     Harborside Financial Center
                     Plaza II, 3rd Floor
                     Jersey City, NJ 07311                              956,112                        24.44%

                     National Financial Services, LLC
                     For the Exclusive Benefit of Our
                     Customers
                     Attn: Mutual Funds Dept.
                     499 Washington Blvd., 4th Floor
                     Jersey City, NJ 07310                              263,578                        6.74%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                         306,626                        7.84%

                     Raymond James
                     Omnibus for Mutual Funds
                     Attn: Courtney Waller
                     880 Carillon Parkway
                     St. Petersburg, FL 33716-1102                      211,431                        5.40%

                     UBS WM USA
                     Omni Account M/F
                     Attn: Department Manager
                     1000 Harbor Blvd., 5th Floor
                     Weehawken, NJ 07086-6761                           272,378                        6.96%

All Market Real      Charles Schwab & Co.
Return Portfolio     For the Exclusive Benefit of
                     Customers
                     Mutual Fund Operations
                     211 Main St.
                     San Francisco, CA 94105-1905                       324,185                        19.34%

                     Mid Atlantic Trust Company FBO
                     Three Rivers Annuity Fund
                     1251 Waterfront Pl., Ste. 525
                     Pittsburgh, PA 15222-4228                          523,811                        31.25%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                         188,276                        11.23%

Class C Shares


Bond Inflation       Ascensus Trust Company C/F
Strategy             C/F Ronald Snyder IRA
                     Rollover Account
                     2936 Wooded Vista Ct.
                     Mason, OH 45103-8551                                13,651                        5.38%

                     Edith M. Terilli TOD
                     12 Washington Ave Unit 328
                     Plainview, NY 11803-4053                            18,437                        7.27%

                     First Clearing, LLC
                     Special Custody Acct. for the
                     Exclusive Benefit of Customer
                     2801 Market St.
                     Saint Louis, MO 63103-2523                          19,440                        7.67%

                     LPL Financial
                     Omnibus Customer Account
                     Attn: Mutual Fund Trading
                     4707 Executive Dr.
                     San Diego, CA 92121-3091                            13,308                        5.25%

                     Morgan Stanley Smith Barney
                     Harborside Financial Center
                     Plaza II, 3rd Floor
                     Jersey City, NJ 07311                               14,399                        5.68%

                     National Financial Services, LLC
                     For the Exclusive Benefit of Our
                     Customers
                     Attn: Mutual Funds Dept.
                     499 Washington Blvd., 4th Floor
                     Jersey City, NJ 07310                               18,185                        7.17%

                     Thomas M. Nickolin & Irene Nickolin
                     JTWROS
                     2727 Christopher Dr.
                     Batavia, OH 45103-8551                              15,006                        5.92%

Municipal Bond       First Clearing, LLC
Inflation Strategy   Special Custody Acct. for the
                     Exclusive Benefit of Customer
                     2801 Market St.
                     Saint Louis, MO 63103-2523                         124,183                        10.16%

                     LPL Financial
                     Omnibus Customer Account
                     Attn: Mutual Fund Trading
                     4707 Executive Dr.
                     San Diego, CA 92121-3091                            82,431                        6.75%

                     MLPF&S
                     For the Sole Benefit of Its
                     Customers
                     Attn: Fund Admin.
                     4800 Deer Lake Dr., East, 2nd Floor
                     Jacksonville, FL 32246-6484                        269.399                        22.05%

                     Morgan Stanley Smith Barney
                     Harborside Financial Center
                     Plaza II, 3rd Floor
                     Jersey City, NJ 07311                              319,811                        26.17%

                     National Financial Services, LLC
                     For the Exclusive Benefit of Our
                     Customers
                     Attn: Mutual Funds Dept.
                     499 Washington Blvd., 4th Floor
                     Jersey City, NJ 07310                              129,793                        10.62%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                         105,350                         8.62%

All Market Real      First Clearing, LLC
Return Portfolio     Special Custody Acct. for the
                     Exclusive Benefit of Customer
                     2801 Market St.
                     Saint Louis, MO 63103-2523                          26,708                         7.48%

                     Morgan Stanley Smith Barney
                     Harborside Financial Center
                     Plaza II, 3rd Floor
                     Jersey City, NJ 07311                               50,395                        14.11%

                     National Financial Services, LLC
                     For the Exclusive Benefit of Our
                     Customers
                     Attn: Mutual Funds Dept.
                     499 Washington Blvd., 4th Floor
                     Jersey City, NJ 07310                               26,773                         7.50%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                          27,808                         7.79%

                     Raymond James
                     Omnibus for Mutual Funds
                     Attn: Courtney Waller
                     880 Carillon Parkway
                     St. Petersburg, FL 33716-1102                       19,697                         5.52%

                     UBS WM USA
                     Omni Account M/F
                     Attn: Department Manager
                     1000 Harbor Blvd., 5th Floor
                     Weehawken, NJ 07086-6761                            92,634                        25.94%

Advisor Class
Shares

Fund                 Name and Address                            Number of Advisor Class Shares  % of Advisor Class Shares
----                 ----------------                            ------------------------------  -------------------------

Bond Inflation       Charles Schwab & Co.
Strategy             For the Exclusive Benefit of
                     Customers
                     Mutual Fund Operations
                     211 Main Street
                     San Francisco, CA 94105-1905                       903,267                        51.30%

                     Raymond James
                     Omnibus for Mutual Funds
                     Attn: Courtney Waller
                     880 Carillon Parkway
                     St. Petersburg, FL 33716-1102                      105,626                        6.00%

                     UBS WM USA
                     Omni Account M/F
                     Attn: Department Manager
                     1000 Harbor Blvd., 5th Floor
                     Weehawken, NJ 07086-6761                           376,259                        21.37%

Municipal            Charles Schwab & Co.
Bond Inflation       For the Exclusive Benefit of
Strategy             Customers
                     Mutual Fund Operations
                     211 Main Street
                     San Francisco, CA 94105-1905                     1,767,630                        10.76%

                     Pershing, LLC
                     P.O. Box 2052
                     Jersey City, NJ 07303-2052                       8,224,517                        50.08%

                     Vallee & Co. FBO NJ
                     C/O BMO Harris Bank NA
                     Attn: MF
                     480 Pilgrim Way
                     Suite 1000
                     Green Bay, WI 54304-5280                         1,985,174                        12.09%

All Market Real      Charles Schwab & Co.
Return Portfolio     For the Exclusive Benefit of
                     Customers
                     Mutual Fund Operations
                     211 Main Street
                     San Francisco, CA 94105-1905                       353,819                        11.20%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave.
                     White Plains, NY 10601-1712                        235,194                         7.44%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave., 17th Floor
                     White Plains, NY 10601-1785                        198,486                         6.28%

                     UBS WM USA
                     Omni Account M/F
                     Attn: Department Manager
                     1000 Harbor Blvd., 5th Floor
                     Weehawken, NJ 07086-6761                           600,403                        19.00%

Class R Shares

Bond Inflation       FIIOC FBO
Strategy             Queen City Payroll Services, Inc.
                     Retirement Plan
                     100 Magellan Way (KW1C)
                     Covington, KY 41015-1987                               135                         6.56%

                     Matrix Trust Company Cust. FBO
                     FNtech 401(K) Profit Sharing Plan
                     717 17th St., Ste. 1300
                     Denver, CO 80202-3304                                  279                        13.57%

                     UMB Bank NA Cust.
                     FBO Planmember
                     6187 Carpinteria Ave.
                     Carpinteria, CA 93013-2805                           1,643                        79.86%

All Market Real      Alerus Financial FBO
Return Portfolio     Herregan Distributors, Inc.
                     Employee PS 401(K) Plan
                     PO Box 64535
                     Saint Paul, MN 55164-0535                           16,654                        89.14%

                     MG Trust Company Cust. FBO
                     First Bank
                     717 17th St., Ste. 1300
                     Denver, CO 80202-3304                                2,030                        10.86%

Class K Shares

Bond Inflation       Great-West Trust Company, LLC TTEE
Strategy             FBO Klatte Budenslek &
                     Young-Agriesti LLP 401K Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                     7,922                        5.31%

                     Great-West Trust Company, LLC TTEE
                     FBO Sanitary Plumbing & Heating
                     Corp. 401(K) Profit Sharing Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                     8,364                        5.61%

                     Great-West Trust Company, LLC TTEE C
                     AGMotion Inc. 401K
                     8515 East Orchard Road
                     Greenwood Village, CO 80111-5002                    11,561                        7.75%

                     Great-West Trust Company, LLC TTEE C
                     Cranemere LLC 401K
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    13,798                        9.25%

                     Great-West Trust Company, LLC TTEE C
                     Digestive Healthcare of Georgia PC
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                     7,506                        5.03%

                     Great-West Trust Company, LLC TTEE C
                     Financial Advisors Retirement Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    24,552                        16.46%

                     Great-West Trust Company, LLC TTEE C
                     News 2 You Inc. 401 K
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    14,583                        9.77%

All Market Real      Great-West Trust Company, LLC TTEE
Return Portfolio     FBO Katz & Stefani, LLC
                     401K and Profit Sharing Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    12,453                         5.47%

                     Great-West Trust Company, LLC TTEE
                     FBO Klatte Budenslek &
                     Young-Agriesti, LLP
                     401K Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    21,819                         9.58%

                     Great-West Trust Company, LLC TTEE
                     FBO Sanitary Plumbing & Heating Corp.
                     401(K) Profit Sharing Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    19,962                         8.77%

                     Great-West Trust Company, LLC TTEE C
                     Cranemere LLC 401K
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    14,293                         6.28%

                     Great-West Trust Company, LLC TTEE C
                     Perry Hay & Chu PSP
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    14,274                         6.27%

                     Great-West Trust Company, LLC TTEE C
                     Stoner Albright & Co. Ret. Plan
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    22,960                        10.08%


Bond Inflation       Great-West Trust Company, LLC TTEE C
Strategy             Webcor Builders 401K PSP
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                    26,230                       100.00%
All Market Real      Sanford Bernstein & Co., LLC
Return Portfolio     1 N. Lexington Ave.
                     White Plains, NY 10601-1712                        516,639                        27.00%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave.
                     White Plains, NY 10601-1712                        114,590                         5.99%

                     Texasavers 401K Plan
                     Employee Retirement System of Texas C/O
                     Fascore LLC
                     8515 East Orchard Road, #2T2
                     Greenwood Village, CO 80111-5002                   118,317                         6.18%

                     Wells Fargo Bank NA FBO
                     HLS&R Education Domestic Equity
                     P.O. Box 1533
                     Minneapolis, MN 55480-1533                         331,739                        17.34%

                     Wells Fargo Bank NA FBO
                     HLS&R Inc. Domestic Equities
                     P.O. Box 1533
                     Minneapolis, MN 55480-1533                         469,751                        24.55%

                     Wells Fargo Bank NA FBO
                     NCCI Holdings - Inflation Sensitive
                     P.O. Box 1533
                     Minneapolis, MN 55480-1533                         254,765                        13.32%

Class Z Shares


Bond Inflation       AB MMSRetirement Allocation
Strategy             1345 Avenue of the Americas
                     New York, NY  10105-0302                            47,649                         6.60%

                     AB MMSRetirement Vintage 2010
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                            99,767                        13.82%

                     AB MMSRetirement Vintage 2015
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           219,379                        30.40%

                     AB MMSRetirement Vintage 2020
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           225,907                        31.30%

                     CollegeBound Fund
                     CBF-Bond Inflation Strategy
                     529 Plan
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           128,976                        17.87%

All Market Real      AB MMSRetirement Vintage 2010
Return Portfolio     1345 Avenue of the Americas
                     New York, NY  10105-0302                            55,361                         5.26%

                     AB MMSRetirement Vintage 2015
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           166,602                        15.82%

                     AB MMSRetirement Vintage 2020
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           313,451                        29.77%

                     AB MMSRetirement Vintage 2025
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                           291,387                        27.68%

                     AB MMSRetirement Vintage 2030
                     1345 Avenue of the Americas
                     New York, NY  10105-0302                            99,367                         9.44%

                     AB MMSRetirement Vintage 2035
                     1345 Avenue of the Americas
                     New York, NY 10105-0302                             85,465                         8.12%

Class 2 Shares

Fund                 Name and Address                            Number of Class 2 Shares        % of Class 2 Shares
----                 ----------------                            ------------------------        -------------------

Bond Inflation       Sanford Bernstein & Co., LLC
Strategy             1 N. Lexington Ave., 17th Floor
                     White Plains, NY 10601-1712                        635,831                        14.94%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave., 17th Floor
                     White Plains, NY 10601-1785                        307,097                         7.22%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave, 17th Floor
                     White Plains, NY 10601-1712                        304,847                         7.16%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave., 17th Floor
                     White Plains, NY 10601-1785                        255,849                         6.01%

                     Sanford Bernstein & Co., LLC
                     1 N. Lexington Ave, 17th Floor
                     White Plains, NY 10601-1712                        255,100                         6.00%


All Market Real      AllianceBernstein L.P.
Return Portfolio     Attn: Brent Mather-Seed Acct.
                     1 N. Lexington Ave.
                     White Plains, NY 10601-1712                          1,000                       100.00%



Custodian and Accounting Agent
------------------------------

            State Street Bank and Trust Company ("State Street"), c/o State
Street Corporation CCB/5, 1 Iron Street, Boston, Massachusetts 02210, acts as
the Funds' custodian for the assets of the Funds and as the Funds' accounting
agent but plays no part in deciding the purchase or sale of portfolio
securities. Subject to the supervision of the Directors, State Street may enter
into subcustodial agreements for the holding of the Funds' foreign securities.

Principal Underwriter
---------------------

            ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, New York 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 the
Funds offered hereby are passed upon by Seward & Kissel LLP, 901 K Street NW,
Suite 800, Washington, DC 20001.

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. A description of the Adviser's proxy voting policies and procedures
is 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 is
available (1) without charge, upon request, by calling (800) 227-4618; or on or
through the Fund's website at www.ABglobal.com; or both; and (2) 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 Company 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., or on the Internet at www.ABglobal.com.



--------------------------------------------------------------------------------

        FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
                                ACCOUNTING FIRM

--------------------------------------------------------------------------------

            The financial statements of each of Bond Inflation Strategy,
Municipal Bond Inflation Strategy and All Market Real Return Portfolio for the
fiscal year ended October 31, 2015 and the report of Ernst & Young LLP, the
independent registered public accounting firm, are incorporated herein by
reference to each Fund's annual report. The annual reports were filed on Form
N-CSR with the SEC on January 8, 2016. The unaudited financial statements of All
Market Real Return for the six-month period ended April 30, 2016 are
incorporated herein by reference to the Fund's semi-annual report. The
semi-annual report was filed on Form N-CSRS with the SEC on July 5, 2016, 2016.
It is available without charge upon request by calling ABIS at (800) 227-4618 or
on the Internet at www.ABglobal.com.



                                                                      Appendix A


                         Proxy Voting Policy Statement

Introduction

As an investment adviser, we are shareholder advocates and have a fiduciary duty
to make investment decisions that are in our clients' best interests by
maximizing the value of their shares. Proxy voting is an integral part of this
process, through which we support strong corporate governance structures,
shareholder rights and transparency.

We have an obligation to vote proxies in a timely manner and we apply the
principles in our Proxy Voting Policy ("Proxy Voting Policy" or "Policy") and
this policy statement to our proxy decisions. We believe a company's
environmental, social and governance ("ESG") practices may have a significant
effect on the value of the company, and we take these factors into consideration
when voting. For additional information regarding our ESG policies and
practices, please refer to our firm's Statement of Policy Regarding Responsible
Investment ("RI Policy").

Our Proxy Voting Policy, which outlines our policies for proxy voting and
includes a wide range of issues that often appear on proxies, applies to all of
AB's investment management subsidiaries and investment services groups investing
on behalf of clients globally. Both this Statement and the Policy are intended
for use by those involved in the proxy voting decision-making process and those
responsible for the administration of proxy voting ("Proxy Managers"), in order
to ensure that our proxy voting policies and procedures are implemented
consistently. Copies of the Policy, the RI Policy and our voting records, as
noted below in "Voting Transparency", can be found on our Internet site
(www.abglobal.com).

We sometimes manage accounts where proxy voting is directed by clients or
newly-acquired subsidiary companies. In these cases, voting decisions may
deviate from the Policy.

Research Underpins Decision Making

As a research-driven firm, we approach our proxy voting responsibilities with
the same commitment to rigorous research and engagement that we apply to all of
our investment activities. The different investment philosophies utilized by our
investment teams may occasionally result in different conclusions being drawn
regarding certain proposals and, in turn, may result in the Proxy Manager making
different voting decisions on the same proposal. Nevertheless, the Proxy Manager
votes proxies with the goal of maximizing the value of the securities in client
portfolios.

In addition to our firm-wide proxy voting policies, we have a Proxy Committee,
which provides oversight and includes senior investment professionals from
Equities, Legal personnel and Operations personnel. It is the responsibility of
the Proxy Committee to evaluate and maintain proxy voting procedures and
guidelines, to evaluate proposals and issues not covered by these guidelines, to
consider changes in policy, and to review this Statement and the Policy no less
frequently than annually. In addition, the Proxy Committee meets at least three
times a year and as necessary to address special situations.

Research Services

We subscribe to the corporate governance and proxy research services of
Institutional Shareholder Services ("ISS"). All our investment professionals can
access these materials via the Proxy Manager and/or Proxy Committee.

Engagement

In evaluating proxy issues and determining our votes, we welcome and seek out
the points of view of various parties. Internally, the Proxy Manager may consult
the Proxy Committee, Chief Investment Officers, Directors of Research, and/or
Research Analysts across our equities platforms, and Portfolio Managers in whose
managed accounts a stock is held. Externally, we may engage with companies in
advance of their Annual General Meeting, and throughout the year. We believe
engagement provides the opportunity to share our philosophy, our corporate
governance values, and more importantly, affect positive change. Also, these
meetings often are joint efforts between the investment professionals, who are
best positioned to comment on company-specific details, and the Proxy
Manager(s), who offer a more holistic view of governance practices and relevant
trends. In addition, we engage with shareholder proposal proponents and other
stakeholders to understand different viewpoints and objectives.

Proxy Voting Guidelines

Our proxy voting guidelines are both principles-based and rules-based. We adhere
to a core set of principles that are described in the Proxy Voting Policy. We
assess each proxy proposal in light of these principles. Our proxy voting
"litmus test" will always be what we view as most likely to maximize long-term
shareholder value. We believe that authority and accountability for setting and
executing corporate policies, goals and compensation generally should rest with
the board of directors and senior management. In return, we support strong
investor rights that allow shareholders to hold directors and management
accountable if they fail to act in the best interests of shareholders.

Our proxy voting guidelines pertaining to specific issues are set forth in the
Policy and include guidelines relating to board and director proposals,
compensation proposals, capital changes and anti-takeover proposals, auditor
proposals, shareholder access and voting proposals, and environmental, social
and disclosure proposals. The following are examples of specific issues within
each of these broad categories:

Board and Director Proposals: Election of Directors

The election of directors is an important vote. We expect directors to represent
shareholder interests at the company and maximize shareholder value. We
generally vote in favor of the management-proposed slate of directors while
considering a number of factors, including local market best practice. We
believe companies should have a majority of independent directors and
independent key committees. However, we will incorporate local market regulation
and corporate governance codes into our decision making. We may support more
progressive requirements than those implemented in a local market if we believe
more progressive requirements may improve corporate governance practices. We
will generally regard a director as independent if the director satisfies the
criteria for independence (i) espoused by the primary exchange on which the
company's shares are traded, or (ii) set forth in the code we determine to be
best practice in the country where the subject company is domiciled. We consider
the election of directors who are "bundled" on a single slate on a case-by-case
basis considering the amount of information available and an assessment of the
group's qualifications.

Compensation Proposals: Approved Remuneration Reports and Policies

In certain markets, (e.g., Australia, Canada, Germany and the United States),
publicly traded issuers are required by law to submit their company's
remuneration report to a non-binding shareholder vote. The report contains,
among other things, the nature and amount of the compensation of the directors
and certain executive officers as well as a discussion of the company's
performance. In other markets, remuneration policy resolutions are binding.

We evaluate remuneration reports and policies on a case-by-case basis, taking
into account the reasonableness of the company's compensation structure and the
adequacy of the disclosure. Where a company permits retesting of
performance-based awards in its compensation plan, we will evaluate the specific
terms of the plan, including the volatility of the industry and the number and
duration of the retests, before determining whether or not to support the
company's remuneration report. We may abstain or vote against a report if
disclosure of the remuneration details is inadequate or the report is not
provided to shareholders with sufficient time prior to the meeting to consider
its terms.

In markets where remuneration reports are not required for all companies, we
will support shareholder proposals asking the board to adopt a policy (i.e.,
"say on pay") that the company's shareholders be given the opportunity to vote
on an advisory resolution to approve the compensation committee's report.
Although say on pay votes are by nature only broad indications of shareholder
views, they do lead to more compensation-related dialogue between management and
shareholders and help ensure that management and shareholders meet their common
objective: maximizing the value of the company.

Capital Changes and Anti-Takeover Proposals: Authorize Share Repurchase
We generally support share repurchase proposals that are part of a
well-articulated and well-conceived capital strategy. We assess proposals to
give the board unlimited authorization to repurchase shares on a case-by-case
basis. Furthermore, we would generally support the use of derivative instruments
(e.g., put options and call options) as part of a share repurchase plan absent a
compelling reason to the contrary. Also, absent a specific concern at the
company, we will generally support a repurchase plan that could be continued
during a takeover period.

Auditor Proposals: Appointment of Auditors We believe that the company is in the
best position to choose its accounting firm, and we generally support
management's recommendation.

We recognize that there may be inherent conflicts when a company's independent
auditors perform substantial non-audit related services for the company.
Therefore, in reviewing a proposed auditor, we will consider the amount of fees
paid for non-audit related services performed compared to the total audit fees
paid by the company to the auditing firm, and whether there are any other
reasons for us to question the independence or performance of the firm's auditor
such as, for example, tenure. We generally will deem as excessive the non-audit
fees paid by a company to its auditor if those fees account for 50% or more of
total fees paid. In the UK market, which utilizes a different standard, we
adhere to a non-audit fee cap of 100% of audit fees. Under these circumstances,
we generally vote against the auditor and the directors, in particular the
members of the company's audit committee. In addition, we generally vote against
authorizing the audit committee to set the remuneration of such auditors. We
exclude from this analysis non-audit fees related to IPOs, bankruptcy emergence,
and spin-offs and other extraordinary events. We may vote against or abstain due
to a lack of disclosure of the name of the auditor while taking into account
local market practice.

Shareholder Access and Voting Proposals: Proxy Access for Annual Meetings These
proposals allow "qualified shareholders" to nominate directors. We generally
vote in favor of management and shareholder proposals for proxy access that
employ guidelines reflecting the SEC framework for proxy access (adopted by the
US Securities and Exchange Commission ("SEC") in 2010, but vacated by the DC
Circuit Court of Appeals in 2011), which would have allowed a single
shareholder, or group of shareholders, who hold at least 3% of the voting power
for at least three years continuously to nominate up to 25% of the current board
seats, or two directors, for inclusion in the subject company's annual proxy
statement alongside management nominees.

We will generally vote against proposals that use requirements that are stricter
than the SEC's framework and against individual board members, or entire boards,
who exclude from their ballot properly submitted shareholder proxy access
proposals or include their own competing, more strict, proposals on the same
ballot.

We will evaluate on a case-by-case basis proposals with less stringent
requirements than the vacated SEC framework.

From time to time we may receive requests to join with other shareholders to
support a shareholder action. We may, for example, receive requests to join a
voting block for purposes of influencing management. If the third parties
requesting our participation are not affiliated with us and have no business
relationships with us, we will consider the request on a case-by-case basis.
However, where the requesting party has a business relationship with us (e.g.,
the requesting party is a client or a significant service provider), agreeing to
such a request may pose a potential conflict of interest. As a fiduciary we have
an obligation to vote proxies in the best interest of our clients (without
regard to our own interests in generating and maintaining business with our
other clients) and given our desire to avoid even the appearance of a conflict,
we will generally decline such a request.

Environmental, Social and Disclosure Proposals: Lobbying and Political Spending
We generally vote in favor of proposals requesting increased disclosure of
political contributions and lobbying expenses, including those paid to trade
organizations and political action committees, whether at the federal, state, or
local level. These proposals may increase transparency.

We generally vote proposals in accordance with these guidelines but, consistent
with our "principles-based" approach to proxy voting, we may deviate from the
guidelines if warranted by the specific facts and circumstances of the situation
(i.e., if, under the circumstances, we believe that deviating from our stated
policy is necessary to help maximize long-term shareholder value). In addition,
these guidelines are not intended to address all issues that may appear on all
proxy ballots. Proposals not specifically addressed by these guidelines, whether
submitted by management or shareholders, will be evaluated on a case-by-case
basis, always keeping in mind our fiduciary duty to make voting decisions that,
by maximizing long-term shareholder value, are in our clients' best interests.

Conflicts of Interest

As a fiduciary, we always must act in our clients' best interests. We strive to
avoid even the appearance of a conflict that may compromise the trust our
clients have placed in us, and we insist on strict adherence to fiduciary
standards and compliance with all applicable federal and state securities laws.
We have adopted a comprehensive Code of Business Conduct and Ethics ("Code") to
help us meet these obligations. As part of this responsibility and as expressed
throughout the Code, we place the interests of our clients first and attempt to
avoid any perceived or actual conflicts of interest.

We recognize that there may be a potential material conflict of interest when we
vote a proxy solicited by an issuer that sponsors a retirement plan we manage
(or administer), that distributes AB-sponsored mutual funds, or with which we or
one or more of our employees have another business or personal relationship that
may affect how we vote on the issuer's proxy. Similarly, we may have a potential
material conflict of interest when deciding how to vote on a proposal sponsored
or supported by a shareholder group that is a client. In order to avoid any
perceived or actual conflict of interest, we have established procedures for use
when we encounter a potential conflict to ensure that our voting decisions are
based on our clients' best interests and are not the product of a conflict.
These procedures include compiling a list of companies and organizations whose
proxies may pose potential conflicts of interest (e.g., if such company is our
client) and reviewing our proposed votes for these companies and organizations
in light of the Policy and ISS's recommendations. If our proposed vote is
contrary to, or not contemplated in, the Policy, is consistent with a client's
position and is contrary to ISS's recommendation, we refer to proposed vote to
our Independent Compliance Officer for his determination.

In addition, our Proxy Committee takes reasonable steps to verify that ISS
continues to be independent, including an annual review of ISS's conflict
management procedures. When reviewing these conflict management procedures, we
consider, among other things, whether ISS (i) has the capacity and competency to
adequately analyze proxy issues; and (ii) can offer research in an impartial
manner and in the best interests of our clients.

Voting Transparency

We publish our voting records on our Internet site (www.abglobal.com) quarterly,
30 days after the end of the previous quarter. Many clients have requested that
we provide them with periodic reports on how we voted their proxies. Clients may
obtain information about how we voted proxies on their behalf by contacting
their Advisor. Alternatively, clients may make a written request to the Chief
Compliance Officer.

Recordkeeping

All of the records referenced in our Policy will be kept in an easily accessible
place for at least the length of time required by local regulation and custom,
and, if such local regulation requires that records are kept for less than five
years from the end of the fiscal year during which the last entry was made on
such record, we will follow the U.S. rule of five years. We maintain the vast
majority of these records electronically. We will keep paper records, if any, in
one of our offices for at least two years.