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                                                               AB CAP FUND, INC.
                                      -AB EMERGING MARKETS MULTI-ASSET PORTFOLIO
                             (Class A-ABAEX; Class C-ABCEX; Advisor Class-ABYEX;
                     Class R-ABREX; Class K-ABKEX; Class I-ABIEX; Class Z-ABZEX)

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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
                                 July 31, 2018

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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
prospectus, dated July 31, 2018, for the AB Emerging Markets Multi-Asset
Portfolio (the "Fund") of AB Cap Fund, Inc. (the "Company") that offers Class A,
Class C, Class R, Class K, Class I, Class Z and Advisor Class shares of the Fund
(the "Prospectus"). Financial statements for the fiscal year ended March 31,
2018 are included in the Fund's annual report to shareholders and are
incorporated in this SAI by reference. Copies of the Prospectus and the 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.abfunds.com.





                               TABLE OF CONTENTS
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                                                                           Page
                                                                           ----

INFORMATION ABOUT THE FUND AND ITS INVESTMENTS                                1
INVESTMENT RESTRICTIONS                                                      45
MANAGEMENT OF THE FUND                                                       47
EXPENSES OF THE FUND                                                         69
PURCHASE OF SHARES                                                           73
REDEMPTION AND REPURCHASE OF SHARES                                          96
SHAREHOLDER SERVICES                                                         99
NET ASSET VALUE                                                             101
DIVIDENDS, DISTRIBUTIONS AND TAXES                                          105
PORTFOLIO TRANSACTIONS                                                      113
GENERAL INFORMATION                                                         118
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED
   PUBLIC ACCOUNTING FIRM                                                   124
APPENDIX A:  PROXY VOTING AND GOVERNANCE 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 FUND AND ITS INVESTMENTS

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Introduction to the Fund
------------------------

            The Company is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Company's
shares are offered in separate series. The Fund is a series of the Company, a
separate pool of assets constituting, in effect, a separate open-end management
investment company with its own investment objective and policies. Except as
otherwise noted, the Fund's investment objective and policies described below
are not "fundamental policies" within the meaning of the 1940 Act, and may,
therefore, be changed by the Board of Directors of the Company (the "Board" or
the "Directors") without shareholder approval. However, the Fund will not change
its investment objective without at least 60 days' prior written notice to
shareholders. There is no guarantee that the Fund will achieve its investment
objective. Whenever any investment policy or restriction states a percentage of
the 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, except with respect to borrowing, any later increases or decreases
in percentage beyond the specified limitations 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 Fund's investment policies and
practices supplements the information set forth in the Prospectus.

Convertible Securities
----------------------

            Convertible securities include bonds, debentures, corporate notes
and preferred stocks that are convertible at a stated exchange rate into shares
of the underlying common stock. Prior to their conversion, convertible
securities have the same general characteristics as non-convertible debt
securities, which provide a stable stream of income with generally higher yields
than those of equity securities of the same or similar issuers. As with debt
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, to increase as interest rates decline.
While convertible securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality, they do enable the
investor to benefit from increases in the market price of the underlying common
stock.

            When the market price of the common stock underlying a convertible
security increases, the price of the convertible security increasingly reflects
the value of the underlying common stock and may rise accordingly. As the market
price of the underlying common stock declines, the convertible security tends to
trade increasingly on a yield basis, and thus may not depreciate to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They consequently entail less
risk than the issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the convertible
security sells above its value as a fixed-income security.

Depositary Receipts
-------------------

            The Fund may invest in depositary receipts. American Depositary
Receipts ("ADRs") are depositary receipts typically issued by a U.S. bank or
trust company that evidence ownership of underlying securities issued by a
foreign corporation. European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") or other types of depositary receipts are typically issued by
non-U.S. banks or trust companies and evidence ownership of underlying
securities issued by either a U.S. or non-U.S. company. Transactions in these
securities may not necessarily be settled in the same currency as transactions
in the securities that they represent. In addition, the issuers of the
securities of unsponsored depositary receipts are not obligated to disclose
material information in the United States. Generally, ADRs, in registered form,
are designed for use in the U.S. securities markets, EDRs, in bearer form, are
designed for use in European securities markets and GDRs, in bearer form, are
designed for use in two or more securities markets, such as those of Europe and
Asia.

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

            The Fund may, but is not required to, use derivatives for hedging or
other risk management purposes or as part of its investment strategies.
Derivatives are financial contracts whose value depends on, or is derived from,
the value of an underlying asset, reference rate or index. These assets, rates,
and indices may include bonds, stocks, mortgages, commodities, interest rates,
currency exchange rates, bond indices and stock indices.

            There are four principal types of derivatives -- options, futures
contracts, forwards and swaps. These principal types of derivative instruments,
as well as the methods in which they may be used by the Fund are described
below. Derivatives include listed and cleared transactions where the 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 Fund 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 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 tangible 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 asset underlying the forward contract to an agreed-upon
location at a future date (rather than settled by cash) or is 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 the 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") or Securities and Exchange Commission ("SEC") 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 the 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 the 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 the
            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, the 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 the Fund's counterparty to perform
            its obligations under the transaction. If the counterparty defaults,
            the 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, the 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 the
            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. The 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. Various U.S. Government entities, including the
            CFTC and the SEC, are in the process of adopting and implementing
            additional regulations governing derivatives markets required by,
            among other things, the Dodd-Frank Act, including clearing as
            discussed above, margin, reporting and registration requirements. In
            December 2015, the SEC proposed a new rule regarding derivatives
            imposing, among other things, limits on the amount of leverage a
            fund could be exposed to through derivatives and other senior
            securities transactions. While the full extent and cost of these
            regulations is unclear, and proposed regulations may be revised
            before adoption or may never be adopted, these regulations could,
            among other things, restrict the 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 the 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 the Fund. Derivatives do not
            always perfectly or even highly correlate with or track the value of
            the assets, rates or indices they are designed to closely track.
            Consequently, the 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. The Fund may purchase and sell derivative instruments only to
the extent that such activities are consistent with the requirements of the
Commodity Exchange Act and the rules adopted by the CFTC thereunder. Under CFTC
rules, a registered investment company that conducts more than a certain amount
of trading in futures contracts, commodity options, certain swaps and other
commodity interests is a commodity pool and its adviser must register as a
commodity pool operator, or CPO. Under such rules, registered investment
companies that are commodity pools are subject to additional registration,
recordkeeping, reporting and disclosure requirements. AllianceBernstein L.P.,
the Fund's adviser (the "Adviser") has registered as a CPO with respect to the
Fund. This registration subjects the Fund to certain recordkeeping, reporting
and disclosure requirements but, under rules adopted by the CFTC, compliance
with SEC disclosure and filing requirements, for the most part, constitutes
compliance with comparable CFTC requirements.

Use of Options, Futures Contracts, Forwards and Swaps by the 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 Fund may, for example, enter into forward currency exchange
contracts to attempt to minimize the risk to the Fund from adverse changes in
the relationship between the U.S. Dollar and other currencies. The Fund may
purchase or sell forward currency exchange contracts for hedging purposes
similar to those described below in connection with its transactions in foreign
currency futures contracts. For instance, the Fund may enter into a forward
contract when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. Dollar price of
the security ("transaction hedge"). In addition, when the Fund believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency, or when the Fund believes that the U.S.
Dollar may suffer a substantial decline against a foreign currency, it may enter
into a forward purchase contract to buy that foreign currency for a fixed dollar
amount ("position hedge"). If the Adviser were to forecast incorrectly the
direction of exchange rate movements, the Fund might be required to complete
such forward transactions at prices inferior to the then current market values.
The Fund may also purchase or sell forward currency exchange contracts for
non-hedging purposes as a means of making 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 Fund may be required to forgo
all or a portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates.

            The 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. The Fund may write and purchase call and
put options on securities. In purchasing an option on securities, the 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,
the 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 the Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.

            The 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. The Fund
may write covered options or uncovered options. A call option written by the
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 exercise price of the call option it
has written. A put option written by the Fund is covered if the Fund holds a put
option on the underlying securities with an exercise price equal to or greater
than the exercise price of the put option it has written. Uncovered options or
"naked options" are riskier than covered options. For example, if the 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.

            The 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.

            The 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.

            The 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 in 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 Fund 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, the 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, the 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 Fund will effect such transactions only with investment dealers
and other financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Adviser, and the Adviser has adopted
procedures for monitoring the creditworthiness of such entities. Options
purchased or written in negotiated transactions may be illiquid and it may not
be possible for the Fund to effect a closing transaction at a time when the
Adviser believes it would be advantageous to do so.

            -- Options on Securities Indices. An option on a securities index is
similar to an option on a security except that, rather than taking or making
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in the case of a
call) or less than (in the case of a put) the exercise price of the option.

            The Fund may write (sell) call and put options and purchase call and
put options on securities indices. If the 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.

            The Fund may also write put or call options on securities indices
to, among other things, earn income. If the value of the chosen index declines
below the exercise price of the put option, the Fund has the risk of loss of the
amount of the difference between the exercise price and the closing level of the
chosen index, which it would be required to pay to the buyer of the put option
and which may not be offset by the premium it received upon sale of the put
option. Similarly, if the value of the index is higher than the exercise price
of the call option, the Fund has the risk of loss of the amount of the
difference between the exercise price and the closing level of the chosen index,
which may not be 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
the 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 the Fund is
substantially fully invested is a form of leverage, up to the amount of the
premium and related transaction costs, and involves risks of loss and of
increased volatility similar to those involved in purchasing call options on
securities the Fund owns.

            -- Other Option Strategies. In an effort to earn extra income, to
adjust exposure to individual securities or markets, or to protect all or a
portion of its portfolio from a decline in value, sometimes within certain
ranges, the Fund may use option strategies such as the concurrent purchase of a
call or put option, including on individual securities and stock indices,
futures contracts (including on individual securities and stock indices) or
shares of exchange-traded funds ("ETFs") at one strike price and the writing of
a call or put option on the same individual security, stock index, futures
contract or ETF at a higher strike price in the case of a call option or at a
lower strike price in the case of a put option. The maximum profit from this
strategy would result, for the call options, from an increase in the value of
the individual security, stock index, futures contract or ETF above the higher
strike price or, for the put options, from the decline in the value of the
individual security, stock index, futures contract or ETF below the lower strike
price. If the price of the individual security, stock index, futures contract or
ETF declines in the case of the call option or increases in the case of the put
option, the Fund has the risk of losing the entire amount paid for the call or
put options.

            -- Options on Foreign Currencies. The Fund may purchase and write
options on foreign currencies for hedging and non-hedging purposes. For example,
a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant. In order to protect
against such diminutions in the value of portfolio securities, the Fund may
purchase put options on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell such currency for a fixed amount
in dollars and could thereby offset, in whole or in part, the adverse effect on
its portfolio which otherwise would have resulted.

            Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Fund may purchase call options on the currency. 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.

            The Fund may write options on foreign currencies for hedging
purposes or to increase return. For example, where the Fund anticipates a
decline in the dollar value of non-U.S. Dollar-denominated securities due to
adverse fluctuations in exchange rates, it could, instead of purchasing a put
option, write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the diminution in
value of portfolio securities could be offset by the amount of the premium
received.

            Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, 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, the Fund may also invest in options on foreign currencies for non-hedging
purposes as a means of making investments in foreign currencies. The Fund may
use options on currency to seek to increase total return when the Adviser
anticipates that a foreign currency will appreciate or depreciate in value but
securities denominated in that currency are not held by the Fund and do not
present attractive investment opportunities. For example, the Fund may purchase
call options in anticipation of an increase in the market value of a currency.
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 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 the
Fund will generally purchase or sell options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option, or at any particular time. For
some options, no secondary market on an exchange may exist. In such event, it
might not be possible to effect closing transactions in particular options, with
the result that the Fund would have to exercise its options in order to realize
any profit and would incur transaction costs on the purchase or sale of the
underlying currency.

            -- Futures Contracts and Options on Futures Contracts. Futures
contracts that the 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. The 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
the Fund's current or intended investments in fixed-income securities. For
example, if the Fund owned long-term bonds and interest rates were expected to
increase, the 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 the Fund's
portfolio. However, the market for interest rate futures contracts may be more
liquid than the cash market for individual bonds, and the use of interest rate
futures contracts as a hedging technique allows the 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 the Fund's interest rate futures contracts would be
expected to increase at approximately the same rate, thereby keeping the net
asset value, or NAV, of the 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, the 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 the Fund's
cash reserves could then be used to buy long-term bonds on the cash market.

            The 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. The
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, the 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 its value as a result of the change in exchange rates.

            Conversely, the 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 the 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.

            The Fund may also engage in currency "cross hedging" when, in the
opinion of the Adviser, the historical relationship among foreign currencies
suggests that the 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.

            The Fund may also use foreign currency futures contracts and options
on such contracts for non-hedging purposes. Similar to options on currencies
described above, the 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 futures contracts on foreign currencies and
options on such contracts 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 the Fund's current
or intended investments from broad fluctuations in stock or bond prices. For
example, the 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 the 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 the 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 the Fund's
portfolio. If the futures price at expiration of the option is below the
exercise price, the 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, the 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 the 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, the Fund's losses from exercised options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.

            The 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, the Fund could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such a 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
the Fund will increase prior to acquisition due to a market advance or changes
in interest or exchange rates, the 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.

            -- Swaps: Interest Rate Transactions. The Fund may enter into
interest rate swap, swaption, 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 the 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 may
lose the net amount of interest payments that it is contractually entitled to
receive.

            Interest rate swaps involve the exchange by the 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. Interest rate swaps are
entered into on a net basis (i.e., the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments).

            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.
The Fund will enter into bilateral swap agreements, including 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 nationally
recognized statistical rating organization ("NRSRO") or counterparties with
guarantors with debt securities having such a rating. For cleared interest rate
swaps, the Adviser will monitor the creditworthiness of each of the central
clearing counterparty, clearing broker and executing broker but there will be no
prescribed NRSRO rating requirements for these entities.

            -- Credit Default Swaps. The "buyer" in a credit default swap
contract is obligated to pay the "seller" a periodic stream of payments over the
term of the contract in return for a contingent payment upon the occurrence of a
credit event with respect to an underlying reference obligation. Generally, a
credit event means bankruptcy, failure to pay, obligation acceleration or
restructuring. The 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" (face amount) of the reference obligation, in which case the Fund
will receive the reference obligation in return, or (ii) an amount equal to the
difference between the par value and the current market value of the reference
obligation. The value of the reference obligation received by the Fund as a
seller, coupled with the periodic payments previously received, may be less than
the full notional value it pays to the buyer, resulting in a loss of value to
the Fund. If the Fund is a buyer and no credit event occurs, the Fund will lose
its periodic stream of payments over the term of the contract. However, if a
credit event occurs, the buyer typically receives the full notional value for a
reference obligation that may have little or no value.

            Credit default swaps may involve greater risks than if the Fund had
invested in the reference obligation directly. Credit default swaps are subject
to general market risk, liquidity risk and credit risk.

            - Total Return Swaps. The 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.

            -- Currency Swaps. The Fund may enter into currency swaps for
hedging purposes in an attempt to protect against adverse changes in exchange
rates between the U.S. Dollar and other currencies or for non-hedging purposes
as a means of making direct investments in foreign currencies, as described
below under "Currency Transactions". Currency swaps involve the exchange by the
Fund with another party of a series of payments in specified currencies.
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 bilaterally and privately negotiated,
with the Fund expecting to achieve an acceptable degree of correlation between
its portfolio investments and its currency swaps positions. The Fund will not
enter into any currency swap unless the credit quality of the unsecured senior
debt or the claims-paying ability of the counterparty thereto is rated in the
highest short-term rating category of at least one NRSRO at the time of entering
into the transaction.

            Special Risks Associated with Swaps. Risks may arise as a result of
the failure of the counterparty to a bilateral 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 the counterparty to a bilateral swap contract. 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 certain interest rate swaps and credit default swaps, are 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 changes in value 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.

            -- Synthetic Foreign Equity Securities. The Fund may invest in
different types of derivatives generally referred to as synthetic foreign equity
securities. These securities may include international warrants or local access
products. International warrants are financial instruments issued by banks or
other financial institutions, which may or may not be traded on a foreign
exchange. International warrants are a form of derivative security that may give
holders the right to buy or sell an underlying security or a basket of
securities representing an index from or to the issuer of the warrant for a
particular price or may entitle holders to receive a cash payment relating to
the value of the underlying security or index, in each case upon exercise by the
Fund. Local access products are similar to options in that they are exercisable
by the holder for an underlying security or a cash payment based upon the value
of that security, but are generally exercisable over a longer term than typical
options. These types of instruments may be American style, which means that they
can be exercised at any time on or before their expiration date, or European
style, which means that they may be exercised only on the expiration date.

            Other types of synthetic foreign equity securities in which the Fund
may invest include covered warrants and low exercise price warrants. Covered
warrants entitle the holder to purchase from the issuer, typically a financial
institution, upon exercise, common stock of an international company or receive
a cash payment (generally in U.S. Dollars). The issuer of the covered warrant
usually owns the underlying security or has a mechanism, such as owning equity
warrants on the underlying securities, through which they can obtain the
securities. The cash payment is calculated according to a predetermined formula,
which is generally based on the difference between the value of the underlying
security on the date of exercise and the strike price. Low exercise price
warrants are warrants with an exercise price that is very low relative to the
market price of the underlying instrument at the time of issue (e.g., one cent
or less). The buyer of a low exercise price warrant effectively pays the full
value of the underlying common stock at the outset. In the case of any exercise
of warrants, there may be a time delay between the time a holder of warrants
gives instructions to exercise and the time the price of the common stock
relating to exercise or the settlement date is determined, during which time the
price of the underlying security could change significantly. In addition, the
exercise or settlement date of the warrants may be affected by certain market
disruption events, such as difficulties relating to the exchange of a local
currency into U.S. Dollars, the imposition of capital controls by a local
jurisdiction or changes in the laws relating to foreign investments. These
events could lead to a change in the exercise date or settlement currency of the
warrants, or postponement of the settlement date. In some cases, if the market
disruption events continue for a certain period of time, the warrants may become
worthless resulting in a total loss of the purchase price of the warrants.

            The Fund will acquire synthetic foreign equity securities issued by
entities deemed to be creditworthy by the Adviser, which will monitor the
creditworthiness of the issuers on an ongoing basis. Investments in these
instruments involve the risk that the issuer of the instrument may default on
its obligation to deliver the underlying security or cash in lieu thereof. These
instruments may also be subject to liquidity risk because there may be a limited
secondary market for trading the warrants. They are also subject, like other
investments in foreign securities, to foreign risk and currency risk.

            International warrants also include equity warrants, index warrants,
and interest rate warrants. Equity warrants are generally issued in conjunction
with an issue of bonds or shares, although they also may be issued as part of a
rights issue or scrip issue. When issued with bonds or shares, they usually
trade separately from the bonds or shares after issuance. Most warrants trade in
the same currency as the underlying stock (domestic warrants), but also may be
traded in different currency (euro-warrants). Equity warrants are traded on a
number of foreign exchanges and in OTC markets. Index warrants and interest rate
warrants are rights created by an issuer, typically a financial institution,
entitling the holder to purchase, in the case of a call, or sell, in the case of
a put, respectively, an equity index or a specific bond issue or interest rate
index at a certain level over a fixed period of time. Index warrants
transactions settle in cash, while interest rate warrants can typically be
exercised in the underlying instrument or settle in cash.

            The Fund also may invest in long-term options of, or relating to,
international issuers. Long-term options operate much like covered warrants.
Like covered warrants, long-term options are call options created by an issuer,
typically a financial institution, entitling the holder to purchase from the
issuer outstanding securities of another issuer. Long-term options have an
initial period of one year or more, but generally have terms between three and
five years. Unlike U.S. options, long-term European options do not settle
through a clearing corporation that guarantees the performance of the
counterparty. Instead, they are traded on an exchange and subject to the
exchange's trading regulations.

            -- Eurodollar Instruments. Eurodollar instruments are essentially
U.S. Dollar-denominated futures contracts or options thereon that are linked to
the London Interbank Offered Rate and are subject to the same limitations and
risks as other futures contracts and options.

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

Forward Commitments and When-Issued and Delayed Delivery Securities
-------------------------------------------------------------------

            Forward commitments for the purchase or sale of securities may
include purchases on a "when-issued" basis or purchases or sales on a "delayed
delivery" basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade). When forward commitment transactions are negotiated, the price is fixed
at the time the commitment is made. The Fund assumes the rights and risks of
ownership of the security, but the Fund does not pay for the securities until
they are received. If the 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
Corporation, or FHLMC (including fixed-rate or variable-rate mortgages) are
allocated to the TBA mortgage-backed securities transactions.

            At the time the 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, the 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 the 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 the 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 files for bankruptcy, becomes insolvent,
or defaults on its obligation, the Fund may be adversely affected.

Illiquid Securities
-------------------

            The Fund will not invest in illiquid securities if immediately after
such investment more than 15% 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 OTC and the cover for options written by the Fund OTC, and
(c) repurchase agreements not terminable within seven days. As discussed in more
detail below, 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 the Fund's investment in Rule 144A Securities. An insufficient
number of qualified institutional buyers interested in purchasing certain
restricted securities held by the 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 the 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.

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

            The Fund may invest in pre-IPO (initial public offering) 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 Fund 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 Fund
from selling its 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.

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

            The Fund may invest in shares of ETFs subject to the restrictions
and limitations of the 1940 Act or any applicable rules, exemptive orders or
regulatory guidance. ETFs are pooled investment vehicles, which may be managed
or unmanaged, that generally seek to track the performance of a specific index.
ETFs will not track their underlying indices precisely since the ETFs have
expenses and may need to hold a portion of their assets in cash, unlike the
underlying indices, and the ETFs may not invest in all of the securities in the
underlying indices in the same proportion as the underlying indices for various
reasons. The 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.

            The Fund may also invest in investment companies other than ETFs as
permitted by the 1940 Act or the rules and regulations or exemptive orders
thereunder. As with ETF investments, if the Fund acquires shares in other
investment companies, shareholders would bear, indirectly, the expenses of such
investment companies (which may include management and advisory fees), which to
the extent not waived or reimbursed, would be in addition to the Fund's
expenses. The Fund intends to invest uninvested cash balances in an affiliated
money market fund as permitted by Rule 12d1-1 under the 1940 Act. The Fund's
investment in other investment companies, including ETFs, subjects the Fund
indirectly to the underlying risks of those investment companies.

Loans of Portfolio Securities
-----------------------------

            The 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 and regulations thereunder (as such
statute, rules and regulations may be amended from time to time) or by guidance
regarding, interpretations of, or exemptive orders under, the 1940 Act. Under
the securities lending program, all securities loans will be secured continually
by cash collateral. A principal risk in lending portfolio securities is that the
borrower will fail to return the loaned securities upon termination of the loan
and 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 the net return from the interest earned on the
cash collateral after a rebate is 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 fees are paid to the securities lending agent and for certain other
administrative expenses.

            The Fund will have the right, by providing notice to the borrower at
any time, to call a loan and obtain the securities loaned 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.

            The Fund will invest any 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.

            The Fund will not have the right to vote on 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 its securities, its
investment performance will continue to reflect the value of securities on loan.

Loan Participations and Assignments
-----------------------------------

            The Fund may invest in direct debt instruments, which are interests
in amounts owed to lenders or lending syndicates by corporate, governmental, or
other borrowers ("Loans"), either by participating as co-lender at the time the
Loan is originated ("Participations") or by buying an interest in the Loan in
the secondary market from a financial institution or institutional investor
("Assignments"). A Loan is often administered by a bank, or other financial
institution, that acts as agent for all the holders. The financial status of the
agent interposed between the Fund and a borrower may affect the ability of the
Fund to receive principal and interest payments.

            The return on these investments 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. The agent bank typically has broad discretion in enforcing loan
agreements.

            The Fund's investment in Participations typically will result in the
Fund having a contractual relationship only with the financial institution
arranging the Loan with the borrower (the "Lender") and not with the borrower
directly. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
borrower. In connection with purchasing Participations, 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. The 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
Investors Service, Inc. ("Moody's") or BBB- or higher by S&P Global
Ratings("S&P")) or higher.

            When the 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.

            The 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 difficult for the Fund to
assign a value to these securities for purposes of valuing the Fund's portfolio
and calculating its asset value.

            The Loans may include participations in "bridge loans", which are
Loans taken out by borrowers for a short period (typically less than six months)
pending arrangement of more permanent financing through, for example, the
issuance of bonds, frequently high-yield bonds issued for purposes of
acquisitions. The 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 the 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"), 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 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 five 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. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
interest rates the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the pool. Historically, actual average life has been
consistent with the 12-year assumption referred to above. Actual prepayment
experience may cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than the
original investment, thus affecting the yield of the Fund. The compounding
effect from reinvestment of monthly payments received by the Fund will increase
the yield to shareholders compared with bonds that pay interest semi-annually.

            The principal U.S. Governmental (i.e., backed by the full faith and
credit of the United States Government) guarantor of mortgage-related securities
is GNMA. GNMA is a wholly-owned 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 the GSEs have paid dividends to the U.S. Treasury in a
cumulative amount that exceeds 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, 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 that 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 GSE 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 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. ARMS bear 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.

            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.

            "To Be Announced" Mortgaged-Backed Securities. TBA mortgage-backed
securities are described in "Forward Commitments and When-Issued and Delayed
Delivery Securities" above.

            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, the 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.
Conversely, during periods of rising interest rates, a reduction in prepayments
may increase the effective life of mortgage-related securities, subjecting them
to greater risk of decline in market value in response to rising interest rates.
If the life of a mortgage-related security is inaccurately predicted, the 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
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.

            Mortgage-related securities issued by certain private organizations
may not be readily marketable there may be a limited market for these
securities, especially when there is a perceived weakness in the mortgage and
real estate market sectors. In particular, the secondary market for CMOs may be
more volatile and less liquid than those for other mortgage-related securities,
thereby potentially limiting the Fund's ability to buy or sell those securities
at any particular time. Without an active trading market, mortgage-related
securities held in the Fund's portfolio may be particularly difficult to value
because of the complexities involved in the value of the underlying mortgages.
In addition, the rating agencies may have difficulties in rating commercial
mortgage-related securities through different economic cycles and in monitoring
such ratings on a longer-term basis.

            As with fixed-income securities generally, the value of
mortgage-related securities can also be adversely affected by increases in
general interest rates relative to the yield provided by such securities. Such
an adverse effect is especially possible with fixed-rate mortgage securities. If
the yield available on other investments rises above the yield of the fixed-rate
mortgage securities as a result of general increases in interest rate levels,
the value of the mortgage-related securities will decline.

            GSE Risk-Sharing Bonds. Another type of mortgage-related security,
known as GSE Risk-Sharing Bonds or Credit Risk Transfer securities ("CRTs"),
transfer a portion of the risk of borrower defaults from the issuing GSE to
investors through the issuance of a bond whose return of principal is linked to
the performance of a selected pool of mortgages. CRTs are issued by GSEs (and
sometimes banks or mortgage insurers) and structured without any government or
GSE guarantee in respect of borrower defaults or underlying collateral.
Typically, CRTs are issued at par and have stated final maturities. CRTs are
structured so that: (i) interest is paid directly by the issuing GSE and (ii)
principal is paid by the issuing GSE in accordance with the principal payments
and default performance of a certain pool of residential mortgage loans acquired
by the GSE.

            The risks associated with an investment in CRTs differ from the
risks associated with an investment in mortgage-backed securities issued by GSEs
because, in CRTs, some or all of the credit risk associated with the underlying
mortgage loans is transferred to the end-investor. As a result, in the event
that a GSE fails to pay principal or interest on a CRT or goes through
bankruptcy, insolvency or similar proceeding, holders of such CRT have no direct
recourse to the underlying mortgage loans.

            Other Asset-Backed Securities. The 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, the 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 these 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. The Fund may invest securities issued in
structured financing transactions, which generally involve aggregating types of
debt assets in a pool or special purpose entity and then issuing new securities.
Types of structured financings include, for example, mortgage-related and other
asset-backed securities. The Fund's investments includes investments in
structured securities that represent interests in entities organized and
operated solely for the purpose of restructuring the investment characteristics
of debt obligations. This type of restructuring involves the deposit with or
purchase by an entity, such as a corporation or trust, of specified instruments
(such as commercial bank loans) and the issuance by that entity of one or more
classes of securities ("Structured Securities") backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued Structured Securities to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to Structured Securities is dependent on the
extent of the cash flow on the underlying instruments. Because Structured
Securities of the type in which the Fund anticipates it will invest typically
involve no credit enhancement, their credit risk generally will be equivalent to
that of the underlying instruments.

            The 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
---------------

            The 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. Therefore, 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 interest and principal payments. Similar to investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The Fund will indirectly
bear its proportionate share of expenses incurred by REITs in which the Fund
invests in addition to the expenses incurred directly by the Fund.

            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.

            Because REITs are often smaller capitalization companies, investing
in REITs may involve risks similar to those associated with investing in such
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 the 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, the 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
the 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, the Fund would attempt to exercise its rights with respect to the
underlying security, including possible sale of the security. The Fund may incur
various expenses in connection with the exercise of its rights and may be
subject to various delays and risks of loss, including (a) possible declines in
the value of the underlying securities, (b) possible reduction in levels of
income and (c) lack of access to the securities (if they are held through a
third-party custodian) and possible inability to enforce the Fund's rights. The
Board has established procedures, which are periodically reviewed by the Board,
pursuant to which the Adviser monitors the creditworthiness of the dealers with
which the Fund enters into repurchase agreement transactions.

            The 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, constitutes 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
constitutes two separate transactions. The Fund has the risk of changes in the
value of the purchased security during the term of the buy/sell back agreement
although these agreements typically provide for the repricing of the original
transaction at a new market price if the value of the security changes by a
specific amount.

Reverse Repurchase Agreements
-----------------------------

            Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. During the reverse repurchase agreement
period, the Fund continues to receive principal and interest payments on these
securities. Generally, the effect of such a transaction 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.

            Reverse repurchase agreements are considered to be a loan to the
Fund by the counterparty, collateralized by the assets subject to repurchase. By
entering into reverse repurchase agreements, the Fund obtains additional cash to
invest on 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 than it pays in interest on the reverse repurchase
transactions. However, there is the risk that returns could be reduced if the
rates of interest on the investment proceeds do not exceed the interest paid by
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.

Rights and Warrants
-------------------

            The 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 and Fitch
Ratings ("Fitch") are generally accepted barometers 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 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 the
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 and Fitch.
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, 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 the 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 in high-yielding securities for the Fund, the Adviser will attempt
to identify those high-yielding securities whose financial condition is adequate
to meet future obligations, has improved, or is expected to improve in the
future. The Adviser's analysis focuses on relative values based on such factors
as interest or dividend coverage, asset coverage, earnings prospects, and the
experience and managerial strength of the issuer.

            In the event that the credit rating of a security held by the Fund
is downgraded, the credit quality deteriorates after purchase, or the security
defaults, the Fund will not be obligated to dispose of that security and may
continue to hold the security if, in the opinion of the Adviser, such investment
is appropriate in the circumstances.

            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
-----------

            The Fund may make short sales of securities or maintain short
positions. A short sale is effected by selling a security that the 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 the
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
the 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 worth no more than par at maturity. However, the short sale of other
instruments or securities generally, including equity securities, fixed-income
securities convertible into equities or other instruments, or fixed-income
securities that are 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 the 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.

Structured Products
-------------------

            The 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 equity
or other securities.

            Investing in structured products may be more efficient and/or less
expensive for the 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
the Fund to the credit risk of the issuer of the structured product.

            Structured Notes and Indexed Securities: The Fund may invest in a
particular type of structured instrument sometimes referred to as a "structured
note". The terms of these notes may be structured by the issuer and the
purchaser of the note. Structured notes are derivative debt instruments, the
interest rate or principal of which is determined by an unrelated indicator (for
example, a currency, security, commodity or index thereof). Indexed securities
may include structured notes as well as securities other than debt securities,
the interest rate or principal of which is determined by an unrelated indicator.
The terms of structured notes and indexed securities may provide that in certain
circumstances no principal is due at maturity, which may result in a total loss
of invested capital. Structured notes and indexed securities may be positively
or negatively indexed, so that appreciation of the unrelated indicator may
produce an increase or a decrease in the interest rate or the value of the
structured note or indexed security at maturity may be calculated as a specified
multiple of the change in the value of the unrelated indicator. Therefore, the
value of such notes and securities may be very volatile. Structured notes and
indexed securities may entail a greater degree of market risk than other types
of debt securities because the investor bears the risk of the unrelated
indicator. Structured notes or indexed securities also may be more volatile,
less liquid, and more difficult to accurately price than less complex securities
and instruments or more traditional debt securities.

            Commodity Index-Linked Notes and Commodity-Linked Notes: Structured
products may provide exposure to the commodities markets. These structured notes
may include leveraged or unleveraged commodity index-linked notes, which are
derivative debt instruments with principal and/or coupon payments linked to the
performance of commodity indices. They also include commodity-linked notes with
principal and/or coupon payments linked to the value of particular commodities
or commodities futures contracts, or a subset of commodities and commodities
future contracts. The value of these notes will rise or fall in response to
changes in the underlying commodity, commodity futures contract, subset of
commodities or commodities futures contracts or commodity index. These notes
expose the Fund economically to movements in commodity prices. These notes also
are subject to risks, such as credit, market and interest rate risks, that in
general affect the values of debt securities. In addition, these notes are often
leveraged, increasing the volatility of each note's market value relative to
changes in the underlying commodity, commodity futures contract or commodity
index. Therefore, the Fund might receive interest or principal payments on the
note that are determined based on a specified multiple of the change in value of
the underlying commodity, 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, the 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 the Fund would receive as an investor in the trust. The 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, and leverage risk and
management risk. These securities are generally structured as Rule 144A
securities so that they may be freely traded among institutional buyers.
However, changes in the market for credit-linked securities or the availability
of willing buyers may result in the securities becoming illiquid.

Zero-Coupon and Payment-in-Kind Bonds
-------------------------------------

            The Fund may at times invest in so-called "zero-coupon" bonds and
"payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount
from their principal amount in lieu of paying interest periodically.
Payment-in-kind bonds allow the issuer, at its option, to make current interest
payments on the bonds either in cash or in additional bonds. Because zero-coupon
bonds do not pay current interest, their value is generally subject to greater
fluctuations in response to changes in market interest rates than bonds that pay
interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer
to avoid the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current interest in cash,
the Fund is nonetheless required to accrue interest income on such investments
and to distribute such amounts at least annually to shareholders. Thus, the Fund
could be required to liquidate other investments in order to satisfy its
dividend requirements at times when the Adviser would not otherwise deem it
advisable to do so.

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

            Borrowing and Use of Leverage. The Fund may use borrowings for
investment purposes subject to the restrictions of the 1940 Act. Borrowings by
the Fund result in leveraging of the Fund's shares of common stock. The proceeds
of such borrowings will be invested in accordance with the Fund's investment
objective and policies. The Fund may also create leverage through the use of
derivatives and may use leverage for investment purposes by entering into
transactions such as reverse repurchase agreements and forward contracts and
dollar rolls. This means that the Fund uses 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
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 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
such return, 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 the NAV of the Fund's shares.

            Certain transactions, such as derivatives transactions, forward
commitments, reverse repurchase agreements and short sales, involve leverage and
may expose the Fund to potential losses that, in some cases, may exceed the
amount originally invested by the Fund. When the 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 Fund and
its 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 Fund or its service providers or the issuers of securities in
which the Fund invests 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 Fund
does not control the cyber security defenses or plans of its service providers,
financial intermediaries and companies in which it invests or with which it does
business.

            Additional Risks of Futures Contracts, Options on Futures Contracts,
Swaps, Forward Contracts and Options on Foreign Currencies. Unlike transactions
entered into by the Fund in futures contracts, swaps, options on foreign
currencies and forward contracts may not be traded on contract markets regulated
by the CFTC or (with the exception of certain foreign currency options) by the
SEC. Such instruments may be traded through financial institutions acting as
market makers, although foreign currency options are also traded on certain
national securities exchanges, such as the Nasdaq PHLX and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options on currencies
may be traded OTC. 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
and a trader of forward contracts could lose amounts substantially in excess of
their initial investments, due to the margin and collateral requirements
associated with such positions.

            Options on foreign currencies traded on national securities
exchanges are within the jurisdiction of the SEC, as are other securities traded
on such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default. Further,
a liquid secondary market in options traded on a national securities exchange
may be more readily available than in the OTC market, potentially permitting the
Fund to liquidate open positions at a profit prior to exercise or expiration, or
to limit losses in the event of adverse market movements.

            The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the OTC market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in applicable foreign countries
for this purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on the OCC
or its clearing member, impose special procedures on exercise and settlement,
such as technical changes in the mechanics of delivery of currency, the fixing
of dollar settlement prices or prohibitions on exercise.

            In addition, futures contracts, options on futures contracts,
forward contracts and options on foreign currencies may be traded on foreign
exchanges. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be adversely affected by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in 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
requirements than in the United States, and (v) lesser trading volume.

            Risks of Investments in Foreign Securities. Investors should
understand and consider carefully the substantial risks involved in securities
of foreign companies and governments of foreign nations, some of which are
referred to below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-U.S. companies which are
generally denominated in foreign currencies, and utilization of derivative
investment products denominated in, or the value of which is dependent upon
movements in the relative value of, a foreign currency, involve certain
considerations comprising both risk and opportunity not typically associated
with investing in U.S. companies. These considerations include changes in
exchange rates and exchange control regulations, political and social
instability, expropriation, imposition of foreign taxes, less liquid markets and
less available information than are generally the case in the United States,
higher transaction costs, less government supervision of exchanges, brokers and
issuers, difficulty in enforcing contractual obligations, lack of uniform
accounting and auditing standards and greater price volatility.

            There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign issuers are subject to accounting and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and profits appearing on
the financial statements of a foreign issuer may not reflect its financial
position or results of operations in the way they would be reflected had the
financial statement been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps accounting records
in local currency, inflation accounting rules in some of the countries in which
the Fund may invest require, for both tax and accounting purposes, that certain
assets and liabilities be restated on the issuer's balance sheet in order to
express items in terms of currency of constant purchasing power. Inflation
accounting may indirectly generate losses or profits. Consequently, financial
data may be materially affected by restatements for inflation and may not
accurately reflect the real condition of those issuers and securities markets.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.

            It is contemplated that foreign securities will be purchased in OTC
markets or on stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if that
is the best available market. Foreign securities markets are generally not as
developed or efficient as those in the United States. While growing in volume,
they usually have substantially less volume than the New York Stock Exchange
(the "Exchange"), and securities of some foreign companies are less liquid and
more volatile than securities of comparable U.S. companies. Similarly, volume
and liquidity in most foreign bond markets is less than in the United States
and, at times, volatility of price can be greater than in the United States.
Commissions on foreign stock exchanges are often higher than negotiated
commissions on U.S. exchanges, although the 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 the Fund may invest and
could adversely affect the Fund's assets should these conditions or events
recur.

            In June 2016, the United Kingdom ("UK") voted in a referendum to
leave the European Union ("EU"). On March 29, 2017, the UK notified the European
Council of its intention to withdraw from the EU. It is expected that the UK's
withdrawal will be completed within two years of such notification. There is
considerable uncertainty relating to the potential consequences 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 the Fund's investments.

            Foreign investment in the securities of companies in certain
countries is restricted or controlled to varying degrees. These restrictions or
controls may at times limit or preclude Fund investment in certain foreign
securities and increase the costs and expenses of the Fund. Certain countries in
which the Fund may invest require governmental approval prior to investments by
foreign persons, limit the amount of investment by foreign persons in a
particular issuer, limit the investment by foreign persons only to a specific
class of securities of an issuer that may have less advantageous rights than the
classes available for purchase by domiciliaries of the countries and/or impose
additional taxes on foreign investors.

            Certain countries may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.

            Income from certain investments held by the Fund could be reduced by
foreign income taxes, including withholding taxes. It is impossible to determine
the effective rate of foreign tax in advance. The 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 "United States
Federal Income Taxation of the Fund".

            Investors should understand that the expenses of a fund investing in
foreign securities may be higher than investment companies investing only in
domestic securities since, among other things, the cost of maintaining the
custody of foreign securities is higher and the purchase and sale of portfolio
securities may be subject to higher transaction charges, such as stamp duties
and turnover taxes.

            For many securities of foreign issuers, there are U.S.
Dollar-denominated ADRs that are traded in the United States on exchanges or
OTC. 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, the Fund can avoid currency risks which
might occur during the settlement period for either purchases or sales.

            Investments in China. Risks of investments in securities of
companies in China include the volatility of the Chinese stock market, heavy
dependence on exports, which may decrease, sometimes significantly, when the
world economy weakens, and the continuing importance of the role of the Chinese
Government, which may take actions that affect economic and market practices.
While the Chinese economy has grown rapidly in recent years, there is no
guarantee that this growth rate will be maintained. In addition, trade disputes
between China and its trading counterparties, including the United States, may
arise, which could potentially result in trade tariffs, embargoes, trade
limitations, trade wars and other negative consequences. These consequences
could trigger, among other things, a substantial reduction in international
trade and the failure of individual companies and/or large segments of China's
export industry, which could have potentially significant negative effects on
the Chinese economy as well as the global economy. Risks of investments in
companies based in Hong Kong include heavy reliance on the U.S. economy and
regional economies, particularly the Chinese economy, which makes these
investments vulnerable to changes in these economies. These and related factors
may result in adverse effects on investments in China and have a negative impact
on the Fund's performance.

            The Fund may invest in China A shares of certain Chinese companies
listed and traded through the Shanghai-Hong Kong Stock Connect and Shenzhen-Hong
Kong Stock Connect programs ("Stock Connect"). Stock Connect is a securities
trading and clearing program established by Hong Kong Exchanges and Clearing
Limited, the Shanghai Stock Exchange, the Shenzhen Stock Exchange and China
Securities Depository and Clearing Corporation Limited, which seeks to provide
mutual stock market access between Mainland China and Hong Kong.

            Trading through Stock Connect is subject to a number of restrictions
and risks that could impair the Fund's ability to invest in or sell China A
shares and affect investment returns, including limitations on trading and
possible imposition of trading suspensions. For example, Stock Connect is
subject to quotas that limit aggregate net purchases on an exchange on a
particular day, and an investor cannot purchase and sell the same security
through Stock Connect on the same trading day. In addition, Stock Connect is
generally only available on business days when both the China and Hong Kong
markets are open. Furthermore, uncertainties in China's tax rules related to the
taxation of income and gains from investments in China A shares could result in
unexpected tax liabilities for the Fund. Investing in China A shares is also
subject to the clearance and settlement procedures associated with Stock
Connect, which could pose risks to the Fund.

            All transactions in Stock Connect securities will be made in
renminbi, and accordingly the Fund will be exposed to renminbi currency risks.
The ability to hedge renminbi currency risks may be limited. In addition, given
the renminbi is subject to exchange control restrictions, the Fund could be
adversely affected by delays in converting other currencies into renminbi and
vice versa and at times when there are unfavorable market conditions.

            Stock Connect is a relatively new program to the market and is
subject to regulations promulgated by regulatory authorities and implementation
rules made by the stock exchanges in China and Hong Kong. Furthermore, new
regulations may be promulgated from time to time by the regulators in connection
with operations and cross-border legal enforcement under Stock Connect.

            Foreign Currency Transactions. The Fund may invest in securities
denominated in foreign currencies and a corresponding portion of the Fund's
revenues will be received in such currencies. In addition, the Fund may conduct
foreign currency transactions for hedging and non-hedging purposes on a spot
(i.e., cash) basis or through the use of derivatives transactions, such as
forward currency exchange contracts, currency futures and options thereon, and
options on currencies as described above. The dollar equivalent of the Fund's
net assets and distributions will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. Dollar. Such changes
will also affect the Fund's income. The Fund will, however, have the ability to
attempt to protect itself against adverse changes in the values of foreign
currencies by engaging in certain of the investment practices listed above.
While the Fund has this ability, there is no certainty as to whether and to what
extent the Fund will engage in these practices.

            Currency exchange rates may fluctuate significantly over short
periods of time causing, along with other factors, the Fund's NAV to fluctuate.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. To the extent
the Fund's total assets (adjusted to reflect the Fund's net position after
giving effect to currency transactions) is denominated or quoted in the
currencies of foreign countries, the Fund will be more susceptible to the risk
of adverse economic and political developments within those countries.

            The Fund will incur costs in connection with conversions between
various currencies. The Fund may hold foreign currency received in connection
with investments when, in the judgment of the Adviser, it would be beneficial to
convert such currency into U.S. Dollars at a later date, based on anticipated
changes in the relevant exchange rate.

            If the value of the foreign currencies in which the Fund receives
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 the distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if the
value of a particular foreign currency declines between the time the Fund incurs
expenses in U.S. Dollars and the time cash expenses are paid, the amount of the
currency required to be converted into U.S. Dollars in order to pay expenses in
U.S. Dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, the Fund may
engage in certain currency hedging transactions, which themselves, involve
certain special risks.

            Investments in Lower-Rated and Unrated Instruments. The Fund may
invest in lower-rated securities, which may include securities having the lowest
rating for non-subordinated debt securities (i.e., rated C by Moody's or CCC or
lower by S&P & Fitch), and unrated securities of equivalent investment quality
(commonly referred to as "junk bonds"). Lower-rated debt securities 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 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 objective, there will be
times, such as during periods of rising interest rates, when depreciation and
realization of capital losses on fixed-income 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.

            Sovereign Debt Obligations. No established secondary markets may
exist for many of the sovereign debt obligations in which the Fund may invest.
Reduced secondary market liquidity may have an adverse effect on the market
price and the Fund's ability to dispose of particular instruments when necessary
to meet its liquidity requirements or in response to specific economic events
such as a deterioration in the creditworthiness of the issuer. Reduced secondary
market liquidity for certain sovereign debt obligations may also make it
difficult for the Fund to obtain accurate market quotations for the purpose of
valuing its portfolio. Market quotations are generally available on many
sovereign debt obligations only from a limited number of dealers and may not
necessarily represent firm bids of those dealers or prices for actual sales.

            By investing in sovereign debt obligations, the Fund will be exposed
to the direct or indirect consequences of political, social and economic changes
in various countries. Political changes in a country may affect the willingness
of a foreign government to make or provide for timely payments of its
obligations. The country's economic status, as reflected in, among other things,
its inflation rate, the amount of external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.

            Many countries providing investment opportunities for the Fund have
experienced substantial, and in some periods extremely high, rates of inflation
for many years. Inflation and rapid fluctuation in inflation rates have had and
may continue to have adverse effects on the economies and securities markets of
certain of these countries. In an attempt to control inflation, wage and price
controls have been imposed in certain countries.

            Investing in sovereign debt obligations involves economic and
political risks. The sovereign debt obligations in which the Fund may invest in
most cases pertain to countries that are among the world's largest debtors to
commercial banks, foreign governments, international financial organizations and
other financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, obtaining new credit to finance interest payments. Certain governments
have not been able to make payments of interest on or principal of sovereign
debt obligations as those payments have come due. Obligations arising from past
restructuring agreements may affect the economic performance and political and
social stability of those issuers.

            Central banks and other governmental authorities which control the
servicing of sovereign debt obligations may not be willing or able to permit the
payment of the principal or interest when due in accordance with the terms of
the obligations. As a result, the issuers of sovereign debt obligations may
default on their obligations. Defaults on certain sovereign debt obligations
have occurred in the past. Holders of certain sovereign debt obligations may be
requested to participate in the restructuring and rescheduling of these
obligations and to extend further loans to the issuers. The interests of holders
of sovereign debt obligations could be adversely affected in the course of
restructuring arrangements or by certain other factors referred to below.
Furthermore, some of the participants in the secondary market for sovereign debt
obligations may also be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.

            The ability of governments to make timely payments on their
obligations is likely to be influenced strongly by the issuer's balance of
payments, including export performance, and its access to international credits
and investments. A country whose exports are concentrated in a few commodities
could be vulnerable to a decline in the international prices of one or more of
those commodities. Increase protectionism on the part of a country's trading
partners could also adversely affect the country's exports and diminish its
trade account surplus, if any.

            To the extent that a country receives payment for its exports in
currencies other than dollars, its ability to make debt payments denominated in
dollars could be adversely affected. To the extent that a country develops a
trade deficit, it may need to depend on continuing loans from foreign
governments, multilateral organizations or private commercial banks, aid
payments from foreign governments and on inflows of foreign investment. The
access of a country to these forms of external funding may not be certain, and a
withdrawal of external funding could adversely affect the capacity of a
government to make payments on its obligations. In addition, the cost of
servicing debt obligations can be affected by a change in international interest
rates since the majority of these obligations carry interest rates that are
adjusted periodically based on international rates.

            Another factor bearing on the ability of a country to repay
sovereign debt obligations is the level of the country's international reserves.
Fluctuations in the level of these reserves can affect the amount of foreign
exchange readily available for external debt payments and, thus, could have a
bearing on the capacity of the country to make payments on its sovereign debt
obligations.

            The Fund is permitted to invest in sovereign debt obligations that
are not current in the payment of interest or principal or are in default, so
long as the Adviser believes it to be consistent with the Fund's investment
objectives. The Fund may have limited legal recourse in the event of a default
with respect to certain sovereign debt obligations it holds. For example,
remedies for defaults on certain sovereign debt obligations, unlike those on
private debt, must, in some cases, be pursued in the courts of the defaulting
party itself. Legal recourse therefore may be significantly diminished.
Bankruptcy, moratorium and other similar laws applicable to issuers of sovereign
debt obligations may be substantially different from those applicable to issuers
of private debt obligations. The political context, expressed as a willingness
of an issuer of sovereign debt obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not contest
payments to the holders of securities issued by foreign governments in the event
of default under commercial bank loan agreements.

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

                            INVESTMENT RESTRICTIONS

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

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

            The following fundamental investment policies may not be changed
without approval by the vote of a majority of the Fund's outstanding voting
securities, which means the affirmative vote of (i) 67% or more of the shares of
the Fund represented at a meeting at which more than 50% of the outstanding
shares are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, whichever is less.

            As a matter of fundamental policy, the 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) may purchase and sell commodities to the extent allowed by
applicable law; and

                  (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, the Fund 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.

Non-Fundamental Investment Policy
---------------------------------

            The following is a description of an operating policy that the Fund
has adopted but that is not fundamental and is subject to change without
shareholder approval.

            The Fund 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
Fund may obtain such short-term credits as are necessary for the clearance of
portfolio transactions, and the Fund may make margin payments in connection with
futures contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments.

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

                             MANAGEMENT OF THE FUND

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

The Adviser
-----------

            The Adviser, a Delaware limited partnership with principal offices
at 1345 Avenue of the Americas, New York, NY 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 the
Fund under the supervision of the Board. 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 June 30, 2018, totaling
approximately $540 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 June 30, 2018, the direct ownership structure of the Adviser,
expressed as a percentage of general and limited partnership interests, was as
follows:

                AXA and its subsidiaries                         63.3
                AllianceBernstein Holding L.P.                   35.9
                Unaffiliated holders                              0.8
                                                       ---------------------
                                                                100.0%
                                                       =====================

            During 2017, AXA S.A. ("AXA"), a French holding company for the AXA
Group, a worldwide leader in life, property and casualty and health insurance
and asset management, announced its intention to pursue the sale of a minority
stake in AXA Equitable Holdings, Inc. ("EQH"), the holding company for a
diversified financial services organization, through an initial public offering
("IPO"). During the second quarter of 2018, EQH completed the IPO, and, as a
result, AXA owns approximately 71.9% of the outstanding common stock of EQH as
of June 30, 2018. AXA has announced its intention to sell its entire interest in
EQH over time, subject to market conditions and other factors. AXA is under no
obligation to do so and retains the sole discretion to determine the timing of
any future sales of shares of EQH common stock.

            As of June 30, 2018, EQH owns approximately 3.8% of the issued and
outstanding units representing assignments of beneficial ownership of limited
partnership interests in AB Holding ("AB Holding Units"). AllianceBernstein
Corporation (an indirect wholly-owned subsidiary of EQH, "GP") is the general
partner of both AB Holding and AB. The GP owns 100,000 general partnership units
in AB Holding and a 1% general partnership interest in AB.

            Including both the general partnership and limited partnership
interests in AB Holding and AB, EQH and its subsidiaries have an approximate
64.7% economic interest in AB as of June 30, 2018.


Advisory Agreement and Expenses
-------------------------------

            The Adviser serves as investment manager and adviser of the Fund,
continuously furnishes an investment program for the Fund, and manages,
supervises and conducts the affairs of the Fund, subject to the Board's
oversight.

            Under the Fund's Advisory Agreement, the Adviser furnishes advice
and recommendations with respect to the Fund's portfolio of securities and
investments, and provides persons satisfactory to the Board to act as officers
of the Fund. Such officers or employees may be employees of the Adviser or of
its affiliates.

            The Adviser is, under the Fund's Advisory Agreement, responsible for
certain expenses incurred by the Fund, including, for example, office
facilities, and any expenses incurred in promoting the sale of shares of the
Fund (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 prospectuses of the Fund and other reports to shareholders
and fees related to registration with the SEC and with state regulatory
authorities).

            The 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 Fund by the Adviser, the 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 the Fund. Costs
currently reimbursed include the costs of the Adviser's personnel performing
certain administrative services for the Fund, 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 Fund on a fully-costed basis (i.e.,
includes each person's total compensation and a factor reflecting the Adviser's
total cost relating to that person, 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 March 31, 2018, the Fund paid the Adviser a
total amount of $76,019. The Adviser agreed to voluntarily waive such fees in
the amount of $64,739 and $54,677 for the fiscal years ended March 31, 2017 and
March 31, 2016, respectively.

            The Advisory Agreement continues in effect, provided that such
continuance is specifically approved at least annually by a vote of a majority
of the Fund's outstanding voting securities or by the Fund's Board 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. Most recently, continuance of
the Advisory Agreement was approved for an additional annual term by the Board,
including a majority of the Directors who are not parties to the Advisory
Agreement or interested persons of any such party, at meetings held on May 1-3,
2018.

            Any material amendment to the Advisory Agreement must be approved by
the vote of a majority of the outstanding securities of the Fund and by the vote
of a majority of the Directors who are not interested persons of the Fund or the
Adviser. The Advisory Agreement is terminable without penalty on 60 days'
written notice by a vote of a majority of the outstanding voting securities of
the Fund, by a vote of a majority of the Directors, or by the Adviser on 60
days' written notice, and will automatically terminate in the event of 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.

            Effective as of February 3, 2017, the Fund has contractually agreed
to pay a monthly fee to the Adviser at an annualized rate of .85 of 1% of the
first $1 billion, .80 of 1% of the excess over $1 billion up to $2 billion, .75
of 1% of the excess over $2 billion up to $3 billion and .70 of 1% of the excess
over $3 billion of the average daily net assets of the Fund. Effective as of
February 3, 2017, the Adviser has contractually agreed to waive its fee and bear
certain expenses of the Fund for the period through the effective date of the
subsequent prospectus incorporating the Fund's annual financial statements (the
"Period") so that total Fund operating expenses (excluding expenses associated
with acquired fund fees and expenses other than the advisory fees of any AB
Mutual Funds in which the Fund may invest, interest expense, taxes,
extraordinary expenses, and brokerage commissions and other transaction costs)
do not exceed on an annual basis 1.24%, 1.99%, 1.49%, 1.24%, .99%, .99% and .99%
of average daily net assets, respectively, for Class A, Class C, Class R, Class
K, Class I, Class Z and Advisor Class shares. 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. The fee waiver and/or
expense reimbursement agreement may be terminated after July 31, 2019 upon 60
days' prior notice by the Adviser. Prior to February 3, 2017, the Fund had
contractually agreed to pay a monthly fee to the Adviser at an annualized rate
of 1.00% of the first $1 billion, .95 of 1% of the excess over $1 billion up to
$2 billion, .90 of 1% of the excess over $2 billion up to $3 billion and .85 of
1% of the excess over $3 billion of the average daily net assets of the Fund.
For the fiscal year ended March 31, 2018, the Fund paid the Adviser advisory
fees in the amount of $885,398. The Adviser did not receive any fees from the
Fund for the fiscal years ended March 31, 2017 and March 31, 2016. Prior
to February 3, 2017, the Adviser had contractually agreed to waive its fee and
bear certain expenses so that total operating expenses, excluding interest
expense, do not exceed on an annual basis 1.60%, 2.35%, 1.85%, 1.60%, 1.35% and
1.35% of average daily net assets, respectively, for Class A, Class C, Class R,
Class K, Class I and Advisor Class shares. Under the expense limitation
undertaking, $696,063, $462,171 and $392,909 was waived and/or reimbursed by the
Adviser for the fiscal years ended March 31, 2018, March 31, 2017 and March 31,
2016, respectively (not including the Adviser's waiver of its administrative
reimbursement in the amount of $0, $64,739 and $54,677, respectively, as set
forth above).

            In addition, to the extent that the Fund invests in AB Government
Money Market Portfolio (except for the investment of any cash collateral from
securities lending), the Adviser has contractually agreed to waive its
management fee from the Fund in an amount equal to the Fund's pro rata share of
the AB Government Money Market Portfolio's effective management fee. This
agreement will remain in effect until July 31, 2019 and will continue thereafter
from year to year unless the Adviser provides notice of termination to the Fund
at least 60 days prior to the end of the period. To the extent that the Fund
invests securities lending cash collateral in the AB Government Money Market
Portfolio, the Adviser has also agreed to waive a portion of the Fund's share of
the advisory fees of AB Government Money Market Portfolio. In connection with
the investment by the Fund in the AB Government Money Market Portfolio, the
Adviser waived its investment management fee in the amount of $15,277 and $6,121
for the fiscal years ended March 31, 2018 and March 31, 2017, respectively.

            The Adviser may act as an investment adviser to other persons, firms
or corporations, including investment companies, and is the investment adviser
to AB Bond 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 High Income Fund, Inc., AB
Institutional Funds, Inc., AB Large Cap Growth Fund, Inc., AB Municipal Income
Fund, Inc., AB Municipal Income Fund II, AB Relative Value Fund, Inc., AB
Sustainable Global Thematic Fund, Inc., AB Sustainable International Thematic
Fund, Inc., 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., and The AB Portfolios, all registered
open-end investment companies; and to AllianceBernstein Global High Income Fund,
Inc., AB Multi-Manager Alternative Fund, AllianceBernstein National Municipal
Income Fund, Inc. and Alliance California Municipal Income Fund, Inc., all
registered closed-end investment companies. The registered investment companies
for which the Adviser serves as investment adviser are referred to collectively
below as the "AB Fund Complex", while all of these investment companies, except
Bernstein Fund, Inc., Sanford C. Bernstein Fund, Inc. and AB Multi-Manager
Alternative Fund, are referred to collectively below as the "AB Funds."

            Certain other clients of the Adviser may have investment objectives
and policies similar to those of the Fund. The Adviser may, from time to time,
make recommendations which result in the purchase or sale of the particular
security by its other clients simultaneously with a purchase or sale thereof by
the Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price. 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 Fund. When two or more of the Adviser's clients (including the
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.

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

            Certain information concerning the Directors is set forth below.

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

INDEPENDENT DIRECTORS

Marshall C. Turner, Jr.,#  Private Investor since        94       Xilinx, Inc.
Chairman of the Board      prior to 2013.  Former                 (programmable
76                         Chairman and CEO of                    logic
(2005)                     Dupont Photomasks, Inc.                semi-
                           (components of                         conductors)
                           semi-conductor                         since 2007
                           manufacturing). He 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 AB
                           Funds since February
                           2014.

Michael J. Downey,#        Private Investor since        94       The Asia
74                         prior to 2013. Formerly,               Pacific
(2005)                     managing partner of                    Fund, Inc.
                           Lexington Capital, LLC                 (registered
                           (investment advisory                   investment
                           firm) from December 1997               company) since
                           until December 2003. He                prior to 2013
                           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        94       None
85                         an Independent
(1992)                     Consultant since prior
                           to 2013. 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
                           early February 2014. He
                           served as Chairman of
                           such AB Funds from 2003
                           through December 2013.
                           He is also active in a
                           number of mutual fund
                           related organizations
                           and committees.

Nancy P. Jacklin,#         Private Investor since        94       None
70                         prior to 2013.
(2006)                     Professorial Lecturer at
                           the Johns Hopkins School
                           of Advanced
                           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
                           of 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 of          94       None
62                         Slalom Consulting
(2016)                     (consulting) since 2014,
                           private investor and
                           member of the Partners
                           Healthcare Investment
                           Committee. Formerly,
                           Director of Norfolk &
                           Dedham Group (mutual
                           property and casualty
                           insurance) from 2011
                           until November 2016;
                           Director of Partners
                           Community Physicians
                           Organization
                           (healthcare) from 2014
                           until December 2016; and
                           Managing Director of The
                           Crossland Group
                           (consulting) from 2012
                           until 2013. She has
                           held a number of senior
                           positions in the asset
                           and wealth management
                           industries, including at
                           Eastern Bank (where her
                           roles included President
                           of Eastern Wealth
                           Management), Thomson
                           Financial (Global Head
                           of Sales for Investment
                           Management), and Putnam
                           Investments (where her
                           roles included Head of
                           Global Investment
                           Research). She has
                           served on a number of
                           private company and
                           nonprofit boards, and as
                           a director or trustee of
                           the AB Funds since June
                           2016.

Garry L. Moody,#           Independent Consultant.       94       None
66                         Formerly, Partner,
(2008)                     Deloitte & Touche LLP
                           (1995-2008) where he
                           held a number of senior
                           positions, including
                           Vice Chairman, and U.S.
                           and Global Investment
                           Management Practice
                           Managing Partner;
                           President, Fidelity
                           Accounting and Custody
                           Services Company
                           (1993-1995), 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       94       None
78                         prior to January 2007,
(2007)                     of the law firm 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      94       None
58                         the Adviser++ and the
(2010)                     head of
                           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, he was Managing
                           Director and Head of
                           North American Client
                           Service and Sales in the
                           Adviser's institutional
                           investment management
                           business, with which he
                           had been associated
                           since prior to 2004.

----------------
*     The address for each of the Fund's Directors is c/o AllianceBernstein
      L.P., Attention: Legal & Compliance Department - Mutual Fund Legal, 1345
      Avenue of the Americas, New York, NY 10105.

**    There is no stated term of office for the Fund'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 Fund due to his affiliation with 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 2013 until
July 2014, Mr. Downey was a director of The Merger Fund (a registered investment
company) from 1995 until 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 management of the business and affairs of the Fund are overseen
by the Board. Directors who are not "interested persons" of the Fund, as defined
in the 1940 Act, are referred to as "Independent Directors", and Directors who
are "interested persons" of the Fund are referred to as "Interested Directors".
Certain information concerning the Fund's governance structure and each Director
is set forth below.

            Experience, Skills, Attributes, and Qualifications of the Fund'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 shareholders at any annual or special
meeting of shareholders. 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 Fund 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 a 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 Fund'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 Fund and other AB Funds as
noted in the table above: 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; 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), and as a
financial services lawyer in private practice, and has served as Chair 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 a management
consultant and as a director of various private companies and non-profit
organizations, as well as extensive asset management experience at a number of
companies, including as an executive in the areas of portfolio management,
research, and sales and marketing; 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 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 served as 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 Fund. The Fund has engaged the Adviser to manage the Fund on a
day-to-day basis. The Board is responsible for overseeing the Adviser and the
Fund's other service providers in the operations of the Fund in accordance with
the Fund's investment objective and policies and otherwise in accordance with
its prospectus, the requirements of the 1940 Act and other applicable Federal,
state and other securities and other laws, and the Fund's charter and bylaws.
The Board typically meets in-person at regularly scheduled meetings four 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 Fund is required to have an
Independent Director as Chairman pursuant to certain 2003 regulatory settlements
involving the Adviser.

            Risk Oversight. The Fund 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 Fund 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
Fund's investment program and operations and is addressed as part of various
regular Board and committee activities. The Fund'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 Fund'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 of the Adviser), the Fund's Chief Compliance
Officer, the Fund's independent registered public accounting firm, the Adviser's
internal legal counsel, the Adviser's Chief Compliance Officer and internal
auditors for the Adviser, as appropriate, regarding risks faced by the Fund 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 Fund 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 Fund 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 Fund's goals. As a result of the foregoing and other factors the Fund'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 the Fund's accounting and financial reporting policies and
practices. The Audit Committee met three times during the Fund's most recently
completed fiscal year.

            The function of the Governance and Nominating Committee includes the
nomination of persons to fill any vacancies or newly created positions on the
Board. The Governance and Nominating Committee met three times during the Fund's
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 Fund 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 for nomination as Directors submitted by the Fund's current Board
members, officers, the Adviser, shareholders 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 the 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 not
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 the 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 Fund; (v) the class or
series and number of all shares of the Fund 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 Fund's 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 Fund, 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 seven times during the Fund's most recently completed
fiscal year.

            The dollar range of the 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           AGGREGATE DOLLAR
                                 OF EQUITY              RANGE OF EQUITY
                                 SECURITIES IN          SECURITIES IN THE
                                 THE FUND AS OF         AB FUND COMPLEX AS OF
                                 DECEMBER 31, 2017      DECEMBER 31, 2017
                                 -----------------      ---------------------

John H. Dobkin*                       None              Over $100,000
Michael J. Downey                     None              Over $100,000
William H. Foulk, Jr.                 None              Over $100,000
D. James Guzy*                        None              Over $100,000
Nancy P. Jacklin                      None              Over $100,000
Robert M. Keith                       None                   None
Carol C. McMullen                     None              Over $100,000
Garry L. Moody                        None              Over $100,000
Marshall C. Turner, Jr.               None              Over $100,000
Earl D. Weiner                        None              Over $100,000

-----------
*  Messrs. Dobkin and Guzy retired as Directors effective December 31, 2017.

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

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

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

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

Henry D'Auria,       Vice President          Senior Vice President of the
56                                           Adviser,** with which he has been
                                             associated since prior to 2013.

Paul J. DeNoon,      Vice President          Senior Vice President of the
56                                           Adviser,** with which he has been
                                             associated since prior to 2013.

Morgan C. Harting,   Vice President          Senior Vice President of the
47                                           Adviser,** with which he has been
                                             associated since prior to 2013.

Shamaila Khan,       Vice President          Senior Vice President of the
47                                           Adviser,** with which she has been
                                             associated since prior to 2013.

Emilie D. Wrapp,     Secretary               Senior Vice President, Assistant
62                                           General Counsel and Assistant
                                             Secretary of ABI,** with which she
                                             has been associated since prior to
                                             2013.

Joseph J. Mantineo,  Treasurer and Chief     Senior Vice President of ABIS,**
59                   Financial Officer       with which he has been associated
                                             since prior to 2013.

Vincent S. Noto,     Chief Compliance        Senior Vice President since 2015
53                   Officer                 and 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 2013.

Phyllis J. Clarke,   Controller and Chief    Vice President of ABIS,** with
57                   Accounting Officer      which she has been associated
                                             since prior to 2013.
-------------------
*     The address for each of the Fund's Officers is 1345 Avenue of the
      Americas, New York, NY 10105.
**    The Adviser, ABI and ABIS are affiliates of the Fund.

            The Fund does not pay any fees to, or reimburse expenses of, its
Directors who are considered "interested persons" (as defined in Section
2(a)(19) of the 1940 Act) of the Fund. The aggregate compensation paid to the
Directors by the Fund for the fiscal year ended March 31, 2018, the aggregate
compensation paid to each of the Directors during calendar year 2017 by the AB
Fund Complex, and the total number of registered investment companies (and
separate investment portfolios within the 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 Fund nor any other fund 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
                                                     Number of
                                                     Registered
                                                     Investment
                                                     Companies     Total Number
                                                     in the AB     of Investment
                                                     Fund          Portfolios
                                                     Complex,      within the AB
                                       Total         Including     Fund Complex,
                                       Compensation  the Fund,     Including the
                                       from the      as to which   Fund, as to
                                       AB Fund       the           which the
                        Aggregate      Complex,      Director is   Director is a
Name of Director of     Compensation   Including     a Director    Director or
the Fund                from the Fund  the Fund      or Trustee    Trustee
-------------------     -------------  --------      ----------    -------------

John H. Dobkin*         $2,227         $285,000          26             94
Michael J. Downey       $2,983         $285,000          26             94
William H. Foulk, Jr.   $2,983         $285,000          26             94
D. James Guzy*          $2,274         $285,000          26             94
Nancy P. Jacklin        $3,190         $305,000          26             94
Robert M. Keith         $0             $0                26             94
Carol C. McMullen       $2,983         $285,000          26             94
Garry L. Moody          $3,396         $325,000          26             94
Marshall C. Turner, Jr. $4,962         $480,000          26             94
Earl D. Weiner          $2,983         $285,000          26             94

* Messrs. Dobkin and Guzy retired as Directors effective December 31, 2017.

            As of July 2, 2018, the Directors and officers of the Fund as a
group owned less than 1% of the shares of the Fund.

Additional Information About the Fund's Portfolio Managers
----------------------------------------------------------

            The management of, and investment decisions for, the Fund's
portfolio are made by the Adviser's Emerging Markets Multi-Asset Team. Henry
D'Auria, Paul J. DeNoon, Morgan Harting and Shamaila Khan are the investment
professionals(1) primarily responsible for the day-to-day management of the
Fund's portfolio (the "Portfolio Managers"). For additional information about
the portfolio management of the Fund, see "Management of the Fund - Portfolio
Managers" in the Fund's Prospectus.

-----------------
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.

            As of March 31, 2018, employees of the Adviser had approximately
$49,543,720 in shares of all AB Mutual Funds (excluding AB money market funds)
through their interests in certain deferred compensation plans, including the
Incentive Compensation Award Plan, including both vested and unvested amounts.

            The dollar ranges of the Fund's equity securities owned directly or
beneficially by the Fund's portfolio managers as of March 31, 2018 are set forth
below:

                   DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND(2)
                   ---------------------------------------------
                      Henry D'Auria                  None
                      Paul J. DeNoon                 None
                      Morgan C. Harting            $1-$10,000
                      Shamaila Khan                   None

----------------
2     The dollar range presented above include any vested shares awarded under
      the Adviser's Partners Compensation Plan (the "Plan").

            The following tables provide information regarding registered
investment companies other than the Fund, other pooled investment vehicles and
other accounts over which each Portfolio Manager also has day-to-day management
responsibilities. The tables provide the numbers of such accounts, the total
assets in such accounts and the number of accounts and total assets whose fees
are based on performance. The information is provided as of March 31, 2018.

--------------------------------------------------------------------------------
                          REGISTERED INVESTMENT COMPANIES
                               (excluding the Fund)
--------------------------------------------------------------------------------
                                                    Number of     Total Assets
                    Total                           Registered    of Registered
                    Number of                       Investment    Investment
                    Registered   Total Assets of    Companies     Companies
                    Investment   Registered         Managed with  Managed with
                    Companies    Investment         Performance-  Performance-
Portfolio Manager   Managed      Companies Managed  Fees          based Fees
--------------------------------------------------------------------------------
Henry D'Auria           15       $2,537,000,000        None         None
Paul J. DeNoon          19      $11,759,000,000        None         None
Morgan C. Harting        2         $262,000,000        None         None
Shamaila Khan            5         $403,000,000        None         None
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                         OTHER POOLED INVESTMENT VEHICLES
--------------------------------------------------------------------------------
                                                                   Total
                    Total                            Number of     Assets of
                    Number of                        Other Pooled  Other Pooled
                    Other                            Investment    Investment
                    Pooled       Total Assets of     Vehicles      Vehicles
                    Investment   Other Pooled        Managed with  Managed with
                    Vehicles     Investment          Performance-  Performance-
Portfolio Manager   Managed      Vehicles Managed    based Fees    based Fees
--------------------------------------------------------------------------------
Henry D'Auria           22       $1,291,000,000        None          None
Paul J. DeNoon          72      $41,494,000,000        None          None
Morgan C. Harting        3          $15,000,000        None          None
Shamaila Khan           35       $5,118,000,000        None          None
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
                                 OTHER ACCOUNTS
--------------------------------------------------------------------------------
                                                    Number of      Total Assets
                                                    Other          of Other
                    Total Number                    Accounts       Accounts
                    of Other     Total Assets of    Managed with   Managed with
                    Accounts     Other Accounts     Performance-   Performance-
Portfolio Manager   Managed      Managed            based Fees     based Fees
-------------------------------------------------------------------------------
Henry D'Auria           15       $2,622,000,000          1         $168,000,000
Paul J. DeNoon          17       $8,828,000,000          2         $538,000,000
Morgan C. Harting      None           None             None            None
Shamaila Khan           15       $8,187,000,000          2         $538,000,000
--------------------------------------------------------------------------------

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 (subject to certain exceptions, including
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 Fund. 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 Fund's 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 Fund 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 FUND

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

Distribution Services Agreement
-------------------------------

            The Fund has entered into a Distribution Services Agreement (the
"Agreement") with ABI, the Fund's principal underwriter to permit ABI to
distribute the Fund's shares and to permit the Fund to pay distribution services
fees to defray expenses associated with distribution of its Class A shares,
Class C shares, Class R shares, Class K shares and Class 1 shares in accordance
with a plan of distribution that is included in the Agreement and that has been
duly adopted and approved in accordance with Rule 12b-1 adopted by the SEC under
the 1940 Act (the "Plan").

            In approving the Plan, the Directors determined that there was a
reasonable likelihood that the Plan would benefit the 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 the Fund and each
class of shares thereof for successive one-year periods provided that such
continuance is specifically approved at least annually by a majority of the
Independent Directors who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto (the "Qualified
Directors") and by a vote of a majority of the entire Board at a meeting called
for that purpose. Most recently, the Directors approved the continuance of the
Plan for an additional annual term at their meetings held on May 1-3, 2018.

            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 the 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. The Agreement may be
terminated (a) by the Fund without penalty at any time by a majority vote of the
holders of the Fund's outstanding voting securities, voting separately by class,
or by a majority vote of the Qualified Directors or (b) by ABI. To terminate the
Plan or the Agreement, any party must give the other parties 60 days' written
notice; except that the Fund may terminate the Plan without giving prior notice
to ABI. The Agreement will terminate automatically in the event of its
assignment. The Plan is of a type known as a "reimbursement plan", which means
that it reimburses 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 R, Class K or Class 1
shares, (i) no distribution services fees (other than current amounts accrued
but not yet paid) would be owed by the Fund to ABI with respect to that class,
and (ii) the Fund would not be obligated to pay ABI for any amounts expended
under the Agreement not previously recovered by ABI from distribution services
fees or through deferred sales charges in respect of shares of such class.

            Distribution services fees are accrued daily and paid monthly and
are charged as expenses of the Fund as accrued. The distribution services fees
attributable to the Class C, Class R, Class K and Class 1 shares 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 distribution services fees on the Class C shares and the
distribution services fees on the Class R, Class K and Class 1 shares are the
same as those of the initial sales charge and distribution services fee with
respect to the Class A shares in that in each case the sales charge and/or
distribution services fee provide for the financing of the distribution of the
relevant class of the Fund's shares.

            With respect to Class A shares of the 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 R, Class K and Class 1 shares under the Plan of the
Fund is directly tied to the expenses incurred by ABI. Actual distribution
expenses for Class C shares, Class R shares, Class K shares and Class 1 shares
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, payments received from CDSCs. The excess will be carried forward
by ABI and reimbursed from distribution services fees subsequently 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.

            During the fiscal year ended March 31, 2018, the distribution
services fees for expenditures payable to ABI were as follows:

                                                      Percentage per annum of
                        Distribution services fees    the aggregate average
                        for expenditures payable      daily net assets
Share Class             to ABI                        attributable to shares
-----------             --------------------------    ----------------------
A                       $18,158                       0.25%
C                       $16,472                       1.00%
R                       $1,357                        0.50%
K                       $829                          0.25%

            For the fiscal year ended March 31, 2018, expenses incurred by the
Fund and costs allocated to the Fund in connection with activities primarily
intended to result in the sale of certain share classes were as follows:

Category
of Expense           Class A         Class C          Class R         Class K
----------           -------         -------          -------         -------

Advertising/
Marketing             $467             $117               $24              $4

Printing and
Mailing of
Prospectuses and
Semi-Annual and
Annual Reports to
Other than Current
Shareholders          $122              $29                $7              $1

Compensation to
Underwriters         $21,418         $21,633           $1,266            $805

Compensation to
Dealers              $4,355            $999              $224             $35

Compensation to
Sales Personnel      $9,284          $1,986              $126             $15

Interest, Carrying
or Other Financing
Charges                 $0               $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)            $1,225            $304               $64             $10

Totals               $36,871         $25,068           $1,711            $870

            During the fiscal year ended March 31, 2018, unreimbursed
distribution expenses incurred and carried over for reimbursement in future
years in respect of the Class C, Class R and Class K shares of the Fund were
$11,517, $561 and $0, respectively, representing .41%, .17% and 0% of the net
assets of each class, respectively.

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 Fund. ABIS registers the transfer, issuance and
redemption of Fund shares and disburses dividends and other distributions to
Fund shareholders.

            ABIS receives a transfer agency fee per account holder of each of
the Class A, Class C, Class 1, Class 2 shares, Class Z shares and Advisor Class
shares of the Fund, plus reimbursement for out-of-pocket expenses. The transfer
agency fee with respect to the Class C shares is higher than the transfer agency
fee with respect to the other classes of shares, reflecting the additional costs
associated with the Class C CDSCs. For the fiscal year ended March 31, 2018, the
Fund paid ABIS $30,740 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 Fund often does not maintain an account for you. Thus, some or all of the
transfer agency functions for these accounts are performed by the financial
intermediaries. Retirement plans may also hold Fund shares in the name of the
plan, rather than the participant. Financial intermediaries and recordkeepers,
who may have affiliated financial intermediaries who sell shares of the AB
Mutual Funds, may be paid by the Fund, the Adviser, ABI and ABIS (i) account
fees in amounts up to $19 per account per annum, (ii) asset-based fees of up to
0.25% (except in respect of a limited number of intermediaries) per annum of the
average daily assets held through the intermediary, or (iii) a combination of
both. These amounts include fees for shareholder servicing, sub-transfer agency,
sub-accounting and recordkeeping services. These amounts do not include fees for
shareholder servicing that may be paid separately by the Fund pursuant to its
Rule 12b-1 plan. Amounts paid by the Fund for these services are included in
"Other Expenses" under "Fees and Expenses of the Fund" in the Summary
Information section of the Prospectus. In addition, financial intermediaries may
be affiliates of entities that receive compensation from the Adviser or ABI for
maintaining retirement plan "platforms" that facilitate trading by affiliated
and non-affiliated financial intermediaries and recordkeeping for retirement
plans.

            Because financial intermediaries and plan recordkeepers may be paid
varying amounts per class for sub-transfer agency and related recordkeeping
services, the service requirements of which may also vary by class, this may
create an additional incentive for financial intermediaries and their financial
advisors to favor one fund complex over another or one class of shares over
another.

Securities Lending Agreement
----------------------------

            Brown Brothers Harriman & Co. ("Brown Brothers") serves as the
securities lending agent to the Fund and is responsible for the implementation
and administration of a securities lending program pursuant to a Securities
Lending Agency Agreement ("Securities Lending Agreement"). Pursuant to the
Securities Lending Agreement, Brown Brothers provides the following services:
effecting loans of Fund securities to any person on a list of approved
borrowers; determining whether a loan shall be made and negotiating and
establishing the terms and conditions of the loan with the borrower; ensuring
that payments relating to distributions on loaned securities are timely and
properly credited to the Fund's account; collateral management (including
valuation and daily mark-to-market obligations); cash collateral reinvestment in
accordance with the Securities Lending Agreement; and maintaining records and
preparing reports regarding loans that are made and the income derived
therefrom.

            The Fund earned income and paid fees and compensation related to its
securities lending activities during the most recent fiscal year as follows:

Gross income from securities lending activities                        $2,432

Fees paid to securities lending agent from revenue split                $210

Fees paid for any cash collateral management services
(including fees deducted from a pooled cash collateral
reinvestment vehicle) that are not included in
the revenue split                                                        $0

Administrative fees not included in the revenue split                    $0

Indemnification fees not included in the revenue split                   $0

Rebate (paid to borrow)                                                 $333

Other fees not included in revenue split                                 $0

Aggregate fees and/or compensation for securities lending
activities                                                             $(543)

Net income from securities lending activities                          $1,889

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

                               PURCHASE OF SHARES

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

            The following information supplements that set forth in your
Prospectus under the heading "Investing in the Fund".

General
-------

            Shares of the Fund are offered on a continuous basis at a price
equal to their NAV plus an initial sales charge at the time of purchase ("Class
A shares"), without any initial sales charge and, as long as the shares are held
for one year or more, without any CDSC ("Class C shares"), to Group Retirement
Plans, as defined below, eligible to purchase Class R shares, without any
initial sales charge or CDSC ("Class R shares"), to Group Retirement Plans
eligible to purchase Class K shares, without any initial sales charge or CDSC
("Class K shares"), to Group Retirement Plans and certain investment advisory
clients of, and certain other persons associated with, the Adviser and its
affiliates eligible to purchase Class I shares, without any initial sales charge
or CDSC ("Class I shares"), to private clients ("Clients") of Sanford C.
Bernstein & Co. LLC ("Bernstein") without any initial sales charge or CDSC (the
"Class 1 shares"), to institutional clients of the Adviser and Bernstein Clients
who have at least $3 million in fixed-income assets under management with
Bernstein without any initial sales charge or CDSC (the "Class 2 shares"), to
investors eligible to purchase Class Z shares, without any initial sales charge
or CDSC ("Class Z shares") or to investors eligible to purchase Advisor Class
shares, without any initial sales charge or CDSC ("Advisor Class shares"), in
each case as described below. "Group Retirement Plans" are defined as 401(k)
plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money
purchase pension plans, defined benefit plans, and non-qualified deferred
compensation plans where plan level or omnibus accounts are held on the books of
the Fund. All of the classes of shares of the Fund, except Class I, Advisor
Class, Class Z and Class 2 shares, are subject to Rule 12b-1 asset-based sales
charges. Shares of the Fund that are offered subject to a sales charge are
offered through (i) investment dealers that are members of the Financial
Industry Regulatory Authority 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 Fund 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 made through the 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 Fund, including requirements as to the
classes of shares available through that financial intermediary and the minimum
initial and subsequent investment amounts. The Fund is not responsible for, and
has no control over, the decision of any financial intermediary to impose such
differing requirements. Sales personnel of financial intermediaries distributing
the Fund's shares may receive differing compensation for selling different
classes of shares.

            In order to open your account, the Fund or your financial
intermediary is required to obtain certain information from you for
identification purposes. This information may include name, date of birth,
physical address, social security/taxpayer identification number and
ownership/control information (for certain legal entities). Ownership/control
information for legal entities may include the name, date of birth, physical
address, and identification number (generally a social security or taxpayer
identification number) of owners/controlling persons. 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.

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

            The 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 the 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 the Fund is its NAV, plus, in
the case of Class A shares, 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 Fund
shares, the NAV is computed as of the Fund Closing Time, which is the close of
regular trading on each day the Exchange is open (ordinarily 4:00 p.m., Eastern
time, but sometimes earlier, as in the case of scheduled half-day trading or
unscheduled suspensions of trading) by dividing the value of the Fund's total
assets, 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 the Fund are
expected to be substantially the same. However, the NAVs of the Class C and
Class R shares will generally be slightly lower than the NAVs of the Class A,
Class K, Class I, Class 1, Class 2, 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.

            The Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to their NAV next determined (plus
applicable Class A sales charges), as described below. Orders received by ABIS
prior to the Fund Closing Time are priced at the NAV computed as of the Fund
Closing Time on that day (plus applicable Class A sales charges). In the case of
orders for purchase of shares placed through financial intermediaries the
applicable public offering price will be the NAV 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 the Fund or its transfer agent. If the financial intermediary
fails to do so, the investor will not receive that day's NAV. If a financial
intermediary or ABIS receives an 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.

            The Fund may, at its sole option, accept securities as payment for
shares of the Fund, including from certain affiliates of the Fund in accordance
with the Fund's procedures, if the Adviser believes that the securities are
appropriate investments for the Fund. The securities are valued by the method
described under "Net Asset Value" below as of the date the Fund receives the
securities and corresponding documentation necessary to transfer the securities
to the Fund. This is a taxable transaction to the shareholder.

            Following the initial purchase of Fund 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 obtained by calling the "For Literature" telephone number shown on
the cover of this SAI. Except with respect to certain omnibus accounts,
telephone purchase orders with payment by electronic funds transfer may not
exceed $500,000. Payment for shares purchased by telephone can be made only by
electronic funds transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House Association
("NACHA"). Telephone purchase requests must be received before the Fund Closing
Time, on a Fund business day to receive that day's public offering price.
Telephone purchase requests received after the Fund Closing Time, are
automatically placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of the Fund
Closing Time on such following business day.

            Full and fractional shares are credited to a shareholder's account
in the amount of his or her subscription. As a convenience, and to avoid
unnecessary expense to the Fund, the Fund will not issue stock certificates
representing shares of the Fund. Ownership of the Fund's shares will be shown on
the books of the Fund's transfer agent.

            Each class of shares of the Fund represents an interest in the same
portfolio of investments of the 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) Class C and Class R shares typically each bear the expense of a
higher distribution services fee than those borne by Class A, Class K and Class
1 shares, and Class I shares, Class 2 shares, Class Z shares and Advisor Class
shares do not bear such a fee, (iii) Class C shares typically bear higher
transfer agency costs than that borne by the other classes of shares, (iv) Class
C shares are subject to a conversion feature and will convert to Class A shares
under certain circumstances, and (v) each of Class A, Class C, Class R, Class K
and Class 1 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, provided
that, if the Fund submits to a vote of the Class A shareholders an amendment to
the Plan that would materially increase the amount to be paid thereunder with
respect to the Class A shares, then such amendment will also be submitted to the
Class C shareholders because the Class C shares convert to Class A shares under
certain circumstances, and the Class A shareholders and the Class C shareholders
will vote separately by class. 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.

Frequent Purchases and Redemptions
----------------------------------

            The Board has adopted policies and procedures designed to detect and
deter frequent purchases and redemptions of Fund shares or excessive or
short-term trading that may disadvantage long-term Fund shareholders. These
policies are described below. There is no guarantee that the 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 Fund reserves the
right to restrict, reject or cancel, without any prior notice, any purchase or
exchange order for any reason, including any purchase or exchange order accepted
by any shareholder's financial intermediary.

            Risks Associated With Excessive or Short-Term Trading Generally.
While the Fund 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 the 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 the Fund to sell shares at
inopportune times to raise cash to accommodate redemptions relating to
short-term trading. In particular, the 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, the 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.

            Because the Fund invests significantly in securities of foreign
issuers, it 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 the 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"). The 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 Fund expects that the use of fair value pricing, in addition to the
short-term trading policies discussed below, will significantly reduce a
shareholder's ability to engage in time zone arbitrage to the detriment of other
Fund shareholders.

            A shareholder engaging in a short-term trading strategy may also
target the Fund irrespective of its investments in securities of foreign
issuers. Any fund that invests in securities that are, among other things,
thinly traded, traded infrequently or relatively illiquid has the risk that the
current market price for the securities may not accurately reflect current
market values. A shareholder may seek to engage in short-term trading to take
advantage of these pricing differences (referred to as "price arbitrage"). The
Fund may be adversely affected by price arbitrage.

            Policy Regarding Short-Term Trading. Purchases and exchanges of
shares of the Fund should be made for investment purposes only. The Fund seeks
to prevent patterns of excessive purchases and sales or exchanges of Fund shares
to the extent they are detected by the procedures described below, subject to
the Fund's ability to monitor purchase, sale and exchange activity. The 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 Fund, through its agents, ABI and
      ABIS, maintains 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 Fund 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 Fund 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 Fund determines, in its 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 Fund 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 the 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 the Fund, particularly among certain brokers, dealers and other
      financial intermediaries, including sponsors of retirement plans and
      variable insurance products. The Fund applies its surveillance procedures
      to these omnibus account arrangements. As required by SEC rules, the Fund
      has entered into agreements with all of its financial intermediaries that
      require the financial intermediaries to provide the 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).

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 the 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 the
Fund the accumulated distribution services fee and CDSC on Class C shares prior
to conversion 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.

            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 of 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 of 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 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 March 31, 2018, March 31, 2017 and
March 31, 2016 the aggregate amounts of underwriting commissions payable with
respect to shares of the Fund were $25,038, $4,919 and $2,418, respectively. Of
that amount, ABI retained $1,596, $287 and $231, respectively, representing that
portion of the sales charges paid on Class A shares which was not reallocated to
selected dealers. During the Fund's fiscal years ended March 31, 2018, March 31,
2017 and March 31, 2016, ABI received CDSCs of $82, $7 and $19, respectively, on
Class A Shares and $74, $24 and $0, respectively, on Class C Shares.

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

                                  Sales Charge

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

Up to $100,000                    4.44%         4.25%             4.00%

$100,000 up to $250,000           3.36          3.25              3.00

$250,000 up to $500,000           2.30          2.25              2.00

$500,000 up to $1,000,000*        1.78          1.75              1.50

-----------------
* There is no initial sales charge on transactions of $1,000,000 or more.

            All or a portion of the initial sales charge may be paid to your
financial representative. With respect to purchases of $1,000,000 or more, Class
A shares 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 Fund receives
the entire NAV of its Class A shares sold to investors. ABI's commission is the
sales charge shown in the Prospectus 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 Money Market Portfolio that were purchased for
cash without the payment of an initial sales charge and without being subject to
a CDSC.

            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 that are not subject to an initial sales charge at up to the
following rates: 1.00% on purchase amounts up to $3,000,000; plus 0.75% on
purchase amounts over $3,000,000 up to $5,000,000; and 0.50% on purchase amounts
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. The 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 Fund 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, 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 who purchase Class A shares for their
                  own accounts through self-directed and/or non-discretionary
                  brokerage accounts with the broker-dealers or financial
                  intermediaries that may or may not charge a transaction fee to
                  its clients;

            (v)   plan participants who roll over amounts distributed from
                  employer maintained retirement plans to
                  AllianceBernstein-sponsored IRAs where the plan is a client of
                  or serviced by the Adviser's Institutional Investment
                  Management Division or Bernstein Global Wealth Management
                  Division, including subsequent contributions to those IRAs;

            (vi)  persons participating in a "Mutual Fund Only" brokerage
                  program, sponsored and maintained by a registered
                  broker-dealer or other financial intermediary;

            (vii) certain retirement plan accounts as described under
                  "Alternative Purchase Arrangements--Group Retirement Plans and
                  Tax-Deferred Accounts";

            (viii) 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; and

            (ix)  certain firm-specific waivers as disclosed in Appendix B of
                  the Prospectus.

            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 the Fund will receive
the full amount of the investor's purchase payment and, as long as the shares
are held for one year or more, without a CDSC so that the investor will receive
as proceeds upon redemption the entire NAV of his or her Class C shares. The
Class C distribution services fee enables the 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 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.

            Ten years after the end of the calendar month in which the
shareholder's purchase order was accepted Class C shares will automatically
convert to Class A shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the relative NAVs of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class C shares that have been outstanding long enough for ABI
to have been compensated for distribution expenses incurred in the sale of the
shares.

            Conversion Feature for Class C Shares. For purposes of conversion to
Class A shares, Class C shares purchased through the reinvestment of dividends
and distributions paid in respect of such shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time any Class C shares
in the shareholder's account (other than those in the sub-account) convert to
Class A shares, an equal pro-rata portion of such shares in the sub-account will
also convert to Class A shares.

            The conversion to Class A shares is subject to the continuing
availability of an opinion of counsel to the effect that the conversion of Class
C shares to Class A shares does not constitute a taxable event under federal
income tax law. The conversion of Class C shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class C shares would
occur, and shares might continue to be subject to the higher distribution
services fee for an indefinite period, which may extend beyond the period ending
ten years for Class C shares after the end of the calendar month in which the
shareholder's purchase order was accepted.

            Contingent Deferred Sales Charge. Class A share purchases of
$1,000,000 or more and Class C shares that, in either case, are redeemed within
one year of purchase will be subject to a CDSC of 1%, as will 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. The CDSC period begins with the date of your original purchase, not
the date of exchange for the other Class C shares, if applicable.

            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 the
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 who has attained
the age of 70 1/2, (iii) that had been purchased by present or former Directors
of the Fund, by a Relative of any such person, by any trust, individual
retirement account or retirement plan account for the benefit of any such person
or Relative, or by the estate of any such person or Relative, (iv) pursuant to,
and in accordance with, a systematic withdrawal plan (see "Sales Charge
Reduction Programs for Class A Shares - Systematic Withdrawal Plan" below), (v)
to the extent that the redemption is necessary to meet a plan participant's or
beneficiary's request for a distribution or loan from a Group Retirement Plan or
to accommodate a plan participant's or beneficiary's direction to reallocate his
or her plan account among other investment alternatives available under a Group
Retirement Plan, (vi) due to the complete termination of a trust upon the death
of the trustor/grantor, beneficiary or trustee but only if the trust termination
is specifically provided for in the trust document, or (vii) that had been
purchased with proceeds from a Distribution resulting from any SEC enforcement
action related to trading in shares of 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 R Shares. 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 do not have an
initial sale charge or CDSC, but 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 and Class I shares.

            Class K Shares. Class K shares are available at NAV to Group
Retirement Plans. Class K shares 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 have (i) a lower expense
ratio than Class R shares and pay correspondingly higher dividends than Class R
shares and (ii) a higher expense ratio than Class I shares and pay
correspondingly lower dividends than Class I shares.

            Class I Shares. Class I shares are available at NAV to Group
Retirement Plans. Class I shares are also available to certain institutional
investment advisory clients of, and certain other persons associated with, the
Adviser and its affiliates who invest at least $2 million in the Fund. 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 are not subject to an initial sales charge, CDSC or
distribution services fee, and thus have a lower expense ratio and pay
correspondingly higher dividends than Class R and Class K shares.

            Class 1 Shares. Class 1 shares are offered only to Bernstein
Clients. Class 1 shares incur a .25% distribution services fee and thus have a
lower expense ratio and pay correspondingly higher dividends than Class C
shares.

            Class 2 Shares. Class 2 shares are offered only to institutional
clients of the Adviser and Bernstein Clients who meet certain minimum
requirements for assets under management with Bernstein after giving effect to
their investment in the Fund. Class 2 shares do not incur any distribution
services fees and will thus have a lower expense ratio and pay correspondingly
higher dividends than Class A, Class C and Class 1 shares.

            Class Z Shares. Class Z shares are available at NAV to certain Group
Retirement Plans and certain AllianceBernstein-sponsored Group Retirement Plans.
Class Z shares generally are not available to 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 are also available to certain institutional investment
advisory clients of, and certain other persons associated with, the Adviser and
its affiliates who invest at least $2 million in the Fund. Class Z shares are
also available to persons participating in certain fee-based programs sponsored
and maintained by registered broker-dealers or other financial intermediaries
with omnibus account arrangements with the Fund. Class Z shares are not subject
to an initial sales charge, CDSC or distribution services fee, and thus have a
lower expense ratio and pay correspondingly higher dividends than Class R and
Class K shares.

            Advisor Class Shares. Advisor Class shares of the Fund 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 or other investment companies managed by the
Adviser, officers, directors and present or retired full-time employees and
former employees (for subsequent investment in accounts established during the
course of their employment) of the Adviser, ABI, ABIS and their affiliates; or
the relatives of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person; (iv) by the
categories of investors described in clauses (i), (iii) and (iv) under "Class A
Shares - Sales at NAV"; or (v) through brokerage platforms of firms that have
agreements with ABI to offer such shares when acting solely on an agency basis
for the purchase or sale of such shares. 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 the Fund in order to be approved by ABI for investment
in Advisor Class shares. A commission or other 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 are not subject to an initial sales charge, a CDSC or distribution
services fees, and thus have a lower expense ratio and pay correspondingly
higher dividends than Class A, Class C, Class R, Class K or Class 1 shares.

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

            The Fund offers special distribution arrangements for Group
Retirement Plans. However, plan sponsors, plan fiduciaries and other financial
intermediaries may establish requirements as to the purchase, sale or exchange
of shares of the Fund, including maximum and minimum initial investment
requirements, that are different from those described in this SAI. Group
Retirement Plans also may not offer all classes of shares of the Fund. In
addition, the Class A 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 Prospectus 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 next
monthly measurement of assets and employees. If a plan terminates the 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 Fund's 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 an initial front-end sales
charge or CDSC, but are subject to a .50% distribution services fee.

            Class K Shares. Class K shares are available to certain Group
Retirement Plans. Class K shares are not subject to an initial front-end sales
charge or CDSC, but are subject to a .25% distribution services fee.

            Class I Shares. Class I shares are available to certain Group
Retirement Plans. 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 are not subject
to a front-end sales charge, CDSC or distribution services fee.

            Class Z Shares. Class Z shares are available to certain Group
Retirement Plans. Class Z shares are also available to certain
AllianceBernstein-sponsored Group Retirement Plans. Class Z shares generally are
not available to traditional and Roth IRAs, Coverdell Education Savings
Accounts, SEPs, SAR-SEPs, SIMPLE IRAs and individual 403(b) plans. Class Z
shares are not subject to an initial sales charge or CDSC or distribution
services fee.

            Choosing a Class of Shares for Group Retirement Plans. Plan
sponsors, plan fiduciaries and other financial intermediaries may establish
requirements as to the purchase, sale or exchange of shares of the 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, the 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 Rule 12b-1 distribution services fees and Class I
and Class Z shares have no CDSC or Rule 12b-1 distribution services 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 services 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 services fees (0.50%) and
                  the absence of a CDSC with respect to Class R shares; and

            o     the lower Rule 12b-1 distribution services 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 services 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, the Fund must be notified by the
shareholder or his or her financial intermediary that they qualify for such a
reduction. If the Fund is not notified that a shareholder is eligible for these
reductions, the 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 the Fund (and/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". 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 FlexFee High Yield Portfolio
  -AB FlexFee International Bond 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 Concentrated Growth Fund
  -AB Concentrated International Growth Portfolio
  -AB Emerging Markets Core Portfolio
  -AB Emerging Markets Multi-Asset Portfolio
  -AB FlexFee Core Opportunities Portfolio
  -AB FlexFee Emerging Markets Growth Portfolio
  -AB FlexFee International Strategic Core Portfolio
  -AB FlexFee Large Cap Growth Portfolio
  -AB FlexFee US Thematic Portfolio
  -AB Global Core Equity Portfolio
  -AB International Strategic Core Portfolio
  -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 Fixed-Income Shares, Inc.
  -AB Government Money Market Portfolio
AB Global Bond Fund, Inc.
AB Global Real Estate Investment Fund, Inc.
AB Global Risk Allocation Fund, Inc.
AB High Income 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 Minnesota Portfolio
  -AB New Jersey Portfolio
  -AB Ohio Portfolio
  -AB Pennsylvania Portfolio
  -AB Virginia Portfolio
AB Relative Value Fund, Inc.
AB Sustainable Global Thematic Fund, Inc.
AB Sustainable International Thematic Fund, Inc.
AB Trust
  -AB Discovery Value Fund
  -AB International Value Fund
  -AB Value Fund
AB Unconstrained Bond Fund, Inc.
The AB Portfolios
  -AB All Market Total Return Portfolio
  -AB Conservative Wealth Strategy
  -AB Growth Fund
  -AB Tax-Managed All Market Income Portfolio
  -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 Plus 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.abfunds.com.

            Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of the 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". 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 Fund held by the
                  investor and (b) all shares held by the investor of any other
                  AB Mutual Fund, including AB Institutional Funds; and

            (iii) the higher of cost or NAV of all shares described in paragraph
                  (ii) owned by another shareholder eligible to combine his or
                  her purchase with that of the investor into a single
                  "purchase" (see above).

            The initial sales charge you pay on each purchase of Class A shares
will take into account your accumulated holdings in all classes of shares of 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 invested, including reinvested distributions but excluding
appreciation and 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 the 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" 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 Fund 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 the 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 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 (i) 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 Fund at the address shown
on the cover of this SAI.

            Dividend Reinvestment Program. Under the 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) in 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. Current shareholders should contact ABIS to establish a
dividend direction plan.

Systematic Withdrawal Plan
--------------------------

            General. Any shareholder who owns or purchases shares of the 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 the 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 the Fund's involuntary redemption provisions. See "Redemption
and Repurchase of Shares--General". Purchases of additional shares concurrently
with withdrawals are undesirable because of sales charges applicable when
purchases are made. While an occasional lump-sum investment may be made by a
holder of Class A shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.

            Payments under a systematic withdrawal plan may be made by check or
electronically via the Automated Clearing House ("ACH") network. Investors
wishing to establish a systematic withdrawal plan in conjunction with their
initial investment in shares of the 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 the Fund. These
financial intermediaries employ financial advisors and receive compensation for
selling shares of the Fund. This compensation is paid from various sources,
including any sales charge, CDSC and/or Rule 12b-1 fee that you or the Fund may
pay. Your individual financial advisor may receive some or all of the amounts
paid to the financial intermediary that employs him or her.

            In the case of Class A shares, all or a portion of the initial sales
charge that you pay may be paid by ABI to financial intermediaries selling Class
A shares. ABI may also pay these financial intermediaries a fee of up to 1% on
purchases of $1 million or more. Additionally, up to 100% of the Rule 12b-1 fees
applicable to Class A shares each year may be paid to financial intermediaries,
including your financial intermediary, that sell Class A shares.

            In the case of Class C shares, ABI may pay, at the time of your
purchase, a commission to firms selling Class C shares in an amount equal to 1%
of your investment. Additionally, up to 100% of the Rule 12b-1 fee applicable to
Class C shares each year may be paid to financial intermediaries, including your
financial intermediary, that sell Class C shares.

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

            In the case of Advisor Class shares, your financial intermediary 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 Fund,
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 recordkeeping and/or transfer
                  agency services.

            Please read your Prospectus carefully for information on this
compensation. Please also refer to Appendix B--Financial Intermediary Waivers in
the Prospectus.

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 Prospectus, some or all
of which may be paid to financial intermediaries (and, in turn, to your
financial advisor), ABI, at its expense, currently provides additional payments
to firms that sell shares of the 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 2018, ABI expects to pay approximately 0.05% of the average
monthly assets of the AB Mutual Funds, or approximately $20 million, for
distribution services and education support related to the AB Mutual Funds. In
2017, ABI paid approximately 0.05% of the average monthly assets of the AB
Mutual Funds or approximately $19 million, for distribution services and
education 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 or 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 Fund 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 Fund - Transfer Agency Agreement" above.
These expenses paid by the Fund are included in "Other Expenses" under "Fees and
Expenses of the Fund - Annual Fund Operating Expenses" in the Prospectus.

            If one mutual fund sponsor makes greater distribution assistance
payments than another, your financial advisor and his or her firm may have an
incentive to recommend 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 purchase.

            ABI anticipates that the firms that will receive additional payments
for distribution services and/or educational support include:

            Advisor Group
            American Enterprise Investment Services
            AXA Advisors
            Cadaret, Grant & Co.
            Citigroup Global Markets
            Citizens Securities
            Commonwealth Financial Network
            Donegal Securities
            Institutional Cash Distributors (ICD)
            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
            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 Fund may use brokers and dealers that sell shares of
the Fund to effect portfolio transactions, the Fund does 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
Prospectus under the heading "Investing in the Fund". If you are an Advisor
Class shareholder through an account established under a fee-based program or
commission-based brokerage program, your program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares of the Fund
that are different from those described herein. 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 the Fund that are
different from those described herein. A commission or other 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. The
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, the Charter of the
Company requires that the Fund 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. The Fund expects that it will typically take one to three business days
following the receipt of your redemption request in proper form to pay out
redemption proceeds. However, while not expected, payment of redemption proceeds
may take up to seven days after the day it is received in proper form by the
Fund by the Fund Closing Time. If a shareholder is in doubt about what documents
are required by his or her investment 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 the 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 the 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 on 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 the Fund by mail, the registered owner or owners
should forward a letter to the 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.

            Telephone Redemption - Payment by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption with payment by electronic
funds transfer 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 for payment by electronic funds transfer may not exceed $100,000, and
must be made before the Fund Closing Time on a Fund business day as defined
above. 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 - Payment by Check. Each Fund shareholder is
eligible to request redemption with payment by check of Fund shares 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) held in nominee or "street name"
accounts, (ii) held by a shareholder who has changed his or her address of
record within the preceding 30 calendar days or (iii) held in any retirement
plan account. Neither the Fund, the Adviser, ABI nor ABIS will be responsible
for the authenticity of telephone requests for redemptions that the 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 the
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.

            Redemptions Through Intermediaries. The Fund may redeem shares
through ABI or financial intermediaries. The redemption 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 the Fund Closing Time if received by ABI prior to a
designated later time (pursuant to an agreement between the financial
intermediary and ABI permitting such an arrangement; the designated time will
vary by financial intermediary). The financial intermediary is responsible for
transmitting the request to ABI on time. 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. Neither the
Fund 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 the Fund are offered through a financial
intermediary, the redemption is settled by the shareholder as an ordinary
transaction with or through that financial intermediary, who may charge the
shareholder for this service.

Account Closure
---------------

            The Fund reserves the right to close out an account that has
remained below $1,000 for 90 days, except for Class 1 and Class 2 shares as
described below. No CDSC will be deducted from the proceeds of this redemption.
In the case of a redemption or repurchase of shares of the 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.

Automatic Sale
--------------

            Class 1 Shares. Under certain circumstances, Bernstein may redeem
your Class 1 shares of the 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, Bernstein may, on at least 60 days'
prior written notice, sell your remaining Class 1 shares in the Fund and close
your account. Bernstein will not close your account if you increase your account
balance to $1,000 during the 60 day notice period.

            Class 2 Shares. Under certain circumstances, Bernstein may redeem
your Class 2 shares of the 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, Bernstein may, on at least 60 days'
prior written notice, sell your remaining Class 2 shares in the Fund and close
your account. Bernstein 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
Prospectus under the heading "Investing in the Fund". The shareholder services
set forth below are applicable to all classes of shares unless otherwise
indicated.

            If you are an Advisor Class shareholder through an account
established under a fee-based program or commission-based brokerage program or a
shareholder in a Group Retirement Plan, your program or retirement plan may
impose requirements with respect to the purchase, sale or exchange of shares of
the Fund that are different from those described herein. A commission or other
transaction fee may be charged by your financial intermediary with respect to
the purchase, sale or exchange of Advisor Class shares made through such
intermediary.

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

            Investors may purchase shares of the 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.

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

            You may exchange your investment in the Fund for shares of the same
class of other AB Mutual Funds (including AB Government Money Market Portfolio,
a money market fund managed by the Adviser) 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 a service in the nature of
investment advisory or administrative services may, on a tax-free basis,
exchange Class A, Class C, Class R, Class K, Class I or Class Z shares of the
Fund for Advisor Class 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 and, in the case of Class C
shares of the Fund, for the purpose of conversion to Class A shares of the Fund.
After an exchange, your Class C shares will automatically convert to Class A
shares in accordance with the conversion schedule applicable to the Class C
shares of the AB Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the original shares is
applied.

            Please read carefully the prospectus of the AB Mutual Fund into
which you are exchanging before submitting the request. Call ABIS at (800)
221-5672 to exchange shares. Except with respect to exchanges of Class A, Class
C, Class R, Class K, Class I or Class Z shares of the Fund for Advisor Class
shares of the 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. Shares acquired pursuant to a telephone request for exchange will
be held under the same account registration as the shares redeemed through such
exchange.

            Eligible shareholders desiring to make an exchange should telephone
ABIS with their account number and other details of the exchange, at (800)
221-5672 before the Fund Closing Time on a Fund business day as defined above.
Telephone requests for exchanges received before the Fund Closing Time on a Fund
business day will be processed as of the close of business on that day. During
periods of drastic economic, market or other developments, such as the terrorist
attacks on September 11, 2001, it is possible that shareholders would have
difficulty in reaching ABIS by telephone (although no such difficulty was
apparent at any time in connection with the attacks). If a shareholder were to
experience such difficulty, the shareholder should issue written instructions to
ABIS at the address shown on the cover of this SAI.

            A shareholder may elect to initiate a monthly "Auto Exchange"
whereby a specified dollar amount's worth of his or her Fund shares (minimum
$25) is automatically exchanged for shares of another 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 the
Fund reasonably believes to be genuine. The 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 the 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 Fund being acquired may legally be sold. Each AB Mutual Fund
reserves the right, at any time on 60 days' notice to its shareholders to reject
any order to acquire its shares through exchange or otherwise, to modify,
restrict or terminate the exchange privilege.

Statements and Reports
----------------------

            Each shareholder of the 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 Fund's independent registered public
accounting firm, Ernst & Young LLP, 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 the 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 the 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. The Fund's 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 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 Fund's
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 Board, to value the 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 or broker-dealer;

            (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 the Fund uses fair value pricing, it may take into account any
factors it deems appropriate. The 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 the Fund to calculate its
NAV may differ from quoted or published prices for the same securities. Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security is materially different than the value that
could be realized upon the sale of that security.

            The 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. The Fund may use fair value pricing more frequently for
securities primarily traded in non-U.S. markets because, among other things,
most foreign markets close well before the Fund 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, the Fund believes that foreign
security values may be affected by events that occur after the close of foreign
securities markets. To account for this, the Fund may frequently value many of
its foreign equity securities using fair value prices based on third party
vendor modeling tools to the extent available.

            The Board may suspend the determination of the Fund's NAV (and the
offering and sales of shares), subject to the rules of the SEC and other
governmental rules and regulations, at a time when: (1) the Exchange is closed,
other than customary weekend and holiday closings, (2) an emergency exists as a
result of which it is not reasonably practicable for 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, 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 the 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 ask 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 each class of shares are invested
together in a single portfolio for the Fund. The NAV of each class will be
determined separately by subtracting the liabilities allocated to that class
from the assets belonging to that class in conformance with the provisions of a
plan adopted by the Fund in accordance with Rule 18f-3 under the 1940 Act.

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

                       DIVIDENDS, DISTRIBUTIONS AND TAXES

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

            Dividends paid by the Fund, if any, with respect to Class A, Class
C, Class R, Class K, Class I, Class Z and Advisor Class 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 distribution services fee applicable to a class
of shares (if any), and the transfer agency costs relating to a class of 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 Fund and to shareholders of the Fund.
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 Fund 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 Fund, including
the effect and applicability of federal, state, local, foreign and other tax
laws and the effects of changes therein.

United States Federal Income Taxation of Dividends and Distributions
--------------------------------------------------------------------

General
-------

            The Fund intends for each taxable year to qualify to be taxed as a
"regulated investment company" under the Code. To so qualify, the 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
contracts 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 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), 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 the 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.

            The 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 for the twelve-month period ending on October 31 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 so elects, and (iii) any ordinary income
or capital gain net income from the preceding calendar year that was not
distributed during that year. Special rules apply to foreign currency gains and
certain income derived from passive foreign investment companies for which the
Fund has made a "mark-to-market" election. 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 Prospectus and the following
discussion relate solely to the significant U.S. federal income taxes on
dividends and distributions by the 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
---------------------------

            The Fund intends to make timely distributions of the Fund's taxable
income (including any net capital gain) so that the Fund will not be subject to
federal income and excise taxes. Income dividends generally are distributed
quarterly; capital gains distributions generally occur annually in December.
Dividends of the Fund's net ordinary income and distributions of any net
realized short-term capital gain are taxable to shareholders as ordinary income.
The investment objective of the Fund is such that only a small portion, if any,
of the Fund's distributions is expected to qualify for the dividends-received
deduction for corporate shareholders.

            Some or all of the distributions from the Fund may be treated as
"qualified dividend income", taxable to individuals, trusts and estates at the
reduced tax rates applicable to long-term capital gains. A distribution from the
Fund will be treated as qualified dividend income to the extent that it is
comprised of dividend income received by the Fund from taxable domestic
corporations and certain qualified foreign corporations, and provided that the
Fund meets certain holding period and other requirements with respect to the
security paying the dividend. In addition, the shareholder must meet certain
holding period requirements with respect to the shares of the Fund in order to
take advantage of this preferential tax rate. To the extent distributions from
the Fund are attributable to other sources, such as taxable interest or
short-term capital gains, dividends paid by the Fund will not be eligible for
the lower rates. The Fund will notify shareholders as to how much of the Fund's
distributions, if any, would qualify for the reduced tax rate, assuming that the
shareholder also satisfies the holding period requirements.

            Distributions of net capital gain are taxable as long-term capital
gain, regardless of how long a shareholder has held shares in the 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, the 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 a capital gain or loss if the Fund
shares are held as a capital asset, and will be a 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 a short-term capital gain or loss.
If a shareholder has held shares in the 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 the 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 Internal
Revenue Service ("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 Fund will report the cost basis of such
covered shares to the IRS and you on Form 1099-B along with the gross proceeds
received on the redemption, the gain or loss realized on such redemption and the
holding period of the redeemed shares.

            Your cost basis in your covered shares is permitted to be calculated
using any one of three alternative methods: Average Cost, First In-First Out
(FIFO) and Specific Share Identification. You may elect which method you want to
use by notifying the Fund. This election may be revoked or changed by you at any
time up to the date of your first redemption of covered shares. If you do not
affirmatively elect a cost basis method then the Fund's default cost basis
calculation method, which is currently the Average Cost method, will be applied
to your account(s). The default method will also be applied to all new accounts
established unless otherwise requested.

            If you hold Fund shares through a broker (or another nominee),
please contact that broker (nominee) with respect to the reporting of cost basis
and available elections for your account.

            You are encouraged to consult your tax advisor regarding the
application of the new cost basis reporting rules and, in particular, which cost
basis calculation method you should elect.

            Qualified Plans. A dividend or capital gains distribution with
respect to shares of the Fund held by a tax-deferred or qualified plan, such as
an individual retirement account, section 403(b)(7) retirement plan 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 (currently
at a rate of 28%) if such shareholder fails to provide the 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.

            Foreign Income Taxes. Investment income received by the Fund 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 Fund to a reduced rate of
such taxes or exemption from taxes on such income. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested within various countries is not known.

            If more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign income taxes paid by the Fund. Pursuant to such election,
shareholders would be required: (i) to include in gross income (in addition to
taxable dividends actually received), their respective pro-rata shares of
foreign taxes paid by the Fund; (ii) treat their pro rata share of such foreign
taxes as having been paid by them; and (iii) either to deduct their pro rata
share of foreign taxes in computing their taxable income, or to use it as a
foreign tax credit against federal income taxes (but not both). No deduction for
foreign taxes could be claimed by a shareholder who does not itemize deductions.
In addition, certain shareholders may be subject to rules which limit their
ability to fully deduct, or claim a credit for, their pro rata share of the
foreign taxes paid by the Fund. A shareholder's foreign tax credit with respect
to a dividend received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least 15 other days
during the 30-day period beginning 15 days prior to the ex-dividend date.

            Each shareholder will be notified within 60 days after the close of
each taxable year of the Fund whether the foreign taxes paid by the Fund will
"pass through" for that year, and, if so, the amount of each shareholder's
pro-rata share (by country) of (i) the foreign taxes paid, and (ii) the Fund's
gross income from foreign sources. Shareholders who are not liable for federal
income taxes, such as retirement plans qualified under section 401 of the Code,
will not be affected by any such "pass through" of foreign taxes.

            The federal income tax status of each year's distributions by the
Fund will be reported to shareholders and to the IRS. The foregoing is only a
general description of the treatment of foreign taxes under the United States
federal income tax laws. Because the availability of a foreign tax credit or
deduction will depend on the particular circumstances of each shareholder,
potential investors are advised to consult their own tax advisers.

United States Federal Income Taxation of the Fund
-------------------------------------------------

            The following discussion relates to certain significant 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.

            Passive Foreign Investment Companies. If the Fund owns shares in a
foreign corporation that constitutes a "passive foreign investment company" (a
"PFIC") for federal income tax purposes and the Fund does not elect or is unable
to elect to either treat such foreign corporation as a "qualified electing fund"
within the meaning of the Code or "mark-to-market" the stock of such foreign
corporation, the Fund may be subject to United States federal income taxation on
a portion of any "excess distribution" it receives from the PFIC or any gain it
derives from the disposition of such shares, even if such income is distributed
as a taxable dividend by the Fund to its shareholders. 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".
Alternatively, the Fund should be able to elect 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.

            Options, Futures Contracts, and Forward Foreign Currency Contracts.
Certain listed options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for federal income
tax purposes. Section 1256 contracts held by the Fund at the end of each taxable
year will be "marked to market" and treated for federal income tax purposes as
though sold for fair market value on the last business day of such taxable year.
Gain or loss realized by the Fund on section 1256 contracts other than forward
foreign currency contracts will be considered 60% long-term and 40% short-term
capital gain or loss. Gain or loss realized by the Fund on forward foreign
currency contracts will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will increase or
decrease the amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described above. The Fund can
elect to exempt its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.

            Gain or loss realized by the Fund on the lapse or sale of put and
call options on foreign currencies which are traded 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.

            Tax Straddles. Any option, futures contract or other position
entered into or held by the Fund in conjunction with any other position held by
the Fund may constitute a "straddle" for federal income tax purposes. A straddle
of which at least one, but not all, the positions are section 1256 contracts may
constitute a "mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of the Fund's gains and losses
with respect to straddle positions by requiring, among other things, that (i)
loss realized on disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the other position
in such straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain being treated as
short-term capital gain rather than long-term capital gain); (iii) losses
recognized with respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as 60% long-term
and 40% short-term capital loss; (iv) losses recognized with respect to certain
straddle positions which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may be deferred.
Various elections are available to the Fund which may mitigate the effects of
the straddle rules, particularly with respect to mixed straddles. In general,
the straddle rules described above do not apply to any straddles held by the
Fund all of the offsetting positions of which consist of section 1256 contracts.

            Currency Fluctuations -- "Section 988" Gains or Losses. Under the
Code, gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues interest or other receivables or accrues
expenses or other liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward contract
denominated in a foreign currency which are attributable to fluctuations in the
value of the foreign currency between the date of acquisition of the asset and
the date of disposition also are treated as ordinary income or loss. These gains
or losses, referred to under the Code as "section 988" gains or losses, increase
or decrease the amount of the Fund's investment company taxable income available
to be distributed to its shareholders as ordinary income, rather than increasing
or decreasing the amount of the Fund's net capital gain. Because section 988
losses reduce the amount of ordinary dividends the Fund will be allowed to
distribute for a taxable year, such section 988 losses may result in all or a
portion of prior dividend distributions for such year being recharacterized as a
non-taxable return of capital to shareholders, rather than as an ordinary
dividend, reducing each shareholder's basis in his or her Fund shares. To the
extent that such distributions exceed such shareholder's basis, each will be
treated as a gain from the sale of shares.

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

            The 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 the 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. However,
distributions of the Fund attributable to U.S. source portfolio interest will
not be subject to this withholding tax.

            A foreign shareholder generally would be exempt from federal income
tax on distributions of the Fund attributable to net long-term and short-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 the Fund is effectively connected with a foreign
shareholder's U.S. trade or business, then ordinary income distributions,
capital gain distributions, and any gain realized upon the sale of shares of the
Fund will be subject to federal income tax at the rates applicable to U.S.
citizens or U.S. corporations.

            The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein.

            The tax rules of other countries with respect to an investment in
the Fund 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 Fund. 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 Fund does not consider sales of shares of the Fund or other
investment companies managed by the Adviser as a factor in the selection of
brokers and dealers to effect portfolio transactions and has adopted a policy
and procedures reasonably designed to preclude such considerations.

            When consistent with the objective of obtaining best execution,
brokerage may be directed to persons or firms supplying investment information
to the Adviser. There may be occasions where the transaction cost charged by a
broker may be greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of the brokerage, research and statistical services
provided by the executing broker.

            Neither the Fund 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 the 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 impracticable to
place an actual dollar value on such investment information, the Adviser
believes that its receipt probably does not reduce the overall expenses of the
Adviser to any material extent.

            The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934, as amended
and is designed to augment the Adviser's own internal research and investment
strategy capabilities. Research services furnished by brokers through which the
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 the
Fund.

            The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of value for research
cannot presently be determined. To the extent that research services of value
are provided by broker-dealers with or through whom the Fund places portfolio
transactions, the Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers as a result of the placement
of portfolio transactions could be useful and of value to the Adviser in
servicing its other clients as well as the Fund; on the other hand, certain
research services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value to it in
servicing the Fund.

            The Fund may deal in some instances in securities that are not
listed on a national securities exchange but are traded in the OTC market. The
Fund may also purchase listed securities through the third market, i.e., from a
dealer that is not a member of the exchange on which a security is listed. Where
transactions are executed in the OTC market or third market, the Fund will seek
to deal with the primary market makers; but when necessary in order to obtain
best execution, it will utilize the services of others. In all cases, the Fund
will attempt to negotiate best execution.

            Transactions for the Fund in fixed-income securities, including
transactions in listed securities, are executed in the OTC market by
approximately fifteen principal market maker dealers with whom the Adviser
maintains regular contact. These transactions will generally be principal
transactions at net prices and the Fund will incur little or no brokerage costs.
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 is available elsewhere. Purchases from underwriters
of newly-issued securities for inclusion in a portfolio 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 asked
price.

            The Fund's portfolio transactions in equity securities may occur on
foreign stock exchanges. Transactions on stock exchanges involve the payment of
brokerage commissions. On many foreign stock exchanges these commissions are
fixed. Securities traded in foreign OTC markets (including most fixed-income
securities) are purchased from and sold to dealers acting as principal. OTC
transactions generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup. The prices of
underwritten offerings, however, generally include a stated underwriter's
discount. The Adviser expects to effect the bulk of its transactions in
securities of companies based in foreign countries through brokers, dealers or
underwriters located in such countries. U.S. Government or other U.S. securities
constituting permissible investments will be purchased and sold through U.S.
brokers, dealers or underwriters.

            Investment decisions for the Fund are made independently from those
for other investment companies and other advisory accounts managed by the
Adviser. It may happen, on occasion, that the same security is held in the
portfolio of the Fund and one or more of such other companies or accounts.
Simultaneous transactions are likely when several funds or accounts are managed
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 the 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 of the Adviser.

            The Adviser continuously monitors and evaluates the performance and
execution capabilities of brokers that transact orders for the Fund to ensure
consistent quality executions. This information is reported to the Adviser's
Brokerage Allocation Committee and Best Execution Committee, which oversee
broker-selection issues. In addition, the Adviser periodically reviews the
Fund's transaction costs in light of current market circumstances using internal
tools and analysis as well as statistical analysis and other relevant
information from external vendors.

             The amount of aggregate brokerage commissions paid by the Fund
during the fiscal years ended March 31, 2018, March 31, 2017 and March 31, 2016,
the related commissions allocated to persons or firms because of research
services provided to the Fund or the Adviser during the most recent fiscal year
and the aggregate amount of transactions allocated to persons or firms because
of research services provided to the Fund or the Adviser during the most recent
fiscal year are as follows:

                               Commissions           Aggregate Brokerage
                               Allocated to Persons  Transactions Allocated to
                 Amount of     or Firms Because of   Persons or Firms Because
                 Aggregate     Research Services     of Research Services
Fiscal Year      Brokerage     Provided to the Fund  Provided to the Fund or
Ended March 31/  Commissions   or the Adviser        the Adviser
---------------  -----------   --------------------  -------------------------

2018             $126,588        $78,020             $98,372,927
2017               58,971
2016               58,309

            The Fund 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 the Fund'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 the Fund), or any affiliated person of such person, to receive a
brokerage commission from such registered investment company provided that such
commission is reasonable and fair compared to the commissions received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time.

             The aggregate amount of brokerage commissions paid to the
Affiliated Brokers during the Fund's three most recent fiscal years, the
Affiliated Brokers' percentage of the aggregate brokerage commissions and the
aggregate dollar amount of brokerage transactions for the three most recent
fiscal years are set forth below:

                   Aggregate
                   Amount of        % of Fund's         % of Fund's Aggregate
                   Brokerage        Aggregate           Dollar Amount of
                   Commissions      Brokerage           Brokerage Transactions
                   Paid to          Commissions Paid    Involving Payment of
Fiscal Year        Affiliated       to Affiliated       Commissions through
Ended March 31/    Brokers          Brokers             Affiliated Brokers
---------------    ----------       -----------------   ----------------------

2018                  $0                  0%                      0%
2017                   0                  0%                      0%
2016                   2              0.003%                   0.02%

            As of the end of the most recent fiscal period, the Fund did not
hold securities of its regular brokers or dealers (as defined in Rule 10b-1
under the 1940 Act) or their parents.

Disclosure of Portfolio Holdings
--------------------------------

            The 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, the 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 the 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.

            The Fund includes portfolio holdings information as required in
regulatory filings and shareholder reports, discloses portfolio holdings
information as required by federal or state securities laws and may disclose
portfolio holdings information in response to requests by governmental
authorities. In addition, the Adviser may post portfolio holdings information on
the Adviser's website (www.abfunds.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 portfolio
security. 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 credit risk or securities type, as applicable, approximately 45 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 the 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, (i) to the Fund's
service providers who require access to the information in order to fulfill
their contractual duties relating to the Fund (including, without limitation,
pricing services and proxy voting services), (ii) to facilitate the review of
the Fund by ratings agencies, (iii) for the purpose of due diligence regarding a
merger or acquisition, or (iv) 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 the 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 the 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 determine 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 the 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

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

            The Fund is a series of AB Cap Fund, Inc., a Maryland corporation.
The Fund was organized in 2011 under the name "AllianceBernstein Emerging
Markets Multi-Asset Portfolio". The Fund changed its name from
"AllianceBernstein Emerging Markets Multi-Asset Portfolio" to "AB Emerging
Markets Multi-Asset Portfolio" on January 5, 2015.

            The Board is authorized to reclassify and issue any unissued shares
to any number of additional series and classes without shareholder approval.
Accordingly, the Board may create additional series of shares in the future, for
reasons such as the desire to establish one or more additional portfolios of the
Fund with different investment objectives, policies or restrictions. Any
issuance of shares of another series would be governed by the 1940 Act and the
laws of the State of Maryland.

            It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal or state law or
in accordance with an undertaking by the Adviser to the SEC. Shareholders have
available certain procedures for the removal of Directors.

            A shareholder will be entitled to share pro rata with other holders
of the same class of shares all dividends and distributions arising from 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 Fund
is empowered to establish, without shareholder approval, additional portfolios
and additional classes of shares within the Fund. If an additional portfolio or
an additional class within the Fund were established, 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. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement and changes in
investment policy, shares of each portfolio would vote as separate series.

            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 class of shares bears its own Rule 12b-1 fees (if
any) and transfer agency expenses; and Class C shares convert to Class A shares
under certain circumstances. Each class of shares of the Fund votes separately
with respect to the Fund's Rule 12b-1 distribution plan and other matters for
which separate class voting is appropriate under applicable law. Shares are
freely transferable, are entitled to dividends as determined by the Directors
and, in liquidation of the Fund, are entitled to receive the net assets of the
Fund.

Principal and Controlling Holders
---------------------------------

            To the knowledge of the Fund, the following persons owned of record
or beneficially, 5% or more of the noted class of outstanding shares of the Fund
as of July 2, 2018:

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

Class A
-------

Charles Schwab & Co.
For the Exclusive Benefit of Customers
Mutual Fund Operations
211 Main Street
San Francisco, CA 94105-1905                           331,315           30.20%

LPL Financial
Omnibus Customer Account
Attn: Mutual Fund Trading
4707 Executive Drive
San Diego, CA 92121-3091                                81,567            7.43%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310                                   82,058            7.48%

Sanford Bernstein & Co. LLC
1 N Lexington Avenue
White Plains, NY 10601-1712                             79,460            7.24%


Class C
-------

Charles Schwab & Co. Inc.
Special Custody Account FBO Customers
Attn: Mutual Funds
211 Main Street
San Francisco, CA 94105-1905                           163,883           57.62%

LPL Financial
Omnibus Customer Account
Attn: Mutual Fund Trading
4707 Executive Dr.
San Diego, CA 92121-3091                                21,985            7.73%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310                                   25,291            8.89%

Pershing LLC
P.O. Box 2052
Jersey City, NJ 07303-2052                              23,831            8.38%


Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                           14,590            5.13%


Advisor Class
-------------

LPL Financial
Omnibus Customer Account
Attn: Mutual Fund Trading
4707 Executive Dr.
San Diego, CA 92121-3091                               908,196            7.15%

National Financial Services LLC
For the Exclusive Benefit of Our Customers
Attn: Mutual Funds Dept.
499 Washington Blvd., 4th Floor
Jersey City, NJ 07310                                1,701,696           13.40%

Raymond James
Omnibus for Mutual Funds
House Acct. Firm
Attn: Courtney Waller
880 Carillon Parkway
St. Petersburg, FL 33716-1102                        2,148,265           16.92%


Class R
-------

Ascensus Trust Company FBO
James Frank Companies 401K PS PL
P.O. Box 10577
Fargo, ND 58106-0577                                    17,209           49.17%

Ascensus Trust Company FBO
Valley Eye Specialists PS Plan
P.O. Box 10758
Fargo, ND 58106-0758                                     8,158           23.31%

FIIOC FBO
Metz Wood Harder Inc.
401k Profit Sharing Plan
100 Magellan Way (KW1C)
Covington, KY 41015-1987                                 1,933            5.52%

Matrix Trust Company Cust. FBO
ETC Companies LLC
717 17th St., Suite 1300
Denver, CO 80202-3304                                    3,121            8.92%


Class K
-------

Ascensus Trust Company FBO
Lawrence P. Lotzof DDS
APC Retirement Savings 401K Plan
P.O. Box 10758
Fargo, ND 58106-0758                                     9,248           26.74%

Ascensus Trust Company FBO
Kinghorn Insurance Agency of Beaufo
P.O. Box 10758
Fargo, ND 58106-0758                                     5,505           15.92%

Great-West Trust Company LLC TTEE Cust.
FBO Sterling Ruby Studio Inc.
Profit Sharing Plan & Trust
8515 E. Orchard Rd., #2T2
Greenwood Village, CO 80111-5002                         3,413            9.87%

Great-West Trust Company LLC TTEE C
Stoner Albright & Company Retirement Plan
8515 E. Orchard Rd., #2T2
Greenwood Village, CO 80111-5002                        10,175           29.42%


Class I
-------

AllianceBernstein L.P.
Attn: Brent Mather-Seed Acct
1 N. Lexington Ave.
White Plains, NY 10601-1712                              1,032            5.82%

Nationwide Trust Co. FSB
C/O IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029                                  1,402            7.90%

TD Ameritrade FBO
Voya Institutional Trust Co. as Cust.
PSP For Emp. Of AllianceBernstein LP
FBO Benjamin M Stein
New York, NY 10031-5303                                  1,083            6.11%

TD Ameritrade FBO
Voya Institutional Trust Co. as Cust.
PSP For Emp. Of AllianceBernstein LP
FBO William Marsalise
Syosset, NY 11791-1213                                  13,788           77.71%


            A shareholder who beneficially owns more than 25% of a Fund's
outstanding voting securities is presumed to "control" the Fund, as that term is
defined in the 1940 Act, and may have a significant impact on matters submitted
to shareholder a shareholder vote. To the knowledge of the Fund, no person
beneficially owned more than 25% of the Fund's outstanding voting securities as
of July 2, 2018.

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

            Brown Brothers, 50 Post Office Square, Boston, MA 02110, acts as the
Fund's custodian and as accounting agent for the assets of the Fund but plays no
part in deciding on the purchase or sale of portfolio securities. Subject to the
supervision of the Fund's Directors, Brown Brothers may enter into subcustodial
agreements for the holding of the Fund's foreign securities.

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

            ABI, an indirect wholly-owned subsidiary of the Adviser, located at
1345 Avenue of the Americas, New York, N.Y. 10105, is the principal underwriter
of shares of the Fund, and as such may solicit orders from the public to
purchase shares of the Fund. Under the Distribution Services Agreement, the 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
Fund 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 the Fund.

Code of Ethics and Proxy Voting Policies and Procedures
-------------------------------------------------------

            The Fund, 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 the Fund.

            The Fund has 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 the 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
through the Fund's website at www.abfunds.com; or both; and (2) on the SEC's
website at www.sec.gov.

Additional Information
----------------------

            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 Fund 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.abfunds.com.



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

        FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC
                                ACCOUNTING FIRM

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

The financial statements of the Fund for the fiscal year ended March 31, 2018
and the report of Ernst & Young LLP, independent registered public accounting
firm, are incorporated herein by reference to the Fund's annual report. The
annual report for the Fund was filed on Form N-CSR with the SEC on June 6, 2018.
The Fund's annual report is available without charge upon request by calling
ABIS at (800) 227-4618 or on the Internet at www.abfunds.com.



                                                                    Appendix A

[A/B]
[LOGO](R)

                  Proxy Voting and Governance 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 and Governance Policy ("Proxy Voting and
   Governance 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 and Governance 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.alliancebernstein.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
   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 Voting
   and Governance Committee, which provides oversight and includes senior
   investment professionals from Equities, Legal personnel and Operations
   personnel. It is the responsibility of the Proxy Voting and Governance
   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 Voting and Governance
   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 Voting and
   Governance 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 Voting and Governance 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 and
   Governance 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 and may take into account affiliations, related-party
   transactions and prior service to the company. We consider the election of
   directors who are "bundled" on a single slate to be a poor governance
   practice and vote on a case-by-case basis considering the amount of
   information available and an assessment of the group's qualifications.


   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 may vote against proposals that use requirements that are stricter than
   the SEC's framework including implementing restrictions 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 Conflicts Officer for his
   determination.

   In addition, our Proxy Voting and Governance 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.alliancebernstein.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.